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Kerala State Board New Syllabus Plus Two Business Studies Chapter Wise Previous Questions and Answers Chapter 10 Financial Markets.

Kerala Plus Two Business Studies Chapter Wise Previous Questions Chapter 10 Financial Markets

Plus Two Business Studies Financial Markets 1 Mark Important Questions

Question 1.
State the market for medium and long term funds. (FEBRUARY – 2009)
a) Money market
b) Capital market
c) Commodity market
d) Exchange market
Answer:
Capital Market

Question 2.
Complete the series: (MAY-2009)
Bombay Stock Exchange -1875
Cochin Stock Exchange -1978
National Stock Exchange – ?
Answer:
National stock exchange – 1992

Question 3.
Complete the following series: (MAY-2009)
Bombay Stock Exchange -1875
Cochin Stock Exchange -1978
National stock exchange – 1992
OTCEI – ?
Answer:
OTCEI – 1992

Question 4.
The settlement cycle in NSE is (MARCH-2015)
a) T + 3
b) T + 2
c) T +1
d) T + 4
Answer:
b) T + 2

Question 5.
The method of issuing securities through intermediaries like issue houses or stock brokers is. (MARCH-2016)
a) Offer for sale
b) Offer through prospectus
c) Private placement
d) Rights issue
Answer:
a) Offer for sale

Question 6.
National Stock Exchange of India (NSE) started its operation in (MARCH-2017)
(a) 1992
(b) 1994
(c) 1993
(d) 2000
Answer:
(b) 1994

Question 7.
Pick out from the following a short term money instrument having a maternity period of one day to fifteen days used for meeting, cash reserve ratio requirement by commercial bank: (MAY-2017)
a) Treasury Bills
b) Call Money
c) Commercial Paper
d) Certificate of Deposits
Answer:
b) Call money

Plus Two Business Studies Financial Markets 2 Marks Important Questions

Question 1.
Write two protective functions performed by SEBI. (FEBRUARY – 2009)
Answer:
a) Prohibition of fraudulent and unfair, trade practices.
b) Controlling insider trading price rigging etc. and imposing penalties for such practices.

Question 2.
Shaheena, one of your classmates in Plus Two Com-merce class, was absent in one day. On that day teacher takes class on the process of dematerialisation. Can you help Shaheena to understand the topic that the teacher taught that day? (MARCH-2010)
Answer:
Dematerialisation : It is a process by which physical share certificates are converted into an equivalent number of securities to be held in electronic form and credited in the investors’ account. For this, the investor has to open a Demat account with an organisation called a depository.

Question 3.
Smt. Faseela is a shareholder of ABC Co. Ltd. She gets allotment of 50 shares free of cost from the company. (MARCH-2012)
i) Find out the method of share allotment referred here.
ii) How it will affect ownership?
Answer:
i) Bonus shares/Stock dividend
ii) Issue of bonus shares does not affect the capital structure of the company.

Question 4.
Complete the following series. (MAY-2013)
a) Calcutta stock exchange -1909
b) Bombay stock exchange – ?
c) OTCEI – ?
Answer:
BSE – 1875
OTCEI – 1992

Plus Two Business Studies Financial Markets 4 Marks Important Questions

Question 1.
This is the agency which regulates the securities market and protects the interest of investors.(MAY-2009)
a) Identify the agency and explain its functions.
Answer:
SEBI
Functions of SEBI
1. Regulatory Functions
a) Registration of brokers and sub brokers and other players in the market.
b) Registration of Mutual Funds.
c) Regulation of stock brokers, portfolio exchanges, underwriters, etc.
d) Regulation of takeover bids by companies
e) Calling for information by undertaking inspection, conducting enquiries and audits of stock exchanges and intermediaries.
1) Levying fee or other charges for carrying out the purposes of the Act.
2) Development Functions
a) Training of intermediaries of the securities market.
b) Conducting research and publishing information useful to all market participants.
c) Undertaking measures to develop the capital markets by adapting a flexible approach.
3) Protective Functions
a) Prohibition of fraudulent and unfair, trade practices.
b) Controlling insider trading price rigging etc. and imposing penalties for such practices.
c) Undertaking steps for investor protection.
d) Promotion of fair practices and code of conduct in securities market.

Question 2.
Your teacher told you to prepare a table showing various money market instruments and their maturity periods. How will you prepare such a table? (MAY-2012)
Answer:
Call money market – 1 -14 days
Commercial Bill Market – 90 days
Treasury Bill Market – 14- 364 days
Commercial Paper – 3-12 Months
Certificate of deposit – 3-12 Months

Question 3.
Differentiate between money market and capital market. (MARCH-2014)
Answer:

Question 4.
“These are markets for short term funds.”(MARCH-2016)
Identify the type of financial market and list out its various instruments.
Answer:
Money Market
Money Market Instruments
1) Treasury Bill : They are issued by the RBI on behalf of the Central Government to meet its short¬term requirement of funds. They are issued at a discount on the face value of the instruments and repayable at par. They are issued in the form of promissory notes. They are also known as Zero Coupon Bonds as no interest is paid on such bills. They are highly liquid. The maturity period of these bills may be between 14 to 364 days.
2) Commercial Paper : Commercial paper is a short-term unsecured promissory note, negotiable and transferable by endorsement and delivery with a maturity period of 15 days to one year. It is sold at a discount and redeemed at par.
3) Call Money : Call money is short term finance repayable on demand, with a maturity period of one day to fifteen days, used for inter-bank transactions.
4) Certificate of Deposit: Certificates of Deposit (CDs) are short-term instruments issued by Commercial Banks and Special Financial Institutions (SFIs), which are freely transferable from one party to another. The maturity period of CDs ranges from 91 days to one year.
5) Commercial Bill: A commercial bill is a Bill of Exchange used to finance the working capital requirements of business firms. When goods are sold in credit, the seller draws the bill and the buyer accepts it. The seller can discount the bill before its maturity with the bank.
When a trade bill is accepted by a commercial bank it is known as commercial bills.

Question 5.
The SEBI has made it mandatory forthe settlement procedure to take place in demat form in certain selected securities. Forthe benefit of an investor in the Capital market, explain how does the demat system work. (MAY-2016)
Answer:
Working of the Demat System
1) A depository participant (DP), either a bank, broker, or financial services company, may be identified.
2) An account opening form and documentation (PAN card details, photograph, power of attorney) may be completed.
3) The physical certificate is to be given to the DP along with a dematerialisation request form.
4) If shares are applied in a public offer, details of DP and demat account are to be given to the depository registrar.
5) If shares are to be sold through a broker, the DP is to be instructed to debit the account with the number of shares.
6) The broker then gives instruction to his DP for delivery of the shares to the stock exchange.
7) The broker then receives payment and pays the person forthe shares sold.
8) Alt these transactions are to be completed within 2 days, i.e., delivery of shares and payment received from the buyer is on a T+2 basis, settlement period.

Question 6.
Briefly explain different methods of floating new is-sues in the primary market. (MARCH-2017)
Answer:
Methods of flotation: There are various methods of floating new issues in the primary market. They are:
Methods of flotation: There are various methods of floating new issues in the primary market. They are:
a) Offer through Prospectus : Prospectus is an invitation to the public for the subscription of shares and debentures of a company. The issues may be underwritten and also are required to be listed on at least one stock exchange.
b) Offer for Sale: Under this method new securities are not offered directly to the public. Initially the entire lots of securities are sold to an intermediary at a fixed price. The intermediary sells these securities to the public at a higher price.
c) Private Placement: Private placement is the allotment of securities by a company to institutional investors or some selected individuals. It is less expensive and saves time.
d) Rights Issue: According to the Companies Act, if a public company wants to issue additional shares, it must first be offered to the existing shareholders, in proportion to the amount paid up on their shares. This right is known as ‘Pre-emptive right’ and such an issue is called right issue.

Question 7.
Agni Ltd. is a medium scale enterprise engaged in the manufacture of match boxes in Kerala. Forfunding its modenisation requirement, it wanted to access capital market with the least cost that is possible. Identify the stock exchange format most suited to the company.
Give any six advantage of the above market. (MAY-2017)
Answer:
a) Overthe counter exchange of India (OTCEI)
b) Advantages of OTCEI
0 It provide online trading facilities to the investors
ii) It ensures a transparent system of trading
iii) It provides a trading platform to smaller and medium companies

Plus Two Business Studies Financial Markets 5 Marks Important Questions

Question 1.
Match the following. (MARCH-2009)

Answer:

Question 2.
‘SEBI’ is the watch dog of the securities market.’ Substantiate your answer. (FEBRUARY-2010)
Answer:
Functions of SEBI
1. Regulatory Functions
a) Registration of brokers and subbrokers and other players in the market.
b) Registration of Mutual Funds.
c) Regulation of stock brokers, portfolio exchanges, underwriters, etc.
d) Regulation of takeover bids by companies
e) Calling for information by undertaking inspection, conducting enquiries and audits of stock exchanges and intermediaries.
1) Levying fee or other charges for carrying out the purposes of the Act.
2) Development Functions
a) Training of intermediaries of the securities market.
b) Conducting research and publishing information useful to all market participants.
c) Undertaking measures to develop the capital markets by adapting a flexible approach.
3) Protective Functions
a) Prohibition of fraudulent and unfair, trade practices.
b) Controlling insidertrading price rigging etc. and imposing penalties for such practices.
c) Undertaking steps for investor protection.
d) Promotion of fair practices and code of conduct in securities market.

Question 3.
It is a market for short-term financial assets having a maturity period of less than one year.(MARCH-2010)
a) Explain the concept referred above.
b) How it differs from capital market?
Answer:
a) Money Market

Question 4.
Stock exchanges are termed as the barometer of the economic progress in a country. (MAY-2010)
a) Do you agree with this statement?
b) Analyse the statement by connecting with the functions of stock exchange.
Answer:
a) Yes.
b) Functions of a Stock Exchange
1) Providing Liquidity and Marketability to Existing Securities: Stock Exchange provides
a ready and continuous market for the sale and purchase of securities.
2) Pricing of Securities : A stock exchange is a mechanism of constant valuation through which the prices of secuqjies are determined. It is based on the forces of demand and supply.
3) Safety of Transaction: Stock exchange has its own well-defined rules and regulations. This ensures safety and fair dealings to investors.
4) Contributes to Economic Growth : Stock exchange provides a platform by which savings are channelised into the most productive investment proposals, which leads to capital formation and economic growth.
5) Providing Scope for Speculation : Stock exchange provides scope within the provisions of Law for speculation in a restricted and controlled manner.
6) Economic barometer: A stock exchange serves as a barometer of a country’s economic condition. Price trends in stock exchange indicate whether economy is going through boom or depression

Question 5.
Mercy, a computer operator of a private firm, wishes to buy some shares from stock exchange. (MARCH-2012)
1) Can she buy shares directly from the stock ex-change? State the reason.
2) Can she purchase shares of all companies from the stock exchange? State the reasons.
Answer:
1) No. Only members of stock exchange are allowed to enter the stock exchange.
2) No. Only listed and govt, securities are permitted to be traded in the stock exchange.

Question 6.
Manoj purchased 250 shares of Coal India Ltd. from the primary market. Later, he sold the shares of Coal India and earned a profit of Rs. 7,500/-. But all these transactions were done without physical transfer of share certificate. What is this system? What are the advantages of this system? (MAY-2012)
Answer:
Dematerialisation : It is a process by which physical share certificates are converted into an equivalent number of securities to be held in electronic form and credited in the investors’ account. For this, the investor has to open a Demat account with an organisation called a depository.
Benefits of Depository Services and Demat Account
1) Sale and Purchase of shares and stocks of any company make easy.
2) Saves time.
3) No paperwork.
4) Lower transaction costs.
5) Ease in trading.
6) Transparency in transactions.
7) No counterfeiting of security certificate.
8) Physical presence of investor is not required in stock exchange.

Question 7.
‘Money market is a wholesale market and capital market is a retail market.’ Do you agree with this statement? (MARCH-2013)
Give other 5 differences between them.
Answer:
a) Yes

Question 8.
“Only listed securities are permitted to be traded in the stock exchange” – Comment. Also explain functions of stock exchange. (MAY-2013)
Answer:
Only listed and Government securities are traded in the stock exchange,
Functions of a Stock Exchange
1) Providing Liquidity and Marketability to Existing Securities: Stock Exchange provides
a ready and continuous market for the sale and purchase of securities.
2) Pricing of Securities : A stock exchange is a mechanism of constant valuation through which the prices of secuqjies are determined. It is based on the forces of demand and supply.
3) Safety of Transaction: Stock exchange has its own well-defined rules and regulations. This ensures safety and fair dealings to investors.
4) Contributes to Economic Growth : Stock exchange provides a platform by which savings are channelised into the most productive investment proposals, which leads to capital formation and economic growth.
5) Providing Scope for Speculation : Stock exchange provides scope within the provisions of Law for speculation in a restricted and controlled manner.
6) Economic barometer: A stock exchange serves as a barometer of a country’s economic condition. Price trends in stock exchange indicate whether economy is going through boom or depression.

Question 9.
Indian money market is a well developed one with the active participation of large number of financial institutions and the presence of innovative financial instruments. (MARCH-2015)
a) Name any three participants of Indian money market.
b) Name any three innovative financial instruments prevailing in Indian money market.
Answer:
a) RBI, Commercial bank, IFCI, IDBI, ICICI, LIC, UTI etc.
b) Call money Commercial bill Treasurybill Commercial paper Certificate of deposit

Plus Two Business Studies Financial Markets 8Marks Important Questions

Question 1.
“It is the regulatory & development agency of Indian Capital Market.” (MARCH-2011)
1) Identify the agency referred here,
Explain the functions performed by this agency,
Answer:
SEBI
Functions of SEBI
1. Regulatory Functions
a) Registration of brokers and subbrokers and other players in thd market.
b) Registration of Mutual Funds.
c) Regulation of stock brokers, portfolio exchanges, underwriters, etc.
d) Regulation of takeover bids by companies
e) Calling for information by undertaking inspection, conducting enquiries and audits of stock exchanges and intermediaries.
1) Levying fee or other charges for carrying out the purposes of the Act.
2) Development Functions
a) Training of intermediaries of the securities market.
b) Conducting research and publishing information useful to all market participants.
c) Undertaking measures to develop the capital markets by adapting a flexible approach.
3) Protective Functions
a) Prohibition of fraudulent and unfair, trade practices.
b) Controlling insidertrading price rigging etc. and imposing penalties for such practices.
c) Undertaking steps for investor protection.
d) Promotion of fair practices and code of conduct in securities market.

Question 2.
“BSE Sensex reached a new record of 20893 point as a result of Listing by Coal India Ltd.” This was headline in a newspaper. (MARCH-2011)
i) Which Financial Market is referred here?
ii) What are its functions?
iii) Which types of Secuitites are traded in this mar-ket?
Answer:
a) Stock Exchange
b) Functions of a Stock Exchange
1) Providing Liquidity and Marketability to Existing Securities: Stock Exchange provides a ready and continuous market for the sale and purchase of securities.
2) Pricing of Securities : A stock exchange is a mechanism of constant valuation through which the prices of secuqjies are determined. It is based on the forces of demand and supply.
3) Safety of Transaction: Stock exchange has its own well-defined rules and regulations. This ensures safety and fair dealings to investors.
4) Contributes to Economic Growth : Stock exchange provides a platform by which savings are channelised into the most productive investment proposals, which leads to capital formation and economic growth.
5) Providing Scope for Speculation : Stock exchange provides scope within the provisions of Law for speculation in a restricted and controlled manner.
6) Economic barometer: A stock exchange serves as a barometer of a country’s economic condition. Price trends in stock exchange indicate whether economy is going through boom or depression.
c) Securities traded in the secondary market are:
i) Corporate Securities
ii) Government Securities
iii) Listed Securities

Question 3.
Explain in detail the difference between capital market and money market of the country. (MAY-2013)
Answer:
Money Market: The money market is a market for short-term funds, which deals in financial assets whose period of maturity is up to one year. It enables in raising short term fund for meeting day-to-day requirements. The major participants in the money market are the Reserve Bank of India, Commercial Banks, Non-Banking Finance Companies, State Governments, Large Corporate Houses and Mutual Funds.
Money Market Instruments
1) Treasury Bill : They are issued by the RBI on behalf of the Central Government to meet its short¬term requirement of funds. They are issued at a discount on the face value of the instruments and repayable at par. They are issued in the form of promissory notes. They are also known as Zero Coupon Bonds as no interest is paid on such bills. They are highly liquid. The maturity period of these bills may be between 14 to 364 days.
2) Commercial Paper : Commercial paper is a short-term unsecured promissory note, negotiable and transferable by endorsement and delivery with a maturity period of 15 days to one year. It is sold at a discount and redeemed at par.
3) Call Money : Call money is short term finance repayable on demand, with a maturity period of one day to fifteen days, used for inter-bank transactions.
4) Certificate of Deposit: Certificates of Deposit (CDs) are short-term instruments issued by
Commercial Banks and Special Financial Institutions (SFIs), which are freely transferable from one party to another. The maturity period of CDs ranges from 91 days to one year.
5) Commercial Bill: A commercial bill is a Bill of Exchange used to finance the working capital requirements of business firms. When goods are sold in credit, the seller draws the bill and the buyer accepts it. The seller can discount the bill before its maturity with the bank.
When a trade bill is accepted by a commercial bank it is known as commercial bills.
Capital Market: It is a market for long term funds where debt and equity are traded. It consists of development banks, commercial banks and stock exchanges. The capital markfet can be divided into:
1. Primary Market.
2. Secondary Market
Primary Market : The primary market is also known as the new issues market. It deals with new securities being issued for the first time. A company can raise capital through the primary market in the form of equity shares, preference shares, debentures, loans and deposits. Funds raised may be for setting up new projects, expansion, diversification, etc. of existing enterprises. The investors in this market are banks, financial institutions, insurance companies, mutual funds and individuals.
Methods of flotation: There are various methods of floating new issues in the primary market. They are:
a) Offer through Prospectus : Prospectus is an invitation to the public for the subscription of shares and debentures of a company. The issues may be underwritten and also are required to be listed on at least one stock exchange.
b) Offer for Sale: Under this method new securities are not offered directly to the public. Initially the entire lots of securities are sold to an intermediary at a fixed price. The intermediary sells these securities to the public at a higher price.
c) Private Placement: Private placement is the allotment of securities by a company to institutional investors or some selected individuals. It is less expensive and saves time.
d) Rights Issue: According to the Companies Act, if a public company wants to issue additional shares, it must first be offered to the existing shareholders, in proportion to the amount paid up on their shares. This right is known as ‘Pre-emptive right’ and such an issue is called right issue.
e) Electronic Initial Public Offer (e-IPOs): It is a method of issuing securities through on-line system of stock exchange. Such a company has to enter into an agreement with the stock exchange. This is called an e-initial public offer.

Question 4.
Asianet Communications Ltd. proposes to raise additional capital through issue of its shares for modernising their communication equipments. Being a specialist in securities you are asked to advice them the various methods of raising capital in the primary market. Advise the company in this issue (MAY-2013)
Answer:
Primary Market : The primary market is also known as the new issues market. It deals with new securities being issued for the first time. A company can raise capital through the primary market in the form of equity shares, preference shares, debentures, loans and deposits. Funds raised may be for setting up new projects, expansion, diversification, etc. of existing enterprises. The investors in this market are banks, financial institutions, insurance companies, mutual funds and individuals.
Methods of flotation: There are various methods of floating new issues in the primary market. They are:
a) Offer through Prospectus : Prospectus is an invitation to the public for the subscription of shares and debentures of a company. The issues may be underwritten and also are required to be listed on at least one stock exchange.
b) Offer for Sale: Under this method new securities are not offered directly to the public. Initially the entire lots of securities are sold to an intermediary at a fixed price. The intermediary sells these securities to the public at a higher price.
c) Private Placement: Private placement is the allotment of securities by a company to institutional investors or some selected individuals. It is less expensive and saves time.
d) Rights Issue: According to the Companies Act, if a public company wants to issue additional shares, it must first be offered to the existing shareholders, in proportion to the amount paid up on their shares. This right is known as ‘Pre emptive right’ and such an issue is called right issue.
e) Electronic Initial Public Offer (e-IPOs): It is a method of issuing securities through on-line system of stock exchange. Such a company has to enter into an agreement with the stock exchange. This is called an e-initial public offer.

Kerala State Board New Syllabus Plus Two Business Studies Chapter Wise Previous Questions and Answers Chapter 9 Financial Management.

Kerala Plus Two Business Studies Chapter Wise Previous Questions Chapter 9 Financial Management

Plus Two Business Studies Financial Management 1 Mark Important Questions

Question 1.
Which among the following is the cheapest source of finance? (FEBRUARY – 2009)
a) Equity share capital
b) Debentures
c) Long term loans
d) Retained earnings
Answer:
d) Retained earnings

Question 2.
The main source of finance of K.K. Ltd. is Equity Capital of Rs. 8,00,000. The company also uses Fixed Inter est Bearing sources of debentures of Rs. 3,00,000 and long term loans Rs. 2,00,000 with an intention to enhance the return to equity shareholders.
a) Identify the concept of Financial Management used in this context. (MAY-2009)
Answer:
Trading on equity

Question 3.
Which among the following is not a factor affecting dividend decision? (MARCH-2010)
Nature of industry
b) Taxation policy
c) Competition
d) Legal restrictions
Answer:
Competition

Question 4.
The prime responsibility of a Finance Manager is to determine in advance the amount of capital and its sources. Give a suitable name to this process. (MAY-2011)
Answer:
Financial planning

Question 5.
Choose the correct pair from the following (MAY-2011)
a) Capital – Capitalisation structure
b) Fixed capital – Short term needs of the firm
c) Working capital – Net current assets
d) Investment decision-Distribution of profit Working
Answer:
capital – Net current assets

Question 6.
EPS stands for (MARCH-2013)
a) Equity per share
b) Earning per share
c) Equity pro share
d) Earning pro share
Answer:
Earnings per share

Question 7.
A major decision of the financial management is whether to distribute profits to shareholders or to retain the profits and reinvest into the business. Name the decision with regard to this. (MAY-2013)
Answer:
Dividend decision

Question 8.
‘Shortage of capital leads to over capitalisation.’ Do you agree with this statement? (MARCH-2014)
a) Letters
b) Memos
c) Complaints
d) Orders
Answer:
Complaints

Question 9.
Select the wrong pair from the following : (MARCH-2015)
a) Interest – Debentures
b) Buildings – Working Capital
c) Mix of debt and equity – Capital Structure
d) Dividend – Share Capital
Answer:
Buildings – Working capital

Question 10.
Financial leverage is favourable when, (MARCH-2016)
a) Return on investment is lower than cost of debt.
b) Debt is easily available.
c) The dividends are paid more.
d) Return on investment is higher than cost of debt.
Answer:
Return investment is higher than debt

Question 11.
List out the twin objectives of financial planning. (MAY-2016)
Answer:
a) To ensure availability of funds
b) To see that the firm does not raise resources unnecessarily

Question 12.
Zero working capital means Zero working capital (MARCH-2017)
a) Current Asset > Current Liability
b) Current Asset < Current Liability
c) Current Asset = Current Liability
d) Current Asset * Current Liability
Answer:
c) Current Asset = Current Liability

Question 13.
Ratios which help in determining the ability of the enterprise to service its long term debts are: (MAY-2017)
a) Liquidity
b) Profitability
c) Turnover
d) Solvency
Answer:
Solvency

Plus Two Business Studies Financial Management 2 Marks Important Questions

Question 1.
Mr.Joseph appointed as the Finance Manager of Venus Exporting Company Ltd. As the Finance Manager, point out two important decisions he has to take. (MAY-2010)
Answer:
Investment decisions, Finance decision and Dividend decision.

Question 2.
Following is the details of dividend received by Mr.Amal from a company during the year 2009-10. (MAY-2012)
Decks Ltd. Additional shares What is the type of dividend payment followed by the company?
Answer:
Bonus share

Question 3.
Determination of capital structure of a firm is a crucial management decision. Point out any four factors influencing the determination of capital structure. (MAY-2013)
Answer:
1) Trading on Equity (Financial Leverage)
2) Stability of Earnings
3) Cost of Debt
4) Interest Coverage Ratio (ICR)

Question 4.
Financial planning strive to achieve mainly two objectives. State these objectives. (MAY-2017)
Answer:
The twin objectives of financial planning are
a) To ensure availability of fund at the right time and its possible Sources.
b) To see that firm does not raise fund unnecessarily.

Plus Two Business Studies Financial Management 3 Marks Important Questions

Question 1.
a) Financial Service (MAY-2010)
b) Financial Markets
c) Financial Management
d) Financial institutions
i) Spot the odd one
ii) Justify your answer.
Answer:
Financial management

Question 2.
Briefly explain the term “Financial Planning”. (MARCH-2016)
Answer:
Financial Planning: The process of estimating the fund requirement of a business and specifying the sources of funds is called financial planning.
It ensures that enough funds are available at right time. The twin objectives of financial planning are
a) To ensure availability of fund at the right time and its possible sources.
b) To see that firm does not raise fund unnecessarily.

Question 3.
Capital structure is the ratio between owned capital and borrowed capital. Several factors are to be considered in determining an appropriate capital structure. Prepare a chart showing the factors affecting capital structure. (MARCH-2017)
Answer:
Factors affecting capital structure
1) Trading on Equity
2) Stability of earnings
3) Cost of debt
4) Interest Cover Ratio
5) Desire for control
6) Capital market condition
7) Taxation policy
8) Legal Requirements

Plus Two Business Studies Financial Management 4 Marks Important Questions

Question 1.
“Finance function is concerned with taking three important decisions”.Comment. (MARCH-2011)
Answer:
Finance Functions: The finance function is concerned with three broad decisions which are :

Finance Decision : It relates to the amount of . finance to be raised from various long term sources.
The main sources of funds for a firm are shareholders’ funds (equity capital and the retained earnings) and borrowed funds (debentures or other forms of debt). A firm needs to have a judicious mix of both debt and equity in making financing decisions.
Investment Decision : The investment decision relates to how the firm’s funds are invested in different assets. Investment decision can be long-term or short-term. A long-term investment decision is also called a Capital budgeting decision.
Short-term investment decisions (also called working capital decisions) are concerned with the decisions about the levels of cash, inventory and receivables.
Dividend Decision : Dividend is that portion of profit which is distributed to shareholders. The decision involved here is how much of the profit earned by company (after paying tax) is to be distributed to the shareholders and how much of it should be retained in the business.

Plus Two Business Studies Financial Management 5 Marks Important Questions

Question 1.
“A Firm’s total investment in the form of Bills Receivable, Debtors, Stock of goods, Cash in hand and at bank were Rs. 5,00,000.” Receivable , Debtors, Stock of goods, Cash in hand and at Bank (MARCH-2011)
a) Identify the type of Capital referred here
b) Explain the factors influencing the investment in these assets.
Answer:
a) Working Capital
b) Factors affecting Working Capital
1) Nature of Business : A trading organisation usually needs a smaller amount of working capital as compared to a manufacturing organisation.
2) Scale of Operations: A large scale organisation requires large amount of working capital as compared to the organisations which operate on a lower scale.
3) Business Cycle : In the boom period larger amount of working capital is needed to meet the demand. In case of depression, demand for goods declines so less working capital is required.
4) Seasonal Factors: During peak season demand of a product will be high and thus high working capital will be required as compared to lean season.
5) Production Cycle: Production cycle is the time span between the receipt of raw material and their conversion into finished goods. Working capital requirement is higher in firms with longer processing cycle and lower in firms with shorter processing cycle.
6) Credit Policy : A liberal credit policy results in higher amount of debtors, increasing the requirement of working capital.
7) Operating Efficiency : If cash, debtors and inventory are efficiently managed, working capital requirement can be reduced.
8) Availability of Raw Materials : If the raw materials are easily available in the market and there is no shortage, huge amount need not be blocked in inventories, so it needs less working capital.

Question 2.
The prime responsibility of a finance manager is to determine in advance the amount of capital, its sources and patterns. (MAY-2013)
a) Give a suitable name to this process.
b) Mention the importance of this process.
Answer:
a) Financial Planning
b) Importance of Financial Planning
1) It ensures adequate funds from various sources.
2) It reduces the uncertainty about the availability of funds.
3) It integrates the financial policies and procedures.
4) It helps the management to eliminate waste of funds and reduce cost.
5) It helps to achieve a balance between the inflow and outflow of funds and ensure liquidity.
6) It serves as the basis of financial control
7) It helps to reduce cost of financing to the minimum.
8) It helps to ensure stability and profitability of business.
9) It makes the firm better prepared to face the future

Question 3.
Spencers India a wholesaler of grocery goods, want to start a new branch in Kerala. They are requiring capital for a period of 20 yrs. Briefly explain the factors that determine the size of their capital requirement, (MARCH-2016)
Answer:
Factors affecting Fixed Capital
1) Nature of Business : A trading concern needs lower investment in fixed assets compared with a manufacturing organization.
2) Scale of Operations: An organisation operating on large scale require more fixed capital as compared to an organisation operating on small scale.
3) Choice of Technique : A capital-intensive organisation requires more amount of fixed capital than labour intensive organisations.
4) Technology Upgradation : Organisations using assets which become obsolete faster require more fixed capital as compared to other organisations.
5) Growth Prospects : Higher growth of an organisation generally requires higher investment in fixed assets.
6) Diversification : The firms dealing in number of products (Diversification) requires more investment in fixed capital.
7) Use of Fixed Assets: Companies acquiring fixed assets on hire purchase or lease system require lesser amount as against cash purchases.

Question 4.
“It is a decision regarding the distribution of profit to shareholders.” Identify the decision and explain the factors affecting such decision. (MARCH-2017)
Answer:
a) Dividend decision
b) Factors affecting Dividend Decision
1) Stability Earnings : A company having stable earnings can declare higher dividends. Otherwise, pay lower dividend.
2) Stability of Dividends : Companies generally follow a policy of stabilising dividend per share. Dividend per share is not altered if the change in earnings is small.
3) Growth Opportunities: Companies having good growth opportunities retain more money out of their earnings to finance the required investment. In such a case, they can declare dividend at a lower rate.
4) Cash Flow Positions : Availability of enough cash in the company is necessary for declaration of dividend.
5) Shareholders’ Preference : While declaring dividends, managements must keep in mind the preferences of the shareholders in this regard.
6) Taxation Policy : A company is required to pay tax on dividend declared by it. If tax on dividend is higher, company will prefer to pay less by way of dividends whereas if tax rates are lower, then more dividends can be declared by the company.
7) Capital Market: Reputed companies have easy access to the capital market and, therefore, they can pay higher dividends than the smaller companies.
8) Legal Constraints: The companies Act has laid down certain restrictions regarding payment of dividend. No dividend can be paid out of capital.

Plus Two Business Studies Financial Management 8 Marks Important Questions

Question 1.
a) What is working capital? (FEBRUARY – 2009)
b) What are the factors determining working capital?
Answer:
a) Working Capital: Working capital is that portion of capital required for investing in current as-sets for meeting day to day working of an organization. Current assets can be converted into cash within a period of one year. They provide liquidity to the business.
Working capital is of two types:
1) Gross working capital = Total of current asset
2) Net working capital = Current assets – Current Liabilities
b) Factors affecting Working Capital
1) Nature of Business : A trading organisation usually needs a smaller amount of working capital as compared to a manufacturing organisation.
2) Scale of Operations: A large scale organisation requires large amount of working capital as compared to the organisations which operate on a lower scale.
3) Business Cycle : In the boom period larger amount of working capital is needed to meet the demand. In case of depression, demand for goods declines so less working capital is required.
4) Seasonal Factors: During peak season demand of a product will be high and thus high working capital will be required as compared to lean season.
5) Production Cycle: Production cycle is the time span between the receipt of raw material and their conversion into finished goods. Working capital requirement is higher in firms with longer processing cycle and lower in firms with shorter processing cycle.
6) Credit Policy : A liberal credit policy results in higher amount of debtors, increasing the requirement of working capital.
7) Operating Efficiency : If cash, debtors and inventory are efficiently managed, working capital requirement can be reduced.
8) Availability of Raw Materials : If the raw materials are easily available in the market and there is no shortage, huge amount need not be blocked in inventories, so it needs less working capital.

Question 2.
“It refers to the mix or components of long term sources of funds”. (MARCH-2009)
a) Identify the concept referred above.
b) What are the factors to be considered while determining it?
Answer:
a) Capital structure
b) Factors Affecting Capital Structure
1) Trading on Equity (Financial Leverage) : It refers to the use of fixed income securities such as debentures and preference capital in the capital structure so as to increase the return of equity shareholders.
2) Stability of Earnings: If the company is earning regular and reasonable income, the management can rely on preference shares or debentures. Otherwise issue of equity shares is recommended.
3) Cost of Debt: A firm’s ability to borrow at lower rate, increases its capacity to employ higher debt.
4) Interest Coverage Ratio (ICR) : The interest . coverage ratio refers to the number of times
earnings before interest and taxes of a company covers the interest obligation. Higher the ratio, better is the position of the firm to raise debt.
5) Desire for control : If the management has a desire to control the business, it will prefer preference shares and debentures in capital structure because they have no voting rights.
6) Flexibility: Capital structure should be capable of being adjusted according to the needs of changing conditions.
7) Capital Market Conditions : In depression, debentures are considered good. In a booming situation, issue of shares will be more preferable.
8) Period of Finance: If funds are required for short period, borrowing from bank should be preferred. If funds are required for longer period company can issue shares and debentures.
9) Taxation Policy : interest on loan and debentures is deductible item under the Income Tax Act whereas dividend is not deductible. In order to take advantage of this provision, companies may issue debentures.
10) Legal Requirements : The structure of capital of a company is also influenced by the statutory requirements. For example, Banking Regulation Act, Indian Companies Act, SEBI, etc.

Question 3.
What is working Capital? What are the factors influencing the working capital requirements. (MARCH-2009)
Answer:
Working Capital: Working capital is that portion of capital required for investing in current assets for meeting day to day working of an organization. Current assets can be converted into cash within a period of one year. They provide liquidity to the business.
Working capital is o f two types:
1) Gross working capital = Total of current asset
2) Net working capital = Current assets – Current Liabilities

Factors affecting Working Capital

1) Nature of Business : A trading organisation usually needs a smaller amount of working capital as compared to a manufacturing organisation.
2) Scale of Operations: A large scale organisation requires large amount of working capital as compared to the organisations which operate on a lower scale.
3) Business Cycle : In the boom period larger amount of working capital is needed to meet the demand. In case of depression, demand for goods declines so less working capital is required.
4) Seasonal Factors: During peak season demand of a product will be high and thus high working capital will be required as compared to lean season.
5) Production Cycle: Production cycle is the time span between the receipt of raw material and their conversion into finished goods. Working capital requirement is higher in firms with longer processing cycle and lower in firms with shorter processing cycle.
6) Credit Policy : A liberal credit policy results in higher amount of debtors, increasing the requirement of working capital.
7) Operating Efficiency : If cash, debtors and inventory are efficiently managed, working capital requirement can be reduced.
8) Availability of Raw Materials : If the raw materials are easily available in the market and there is no shortage, huge amount need not be blocked in inventories, so it needs less working capital.

Question 4.
Mr. Ganesh, the newly appointed Finance Manager of Soorya Ltd, identified that the poor management of capital required for the day to day operation of the business is one of the problems faced by the Finance Department. He decided to take certain remedial measures to make it efficient. (MAY-2009)
a) State the factors to be considered while deter-mining the amount of capital.
Answer:
Working Capital: Working capital is that portion of capital required for investing in current assets for meeting day to day working of an organization. Current assets can be converted into cash within a period of one year. They provide liquidity to the business.
Working capital is o f two types:
1) Gross working capital = Total of current asset
2) Net working capital = Current assets – Current Liabilities

Factors affecting Working Capital

1) Nature of Business : A trading organisation usually needs a smaller amount of working capital as compared to a manufacturing organisation.
2) Scale of Operations: A large scale organisation requires large amount of working capital as compared to the organisations which operate on a lower scale.
3) Business Cycle : In the boom period larger amount of working capital is needed to meet the demand. In case of depression, demand for goods declines so less working capital is required.
4) Seasonal Factors: During peak season demand of a product will be high and thus high working capital will be required as compared to lean season.
5) Production Cycle: Production cycle is the time span between the receipt of raw material and their conversion into finished goods. Working capital requirement is higher in firms with longer processing cycle and lower in firms with shorter processing cycle.
6) Credit Policy : A liberal credit policy results in higher amount of debtors, increasing the requirement of working capital.
7) Operating Efficiency : If cash, debtors and inventory are efficiently managed, working capital requirement can be reduced.
8) Availability of Raw Materials : If the raw materials are easily available in the market and there is no shortage, huge amount need not be blocked in inventories, so it needs less working capital.

Question 5.
What is capital structure and what are the essential features of an appropriate capital structure? (MAY-2010)
Answer:
Capital Structure : Capital structure refers to the mix between owners funds and borrowed funds. Owners fund consists of equity share capital,
preference share capital and reserves and surpluses or retained earnings. Borrowed funds can be in the form of loans, debentures, public deposits, etc.
A capital structure will be said to be optimal when . the proportion of debt and equity is such that it results in an increase in the value of the equity share.

Factors Affecting Capital Structure

1) Trading on Equity (Financial Leverage) : It refers to the use of fixed income securities such as debentures and preference capital in the capital structure so as to increase the return of equity shareholders.
2) Stability of Earnings: If the company is earning regular and reasonable income, the management can rely on preference shares or debentures. Otherwise issue of equity shares is recommended.
3) Cost of Debt: A firm’s ability to borrow at lower rate, increases its capacity to employ higher debt.
4) Interest Coverage Ratio (ICR) : The interest . coverage ratio refers to the number of times earnings before interest and taxes of a company covers the interest obligation. Higher the ratio, better is the position of the firm to raise debt.
5) Desire for control : If the management has a desire to control the business, it will prefer preference shares and debentures in capital structure because they have no voting rights.
6) Flexibility: Capital structure should be capable of being adjusted according to the needs of changing conditions.
7) Capital Market Conditions : In depression, debentures are considered good. In a booming situation, issue of shares will be more preferable.
8) Period of Finance: If funds are required for short period, borrowing from bank should be preferred. If funds are required for longer period company can issue shares and debentures.
9) Taxation Policy : interest on loan and debentures is deductible item under the Income Tax Act whereas dividend is not deductible. In order to take advantage of this provision, companies may issue debentures.
10) Legal Requirements : The structure of capital of a company is also influenced by the statutory requirements. For example, Banking Regulation Act, Indian Companies Act, SEBI, etc.

Question 6.
No business Can run successfully without adequate working capital. By considering this fact, you are required to ‘
a) Narrate the significance of adequacy of working capital and
b) The important factors influencing working capital. (MARCH-2010)
Answer:
Working Capital: Working capital is that portion of capital required for investing in current assets for meeting day to day working of an organization. Current assets can be converted into cash within a period of one year. They provide liquidity to the business.
Working capital is o f two types:
1) Gross working capital = Total of current asset
2) Net working capital = Current assets – Current Liabilities

Factors affecting Working Capital

1) Nature of Business : A trading organisation usually needs a smaller amount of working capital as compared to a manufacturing organisation.
2) Scale of Operations: A large scale organisation requires large amount of working capital as compared to the organisations which operate on a lower scale.
3) Business Cycle : In the boom period larger amount of working capital is needed to meet the demand. In case of depression, demand for goods declines so less working capital is required.
4) Seasonal Factors: During peak season demand of a product will be high and thus high working capital will be required as compared to lean season.
5) Production Cycle: Production cycle is the time span between the receipt of raw material and their conversion into finished goods. Working capital requirement is higher in firms with longer processing cycle and lower in firms with shorter processing cycle.
6) Credit Policy : A liberal credit policy results in higher amount of debtors, increasing the requirement of working capital.
7) Operating Efficiency : If cash, debtors and inventory are efficiently managed, working capital requirement can be reduced.
8) Availability of Raw Materials : If the raw materials are easily available in the market and there is no shortage, huge amount need not be blocked in inventories, so it needs less working capital.

Question 7.
A major policy decision of the Financial Manager of a company is whether to distribute profits to shareholders or retain the profits and reinvest into business. (MAY-2010)
a) Name the policy decision of the Financial Manager with regard to this aspect.
b) Explain the various factors affecting the policy of the management in the maximization of the wealth of the owners.
Answer:
a) Dividend Decision

b) Factors affecting Dividend Decision

1) Stability Earnings : A company having stable earnings can declare higher dividends. Otherwise, pay lower dividend.
2) Stability of Dividends : Companies generally follow a policy of stabilising dividend per share. Dividend per share is not altered if the change in earnings is small.
3) Growth Opportunities: Companies having good growth opportunities retain more money out of their earnings to finance the required investment. In such a case, they can declare dividend at a lower rate.
4) Cash Flow Positions : Availability of enough cash in the company is necessary for declaration of dividend.
5) Shareholders’ Preference : While declaring dividends, managements must keep in mind the preferences of the shareholders in this regard.
6) Taxation Policy : A company is required to pay tax on dividend declared by it. If tax on dividend is higher, company will prefer to pay less by way of dividends whereas if tax rates are lower, then more dividends can be declared by the company.
7) Capital Market: Reputed companies have easy access to the capital market and, therefore, they can pay higher dividends than the smaller companies.
8) Legal Constraints: The companies Act has laid down certain restrictions regarding payment of dividend. No dividend can be paid out of capital.

Question 8.
“Financial planning is one of the important functions of management.” – Explain the statement. Also state various steps and objectives of it. (MARCH-2012)
Answer:
Financial Planning: The process of estimating the fund requirement of a business and specifying the
sources of funds is called financial planning. It ensures that enough funds are available at right time.
The twin objectives of financial planning are
a) To ensure availability of fund at the right time and its possible sources.
b) To see that firm does not raise fund unnecessarily.

Importance of Financial Planning

1) It ensures adequate funds from various sources.
2) It reduces the uncertainty about the availability of funds.
3) It integrates the financial policies and procedures.
4) It helps the management to eliminate waste of funds and reduce cost.
5) It helps to achieve a balance between the inflow and outflow of funds and ensure liquidity.
6) It serves as the basis of financial control
7) It helps to reduce cost of financing to the minimum.
8) It helps to ensure stability and profitability of business.
9) It makes the firm better prepared to face the future

Question 9.
“It is that part of profit of a company which is distributed among the shareholders.” (MARCH-2012)
a) Identify it.
b) Explain internal and external factors affecting it.
Answer:
a) Dividend
b) Factors affecting Dividend Decision
1) Stability Earnings : A company having stable earnings can declare higher dividends. Otherwise, pay lower dividend.
2) Stability of Dividends : Companies generally follow a policy of stabilising dividend per share. Dividend per share is not altered if the change in earnings is small.
3) Growth Opportunities: Companies having good growth opportunities retain more money out of their earnings to finance the required investment. In such a case, they can declare dividend at a lower rate.
4) Cash Flow Positions : Availability of enough cash in the company is necessary for declaration of dividend.
5) Shareholders’ Preference : While declaring dividends, managements must keep in mind the preferences of the shareholders in this regard.
6) Taxation Policy : A company is required to pay tax on dividend declared by it. If tax on dividend is higher, company will prefer to pay less by way of dividends whereas if tax rates are lower, then more dividends can be declared by the company.
7) Capital Market: Reputed companies have easy access to the capital market and, therefore, they can pay higher dividends than the smaller companies.
8) Legal Constraints: The companies Act has laid down certain restrictions regarding payment of dividend. No dividend can be paid out of capital.

Question 10.
Current assets = Working capital current assets – Current liabilities = Working capital. The above two equations are based on two different concepts of working capital. Describe these two concepts of working capital. Explain factors influencing working capital (MAY-2012)
Answer:
a) 1) Gross Working Capital = Total of Current
Assets
2) Net Working Capital = Current Assets – Current Liabilities
b) Factors affecting Working Capital
1) Nature of Business : A trading organisation usually needs a smaller amount of working capital as compared to a manufacturing organisation.
2) Scale of Operations: A large scale organisation requires large amount of working capital as compared to the organisations which operate on a lower scale.
3) Business Cycle : In the boom period larger amount of working capital is needed to meet the demand. In case of depression, demand for goods declines so less working capital is required.
4) Seasonal Factors: During peak season demand of a product will be high and thus high working capital will be required as compared to lean season.
5) Production Cycle: Production cycle is the time span between the receipt of raw material and their conversion into finished goods. Working capital requirement is higher in firms with longer processing cycle and lower in firms with shorter processing cycle.
6) Credit Policy : A liberal credit policy results in higher amount of debtors, increasing the requirement of working capital.
7) Operating Efficiency : If cash, debtors and inventory are efficiently managed, working capital requirement can be reduced.
8) Availability of Raw Materials : If the raw materials are easily available in the market and there is no shortage, huge amount need not be blocked in inventories, so it needs less working capital.

Question 11.
‘It is a composition of owner, equity and debt in the capitalisation.’ (MARCH-2013)
i) Identify the above definition
ii) Explain the factor, determining its make up
Answer:
Capital Structure : Capital structure refers to the mix between owners funds and borrowed funds. Owners fund consists of equity share capital,
preference share capital and reserves and surpluses or retained earnings. Borrowed funds can be in the form of loans, debentures, public deposits, etc.
A capital structure will be said to be optimal when . the proportion of debt and equity is such that it results in an increase in the value of the equity share.

Factors Affecting Capital Structure

1) Trading on Equity (Financial Leverage) : It refers to the use of fixed income securities such as debentures and preference capital in the capital structure so as to increase the return of equity shareholders.
2) Stability of Earnings: If the company is earning regular and reasonable income, the management can rely on preference shares or debentures. Otherwise issue of equity shares is recommended.
3) Cost of Debt: A firm’s ability to borrow at lower rate, increases its capacity to employ higher debt.
4) Interest Coverage Ratio (ICR) : The interest . coverage ratio refers to the number of times earnings before interest and taxes of a company covers the interest obligation. Higher the ratio, better is the position of the firm to raise debt.
5) Desire for control : If the management has a desire to control the business, it will prefer preference shares and debentures in capital structure because they have no voting rights.
6) Flexibility: Capital structure should be capable of being adjusted according to the needs of changing conditions.
7) Capital Market Conditions : In depression, debentures are considered good. In a booming situation, issue of shares will be more preferable.
8) Period of Finance: If funds are required for short period, borrowing from bank should be preferred. If funds are required for longer period company can issue shares and debentures.
9) Taxation Policy : interest on loan and debentures is deductible item under the Income Tax Act whereas dividend is not deductible. In order to take advantage of this provision, companies may issue debentures.
10) Legal Requirements : The structure of capital of a company is also influenced by the statutory requirements. For example, Banking Regulation Act, Indian Companies Act, SEBI, etc.

Question 12.
i) What is dividend? (MARCH-2013)
ii) What are the factor, affecting dividend decision?
Answer:
i) Dividend is that part of the profits of a company which is distributed among shareholders.
ii) Dividend Decision : Dividend is that portion of profit which is distributed to shareholders. The decision involved here is how much of the profit earned by company (after paying tax) is to be distributed to the shareholders and how much of it should be retained in the business.
iii) Factors affecting Dividend Decision
1) Stability Earnings : A company having stable earnings can declare higher dividends. Otherwise, pay lower dividend.
2) Stability of Dividends : Companies generally follow a policy of stabilising dividend per share. Dividend per share is not altered if the change in earnings is small.
3) Growth Opportunities: Companies having good growth opportunities retain more money out of their earnings to finance the required investment. In such a case, they can declare dividend at a lower rate.
4) Cash Flow Positions : Availability of enough cash in the company is necessary for declaration of dividend.
5) Shareholders’ Preference : While declaring dividends, managements must keep in mind the preferences of the shareholders in this regard.
6) Taxation Policy : A company is required to pay tax on dividend declared by it. If tax on dividend is higher, company will prefer to pay less by way of dividends whereas if tax rates are lower, then more dividends can be declared by the company.
7) Capital Market: Reputed companies have easy access to the capital market and, therefore, they can pay higher dividends than the smaller companies.
8) Legal Constraints: The companies Act has laid down certain restrictions regarding payment of dividend. No dividend can be paid out of capital.

Question 13.
It is the capital required for meeting the permanent or long term needs of the business. (MARCH-2014)
a) Identify it.
b) Explain factors determining it.
Answer:
i) Fixed capital
ii) Fixed Capital : Fixed capital refers to the capital needed for the the acquisition of fixed assets to be used for a longer period.
Factors affecting Fixed Capital
1) Nature of Business : A trading concern needs lower investment in fixed assets compared with a manufacturing organization.
2) Scale of Operations: An organisation operating on large scale require more fixed capital as compared to an organisation operating on small scale.
3) Choice of Technique : A capital-intensive organisation requires more amount of fixed capital than labour intensive organisations.
4) Technology Upgradation : Organisations using assets which become obsolete faster require more fixed capital as compared to other organisations.
5) Growth Prospects : Higher growth of an organisation generally requires higher investment in fixed assets.
6) Diversification : The firms dealing in number of products (Diversification) requires more investment in fixed capital.
7) Use of Fixed Assets: Companies acquiring fixed assets on hire purchase or lease system require lesser amount as against cash purchases.

Question 14.
“Capital budgeting is an important decision making area for the finance manager.” Explain. (MARCH-2014)
Answer:
a) Capital Budgeting
b) Importance of Financial Planning
1) It ensures adequate funds from various sources.
2) It reduces the uncertainty about the availability of funds.
3) It integrates the financial policies and procedures.
4) It helps the management to eliminate waste of funds and reduce cost.
5) It helps to achieve a balance between the inflow and outflow of funds and ensure liquidity.
6) It serves as the basis of financial control
7) It helps to reduce cost of financing to the minimum.
8) It helps to ensure stability and profitability of business.
9) It makes the firm better prepared to face the future.

Question 15.
a) “No business can run successfully without adequate working capital.” By highlighting this fact:  Narrate the significance of adequacy of working capital.(MARCH-2015)
ii) Identify the important factors influencing working capital of a firm
Answer:
i) Working Capital : Working capital is that portion of capital required for investing in current as¬sets for meeting day to day working of an organization. Current assets can be converted into cash within a period of one year. They provide liquidity to the business.
Working capital is of two types:
1) Gross working capital = Total of current asset
2) Net working capital = Current assets-Current Liabilities
ii) Factors affecting Working Capital

Factors affecting Working Capital

1) Nature of Business : A trading organisation usually needs a smaller amount of working capital as compared to a manufacturing organisation.
2) Scale of Operations: A large scale organisation requires large amount of working capital as compared to the organisations which operate on a lower scale.
3) Business Cycle : In the boom period larger amount of working capital is needed to meet the demand. In case of depression, demand for goods declines so less working capital is required.
4) Seasonal Factors: During peak season demand of a product will be high and thus high working capital will be required as compared to lean season.
5) Production Cycle: Production cycle is the time span between the receipt of raw material and their conversion into finished goods. Working capital requirement is higher in firms with longer processing cycle and lower in firms with shorter processing cycle.
6) Credit Policy : A liberal credit policy results in higher amount of debtors, increasing the requirement of working capital.
7) Operating Efficiency : If cash, debtors and inventory are efficiently managed, working capital requirement can be reduced.
8) Availability of Raw Materials : If the raw materials are easily available in the market and there is no shortage, huge amount need not be blocked in inventories, so it needs less working capital

Question 16.
“Management of fixed capital involves allocation of firms capital to different long term assets or projects.” By highlighting this statement, you are required to :(MARCH-2015)
i) Identify and explain the various factors influencing the fixed capital requirements of a company, and
ii) State the principles to be followed in managing the fixed assets of a company.
Answer:
i) Fixed Capital: Fixed capital refers to the capital needed for the the acquisition of fixed assets to be used fora longer period.
ii) Factors affecting Fixed Capital
1) Nature of Business : A trading concern needs lower investment in fixed assets compared with a manufacturing organization.
2) Scale of Operations: An organisation operating on large scale require more fixed capital as compared to an organisation operating on small scale.
3) Choice of Technique : A capital-intensive organisation requires more amount of fixed capital than labour intensive organisations.
4) Technology Upgradation : Organisations using assets which become obsolete faster require more fixed capital as compared to other organisations.
5) Growth Prospects : Higher growth of an organisation generally requires higher investment in fixed assets.
6) Diversification : The firms dealing in number of products (Diversification) requires more investment in fixed capital.
7) Use of Fixed Assets: Companies acquiring fixed assets on hire purchase or lease system require lesser amount as against cash purchases.

Question 17.
Mr. Ankit is a newly appointed Finance Manager of Neo Ltd., a manufacturing and trading enterprise. His first assignment with the new employer is about allocation of its capital among projects/assests with long-term implications. Explain the various factors he needs to consider in this regard. (MAY-2016)
Answer:
Factors affecting Fixed Capital
1) Nature of Business : A trading concern needs lower investment in fixed assets compared with a manufacturing organization.
2) Scale of Operations: An organisation operating on large scale require more fixed capital as compared to an organisation operating on small scale.
3) Choice of Technique : A capital-intensive organisation requires more amount of fixed capital than labour intensive organisations.
4) Technology Upgradation : Organisations using assets which become obsolete faster require more fixed capital as compared to other organisations.
5) Growth Prospects : Higher growth of an organisation generally requires higher investment in fixed assets.
6) Diversification : The firms dealing in number of products (Diversification) requires more investment in fixed capital.
7) Use of Fixed Assets: Companies acquiring fixed assets on hire purchase or lease system require lesser amount as against cash purchases.

Question 18.
“Overall financial health of a business enterprise is determined by the quality of its financial management.” Justify the above statement with suitable examples. (MAY-2016)
Answer:
Financial Management: Financial Management is concerned with optimal procurement as well as usage of finance. For optimal procurement, different available sources of finance are identified and compared in terms of their costs and associated risks. Financial Management aims at reducing the cost of funds procured and ensuring availability of enough funds whenever required.
Objectives of Financial Management : The primary aim of financial management is to maximise shareholder’s wealth. It means maximisation of the market value of equity shares. It is the responsibility of the company to pay reasonable dividend and also to maximize the value of its shares.
Finance Functions,: The finance function is concerned with three broad decisions which are :

Finance Decision : It relates to the amount of . finance to be raised from various long term sources.
The main sources of funds for a firm are shareholders’ funds (equity capital and the retained earnings) and borrowed funds (debentures or other forms of debt). A firm needs to have a judicious mix of both debt and equity in making financing decisions.
Investment Decision : The investment decision relates to how the firm’s funds are invested in different assets. Investment decision can be long-term or short-term. A long-term investment decision is also called a Capital budgeting decision.
Short-term investment decisions (also called working capital decisions) are concerned with the decisions about the levels of cash, inventory and receivables.
Dividend Decision : Dividend is that portion of profit which is distributed to shareholders. The decision involved here is how much of the profit earned by company (after paying tax) is to be distributed to the shareholders and how much of it should be retained in the business.

Question 19.
Mr.Amitabh has been appointed as the Finance Manager of a newly floated manufacturing and trading concern. Help him in preparing a note addressed to Board of directors citing the relevance of capital structure decision for the concern and any six prominent factors that determine the choice of capital structure. (MAY-2017)
Answer:
Capital Structure : Capital structure refers to the mix between owners funds and borrowed funds. Owners fund consists of equity share capital, preference share capital and reserves and surpluses or retained earnings. Borrowed funds can be in the form of loans, debentures, public deposits, etc.
A capital structure will be said to be optimal when . the proportion of debt and equity is such that it results in an increase in the value of the equity share.
Factors Affecting Capital Structure
1) Trading on Equity (Financial Leverage) : It refers to the use of fixed income securities such as debentures and preference capital in the capital structure so as to increase the return of equity shareholders.
2) Stability of Earnings: If the company is earning regular and reasonable income, the management can rely on preference shares or debentures. Otherwise issue of equity shares is recommended.
3) Cost of Debt: A firm’s ability to borrow at lower rate, increases its capacity to employ higher debt.
4) Interest Coverage Ratio (ICR) : The interest . coverage ratio refers to the number of times
earnings before interest and taxes of a company covers the interest obligation. Higher the ratio, better is the position of the firm to raise debt.
5) Desire for control : If the management has a desire to control the business, it will prefer preference shares and debentures in capital structure because they have no voting rights.
6) Flexibility: Capital structure should be capable of being adjusted according to the needs of changing conditions.
7) Capital Market Conditions : In depression, debentures are considered good. In a booming situation, issue of shares will be more preferable.
8) Period of Finance: If funds are required for short period, borrowing from bank should be preferred. If funds are required for longer period company can issue shares and debentures.
9) Taxation Policy : interest on loan and debentures is deductible item under the Income Tax Act whereas dividend is not deductible. In order to take advantage of this provision, companies may issue debentures.
10) Legal Requirements : The structure of capital of a company is also influenced by the statutory requirements. For example, Banking Regulation Act, Indian Companies Act, SEBI, etc.

Question 20.
The Managing Director of Ellexi Ltd., is not same about the primary objective of financial management and the broad decision making horizons of it. Assist him forgetting a better idea in this regard. (MAY-2017)
Answer:
Financial Management: Financial Management is concerned with optimal procurement as well as usage of finance. For optimal procurement, different available sources of finance are identified and compared in terms of their costs and associated risks. Financial Management aims at reducing the cost of funds procured and ensuring availability of enough funds whenever required.
Objectives of Financial Management : The primary aim of financial management is to maximise shareholder’s wealth. It means maximisation of the market value of equity shares. It is the responsibility of the company to pay reasonable dividend and also to maximize the value of its shares.
Finance Functions,: The finance function is concerned with three broad decisions which are :

Finance Decision : It relates to the amount of . finance to be raised from various long term sources.
The main sources of funds for a firm are shareholders’ funds (equity capital and the retained earnings) and borrowed funds (debentures or other forms of debt). A firm needs to have a judicious mix of both debt and equity in making financing decisions.
Investment Decision : The investment decision relates to how the firm’s funds are invested in different assets. Investment decision can be long-term or short-term. A long-term investment decision is also called a Capital budgeting decision.
Short-term investment decisions (also called working capital decisions) are concerned with the decisions about the levels of cash, inventory and receivables.
Dividend Decision : Dividend is that portion of profit which is distributed to shareholders. The decision involved here is how much of the profit earned by company (after paying tax) is to be distributed to the shareholders and how much of it should be retained in the business.

Kerala State Board New Syllabus Plus Two Business Studies Chapter Wise Previous Questions and Answers Chapter 8 Controlling.

Kerala Plus Two Business Studies Chapter Wise Previous Questions Chapter 8 Controlling

Plus Two Business Studies Controlling 1 Mark Important Questions

Question 1.
Controlling function of management ensures events to conform to _______ (MAY-2009)
a) Performance
b) Standards
c) Future activites
d) Deviations
Answer:
b) Standards

Question 2.
In the controlling process only those deviations from standard which seem exceptionally are brought to the attention of top management. Identify the relevant principle behind this. (MAY-2010)
Answer:
Management by exception

Question 3.
Find the odd one. (MARCH-2011)
a) Bill of Exchange
b) Treasury Bill
c) Debenture
d) Commercial Paper
Answer:
c) Debenture

Question 4.
________ is the criterion against which actual performance is measured. (MARCH-2012)
Answer:
Standard

Question 5.
Identify the one which is not a feature of controlling function. (MAY-2013)
a) Authority
b) Supervision
c) Forward locking
d) Continuous process
Answer:
Authority

Question 6.
The first step in control process is ______ (MARCH-2014)
a) Corrective action
b) Fixing standard
c) Analysing deviation
d) Measuring actual performance
Answer:
Fixing standard

Question 7.
Identify the management function which denotes th process of ensuring that actual activities conform to planned activities. (MARCH-2015)
Answer:
Controlling

Question 8.
“Control implies the measurement of accomplishment against the standard and the correction of deviations to assure attainment of objectives according to plans’’ is a definition given by (MARCH-2016)
a) Koontz & O Donnel
b) Henry Fayol
c) F.W. Taylor
d) Oliversheldon
Answer:
a). Koontz & O Donnel

Question 9.
Pick out a modern technique of managerial control from the following: (MAY-2016)
a) Statistical reports
b) MIS
c) Breakeven analysis
d) Budgetary control
Answer:
b) MIS (Management Information System)

Question 10.
“Without control system in place, the best of plans can go awry.” Substantiate. (SAY-2016)
Answer:
i) It helps to accomplish organisational goals.
ii) Controlling helps to judge accuracy of standards.
iii) Controlling creates an atmosphere of order and discipline in the organisation.

Plus Two Business Studies Controlling 2 Marks Important Questions

Question 1.
The various steps involved in the control process are given below. Arrange them in their sequence. (SAY-2011)
a) Comparison of performance with the standards.
b) Taking corrective action
c) Measurement of performance
d) Establishment of standards
Answer:
Establishment of standards, Measurement of performance, Comparison of performance with standards, Taking corrective action.

Question 2.
Devu, the Manager of a business unit opined that ‘control without’, planning is meaningless.’ (MARCH-2014)
a) Do you agree with Devu?
b) State reason.
Answer:
a) Yes
b) 1) Planning and control are interdependent and
inseparable functions of management.
2) Planning is a prerequisite for controlling.
3) Planning initiates the process of management and controlling complete the process.
4) Planning is prescriptive where as controlling is evaluative.

Plus Two Business Studies Controlling 3 Marks Important Questions

Question 1.
“If you try to control everything you may end up by controlling nothing.” (FEBRUARY – 2009)
a) Do you agree with the statement?
b) Why?
Answer:
a) Yes. The principle is Management by exception
b) According to this principle, only those deviations which are exceptionally high and which cannot be easily solved by lower level management alone, should be reported to top management.

Question 2.
Mr. Thomas is working as the Marketing Manager in a pharmaceutical company. The target performance fixed by the top management for the Marketing Man-ager is Rs. 40 lakhs sales in a month. During the month of January, 2009 he can make sales of Rs. 32 lakhs only.
a) Which management function is to be applied here? (MAY-2009)
b) Name the steps to be followed while performing this function.
Answer:
Controlling
1) Setting performance standards
2) Measurement of actual performance
3) Comparison of actual performance with standards
4) Analysing deviations
5) Taking corrective action

Question 3.
Just as planning, controlling should also be primarily a forward looking function.” To what extent, this statement is true?(FEBRUARY-2010)
Answer:
Controlling is a forward looking function – However, Like planning, control is also forward looking. Con¬trolling provides valuable information forfuture planning. Corrective action in controlling helps to improve the future performance. Thus controlling is a forward looking.

Question 4.
“Planning without control is a ship without a captain.” (MAY-2011)
a) Do you agree with this statement?
b) Establish the relationship between planning and control.
Answer:
a) yes.
b) 1) Planning and control are interdependent and inseparable functions of management.
2) Planning is a prerequisite for controlling.
3) Planning initiates the process of management and controlling complete the process.
4) Planning is prescriptive where as controlling is evaluative.

Question 5.
An essential part of the control process is corrective actions as and when needed – State your opinion (MARCH-2012)
Answer:
Meaning : Controlling is the process of ensuring that actual performance conform to planned performance. It also ensures that an organisation’s resources are being used effectively for the achievement of predetermined goals. So controlling is a goal oriented function.The controlling functions measure actual performance against standards, find out the deviations, analyse the causes of such deviations and take corrective actions.

Question 6.
The following table shows the details of defective per 1000 units of tooth brush during 4 months (MAY-2012)

The supervisor reported only the defective of Jan.2011 to top management. Explain the underlying principle behind this practice.
Answer:
Management by Exception

Question 7.
Mr. Salam, the new manager of Rubco Ltd., believes that controlling function should concentrate on Key Result Areas, do you agree with Mr. Salam? Sub-stantiate. (MARCH-2016)
Answer:
Yes., I agree with Salam
Controlling function should concentrate on key result areas. This is known as control by exception or management by exception. (MBE)

Question 8.
A system of control pre-supposes the existence of certain standard of performance which eventually are provided by planning. In the light of the above, establish that planning and controlling are inter-related. (MAY-2017)
Answer:
Relationship between Planning and Controlling
1) Planning and control are interdependent and inseparable functions of management.
2) Planning is a prerequisite for controlling.
3) Planning initiates the process of management and controlling complete the process.
4) Planning is prescriptive where as controlling is evaluative.
5) Planning and controlling are both backward looking as well as forward looking functions.
6) Planning based on facts makes controlling easier and effective

Plus Two Business Studies Controlling 4 Marks Important Questions

Question 1.
Planning without control is a ship without a captain. Do you agree with this statement? Establish the relationship between planning and control. (MAY-2010)
Answer:
a) Yes. Planning and control, both are complementary.
b) Relationship between Planning and Controlling
1) Planning and control are interdependent and inseparable functions of management.
2) Planning is a prerequisite for controlling.
3) Planning initiates the process of management and controlling complete the process.
4) Planning is prescriptive where as controlling is evaluative.
5) Planning and controlling are both backward looking as well as forward looking functions.
6) Planning based on facts makes controlling easier and effective

Question 2.
Prepare a seminar paper in ‘Steps in Control Process (MARCH-2013)
Answer:
Controlling Process : Controlling is a systematic process involving the following steps.
1. Setting performance standards
2. Measurement of actual performance
3. Comparison of actual performance with standards
4. Analysing deviations
5. Taking corrective action
1. Setting Performance Standards : Standards are the criteria against which actual performance would be measured. Standards can be set in both quantitative as well as qualitative terms.
2. Measurement of Actual Performance : After establishing standards, the next step is measure-ment of actual performance. Performance should be measured in an objective and reliable manner.
3. Comparing Actual Performance with Standards : This step involves comparison of actual performance with the standard. Such comparison will reveal the deviation between actual and desired results.
4. Analysing Deviations: The deviations from the standards are assessed and analysed to identify the causes of deviations.
5. Taking Corrective Action: The final step in the controlling process is taking corrective action. No corrective action is required when the deviations are within the acceptable limits.

Question 3.
“Planning and Corrtffilling are inseparable Siamese twins of management.” Why? (MARCH-2015)
Answer:
Relationship between Planning and Controlling
1) Planning and control are interdependent and inseparable functions of management.
2) Planning is a prerequisite for controlling.
3) Planning initiates the process of management and controlling complete the process.
4) Planning is prescriptive where as controlling is evaluative.
5) Planning and controlling are both backward looking as well as forward looking functions.
6) Planning based on facts makes controlling easier and effective.

Question 4.
Identify the idea behind the diagram and explain its importance. (MARCH-2017)

Answer:
a) Controlling
b) Importance of Controlling
1) Accomplishing organizational goals : The controlling function measures progress towards the organizational goals and brings to light the deviations, if any, and indicates corrective action.
2) Judging accuracy of standards: A good control system enables management to verify whether the standards set are accurate and objective.
3) Making efficient use of resources : By exercising control, a manager seeks to reduce wastage of resources.

Plus Two Business Studies Controlling 5 Marks Important Questions

Question 1.
Analyze the following activities. (MARCH-2009)
1) Measurement of performance.
2) Taking corrective action.
3) Comparing actual performance with standards.
4) Establishments of standards.
a) Identify the management function.
b) Arrange it in correct order as it takes place in an organisation.
c) Explain the relationship of this function with planning
Answer:
a) Controlling
b) 1) Establishments of standards
2) Measurement of performance
3) Comparing actual performance with standards
4) Taking corrective action

Question 2.
Just as traffic signals are essential to make our roads accident free, management controls are necessary forthe smooth functioning of the organisation. (MARCH-2010)
a) State your opinion about this statement.
b) Briefly explain the steps in control process.
Answer:
a) Yes. Control is necessary for the smooth func¬tioning of the organization.

Question 3.
“This management function is similar to thermostat in refrigerator, which compares actual temperature with the standard and acts when there is deviations.” (MARCH-2011)
a) Which management function is referred here?
b) Write the process involved in it.
Answer:
a) Controlling
b) Controlling Process : Controlling is a systematic process involving the following steps.
1. Setting performance standards
2. Measurement of actual performance
3. Comparison of actual performance with standards
4. Analysing deviations
5. Taking corrective action
1. Setting Performance Standards : Standards are the criteria against which actual performance would be measured. Standards can be set in both quantitative as well as qualitative terms.
2. Measurement of Actual Performance : After establishing standards, the next step is measure-ment of actual performance. Performance should be measured in an objective and reliable manner.
3. Comparing Actual Performance with Standards : This step involves comparison of actual performance with the standard. Such comparison will reveal the deviation between actual and desired results.
4. Analysing Deviations: The deviations from the standards are assessed and analysed to identify the causes of deviations.
5. Taking Corrective Action: The final step in the controlling process is taking corrective action. No corrective action is required when the deviations are within the acceptable limits.

Question 4.
The sales report of Usha Fans Ltd. for the last six months is given below. The target fixed for each month was 2000 fans. In the last 3 months the sales manager of the company was on leave for personal reasons Just as traffic signals are essential to make our roads accident free, management controls are necessary forthe smooth functioning of the organisation. (MAY-2013)

a) Identify the management function in the absence of which the production declined.
b) State the steps to be taken by the management to achieve the target.
Answer:
a) Controlling
b) Controlling Process : Controlling is a systematic process involving the following steps.
1. Setting performance standards
2. Measurement of actual performance
3. Comparison of actual performance with standards
4. Analysing deviations
5. Taking corrective action
1. Setting Performance Standards : Standards are the criteria against which actual performance would be measured. Standards can be set in both quantitative as well as qualitative terms.
2. Measurement of Actual Performance : After establishing standards, the next step is measure-ment of actual performance. Performance should be measured in an objective and reliable manner.
3. Comparing Actual Performance with Standards : This step involves comparison of actual performance with the standard. Such comparison will reveal the deviation between actual and desired results.
4. Analysing Deviations: The deviations from the standards are assessed and analysed to identify the causes of deviations.
5. Taking Corrective Action: The final step in the controlling process is taking corrective action. No corrective action is required when the deviations are within acceptable limits.

Kerala State Board New Syllabus Plus Two Business Studies Chapter Wise Previous Questions and Answers Chapter 7 Directing.

Kerala Plus Two Business Studies Chapter Wise Previous Questions Chapter 7 Directing

Plus Two Business Studies Directing 1 Mark Important Questions

Question 1.
Mr. Abhinav has been working as Marketing Manager of an electrical components manufacturing unitforthe last five years. Mr. Suresh is working as an assistant in the same section. Suresh made a complaint about his junior to the Marketing Manager. Mention the direction in which communication flows. (MARCH-2009)
Answer:
Upward communication

Question 2.
Suggest a suitable term to describe the network of informal communication which lead to ________ (February-2010)
Answer:
Grapevine communication

Question 3.
Mr.Praveen, the production manager of ABC Ltd, always encourages his subordinates to work hard. Which management term is used to refer Praveen’s activity? (MARCH -2010)
Answer:
Motivation

Question 4.
Identify the term used to refer to the ability of a person to look at things from other’s point of view. (MARCH-2010)
a) empathy
b) responsibility
c) sympathy
d) authority
Answer:
Empathy

Question 5.
Observe the following and pick out and odd one. Justify your answer. (MAY-2010)
a) Supervision
b) Control
c) Motivation
d) Leadership
Answer:
Control

Question 6.
Maslow defines this need as “The desire to become everything one is capable of becoming.” (MARCH-2012)
a) Social need
b) Self actualization need
c) Safety need
d) Esteem need
Answer:
Self actualization need

Question 7.
“I am always with the subordinates, giving them direct and immediate guidance and controlling them in the performance of their tasks”. Who am I? (MAY-2012)
Answer:
Supervision

Question 8.
“Desire to become everything one is capable to becoming” Which is the need that Maslow mean here? (MAY-2012)
Answer:
Self Actualisation Needs

Question 9.
Ability of a leader to look things from others point of view is (MARCH-2013)
a) Empathy
b) Sympathy
c) Responsibility
d) Authority
Answer:
a) Empathy

Question 10.
Identify the communication network in the following diagram. (MARCH-2013)

a) wheel pattern
b) Chain pattern
c) Circle pattern
d) Ladder pattern
Answer:
Chain pattern

Question 11.
Which among the following is not an example of downward communication? (MAY-2013)
a) Letters
b) Memos
c) Complaints
d) Orders
Answer:
Complaints

Question 12.
Who among the following suggested need hierarchy theory? . (MARCH-2014)
a) Henry Fayol
b) F.W. Taylor
c) Abraham Maslow
d) Peter Drucker
Answer:
Abraham Maslow

Question 13.
Which one of the following is not an element of directing? (MAY-2016)
a) Planning
b) Supervision
c) Leadership
d) Communication
Answer:
a) Planning

Question 14.
Which one of the following is not a semantic barrier of communication? (MAY-2016)
a) Technical Jargons
b) Gesture decoding
c) Badly expressed messages
d) Status
Answer:
d) Status

Question 15.
Autonomy status requirement of an individual is a factor, under which category of needs identified by Abraham Maslow: (MAY-2017)
a) Affiliation
b) Self Actualisation
c) Esteem needs
d) Safety
Answer:
c) Esteem needs

Question 16.
A democratic leader is otherwise known as: (MAY-2017)
a) Participative leader
b) Free-rein leader
c) Autocratic leader
d) Laissezfaire leader
Answer:
a) Participative leader

Plus Two Business Studies Directing 2 Marks Important Questions

Question 1.
Shajahan, one of your classmates, asks you why informal communication is also known as ‘grapevine’? What explanation will you give to shajahan? (MARCH-2009)
Answer:
The network or pathway of Informal communication is known as grapevine communication. Because the origin and direction of flow of the informal mes-sages cannot be easily traced.

Question 2.
“The sales executive of marketing department communicates with the manager of Production Department about the quality of products.
a) What type of communication takes place here? (MAY-2012)
b) If the sales executive communicates with his boss, ie. marketing manager, what type of communication will be that?
Answer:
a) Diagonal communication
b) Upward communication.

Question 3.
The newly established Technical University in Kerala wants to appoint 100 data entry operators. (MARCH-2015)
a) Suggest a suitable testto be conducted to select the candidates.
b) Justify your answer.
Answer:
a) Performance test.
b) These tests are conducted to assess the actual performance and ability to do the particular job.

Question 4.
Observe the following methods of communication (MARCH-2015)
i) Upward communication
ii) Informal communication
iii) Horizontal communication
iv) Diagonal commyfiication
a) Spot the odd orfe
b) Justify your answer.
Answer:
a) Informal communication
b) Others are methods or types of formal communication.

Question 5.
Prepare a pyramidal diagram showing Maslow’s Need Hierarchy Theory. (MARCH-2016)
Answer:
Maslow’s Need Hierarchy Theory

Question 6.
Diagrammatically present communication process involved in a telephonic conversation between X and Y. (MARCH-2017)
Answer:

Plus Two Business Studies Directing 3 Marks Important Questions

Question 1.
Put a right word in the circle in the picture given be-low. Explain the meaning of that term. (MARCH-2009)

Answer:
Directing: Directing refers to the process of instruct-ing, guiding, counselling, motivating and leading people in the organisation to achieve its objectives.

Question 2.
Identify the communication pattern. Also explain its feature. (MARCH-2011)

Answer:
In wheel network, all subordinates under one superior communicate through him only. The subordinates are not allowed to communicate among themselves.

Question 3.
Differentiate between formal and informal communication. (MAY-2016)
Answer:

Question 4.
Organisation keen on developing effective communication should adopt suitable measures to overcome the barriers. Suggest any six measures to overcome the barriers of communication. (MAY-2017)
Answer:
Measures to overcome barriers to communication
1) The entire problem to be communicated should be studied in depth, analysed and stated in such a mannerthat it is clearly conveyed to subordinates.
2) Communication must be according to the education and understanding levels of subordinates.
3) Before communicating.the message, it is better to consult with others.
4) The contents of the message, tone, language used, etc. are important aspects of effective communication.
5) While conveying message to others, it is better to know the interests and needs of the receiver.
6) Ensure proper feedback.
7) Manager should be a good listener.

Plus Two Business Studies Directing 4 Marks Important Questions

Question 1.
Mr.Ramesh is the newly appointed Branch Manager of a bank in the town. There are 40 employees in the branch. He is very active and enthusiastic in the duties. State any four qualities should he acquire to become a good leader.(MAY-2011)
Answer:
Qualities of Good Leader
1) Physical Features : Physical features like height, weight, health, appearance determine the physical personality of a leader.
2) Knowledge: A good leader should have required knowledge and competence.
3) Honesty: A leader should possess high level of honesty.
4) Initiative : A leader should have courage and initiative.
5) Communication Skills : A leader should have the capacity to clearly explain the ideas.
6) Motivation Skills : The leader should have the ability to motivate the subordinates by satisfying their needs.
7) Self Confidence: A leader should have high level of self confidence.

Question 2.
The workers of the catering department of Akshaya Food Industries, Thrissur whole heartedly accepted Mr.Vivek, the production Manager, as their leader. Explain the qualitieswhich make Mr.Vivek, a good leader. (MAY-2012)
Answer:
Qualities of Good Leader
1) Physical Features : Physical features like height, weight, health, appearance determine the physical personality of a leader.
2) Knowledge: A good leader should have required knowledge and competence.
3) Honesty: A leader should possess high level of honesty.
4) Initiative : A leader should have courage and initiative.
5) Communication Skills : A leader should have the capacity to clearly explain the ideas.
6) Motivation Skills : The leader should have the ability to motivate the subordinates by satisfying their needs.
7) Self Confidence: A leader should have high level of self confidence.

Question 3.
“It is the process of stimulating subordinates to act for accomplishing desired goals.” (MARCH-2014)
a) Identified it.
b) State its importance in business organisation.
Answer:
a) Motivation
b) Importance of Motivation
1) Motivation helps to improve performance levels of employees as well as the organisation.
2) Motivation helps to change negative attitudes of employee to positive attitudes.
3) Motivation helps to reduce employee turnover.
4) Motivation helps to reduce absenteeism in the organisation.
5) Motivation helps managers to introduce changes smoothly

Question 4.
Suppose you are appointed as Marketing Manager in S.K.Industries.State different types of communications possible here. Explain each with its requirements. (MARCH-2014)
Answer:
Formal Communication : Communication through the official chain of command is called formal communication. It flows through the scalar chain of authority. Formal communication may be of two types:
1) Vertical Communication
2) Horizontal Communication
Vertical Communication: Vertical communication flows vertically i.e., upwards or downwards through formal communication channels.
a) Downward Communication : Downward communication refers to flow of communication from a superior to subordinate. E.g. Notices, circulars, memos, reports, etc.
b) Upward Communication : It refers to flow of communication from a subordinate to superior. E.g. application for leave, submission of progress report, suggestions, complaints, etc.
Horizontal or Lateral communication : The flow of communication between persons holding position at the same level of the organisation is known as horizontal communication.

Question 5.
“Effectiveness of leadership depends upon the qualities of a leader.” Explain any four qualities of a leader. (MARCH-2015)
Answer:
Qualities of Good Leader
1) Physical Features : Physical features like height, weight, health, appearance determine the physical personality of a leader.
2) Knowledge: A good leader should have required knowledge and competence.
3) Honesty: A leader should possess high level of honesty.
4) Initiative : A leader should have courage and initiative.
5) Communication Skills : A leader should have the capacity to clearly explain the ideas.
6) Motivation Skills : The leader should have the ability to motivate the subordinates by satisfying their needs.
7) Self Confidence: A leader should have high level of self confidence.

Plus Two Business Studies Directing 5 Marks Important Questions

Question 1.
‘A good communication system is necessary for effective coordination of activities. But there are cer¬tain factors which disrupt the flow of information and communication process. Discuss. (MAY-2009)
a) Briefly explain the factors which disrupt the proper flow of information and communication process.
Answer:
 Barriers to Communication
1) Semantic barriers : Semantic barriers are concerned with problems and obstructions in the process of encoding and decoding of message into words or impressions. Semantic barriers are:-
a) Badly expressed message : The badly expressed messages may be an account of inadequate vocabulary, usage of wrong words, omission of needed words, etc.
b) Symbols with different meanings : People may interpret the same message differently depending upon their attitude, education, social and cultural backgrounds.
c) Faulty Translations : If the translator is not proficient with both the languages, mistakes may arise causing different meanings to the communication.
d) Technical jargon : Technical words may not be understood by the workers.
2) Psychological Barriers : Emotional or psychological factors act as barriers to communicators. Psychological barriers are:
a) Premature evaluation : People evaluate the meaning of message before the sender completes his message.
b) Lack of attention : The preoccupied mind of receiver and the resultant non-listening of message acts as a major psychological barrier.
c) Loss by transmission and poor retention : When communication passes through various levels, there is a chance of distortion of the message.
d) Distrust: Distrust between communicator and communicatee act as a barrier.
3) Organisational Barriers
Organisation’s policies, Number of levels of management, rigid rules, etc,, are the examples . of organisational barriers.
a) Organisational policy: If the organisational policy is complex, it restricts the free flow of communication.
b) Rules and regulations : Rigid Rules and regulations may be a hurdle to communication
c) Status : Status differences of people in communication chain also adversely affect the effectiveness of communication.
d) Complex organisational structure: If there are number of managerial levels, communication gets delayed and distorted.
4) Personal barriers
It includes fear of challenge to authority, lack of confidence, lack of incentives, etc.
a) Fear of challenge to authority: If a superior perceives that a particular communication may affect his authority, then he withhold such communication.
b) Lack of confidence: If superiors do not have confidence on the competency of subordinates*tPiey may not seek their advice.
c) Lack of incentives: If there is no motivation or incentive for communication, subordinates may not take initiative to communicate.

Question 2.
Biju is a newly appointed manager of Niranjan Ltd, where 40 workers are working. He is active and enthusiastic in his duties. What qualities should be possess to become a good leader. (February-2010)
Answer:
Qualities of Good Leader
1) Physical Features : Physical features like height, weight, health, appearance determine the physical personality of a leader.
2) Knowledge: A good leader should have required knowledge and competence.
3) Honesty: A leader should possess high level of honesty.
4) Initiative : A leader should have courage and initiative.
5) Communication Skills : A leader should have the capacity to clearly explain the ideas.
6) Motivation Skills : The leader should have the ability to motivate the subordinates by satisfying their needs.
7) Self Confidence: A leader should have high level of self confidence.

Question 3.
The Manager of Unitech Software Solutions, Mr. Vipin found that majority of his employees are wasting their time unless somebody oversees their activities. (MARCH-2010)
a) How can the Manager solve this problem?
b) Explain the management term related to this and also explain its importance.
Answer:
a) The manager can solve the problem by appointing the supervisors.
b) 1) A good supervisor acts as a guide, friend and philosopher to the workers.
2) Supervisor acts as a link between workers and management. It helps to avoid misunderstandings and conflicts among the management and workers.
3) Supervisor provides good On the Job training to the workers and employees.
4) A supervisor with good leadership qualities can build up high morale among workers.

Question 4.
The success of an enterprise highly depends on effective leadership. (MAY-2010)
a) Do you agree with this statement?
b) State any three qualities of a good leader.
Answer:
a) Yes.
b) Qualities of Good Leader
1) Physical Features : Physical features like height, weight, health, appearance determine the physical personality of a leader.
2) Knowledge: A good leader should have required knowledge and competence.
3) Honesty: A leader should possess high level of honesty.
4) Initiative : A leader should have courage and initiative.
5) Communication Skills : A leader should have the capacity to clearly explain the ideas.
6) Motivation Skills : The leader should have the ability to motivate the subordinates by satisfying their needs.
7) Self Confidence: A leader should have high level of self confidence.

Question 5.
“All organizational facility will become unproductive in the absence of Motivated People.” Explain. (MARCH-2011)
Answer:
Importance of Motivation
1) Motivation helps to improve performance levels of employees as well as the organisation.
2) Motivation helps to change negative attitudes of employee to positive attitudes.
3) Motivation helps to reduce employee turnover.
4) Motivation helps to reduce absenteeism in the organisation.
5) Motivation helps managers to introduce changes smoothly.

Question 6.
Identify the name of the famous psychologist who developed the need hierarchy theory. Explain the theory with the help of a diagram. (MARCH-2012)
Answer:
a) Abraham Maslow
b) Maslow’s Need Hierarchy Theory of Motivation
Abraham Maslow’s Need Hierarchy Theory is considered fundamental to understanding of motivation. His theory was based on human needs. Various human needs are:
1) Physiological Needs : These are the basic needs which include food, clothes, hunger, thirst,shelter, sleep and sex. If physiological needs are not satisfied, the higher level needs will not be emerged.
2) Safety/Security Needs : These needs provide security and protection from physical and emotional harm. These needs include job security, stability of income, pension plans, etc.
3) Social Needs : These needs refer to affection, sense of belongingness, acceptance and friendship. Informal organisation helps to satisfy the social needs of an individual.
4) Esteem Needs : These include factors such as self-respect, autonomy status, recognition and attention.
5) Self Actualisation Needs: It is the highest level of need in the hierarchy. Self actualisation is the need to maximise one’s potential, whatever it may be. These needs include growth, self-fulfilment and achievement of goals

Question 7.
Amal is the newly elected leader of Seven Hills School. Suggest the qualities he should have to become a good leader.(MARCH-2013)
Answer:
Qualities of Good Leader
1) Physical Features : Physical features like height, weight, health, appearance determine the physical personality of a leader.
2) Knowledge: A good leader should have required knowledge and competence.
3) Honesty: A leader should possess high level of honesty.
4) Initiative : A leader should have courage and initiative.
5) Communication Skills : A leader should have the capacity to clearly explain the ideas.
6) Motivation Skills : The leader should have the ability to motivate the subordinates by satisfying their needs.
7) Self Confidence: A leader should have high level of self confidence.

Question 8.
Mr. Ram Mohan is a newly appointed MBA in the marketing Department of a firm. There are 50 7 employees under him and he is very active and enthusiastic in his duties. State the qualities should he acquire to become a good leader. (MAY-2013)
Answer:
Qualities of Good Leader
1) Physical Features : Physical features like height, weight, health, appearance determine the physical personality of a leader.
2) Knowledge: A good leader should have required knowledge and competence.
3) Honesty: A leader should possess high level of honesty.
4) Initiative : A leader should have courage and initiative.
5) Communication Skills : A leader should have the capacity to clearly explain the ideas.
6) Motivation Skills : The leader should have the ability to motivate the subordinates by satisfying their needs.
7) Self Confidence: A leader should have high level of self confidence.

Question 9.
Explain briefly the various qualities to be possessed by a good leader. (MAY-2016)
Answer:
Qualities of Good Leader
1) Physical Features : Physical features like height, weight, health, appearance determine the physical personality of a leader.
2) Knowledge: A good leader should have required knowledge and competence.
3) Honesty: A leader should possess high level of honesty.
4) Initiative : A leader should have courage and initiative.
5) Communication Skills : A leader should have the capacity to clearly explain the ideas.
6) Motivation Skills : The leader should have the ability to motivate the subordinates by satisfying their needs.
7) Self Confidence: A leader should have high level of self confidence.

Question 10.
Explain the term directing in the context of management.Briefly explain the salient principles of directing. (MAY-2017)
Answer:
a) Meaning : Directing refers to the process of in¬structing, guiding, counselling, motivating and leading people in the organisation to achieve its objectives.
b) Principles of Directing
1) Maximum Individual Contribution: This principle emphasises that directing techniques must help every individual in the organization to contribute to his maximum potential for achievement of organisational objectives.
2) Harmony of Objectives : The objectives of individual and organization must be in harmony with each other.
3) Unity of Command : This principle insists that a person in the organisation should receive instructions from one superior only.
4) Appropriateness of Direction Technique : According to this principle, appropriate motivational and leadership techniques should be used while directing the people.
5) Managerial Communication : Effective managerial communication across all the levels in the organisation makes direction effective.
6) Use of informal organization : Managers must make use of informal structure in the formal organisation forgetting correct and real feedback.
7) Leadership : While directing the subordinates, managers should exercise good leadership.
8) Follow through : Managers must continuously review whether the instructions are being understood and followed by the employees or not.

Plus Two Business Studies Directing 8 Marks Important Questions

Question 1.
“Incentives contribute to the performance of the employees.”(MAY-2013)
a) Do you agree with this statement?
b) Justify your view points.
c) Mention the various monetary incentives
Answer:
a) Yes
b) Financial and Non-Financial Incentives: Incentive means all measures which are used to motivate people to improve performance. These incentives maybe-
Financial Incentives: Financial incentives refer to incentives which are in direct monetary form or measurable in monetary term and serve to motivate people for better performance. Financial incentives are:
a) Pay and allowances : It includes basic pay, dearness allowances and other allowances.
b) Commission: Underthis system, a sales person is guaranteed a minimum wage as well as commission on sales. A commission plan motivates him to work better.
c) Bonus : Bonus is an incentive offered over and above the wages/salary to the employees.
d) Profit Sharing: Profit sharing is meant to provide a share to employees in the profits of the organisation.
e) Co-partnership/ Stock option : Under these incentive schemes, employees are offered company shares at a price which is lower than market price.
f) Retirement Benefits : Several retirement benefits such as provident fund,, pension, and gratuity provide financial security to employees after their retirement.
g) Perquisites: It includes car allowance housing, medical aid, and education to the children, etc., over and above the salary.

Question 2.
a) “It is a process of instructing, guiding, motivating and leading people in the organisation to achieve its objectives.”
Identify the definition and briefly explain the elements of it.(MARCH-2016)
1) Supervision 2) Motivation
3) Leadership 4) Communication
Answer:

Supervision : Supervision means overseeing the subordinates at work. Supervision is instructing, guiding and controlling the workforce with a view to see that they are working according to plans, policies, programmes and instructions.
Motivation: Motivation is the process of stimulating people to action to accomplish desired goals. Motivation depends upon satisfying needs of people. Leadership : Leadership can be defined as the process of influencing the behaviour of employees at work towards the accomplishment of organisational objectives.
Communication: Communication may be defined as an exchange of facts, ideas, opinions or emotions between two or more persons to create mutual understanding.

Question 3.
b) What do you mean by incentive? Briefly explain different types of incentives. (MARCH-2016)
Answer:
Financial and Non-Financial Incentives : Incen¬tive means all measures which are used to motivate people to improve performance. These incentives may be –
Financial Incentives : Financial incentives refer to people for better performance. Financial incentives . are:
a) Pay and allowances : It includes basic pay, dearness allowances and other allowances.
b) Commission: Urttferthis system, a sales person is guaranteed a minimum wage as well as commission on sales. A commission plan motivates him to work better.
Non-Financial Incentives: Incentives which are not measurable in terms of money are called Non-Financial Incentives. These incentives are essential forsatisfying psychological, social and emotional needs. Some of the important non-financial incentives are:
a) Status: status means ranking of positions in the organisation. Psychological, social and esteem needs of an individual are satisfied by status given to their job.
b) Organisational Climate : It includes individuals autonomy, reward orientation, consideration to employees, etc. These characteristics influence the behaviour of individuals in the organization

Question 4.
Pecuniary and non-pecuniary incentives are used to motivate employees to improve their performance. Explain the pecuniary and non-peruniary incentives used by organizations now-a-days. (MARCH-2017)
Answer:
Financial Incentives: Financial incentives refer to incentives which are in direct monetary form or measurable in monetary term and serve to motivate people for better performance. Financial incentives are:
a) Pay and allowances : It includes basic pay, dearness allowances and other allowances.
b) Commission: Underthis system, a sales person is guaranteed a minimum wage as well as commission on sales. A commission plan motivates him to work better.
c) Bonus : Bonus is an incentive offered over and above the wages/salary to the employees.
d) Profit Sharing: Profit sharing is meant to provide a share to employees in the profits of the organisation.
e) Co-partnership/ Stock option : Under these incentive schemes, employees are offered company shares at a price which is lower than market price.
f) Retirement Benefits : Several retirement benefits such as provident fund,, pension, and gratuity provide financial security to employees after their retirement.
g) Perquisites: It includes car allowance housing, medical aid, and education to the children, etc., over and above the salary.
Non-Financial Incentives: Incentives which are not measurable in Terms of money are called Non- Financial Incentives. These incentives are essential for satisfying physiological, social and emotional needs. Some of the important non-financial incentives are:
a) Status: status means ranking of positions in the organisation. Physiological, social and esteem needs of an individual are satisfied by status given to their job.
b) Organisational Climate : It includes individual autonomy, reward orientation, consideration to employees, etc. These characteristics influence the behaviour of individuals in the organization.
c) Career Advancement Opportunity: Managers should provide opportunity to employees to improve their skills and be promoted to the higher level jobs.
d) Job Enrichment: It is a method of motivating employee by making the task to be performed by him more interesting and challenging.
e) Employee Recognition Programmes : It includes Congratulating the employee for good performance, Displaying on the notice board about the achievement of employee, installing award or certificate for best performance and Distributing mementos or complimentaries etc.
f) Employee Participation : It means involving employees in decision making of the issues related to them.

Question 5.
What is leadership? What qualities should a leader possess to become a successful one? Briefly ex¬plain its different styles. (MARCH-2017)
Answer:
Leadership : Leadership can be defined as the process of influencing the behaviour of employees at work towards the accomplishment of organisational objectives.
Qualities of Good Leader
1) Physical Features : Physical features like height, weight, health, appearance determine the physical personality of a leader.
2) Knowledge: A good leader should have required knowledge and competence.
3) Honesty: A leader should possess high level of honesty.
4) Initiative : A leader should have courage and initiative.
5) Communication Skills : A leader should have the capacity to clearly explain the ideas.
6) Motivation Skills : The leader should have the ability to motivate the subordinates by satisfying their needs.
7) Self Confidence: A leader should have high level of self confidence.
Leadership Style
1) Autocratic or Authoritarian Leader : An autocratic leader gives orders and expects his subordinates to obey those orders. Here communication is only one-way with the subordinate.
2) Democratic or Participative Leader : A democratic leader encourages subordinates to participate in decision-making. They respect the other’s opinion and support subordinates to perform their duties.
3) Laissez Faire or Free-rein Leader: Here the followers are given a high degree of independence to formulate their own objectives and ways to achieve them.

Kerala State Board New Syllabus Plus Two Business Studies Chapter Wise Previous Questions and Answers Chapter 6 Staffing.

Kerala Plus Two Business Studies Chapter Wise Previous Questions Chapter 6 Staffing

Plus Two Business Studies Staffing 1 Mark Important Questions

Question 1.
Mr. Sajan is working as Human Resource Manager of an automobile manufacturing unit. One of the following combinations represents his functions. Identify it. (MARCH-2009)
a) Recruitment, branding, dividend decision
b) Selection, training, recruitment
c) Selection, recruitment, marketing
d) Training, pricing, promotion
Answer:
Selection, training, recruitment

Question 2.
Which one of the following functions is not related with staffing function? (MAY-2009)
a) Recruitment of employees
b) Selection of employees
c) Compensation of employees
d) Motivation of employees
Answer:
Motivation of employees

Question 3.
Observe the following sources of recruitments: (MAY-2011)
i) Advertisement
ii) Promotion
iii) Employment Exchange
iv) College Campus
a) Spot the odd one
b) Give justfication to your answer.
Answer:
Promotion. All others are external sources of recruitment.

Question 4.
_________ is the non-paid form of non-personal communication. (MARCH-2012)
Answer:
Publicity

Question 5.
Mr.Roshan and Electrical diploma holder, has been appointed as an apprenticeship trainee in the KSEB. Roshan does not know anything about apprenticeship. Being a friend of him, explain the meaning of apprenticeship to his Illiterate parents. (MAY -2013)
Answer:
Under this method, a trainee is put under supervision of an experienced experts.

Question 6.
Sony, the newly appointed staff of Alpha Food Products Ltd. is given training in accounts, purchase, production and quality control sections in each week. Identify the training method. (MARCH-2014)
Answer:
Job Rotation

Question 7.
Shifting the employee from one department to another or from one job to another as part of training is known as ______ (MAY-2016)
a) Internship
b) Coaching
c)Job rotation
d) Apprenticeship
Answer:
c) Job rotation

Question 8.
Which one of the following sources of recruitment is not an external source? (MAY-2017)
a) Employment Exchange
b) Promotion
c) Casual Callers
d) Campus Recruitment
Answer:
b) Promotion

Plus Two Business Studies Staffing 2 Marks Important Questions

Question 1.
State any two benefits of training the employees in an organisation. (FEBRUARY – 2009)
Answer:
a) It enhances employee productivity both in terms of quantity and quality, leading to higher profits
b) Training helps in securing promotion and career growth.

Question 2.
Mr. Alex wishes to start a medium type business unit. He decided to employ 25 candidates for different posts. Which source of recruitment he can adopt? Justify your answer. (MARCH-2009)
a) Internal source only
b) External source only
c) Both internal and external
d) Neither internal or external
Answer:
External source only. Internal source of recruitment is not possible because it is a new firm.

Question 3.
Mr. Mohan Kumar, the HRM Manager of Global Bank Ltd. wants to appoint 50 computer operators for their different branches in Kerala from internal sources. Name any two internal sources forthe recruitment. (MAY-2010)
Answer:
Transfer, Promotion.

Question 4.
“In transfer, there is no change in the status and compensation of the employees.” (MARCH-2012)
State your opinion and justify your answer
Answer:
Yes.
Transfer: It involves shifting of an employee from one job to another without change in responsibility or compensation.

Question 5.
Prepare a flow-chart showing different steps in selection process. (MARCH-2016)
Answer:
Steps in Selection
1) Preliminary Screening
2) Selection tests
3) Interview
4) Reference & Background Check
5) Final Selection
6) Medical Examination
7) Job offer
8) Signing of Employment Contract

Plus Two Business Studies Staffing 3 Marks Important Questions

Question 1.
T.K.Trading Company selected 5 B.Com Graduates forthe post of accountant in their organisation. The chief accounts officer of the company decided to provide training to these employees, while they are actually engaged in their work.
Identify and explain the different types of training programmes which can be used in this case. (MAY-2009)
Answer:
On the job training
b) 1) Apprenticeship Programme
2) Coaching
3) Internship Training
4) Job Rotation

Question 2.
Training is beneficial not only to the employers but also to the employees. Comment. (MARCH -2010)
Answer:
1) Training helps in securing promotion and career growth.
2) Increased performance by the individual helps him to earn more.
3) Training helps to reduce the chances of accident and wastages.
4) Training increases the satisfaction of employees.

Question 3.
Classify the following as internal and external sources of recruitment: (MARCH-2010)
a) Advertisement
b) Transfer
c) Campus recruitment
d) Promotion
e) Employment Exchange
f) Job Contractors
Answer:
Internal sources of recruitment: Transfer, Promotion. External sources of recruitment – Advertisement, Campus recruitment, Employment exchange, Job contractors.

Question 4.
Differentiate between recruitment and selection. (MAY-2016)
Answer:

Question 5.
Match the following: (MARCH-2017)

Answer:

Question 6.
The extent to which sophistication and complexity is increasing, it demands for refined skill sets among existing employees. Explain the two different ways by which an organisation can achieve this. (MAY-2017)
Answer:
The two ways are: (1) Training (2) and Development
1) Training : Training is any process by which the aptitudes, skills and abilities of employees to perform specific jobs are increased.
2) Development: Development refers to the overall growth of the employee. It includes personality development, motivation for growth, career planning, n etc. Development equip the employees to take up future responsibilities of the organisation.

Plus Two Business Studies Staffing 4 Marks Important Questions

Question 1.
In a classroom debate Jith argues that recruitment and selection are same. Anoop argues that both are different. (MARCH-2009)
a) Whom do you support? Give justification.
b) If you are supporting Anoop, which one comes first?
Answer:
a) Recruitment: Recruitment may be defined as the process of searching for prospective employees and stimulating them to apply for jobs in the organisation.
Selection : Selection is the process of selecting the most suitable candidates from a large number of applicants.
b) Recruitment is The first process.

Question 2.
Smt. Nija is newly appointed as Assistant Personnel Manager in a manufacturing unit. You have to give her a detailed idea about various types of tests conducted for selecting candidates. (MARCH-2010)
Answer:
a) Intelligence Tests : This is one of the important psychological tests used to measure the level of intelligence quotient (IQ) of an individual.
b) Aptitude Test: It is a measure of individual’s potential for learning new skills.
c) Personality Tests : Personality tests provide clues to a person’s emotions, reactions, maturity and value system, etc.
d) Trade Test: These tests measure the existing skills of the individual.
e) Interest Tests : Interest tests are used to know’ the pattern of interests or involvement of a person.

Question 3.
Mr.Rasheed sent an application to the post of an Assistant Manager in Jacks FM Radio. Explain the process that Mr. Rasheed has to undergo before he is to be selected to that post. (MARCH-2011)
Answer:
1) Preliminary Screening
2) Selection Tests
3) Employment Interview
4) Reference and Background Checks
5) Final Selection
6) Medical Examination
7) Job Offer
8) Employment Contract

Question 4.
Identify the management function from the following statement. Also explain different sources of it. “It is the process of searching for prospective employees and stimulating them to apply for job in the organization.(MARCH-2012)
Answer:
External Sources: Selection of employees from outside the enterprise is known as external recruitment. The important external sources of recruitment are:
1) Direct Recruitment : Under the direct ‘ recruitment, a notice is placed on the notice-board of the enterprise specifying the details of the jobs available. Jobseekers assemble outside the premises of the organisation on the’specrfied date and selection is done on the spot. It is suitable forfilling casual vacancies.
2) Casual callers : Many reputed business organisations keep a database of unsolicited applicants in their office. These list can be used for recruitment.
3) Advertisement : Advertisement in newspapers or trade and professional journals is generally used when a wider choice is required.
4) Employment Exchange : Employment exchanges keep records of job seekers and will be supplied to business concern on the basis of their requisition.
5) Placement Agencies and Management Consultants : These agencies compile bio-data of a large number of candidates and recommend suitable names to their clients.
6) Campus Recruitment : Business enterprises may conduct campus recruitment in educational institutions for selecting young and talented candidates.
7) Recommendations of Employees : Applicants introduced by present employees, ortheirfriends and relatives may prove to be a good source of recruitment.
8) Labour Contractors : Labour contractors maintain close contacts with labourers and they can provide the required number of unskilled workers at short notice.
9) Web Publishing : There are certain websites specifically designed and dedicated forthe purpose of providing information to the job seekers.

Question 5.
Briefly explain the various methods of on- the -job training.(MARCH-2012)
Answer:
is given training when he is on the job. It means learn-ing while doing. The important On the Job Methods are:
On the Job Method : Under this method the employee is given training when he is on the job. It means learning while doing. The important On the Job Methods are:
a) Apprenticeship Programme : Under apprenticeship training, a trainee is put under the supervision of a master worker.
b) Coaching : In this method, the superior guides and instructs the trainee as a coach.
c) Internship Training : It is a joint programme of training in which vocational and professional institutes enter into an agreement with business enterprises for providing practical knowledge to its students.
d) Job Rotation : Here the trainee is transferred from one job to another job or from one department to another department so that he can learn the working of various sections.

Question 6.
Zodiac Ltd, is contemplating to recruit employees and workers for its proposed overseas project. Write a brief not indicating the various tests used for selection employees.(MAY-2010)
Answer:
Selection Tests : Various tests are conducted to know the level of ability, knowledge, interest, apti¬tude, etc. of a particular candidate. The various types of tests are:
a) Intelligence Tests : This is one of the important psychological tests used to measure the level of intelligence quotient (IQ) of an individual.
b) Aptitude Test : It is a measure of individual’s potential for learning new skills.
c) Personality Tests : Personality tests provide clues to a person’s emotions, reactions, maturity and value system, etc.
d) Trade Test : These tests measure the existing skills of the individual.
e) Interest Tests : Interest tests are used to know the pattern of interests or involvement of a person.

Plus Two Business Studies Staffing 5 Marks Important Questions

Question 1.
Distinguish between recruitment and selection process (FEBRUARY – 2009)
Answer:
Differences between training and development

Question 2.
Human Resource Department of Sachin Power Limited proposed to conduct two programmes for the employees in the organisation. First one to the office staff to provide knowledge and skill in Linux operating system. And second one to higher level managers for their overall growth.(MAY-2009)
a) Identify and differentiate between the two programmes of the Human Resource Department.
b) Differences between training and development.
Answer:
a) Training and Development
b) Differences between training and development

Question 3.
There are different methods of training. Identify and explain each such method. (FEBRUARY – 2010)
Answer:
Training methods: There are two methods of training
1) On the job training.
2) Off the job training .

On the Job Method : Under this method the employee is given training when he is on the job. It means learning while doing. The important On the Job Methods are:
a) Apprenticeship Programme : Under apprenticeship training, a trainee is put under the supervision of a master worker.
b) Coaching : In this method, the superior guides and instructs the trainee as a coach.
c) Internship Training : It is a joint programme of training in which vocational and professional institutes enter into an agreement with business enterprises for providing practical knowledge to its students.
d) Job Rotation : Here the trainee is transferred from one job to another job or from one department to another department so that he can learn the working of various sections.

Off the Job Method : It refers to those methods under which an individual is provided training away from the work place. It means learning before doing. The important Off the Job Methods are:
a) Class room Lectures/Conferences : The lecture approach is well adapted to convey specific information such as rules, procedures or methods. The use of audio-visuals can often make a formal classroom.
b) Films : They can provide information and demonstrate skills.
c) Case Study : Trainee studies the cases to determine problems, analyses causes, develop alternative solutions and select the best solution to implement.
d) Computer Modelling : It stimulate the work environment by programming a computer to imitate the realities of the job and allows learning to take place without the risk or high cost.
e) Vestibule Training : Under this method, separate training centres are setup to give training to the new employees. Actual work environment is created in that centre and employees used the same material, equipment, etc. which they use while doing the actual job.
f) Programmed Instruction : Here information is broken into meaningful units and these units are arranged in a proper way to form a logical and sequential learning package.

Question 4.
Training is the art of increasing the knowledge and skills of an employee for doing a particular job. (MAY-2010)
a) Do you agree with the statement? (MARCH-2010)
b) Write any four advantages of training.
Answer:
a) Yes.
b) Importance of Training

A. Benefits to the Organisation

1) It enhances employee productivity both in terms of quantity and quality, leading to higher profits.
2) Training reduces absenteeism and employee turnover.
3) It helps to obtaining effective response to the changing environment.
4) Training increases employee morale.
5) If the employees are given adequate training, the need for supervision is minimum.
6) Trained employees can use materials and machines economically. It helps to reduce cost of production.

B. Benefits to the Employee

1) Training helps in securing promotion and career growth.
2) Increased performance by the individual helps him to earn more.
3) Training helps to reduce the chances of accident and wastages.
4) Training increases the satisfaction of employees.

Question 5.
Wipro – India Ltd. selected 30 fresh Software Engineers for the company. The personnel management decided to give training to the new employees at the work place itself. (MARCH-2011)
Which method of training is mentioned here? Explain its different ways. Also explain the importance of training.
Answer:
On the job training

On the Job Method : Under this method the employee is given training when he is on the job. It means learning while doing. The important On the Job Methods are:
a) Apprenticeship Programme : Under apprenticeship training, a trainee is put under the supervision of a master worker.
b) Coaching : In this method, the superior guides and instructs the trainee as a coach.
c) Internship Training : It is a joint programme of training in which vocational and professional institutes enter into an agreement with business enterprises for providing practical knowledge to its students.
d) Job Rotation : Here the trainee is transferred from one job to another job or from one department to another department so that he can learn the working of various sections.

Importance of Training

A. Benefits to the Organisation

1) It enhances employee productivity both in terms of quantity and quality, leading to higher profits.
2) Training reduces absenteeism and employee turnover.
3) It helps to obtaining effective response to the changing environment.
4) Training increases employee morale.
5) If the employees are given adequate training, the need for supervision is minimum.
6) Trained employees can use materials and machines economically. It helps to reduce cost of production.

B. Benefits to the Employee

1) Training helps in securing promotion and career growth.
2) Increased performance by the individual helps him to earn more.
3) Training helps to reduce the chances of accident and wastages.
4) Training increases the satisfaction of employees.

Question 6.
In a classroom discussion, Manesh argues that materials and machines are most essential elements of a business unit. Arun argues that without the productive efforts of the workers the materials and machines would be of no use. (MARCH-2012)
1) Whose argument do you support?
2) State five reasons.
Answer:
a) Arun’s argument is right
b) Importance of Staffing
1) Helps in discovering and obtaining competent personnel for various jobs.
2) Makes for higher performance, by putting right person on the right job.
3) Ensures continuous survival and growth of the enterprise.
4) Helps to ensure optimum utilization of the human resources.
5) Improves job satisfaction and morale of employees.

Question 7.
Yasir is a newly appointed manager of Moon Ltd. He is of the view that training will increase productivity of his employees in the organisation. Do you agree with his views? Give the importance of training . (MARCH-2013)
Answer:
Yes
b) Importance of Training

A.Benefits to the Organisation

1) It enhances employee productivity both in terms of quantity and quality, leading to higher profits.
2) Training reduces absenteeism and employee turnover.
3) It helps to obtaining effective response to the changing environment.
4) Training increases employee morale.
5) If the employees are given adequate training, the need for supervision is minimum.
6) Trained employees can use materials and machines economically. It helps to reduce cost of production.

B. Benefits to the Employee

1) Training helps in securing promotion and career growth.
2) Increased performance by the individual helps him to earn more.
3) Training helps to reduce the chances of accident and wastages.
4) Training increases the satisfaction of employees.

Question 8.
Mr.Hari started an industrial unit in Tamil Nadu. His son Manu, your friend appointed as H.R.Manager. Manu appoint 25 staff in different posts. Advise Manu, about different types of training possible here. (MARCH-2014)
Answer:
On the Job Method : Under this method the employee is given training when he is on the job. It means learning while doing. The important On the Job Methods are:
a) Apprenticeship Programme : Under apprenticeship training, a trainee is put under the supervision of a master worker.
b) Coaching : In this method, the superior guides and instructs the trainee as a coach.
c) Internship Training : It is a joint programme of training in which vocational and professional institutes enter into an agreement with business enterprises for providing practical knowledge to its students.
d) Job Rotation : Here the trainee is transferred from one job to another job or from one department to another department so that he can learn the working of various sections.

Question 9.
As attracted by ‘Make in India Scheme’ of govt., RR Autos, a German based company started a car manu-facturing unit in Tamil Nadu.lt requires candidate for different positions in its main plant. What external sources are available to them to fill up different posts? (MARCH-2016)
Answer:
i)Direct recruitment
ii) Advertisement
iii) Casual callers
iv) Web publishing
v) Labour contractors
vi) Employment exchange
vii) Placement and management consultants
viii) Recommendations
External Sources: Selection of employees from outside the enterprise is known as external . recruitment. The important external sources of recruitment are:
1) Direct Recruitment : Under the direct ‘ recruitment, a notice is placed on the notice-board of the enterprise specifying the details of the jobs available. Job seekers assemble outside the premises of the organisation on the’specified date and selection is done on the spot. It is suitable for filling casual vacancies.
2) Casual callers : Many reputed business organisations keep a database of unsolicited applicants in their office. These list can be used for recruitment.
3) Advertisement : Advertisement in newspapers or trade and professional journals is generally used when a wider choice is required.
4) Employment Exchange : Employment exchanges keep records of job seekers and will be supplied to business concern on the basis of their requisition.
5) Placement Agencies and Management Consultants : These agencies compile bio-data of a large number of candidates and recommend suitable names to their clients.
6) Campus Recruitment : Business enterprises may conduct campus recruitment in educational institutions for selecting young and talented candidates.
7) Recommendations of Employees : Applicants introduced by present employees, or their friends and relatives may prove to be a good source of recruitment.
8) Labour Contractors : Labour contractors maintain close contacts with labourers and they can provide the required number of unskilled workers at short notice.
9) Web Publishing : There are certain websites specifically designed and dedicated for the purpose of providing information to the job seekers.

Question 10.
“It’s a managerial function of filling and keeping filled the positions in the organisations structure.” Identify the management function and state different steps followed in it. (MARCH-2017)
Answer:
a) Staffing
b) Staffing Process
1) Manpower planning : It is concerned with forecasting the future manpower needs of the organisation, i.e. finding out number and type of employees need by the organisation in future.
2) Recruitment : Recruitment may be defined as the process of searching for prospective employees and stimulating them to apply for jobs in the organisation.
3) Selection : Selection is the process of selecting the most suitable candidates from a large number of applicants.
4) Placement and Orientation : Placement refers to putting the right person on the right job. Orientation is introducing the selected employee to other employees and familiarising him with the rules and policies of the organisation.
5) Training and Development : The process of training helps to improve the job knowledge and skill of the employees. It motivates the employees and improve their efficiency.
6) Performance Appraisal : Performance appraisal means evaluating an employee’s current and past performance as against certain predetermined standards.
7) Promotion and Career Planning : Promotion means movement of an employee from his present job to a higher level job.
8) Compensation : Compensation refers to all forms of pay or rewards going to employees. It may be in the form of direct financial payments like wages, salaries, commissions and indirect payments like employer paid insurance and vacation.

Plus Two Business Studies Staffing 8 Marks Important Questions

Question 1.
Mr.M.K.Nambiar, the newly appointed Personnel Manager of Hindustan Aeronautics Ltd. wants to identify the sources of man power to fill various job positions in the company. Can you help him to identify different sources he would use? (MARCH-2011)
Answer:
Sources of Recruitment
There are two sources of recruitment.
1) Internal sources .
2) External sources
Sources of Recruitment
There are two sources of recruitment.
1) Internal sources
2) External sources
Internal Sources: It refers to the recruitment for jobs from within the organisation. It includes:
1) Transfer: It involves shifting of an employee from one job to another without change in responsibility or compensation.
2) Promotion: It refers to shifting of a person from lower position to a higher position carrying higher status, responsibility and more salary.
External Sources: Selection of employees from outside the enterprise is known as external . recruitment. The important external sources of recruitment are:
1) Direct Recruitment : Under the direct ‘ recruitment, a notice is placed on the notice-board of the enterprise specifying the details of the jobs available. Job seekers assemble outside the premises of the organisation on the specified date and selection is done on the spot. It is suitable for filling casual vacancies.
2) Casual callers : Many reputed business organisations keep a database of unsolicited applicants in their office. These list can be used for recruitment.
3) Advertisement : Advertisement in newspapers or trade and professional journals is generally used when a wider choice is required.
4) Employment Exchange : Employment exchanges keep records of job seekers and will be supplied to business concern on the basis of their requisition.
5) Placement Agencies and Management Consultants : These agencies compile bio-data of a large number of candidates and recommend suitable names to their clients.
6) Campus Recruitment : Business enterprises may conduct campus recruitment in educational institutions for selecting young and talented candidates.
7) Recommendations of Employees: Applicants introduced by present employees, or their friends and relatives may prove to be a good source of recruitment.
8) Labour Contractors : Labour contractors maintain close contacts with labourers and they can provide the required number of unskilled workers at short notice.
9) Web Publishing : There are certain websites specifically designed and dedicated for the purpose of providing information to the job seekers.

Question 2.
Mr. Padma Kumar, the personnel manager of National Manufacturing Co. is confronted with the problem of recruitment of 10 Clerks – cum – Accounts. (MAY-2013)
Explain the sources of recruitment. Also explain its merits & demerits.
Answer:
Internal Sources : It refers to the recruitment for jobs from within the organisation. It includes:
1) Transfer: It involves shifting of an employee from one job to another without change in responsibility or compensation.
2) Promotion : It refers to shifting of a person from lower position to a higher position carrying higher status, responsibility and more salary.
External Sources : Selection of employees from outside the enterprise is known as external . recruitment. The important external sources of recruitment are:
1) Direct Recruitment : Under the direct ‘ recruitment, a notice is placed on the notice-board of the enterprise specifying the details of the jobs available. Job seekers assemble outside the premises of the organisation on the specified date and selection is done on the spot. It is suitable for filling casual vacancies.
2) Casual callers : Many reputed business organisations keep a database of unsolicited applicants in their office. These list can be used for recruitment.
3) Advertisement: Advertisement in newspapers or trade and professional journals is generally used when a wider choice is required.
4) Employment Exchange : Employment exchanges keep records of job seekers and will be supplied to business concern on the basis of their requisition.
5) Placement Agencies and Management Consultants : These agencies compile bio-data of a large number of candidates and recommend suitable names to their clients.
6) Campus Recruitment : Business enterprises may conduct campus recruitment in educational institutions for selecting young and talented candidates.
7) Recommendations of Employees: Applicants introduced by present employees, or their friends and relatives may prove to be a good source of recruitment.
8) Labour Contractors : Labour contractors maintain close contacts with labourers and they can provide the required number of unskilled workers at short notice.
9) Web Publishing : There are certain websites specifically designed and dedicated for the purpose of providing information to the job seekers.

Kerala State Board New Syllabus Plus Two Business Studies Chapter Wise Previous Questions and Answers Chapter 5 Organising.

Kerala Plus Two Business Studies Chapter Wise Previous Questions Chapter 5 Organising

Plus Two Business Studies Organising 1 Mark Important Questions

Question 1.
The technical term which denotes the number of subordinates that a superior can effectively supervise.(FEBRUARY-2009)
Answer:
Span of control

Question 2.
To satisfy social and cultural needs and to fulfill common interest, people organise themselves. What is the technical term forthis type of organisation? (FEBRUARY-2009)
Answer:
Informal organization

Question 3.
KSR Limited is a transport service company with its head office at Calicut. It has also operations and office in Thrissur, Kochi and Trivandrum.
Name the form of organisational structure suitable to this company. (MAY-2009)
Answer:
Divisional organisation

Question 4.
Anand Industries produce different types of products namely, Mobile phones, Television etc. and they have separate production managers and marketing managers for each line of products. Name the organisation structure that prevails in the firm. (MARCH-2010)
Answer:
Divisional organisation

Question 5.
Mr.Rajagopal is a foreman in a spinning mill and there are 25 employees working under him. Due to the increased number of subordinates he cannot control them effectively and hence the company could not achieve the target. Identify the element or organizational structure violated here. (MAY-2010)
Answer:
Span of control

Question 6.
Mr. Sreekumar is the leader of a marketing item. There are 25 salesmen under him. Due to the increased number of subordinates he cannot supervise them efficiently and hence the company could not achieve the target. Name the element of organisational strucutre violated here. (MAY-2011)
Answer:
Span of control

Question 7.
Identify it:
It is the framework within which an organisation functions.(MARCH-2012)
Answer:
Organisational structure

Question 8.
In which organisation, authority and responsibility relationships are not defined? (MAY-2012)
Answer:
Informal organization

Question 9.
Name the management principle which refers to concentration of authority at one place. (MAY-2013)
Answer:
Centralisation

Question 10.
Which among the following is true for formal organisation? (MAY-2013)
a) It is not clear
b) To satisfy the members
c) Importance to persons and feelings
d) To fulfill the firm’s goals.
Answer:
To fulfill the firm’s goal

Question 11.
Span of control refers to (MARCH-2014)
a) Number of managers.
b) Period of appointment of manager.
c) Number of subordinates under a Manager.
d) None of these.
Answer:
Number of subordinates under a manager.

Question 12.
In connection with Christmas celebration on the employees of National Bank formed a small group, who organized a feast and other entertainments. Name the type of organization referred here. (MARCH-2015)
Answer:
Informal organisation

Question 13.
From the following choose one which is not a part in the process of organising : (MARCH-2015)
a) Division of work
b) Grouping of jobs
c) Co-ordination of activities
d) Scalar chain
Answer:
Scalar chain

Plus Two Business Studies Organising 2 Marks Important Questions

Question 1.
Name any two elements of delegation. (FEBRUARY-2009)
Answer:
1) Identifying and grouping the work to be performed.
2) Defining and delegating authority and . responsibility.
3) and establising relationships for the purpose of accomplishing objectives.

Question 2.
In a manufacturing firm, the Production Manager entrusted a part of his work to the foreman in the factoty. Examine two possible benefitsto be gained from this forthis Foreman. (FEBRUARY-2010)
Answer:
a) Delegation of authority
b) It helps the foreman to take quick decision. It helps to develop creative skill and motivate the subordinate.

Question 3.
Rearrange the following as it takes place in the process of organising: (MARCH-2010)
a) establishing authority relationship
b) division of work
c) co-ordination of activities
d) departmentation
Answer:
Division of work
b) Departmentation
c) Establishing authority relationship
d) Co-ordination of activities

Question 4.
The following are different steps involved in the process of Organising. (MARCH-2011)
i) Grouping of similar jobs.
ii) Division of work.
iii) Co-ordination of activities.
iv) Creation of authority relationship Which of the following sequence js correct?
a) (i), (ii), (iv) & (iii)
b) (ii), (i), (iv) & (iii)
Answer:
i) Division of work
ii) Grouping of similar jobs
iii) Creation of authority relationship
iv) Co-ordination of activities

Question 5.
The aim of organizing is to enable people to work togetherfora common purpose. Explain. (MARCH-2012)
Answer:
Specialisation: Since the activities are divided into convenient jobs, and are assigned to a particular employee, it leads to specialisation, more productivity and efficiency.

Plus Two Business Studies Organising 3 Marks Important Questions

Question 1.
“Delegation of authority leads to reduction in the work load of superiors” In the light of this statement, com-ment briefly on the importance of delegation of authority. (MARCH-2009)
Answer:
1) Reduces the work load of managers : The managers are able to function more efficiently as they get more time to concentrate on important matters.
2) Employee development: Delegation empowers the employees by providing them the chance to use their skills, gain experience and develop themselves for higher positions.
3) Motivation of employees : Responsibility for work builds the self-esteem of an employee and improves his confidence. He feels encouraged and tries to improve his performance.

Question 2.
Match the following : (MAY-2009)

Answer:

Question 3.
In a classroom discussion Saleem, a Plus Two Commerce student, argues that delegation and decentralisation are one and same. (MAY-2009)
a) Do you agree with his argument?
b) Give any two points to justify your answer.
Answer:
a) No. Delegation and decentralisation are different.
b) The differences between Delegation of authority and Decentralization are :

Question 4.
Describe the importance of transferring decision making authority to the lowest levels. (MAY-2012)
Answer:
Importance of Decentralisation
1) Decentralisation helps to promote confidence amongst the subordinates.
2) It is a means of trained manpower
3) It helps in quick decision making.
4) It reduces the burden of top executives.
5) It helps to increase productivity and more returns.
6) It helps in maintaining effective control

Question 5.
Smt. Seema is a Principal of a Higher Secondary School. She decides to give some of her charges to the Vice-Principal Smt. Beena. Which function of management is used here? Explain. (MARCH-2013)
Answer:
Delegation of Authority : Delegation means the granting of authority to subordinates to operate within the prescribed limits. It enables the manager to distribute his workload to others so that he can concentrate on important matters.
Elements of Delegation
1) Authority : Authority refers to the right of an individual to command his subordinates and to take action within the scope of his position. Authority flows from top to bottom. Authority determines the superior subordinate relationship in an organisation.
2) Responsibility: Responsibility is the obligation of a subordinate to properly perform the assigned duty. Responsibility flows upwards, i.e., a subordinate will always be responsible to his superior.
3) Accountability : Accountability implies being answerable for the final outcome, i.e., subordinate will be accountable to a superior for satisfactory performance of work.

Question 6.
ABC Ltd. is manufacturing and distributing plastic home appliances.(MARCH-2014)
Draw a diagram and explain the functional organizational structure of AB Ltd.
Answer:
Functional Organisation.

Question 7.
Delegation of authority leads to inefficient superiors. (MARCH-2014)
a) Do you agree with this statement?
b) Justify your answer.
Answer:
No
b) Importance of Delegation of Authority
1) Reduces the work load of managers : The managers are able to function more efficiently as they get more time to concentrate on important matters.
2) Employee development: Delegation empowers the employees by providing them the chance to use their skills,’gain experience and develop themselves for higher positions.
3) Motivation of employees : Responsibility for work builds the self-esteem of an employee and improves his confidence. He feels encouraged and tries to improvers performance.
4) Facilitation of.growth : Delegation helps in the expansion of an organisation by providing a ready workforce to take up leading positions in new ventures.
5) Superior-subordinate relations: Delegation of authority establishes superior subordinate relationships, which are the basis of hierarchy of management.
6) Better co-ordination: The elements of delegation – authority, responsibility and accountability help to avoid overlapping of duties and duplication of effort.

Plus Two Business Studies Organising 4 Marks Important Questions

Question 1.
Delegation is the administrative process of getting things done through others and sharing authority with them. List out the importance and steps in the process of delegation. (FEBRUARY-2010)
Answer:
Importance of Delegation of Authority
1) Reduces the work load of managers : The managers are able to function more efficiently as they get more time to concentrate on important matters.
2) Employee development: Delegation empowers the employees by providing them the chance to use their skills,’gain experience and develop themselves for higher positions.
3) Motivation of employees : Responsibility for work builds the self-esteem of an employee and improves his confidence. He feels encouraged and tries to improvers performance.
4) Facilitation of growth : Delegation helps in the expansion of an organisation by providing a ready workforce to take up leading positions in new ventures.
5) Superior-subordinate relations: Delegation of authority establishes superior subordinate relationships, which are the basis of hierarchy of management.
6) Better co-ordination: The elements of delegation – authority, responsibility and accountability help to avoid overlapping of duties and duplication of effort.

Question 2.
ABC Ltd., a large size organization has five majorde- partments, viz., Production Department, Purchase Department, Personnel Department, Finance Department & Marketing Department. Which organizational structure is suitable to the company? Draw a chart showing the organizational structure of the company. (MARCH-2011)
Answer:
Functional Organisation.

Question 3.
‘Delegation and Decentralisation are one and same.’ Do you agree with this statement? Give any 4 differences. (MARCH-2013)
Answer:

Plus Two Business Studies Organising 5 Marks Important Questions

Question 1.
Hashik studying in your class has opined that there is no difference between formal and informal organisation. Do you agree? Justify your answer. (MARCH-2010)
Answer:
a) No
b)

Question 2.
Darsana Books Ltd. a leading book sellers of the State organized a book fair at Kottayam as a sales promotion programme under the control and supervision of Mr.Rajesh, the Sales Manager. On the book fairground the employees of the firm arranged a dance programme of a famous film star to collect funds for the rehabilitation of blind children of the locality. Mr. Devargjan, an employee of the firm, voluntarily acted as teh convener of the dance programme. (MAY-2010)
a) Do you find any structural difference in organising these two programmes?
b) Classify the organization of the conduct of books fair and conduct of the dance programme on the basis of their formation.
c) State any three demerits of the organization formed forthe dance programme.
Answer:
a) Yes.
b) Formal & Informal Organisation.
c) 1) It spreads rumours.
2) If informal organisation opposes the policies and changes of management, then it becomes very difficult to implement them in organisation.
3) Informal organizations lead to conflicts among employees.

Question 3.
What is ‘Delegation of Authority’ ? Explain its importance. (MARCH-2011)
Answer:
Delegation of Authority : Delegation means the granting of authority to subordinates to operate within the prescribed limits. It enables the manager to dis-tribute his workload to others so that he can concentrate on important matters.
Importance of Delegation of Authority
1) Reduces the work load of managers : The managers are able to function more efficiently as they get more time to concentrate on important matters.
2) Employee development: Delegation empowers the employees by providing them the chance to use their skills,’gain experience and develop themselves for higher positions.
3) Motivation of employees : Responsibility for work builds the self-esteem of an employee and improves his confidence. He feels encouraged and tries to improvers performance.
4) Facilitation of.growth : Delegation helps in the expansion of an organisation by providing a ready workforce to take up leading positions in new ventures.
5) Superior-subordinate relations: Delegation of authority establishes superior subordinate relationships, which are the basis of hierarchy of management.
6) Better co-ordination: The elements of delegation – authority, responsibility and accountability help to avoid overlapping of duties and duplication of effort.

Question 4.
Bhoomi daily, very often handed over some of his duties to Mr. Vijayan, the Assistant Circulation Manager. This will provide Gopalakrishnan more time to concentrate on the circulation target of the firm. In this regard. (MAY-2011)
Answer:
a) Name the element of organization applied by Gopalakrishnan.
b) State the steps to be fallowed by Mr.Gopalakrishnan before handing over the duties.
c) Do you think that the policy of decentralization can be adopted as an alternative to the above referred concept?
a) Delegation of authority
b) Elements of Delegation
1) Authority : Authority refers to the right of an individual to command his subordinates and to take action within the scope of his position. Authority flows from top to bottom. Authority determines the superior subordinate relationship in an organisation.
2) Responsibility: Responsibility is the obligation of a subordinate to properly perform the assigned duty. Responsibility flows upwards, i.e., a subordinate will always be responsible to his superior.
3) Accountability : Accountability implies being answerable for the final outcome, i.e., subordinate will be accountable to a superior for satisfactory performance of work.
c) No. Decentralisation refers to a systematic dispersal of authority to the lower levels of the orga-nization. it takes place as per the organization structure. It cannot be adopted as an alternative to delegation.
Decentralisation : Decentralisation refers to a systematic dispersal of authority to the lower lev-els of the organisation. Here decision making authority is shared with lower levels in the organisation.

Question 5.
Differentiate between formal organisation and infor-mal organisation. (MARCH-2012)
Answer:

Question 6.
Thomas, one of your friends, has decided to start a business at Kollam. He requested you to assist him in framing a suitable organisation structure. Describe the elements you should keep in mind while assisting Thomas. (MAY-2012)
Answer:
Step in the Process of Organising
1) Division of Work: The first step in the process of organising involves identifying and dividing the work that has to be done. Division of work leads to specialisation!
2) Departmentation : The second step is to group similar or related jobs into larger units, called departments. The grouping of activities is known as departmentation.
3) Assignment of duties : The next step is to allocate the work to various employees according to their ability and competencies.
4) Establishing authority – responsibility relationship: The last step is creation of authority – responsibility relationship among the job positions. It helps in the smooth functioning of the organisation.

Question 7.
General Electronics Ltd. manufacturers of electronic goods organised an exhibition of its products for sales promotion under the control of Mr.Mohan, the Sales Manager, on the exhibition ground, the employees of the company arranged a musical concert to collect funds for the rehabilitation of handicapped children of the locality. Mr. Suresh one of the employees voluntarily act as the convenor of the musical concert.
a) Do you find any structural difference in organising these two programmes. (MAY-2013)
b) Classify the organisation of the conduct of exhibition and musical concert on the basis of their formation.
c) State four demerits of informal organisation.
Answer:
a) Yes
b) Formal and informal organization.
c) i) It is not stable.
ii) No authority responsibility relationships.
iii) No formal rules exist.
iv) Cannot be presented in organization charts. No official line of communication.

Question 8.
Mr. Radhakrishnan, the Branch Manager of a nationalized bank often share some of his work to his immediate subordinate Mr. Rajendran, the Assistant Manager. This helps Mr. Radhakrishnan to spend more time to mobilize their targeted deposit. (MARCH-2015)
a) Name the element of organization applied by Mr. Radhakrishnan.
b) State the various steps to be followed in the process involved in it.
Answer:
Delegation of authority
b) Elements of Delegation
1) Authority : Authority refers to the right of an individual to command his subordinates and to take action within the scope of his position. Authority flows from top to bottom. Authority determines the superior subordinate relationship in an organisation.
2) Responsibility: Responsibility is the obligation of a subordinate to properly perform the assigned duty. Responsibility flows upwards, i.e., a subordinate will always be responsible to his superior.
3) Accountability : Accountability implies being answerable for the final outcome, i.e., subordinate will be accountable to a superior for satisfactory performance of work.

Question 9.
‘Clever Dogs’ is a leading IT Company in Techno Park at Thiruvananthapuram and the organisation has its necessary hierarchical position. The employees of this firm decided to form a Carol Club for its X-mas celebrations and Mr. Mathew is elected as the convenor. (MARCH-2016)
a) Identify the 2 forms of organisation here.
b) Distinguish between them.
Answer:
a) Ciever Dogs is a formal organisation and Carol Club is an informal organisation, b) Distinction between Formal and Informal organisation.

Question 10.
Briefly describe any five advantages of effective delegation in the case of a business enterprise.(MAY-2016)
Answer:
Importance of Delegation of Authority
1) Reduces the work load of managers : The managers are able to function more efficiently as they get more time to concentrate on important matters.
2) Employee development: Delegation empowers the employees by providing them the chance to use their skills,’gain experience and develop themselves for higher positions.
3) Motivation of employees : Responsibility for work builds the self-esteem of an employee and improves his confidence. He feels encouraged and tries to improvers performance.
4) Facilitation of.growth : Delegation helps in the expansion of an organisation by providing a ready workforce to take up leading positions in new ventures.
5) Superior-subordinate relations: Delegation of authority establishes superior subordinate relationships, which are the basis of hierarchy of management.
6) Better co-ordination: The elements of delegation – authority, responsibility and accountability help to avoid overlapping of duties and duplication of effort.

Question 11.
V-Guard Ltd. a leading company in Kerala is engaged in diversified business namely electricals, textiles, amusement parks etc. Each of this have different departments namely Marketing, Production Finance Research and Development etc. Suggest a suitable organizational structure to this company and list its merits and demerits. (MARCH-2017)
Answer:
Divisional Organisation Structure
b) Advantages
1) Each division functions as an autonomous unit which leads to faster decision making.
2) It helps in fixation of responsibility in cases of poor performance of the division
c) Disadvantages 
1) Conflict may arise among different divisions with reference to allocation of funds.
2) ft may lead to increase in costs since there may be a duplication of activities across products.

Question 12.
It is often accepted that, instead of having a confronting attitude, management should skill fully take the advantages of both formal and informal organisation. Substantiate. (MAY-2017)
Answer:
Advantages
1) It is easier to fix responsibility since mutual relationships are clearly defined.
2) Clear determination of duties, authorities and responsibilities. It helps in avoiding duplication of effort.
3) Unity of command is maintained through an established chain of command.
4) It provides stability to the organisation.
5) Co-ordination and control become easy.
Advantages
1) There can be faster spread of communication.
2) It helps to fulfil the social needs of the members and this enhances their jpb satisfaction.
3) Top level managers can know the real feedback of employees on various policies and plans.

Plus Two Business Studies Organising 8 Marks Important Questions

Question 1.
Explain the concept of delegation and decentralisation bringing out their distinction.(FEBRUARY – 2009)
Answer:
Organising is one of the most important functions of management, which includes
1) Identifying and grouping the work to be performed.
2) Defining and delegating authority and responsibility.
3) and establising relationships for the purpose of accomplishing objectives

Question 2.
Joy Ltd. is having an organisational structure which is intentionally created with well defined jobs. (MARCH-2009)
a) Identifythe type of organisation, miniojm
b) State its features.
c) Locate its difference from an organisation created on personal and social relationship on the basis of friendship.
Answer:
a) Formal Organisation
b) Features
1) It is deliberately created by the top management to achieve the objectives.
2) It is based on division of labour and specialisation.
3) It is impersonal – Does not take into consideration emotional aspect of employees.
4) It clearly defines the authority and responsibility of every individual.
5) The principle of scalar chain is followed in formal organisation.
c)

Question 3.
Salma Ltd., a firm manufacturing shampoo has the following departments. Purchase, Marketing, Produc-tion, Finance and Human Resources Department. (MARCH-2009)
Mr. Basheer, the general manage,r was taking all major decisions of the different departments. The company decided to introduce herbal shampoo in the market. In the circumstances of work overload, Mr. Basheer decided to grant some authority to his subordinates.
a) What is the concept referred to?
b) State the importance of this concept
c) How does it differ from decentralisation?
Answer:
a) Delegation of authority
b) Importance of Delegation of Authority
1) Reduces the work load of managers : The managers are able to function more efficiently as they get more time to concentrate on important matters.
2) Employee development: Delegation empowers the employees by providing them the chance to use their skills,’gain experience and develop themselves for higher positions.
3) Motivation of employees : Responsibility for work builds the self-esteem of an employee and improves his confidence. He feels encouraged and tries to improvers performance.
4) Facilitation of.growth : Delegation helps in the expansion of an organisation by providing a ready workforce to take up leading positions in new ventures.
5) Superior-subordinate relations: Delegation of authority establishes superior subordinate relationships, which are the basis of hierarchy of management.
6) Better co-ordination: The elements of delegation – authority, responsibility and accountability help to avoid overlapping of duties and duplication of effort.

c)

Kerala State Board New Syllabus Plus Two Business Studies Chapter Wise Previous Questions and Answers Chapter 4 Planning.

Kerala Plus Two Business Studies Chapter Wise Previous Questions Chapter 4 Planning

Plus Two Business Studies Planning 1 Mark Important Questions

Question 1.
Find out the correct pair: (MAY-2009)
a) Objective – Promotion is based on merit only.
b) Policy – Time rate system of wage payment.
c) Rule – No smoking
d) Method – Make a profit of 40% on capital invested
Answer:
a) Rule – No smoking

Question 2.
Aswathy Automobiles Ltd. has decided to open five showrooms in different parts of the State to meet the increased demand of motor cars. Identify the type of plan in which the decision can be included. (MAY-2010)
Answer:
Programmes

Question 3.
Hindustan Motors Ltd. decided to increase the production of ambassador cards by 10% in the year 2010-11. Identify the type of plan in which the decision can be included. (MAY-2011)
Answer:
Objective

Question 4.
Budget is an instrument of (MARCH-2012)
a) Planning only
b) Control only
c) Both planning and control
d) None of these
Answer:
Both planning and control

Question 5.
The breakup of master plan department wise and sectional wise to support the master plan is called _____ (MAY-2012)
Answer:
Derivative Plan

Question 6.
What do you mean by ‘planning premises’? (MARCH-2013)
Answer:
All planning involves certain assumptions about the future which are known as planning premises.

Question 7.
The management of Sunlight Detergents Ltd. has decided to increase the sales of washing powder by 5 percent. Identify the element of planning in which the decision can be included. (MAY-2013)
Answer:
Objectives

Question 8.
Identify the odd one and justify. (MARCH-2014)
a) Motivation
b) Policies
c) Procedure
d) Objectives
Answer:
Motivation. Others are types of plans.

Question 9.
The basic material upon which plans are drawn is known as ______.
Answer:
Planning premises

Question 10.
Find the odd one from the following:
a) Rule
b) Procedure
c) Policy
d) Objective
Answer:
b) Procedure

Question 11.
Specific statements that tell you about what is to be done are
a) Rules
b) Procedures
c) Policy
d) Strategy
Answer:
a) Rules

Question 12.
The basic material upon which plans are drawn is known as _______
Answer:
Planning premises.

Question 13.
A statement of expected results expressed in numerical terms is known as:
a) Budget
b) Programme
c) Policy
d) Strategy
Answer:
a) Budget

Plus Two Business Studies Planning 2 Marks Important Questions

Question 1.
Identify the type of plan from the following statements and explain its meaning.(FEBRUARY-2009)
a) Smoking is prohibited in the factory premises.
b) Sales only on cash basis.
Answer:
a) Rule
b) Policy

Question 2.
Defect the differences in the following statements contained in a firms plan.(FEBRUARY-2010)
a) We sell goods only on cash basis.
b) Smoking is prohibited in the factory premises.
Answer:
a) Policy
b) Rule

Question 3.
Draw a hierarchy of plans by rearranging the following by taking budget as the base.(MARCH-2010)
Budget, Rules, Policies, Objectives, Procedures, Methods and Programmes.
Answer:
Hierarchy of plans

Question 4.
State the limitations of planning. (MARCH-2014)
Answer:
1) Planning makes the activities rigid.
2) Long term plans are insignificant in the rapidly changing business environment.

Plus Two Business Studies Planning 3 Marks Important Questions

Question 1.
“Planning is of vital importance in the managerial functions but it is noHree from limitations”. Do you agree with this statement? Justify your views. Mention any two limitations of planning. (MAY-2011)
Answer:
a) I agree
b) 1) Planning makes the activities rigid.
2) Long term plans are insignificant in the rapidly changing business environment.
3) It reduces creativity.
4) It involves cost.

Question 2.
Mr. Shallmon, the Production Manager of RM. Ltd., prepared a plan of actipn for the next month. Mr. Hari, the newly appointed assistant asked him, why he is giving this much importance to planning. Give answerto the question of Hari. (MARCH-2012)
Answer:
1) Planning provides directions
2) Planning reduces the risk of uncertainty
3) Planning reduces wasteful activities
4) Planning promotes innovative ideas
5) Planning facilitates decision making
6) Facilitates control

Question 3.
Even though planning is important in business, it suffers some limitations also. Explain any three limitations of planning.
Answer:
Limitations of Planning
1) Planning makes the activities rigid.
2) Long term plans are insignificant in the rapidly changing business environment.
3) It reduces creativity.
4) It involves cost.
5) It involves a lot of time.
6) Planning does not guarantee success.

Plus Two Business Studies Planning 4 Marks Important Questions

Question 1.
You are going to conduct a field trip to V-Guard Industries. You are required to make a detailed plan covering different steps in planning. (FEBRUARY-2009)
Answer:

Question 2.
“Planning, the primary function of management, suf- fersfrom a number of limitations.” Elucidate. (MAY-2009)
Answer:
Limitations of Planning
1) Planning makes the activities rigid.
2) Long term plans are insignificant in the rapidly changing business environment.
3) It reduces creativity.
4) It involves cost.
5) It involves a lot of time.
6) Planning does not guarantee success.

Question 3.
Mr.Gopinathan, an Engineer, has decided to start a small scale industrial unit. As a commerce student, you are asked to prepare a plan of action for this business. In this respect state the steps to be followed in the planning process. (MAY-2010)
Answer:
a) Planning
b) Planning Process (Steps in Planning)
1) Setting Objectives: The first step in planning is setting objectives. Objectives may be set for the entire organisation and for each department. The objective must be specific and clear.
2) Developing premises : Planning is based on certain assumptions about the future. These assumptions are called planning premises. Forecasting is important in developing planning premises.
3) Identifying alternative courses of action: The next step in planning is to identify the alternative courses of action to achieve the objectives.
4) Evaluating alternative Courses : The pros and cons of various alternatives must be evaluated in terms of their expected cost and benefits.
5) Selecting an alternative : After evaluating the alternatives the manager will select that alternative which gives maximum benefit at minimum cost.
6) Implement the plan : Implementation of plan means putting plans, into action so as to achieve the objectives of the business.
7) Follow up action : Plans are to be evaluated regularly to check whether they are being implemented and activities are performed according to schedule.

Question 4.
Explain the following terms: (MARCH-2011)
a) Objectives
b) Procedure
c) Programmes
Answer:
Objectives : Objectives are the ends, towards which activity is aimed at forthe accomplishment of organizational goals. Objective should be measurable in quantitative terms.
2) Procedure : Procedure is a chronological sequence or steps to be undertaken to enforce a policy.
3) Programme : Programme includes all the activities necessary for achieving a given objective. Programmes are the combination of goals, policies, procedures and rules.

Question 5.
“A policy is a guide to thinking and step to decision making.” Do you agree with this statement? Justify your answer. Give two examples of the policies of a firm.(MAY-2013)
Answer:
Policy : Policy is a broad statement formulated to provide guidelineSm decision making.
Eg. 1) Promotion based on merits only.
2) We don’t sell on credit.

Question 6.
The Board of Directors of National Aluminium Co. Ltd. decided to implement the following plans in their production department during the year 2014.
a) Increase the production by 10% in the year 2014.
b) Only ITI certificate holders should be appointed.
c) All employees should punch at the factory gate at 8 am.
d) Newly selected employees should be given one month training.
1) Classifies the plans adopted by the National Aluminium Co. Ltd.
2) Establish the reasons for such classification.
Answer:
a) Objective-Targetto be achieved
b) Policy – Guide in decision making
c) Rule – Rigid policy which cannot be changed.
d) Programme-All activities necessary for achieving a given objective.

Question 7.
What are the steps the management need to take in the process of planning?
Answer:
a) Planning
b) Planning Process (Steps in Planning)
1) Setting Objectives: The first step in planning is setting objectives. Objectives may be set for the entire organisation and for each department. The objective must be specific and clear.
2) Developing premises : Planning is based on certain assumptions about the future. These assumptions are called planning premises. Forecasting is important in developing planning premises.
3) Identifying alternative courses of action: The next step in planning is to identify the alternative courses of action to achieve the objectives.
4) Evaluating alternative Courses : The pros and cons of various alternatives must be evaluated in terms of their expected cost and benefits.
5) Selecting an alternative : After evaluating the alternatives the manager will select that alternative which gives maximum benefit at minimum cost.
6) Implement the plan : Implementation of plan means putting plans, into action so as to achieve the objectives of the business.
7) Follow up action : Plans are to be evaluated regularly to check whether they are being implemented and activities are performed according to schedule.

Question 8.
“Planning is certainly important as it tells us where to go; it provide direction and reduces the risk of uncertainty.” Briefly explain the importance of planning in the light of above statement.
Answer:
Importance of Planning
1) Planning provides directions : By stating in advance how work is to be done planning provides direction for all actions.
2) Planning reduces the risk of uncertainty : Planning enables an organisation to predict future events and prepare to face the unexpected events.
3) Planning reduces wasteful activities: Planning serves as the basis of co-ordinating the activities and efforts of different departments and individuals. It helps to eliminate useless and redundant activities.
4) Planning promotes innovative ideas : Since planning is thinking in advance, there is scope for finding better and different methods to achieve the desired objectives.
5) Planning facilitates decision making: Planning helps in decision making by selecting the best alternative among the various alternatives.
6) Facilitates control: Planning provides the basis for control. Planning specifies the standard with which the actual performance is compared to find out deviation and taking corrective action.

Question 9.
Briefly explain the various limitations of planning the business managers need to overcome.
Answer:
Limitations of Planning
1) Planning makes the activities rigid.
2) Long term plans are insignificant in the rapidly changing business environment.
3) It reduces creativity.
4) It involves cost.
5) It involves a lot of time.
6) Planning does not guarantee success.

Plus Two Business Studies Planning 5 Marks Important Questions

Question 1.
While asking questions in the classroom the teacher asks Kala about the important functions of manage¬ment. She replies: Organising, staffing, directing and controlling.(MARCH-2009)
The teacher replies that one of the important functions is missing. The teacher gives one clue that it is the preliminary function of management.
a) Identify the function.
b) What are the different steps involved in that function.
Answer:
a) Planning
b) Planning Process (Steps in Planning)
1) Setting Objectives: The first step in planning is setting objectives. Objectives may be set for the entire organisation and for each department. The objective must be specific and clear.
2) Developing premises : Planning is based on certain assumptions about the future. These assumptions are called planning premises. Forecasting is important in developing planning premises.
3) Identifying alternative courses of action: The next step in planning is to identify the alternative courses of action to achieve the objectives.
4) Evaluating alternative Courses : The pros and cons of various alternatives must be evaluated in terms of their expected cost and benefits.
5) Selecting an alternative : After evaluating the alternatives the manager will select that alternative which gives maximum benefit at minimum cost.
6) Implement the plan : Implementation of plan means putting plans, into action so as to achieve the objectives of the business.
7) Follow up action : Plans are to be evaluated regularly to check whether they are being implemented and activities are performed according to schedule.

Question 2.
Ganga, a commerce student, argue in a class debate that planning ends with the selection of best alternative. But Parvathy of same class opposed the argument stating the planning continues even after the selection of best alternative.(FEBRUARY-2010)
a) To whom do you agree?
b) Explain the steps to be followed after the selection of best alternative
Answer:
a) Parvathy.
b) 1) Setting Objectives
2) Developing premises
3) Identifying alternative courses of action
4) Evaluating alternative Courses
5) Selecting an alternative
6) Implement the plan
7) Follow up action

Kerala State Board New Syllabus Plus Two Business Studies Chapter Wise Previous Questions and Answers Chapter 3 Business Environment.

Kerala Plus Two Business Studies Chapter Wise Previous Questions Chapter 3 Business Environment

Plus Two Business Studies Business Environment 1 Mark Important Questions

Question 1.
Which of the following is an example of Social environment? (FEBRUARY – 2009)
a) Economic system
b) Stability of Government
c) Consumer protection Act
d) Composition of family
Answer:
d) Composition of family

Question 2.
Find out the environment which describes the char-acteristics of the society.(MARCH-2009)
a) Political environment
b) Legal environment
c) Social environment
d) Technological environment
Answer:
c) Social environment

Question 3.
On November 1,2008 Reserve Bank of India reduced the cash reserve ratio to 5.5% to improve the avail-ability of credit.
identify the environment to which it relates to. (MAY-2009)
Answer:
Economic Environment

Question 4.
Find the odd one. (FEBRUARY-2010)
a) Unstable Government
b) Import-Export policy
c) Taxation Policy
d) Licensing Policy
Answer:
a) Unstable Government

Question 5.
Mr. Ramachandran, a Keralite, is doing computer software business in Germany. He wants to establish a computer software industrial project in Technopark, Thiruvananthapuram because of the business environment prevailing in Kerala.
Identify the particular business environment attracted Mr.Ramachandran. ?(MAY-2010)
Answer:
Political Environment

Question 6.
The Management of Kerala Bank Ltd. has decided to introduce core banking sysem in its branches in Kerala for providing modern banking facilities to its customers. Identify the business environment the bank has been made use of. (MAY-2011)
Answer:
Technological environment

Question 7.
“Introduction of internet banking in banking sector.” Identify the environment referred here. (MARCH-2012)
Answer:
Technological environment

Question 8.
The environment consists of components such as beliefs, traditions, etc. is known as environment. (MARCH-2013)
a) Legal
b) Economic
c) Political
d) Social
Answer:
d) Social

Question 9.
The environment which consists of those elements related to government affairs is called. (MAY-2013)
a) Economic environment
b) Social environment
c) Political environment
d) Legal environment
Answer:
c) Political environment

Question 10.
Royal Insurance Company Ltd. decided to computerise all its branches in Kerala to provide better services to the customers.
Identify the external environment the company has made use of. (MARCH-2015)
Answer:
Technological environment

Question 11.
Abolition of unnecessary licensing and quotas are examples of ___________ (MARCH-2016)
Answer:
Liberalisation

Question 12.
Life expectancy is one of the key elements that influences: (MAY-2016)
a) legal environment
b) Economic environment
c) Social environment
d) Political environment
Answer:
c) Social environment

Question 13.
The integration of the various economies of the world leading towards the emergence of a cohesive global economy is known as _________?(MARCH-2017)
Answer:
Globalisation

Question 14.
Stability and peace prevailing in the country are examples of (MAY-2017)
a) Legal environment
b) Economic environment
c) Social environment
d) Political environment
Answer:
d) Political Environment

Plus Two Business Studies Business Environment 2 Marks Important Questions

Question 1.
“Industrial policies usually give more importance to rural and backward areas.”Give four reasons. (MAY-2013)
Answer:
i) It helps in employment generation and utilization of local resources.
ii) It helps to promote economic and industrial development in the rural area.
iii) It helps to develop traditional sector industries to achieve equitable social development.

Plus Two Business Studies Business Environment 3 Marks Important Questions

Question 1.
Classify the following environmental factors into Economic, Social and Legal factors. (MAY-2009)
1) Tax Rates
2) LabourLaws
3) Level of Education
4) Human Rights
5) Foreign Trade
6) Demographiccomposition
7) Liberalisation
8) Customs and Beliefs
(9) Trademarks Act
Answer:

Question 2.
As a commerce student describe your point of view regarding the fact that aim of globalization is to look up on the world as a global village.”(FEBRUARY-2010)
Answer:
Globalization : Globalisation means the integration of the various economies of the world leading towards the emergence of a cohesive global economy.
Features of Globalisation:
a) Free flow of goods and services across nations
b) Free flow of capital across nations
c) Free flow of information and technology
d) Free movement of people across borders

Question 3.
“Scaning helps to get detailed information”. Give your comments in relation to business environment. (MARCH-2010)
Answer:
1) Identification of opportunities : Environment provides numerous opportunities for business suc-cess. Early identification of opportunities helps an enterprise to be the first to exploit them.
2) Identification of threats : Environmental awareness help managers to identify various threats on time and serves as an early warning signal.
3) Tapping useful resources : Business environment helps to know the availability of resources and making them available on time .

Question 4.
Match the following. (MARCH-2012)

Answer:
a) Legal environment – Labour laws
b) Economic environment – Disinvestment policy
c) Social environment – Level of literacy

Question 5.
‘Govt, has decided to increase foreign direct investment in insurance sector.’ Which area of business environment is mentioned in the above decision. Explain. (MARCH-2013)
Answer:
a) Political environment
b) Political Environment: Political environment includes constitution, political parties and their ideology, types of govt., political stability, attitude towards business, etc.

Question 6.
“Smart phones were widely used in rail ticket booking, internet browsing, e-commerce, etc.” Explain the element of business environment referred here.(MARCH-2016)
Answer:
a) Technological environment
b) Technological Environment : Technological environment consists of new products, new technologies, new approaches to product, new methods and equipments, etc.

Question 7.
What is your understanding about the terms (i) Glo-balization, (ii) Liberalization and (iii) Privatisation? (MAY-2016)
Answer:
a) Globalization : Globalisation means the inte-gration of the various economies of the world leading towards the emergence of a cohesive global economy.
b) Liberalisation : Liberalization of economy means, to free it from direct control imposed by the government.
c) Privatisation: Privatisation means transfer of the public sector enterprises to the private sector.

Question 8.
“Inspite of global economic crisis India is expected to achieve a growth rate of 6.8% in the F.Y. 2015-16.” In theHight of the above statement briefly explain the impact of Government policy changes in business and Industry.(MARCH-2017)
Answer:
1) Competition for Indian firms has increased.
2) The customer’s wider choice in purchasing better quality of goods and services.
3) Rapid technological advancement has changed/ improved the production process.

Question 9.
State the various grounds. Why understanding the importance of business environment is so vital for business managers? (MAY-2017)
Answer:
2 Importance of Business Environment
1) Identification of opportunities : Environment provides numerous opportunities for business success. Early identification of opportunities helps an enterprise to be the first to exploit them.
2) Identification of threats : Environmental awareness help managers to identify various threats on time and serves as an early warning signal.
3) Tapping useful resources : Business environment helps to know the availability of resources and making them available on time .
4) Coping with rapid changes : Environmental . scanning enables the firms to adapt themselves
to the changes in the market.
5) Assistance in planning and policy formulation: Environmental understanding and analysis is the basis for planning and policy making.
6) Improving performance: Environment scanning helps an organisation in improving its performance

Plus Two Business Studies Business Environment 4 Marks Important Questions

Question 1.
Write a short note on any four factors affecting environment of a business. (MARCH-2010)
Answer:
Dimensions of Business Environment

1) Economic Environment: Interest rates, inflation rates, changes in disposable income of people, stock market indices and the value of rupee are some of the economic factors that can affect the business enterprise.
2) Social Environment: The social environment of business includes the social forces like customs and traditions, values, social trends, literacy rate, educational levels, lifestyle, etc.
3) Technological Environment : Technological environment consists of new products, new technologies, new approaches to product, new methods and equipments, etc.
4) Political Environment: Political environment includes constitution, political parties and their ideology, types of govt., political stability, attitude towards business, etc.

Question 2.
Write down the contents you have to include in the seminar report on the topic business environment and its classifications. (MARCH-2014)
Answer:
Business Environment: The term ‘business environment’ means the sum total of all individuals, in-stitutions and other forces that are outside the control of a business enterprise but that may affect its performance.

Question 3.
The Industrial Policy 2003 formulated by the Govt, of India was to highlight some objectives. Name any four such objectives. (MARCH-2015)
Answer:
1) Encourage foreign direct investment
2) Abolition of industrial registration schemes
3) Delicencing of industries.
4) Strengthening the role of private sector
5) Increase in employment opportunities.

Plus Two Business Studies Business Environment 5 Marks Important Questions

Question 1.
Draw a chart showing the components of business environment.(FEBRUARY-2009)
Answer:
Dimensions of Business Environment

1) Economic Environment: Interest rates, inflation rates, changes in disposable income of people, stock market indices and the value of rupee are some of the economic factors that can affect the business enterprise.
2) Social Environment: The social environment of business includes the social forces like customs and traditions, values, social trends, literacy rate, educational levels, lifestyle, etc.
3) Technological Environment : Technological environment consists of new products, new technologies, new approaches to product, new methods and equipments, etc.
4) Political Environment: Political environment includes constitution, political parties and their ideology, types of govt., political stability, attitude towards business, etc,
5) Legal Environment : Legal environment includes various legislations passed by the central, state or local Government.

Question 2.
Following is the headline of an article published in a business format. “Awareness of environment is a must for business success.” Do you agree with this statement? Justify your answer.(MAY-2012)
Answer:
(a) Yes
(b) 2 Importance of Business Environment
1) Identification of opportunities : Environment provides numerous opportunities for business success. Early identification of opportunities helps an enterprise to be the first to exploit them.
2) Identification of threats : Environmental awareness help managers to identify various threats on time and serves as an early warning signal.
3) Tapping useful resources : Business environment helps to know the availability of resources and making them available on time .
4) Coping with rapid changes : Environmental . scanning enables the firms to adapt themselves
to the changes in the market.
5) Assistance in planning and policy formulation: Environmental understanding and analysis is the basis for planning and policy making.
6) Improving performance: Environment scanning helps an organisation in improving its performance.

Kerala State Board New Syllabus Plus Two Business Studies Chapter Wise Previous Questions and Answers Chapter 2 Principles of Management.

Kerala Plus Two Business Studies Chapter Wise Previous Questions Chapter 2 Principles of Management

Plus Two Business Studies Principles of Management 1 Mark Important Questions

Question 1.
Identify the management principle which states that “Union is strength.” (FEBRUARY-2009)
Answer:
Espirit de corps

Question 2.
Mr. Syam, the Production Manager of a firm, instructs Mr. Kiran to produce 50 units of a product per day. Mr. Arun, the Assistant Production Manager, instructs Mr. Kiran to produce 75 units. Which management principle is violated here? (MARCH-2009)
Answer:
Unity of Command

Question 3.
Identify the Management principle which states that managers should never try to have a divide and rule policy. (FEBRUARY-2010)
Answer:
Espirit de corps

Question 4.
Observe the following management principles and pick the odd one out. (MAY-2010)
(a) Unit of command
(b) Unit of direction
(c) Maximum output
(d) Equity
Answer:
(c) Maximum output

Question 5.
Management principles never remain static in its application mode. They can be applied with variation under different conditions in different ways. Identify the nature of management principle referred above. (MAY-2011)
Answer:
Universal Application

Question 6.
Complete the series
General and Industrial Management: Henry Fayol (MAY-2012)
The Philosopy of Management: ______
Answer:
F.W. Taylor

Question 7.
_________ are the prescribed guidelines for conducting an action.(MARCH-2013)
(a) Rules
(b) Methods
(c) Budgets
(d) Programmes
Answer:
(a) Rules

Question 8.
As a part of implementing scientific management techniques in his institution, Mr.Aravind decided to conduct work study. For that he conduct time study, motion study and fatigue study. But he forget to conduct one related study. Identify it.(MARCH-2014)
Answer:
Method study

Question 9.
In the opinion of Henry Fayol, the management expert, each employee should be received orders from one superior only. (MARCH-2015)
Mention the management principle referred here
Answer:
Unity of command

Question 10.
One of the following is not a feature of planning. Spot it. (MARCH-2015)
(a) Pervasiveness
(b) Mental revolution
(c) Continuous process
(d) Flexibility
Answer:
(b) Mental revolution

Question 11.
Henry Fayol a famous management theorist hails from _________. (MARCH-2016)
Answer:
(a) Japan
(b) Spain
(c) Russia
(d) France

Question 12.
Which one of the following principles of Fayol justi¬fies the statement “a place for everything and everything in its place”.(MAY-2016)
(a) Equity
(b) Stability of personnel
(c) Espirit De Corps
(d) Order
Answer:
(d) Order

Question 13.
Which among the following is not a contribution by F.W. Taylor?(MAY-2017)
(a) Differential Piece Rate
(b) Time Study
(c) Scalar Chain
(d) Functional Foremanship
Answer:
(c) Scalar Chain

Plus Two Business Studies Principles of Management 2 Marks Important Questions

Question 1.
Analyse the following diagram.(MARCH-2009)

According to Fayol’s Principles of Management, which term is used to mention the direct communi¬cation between D and P in the above diagram? Explain the concept.
Answer:
Gang Plank : According to the concept of gang plank persons of the same rank can communicate with each other especially in emergency situations. It helpstosave a lot of time in communication and possibility of distortion of messages can be reduced.

Question 2.
Find out the odd one. (MAY-2009)
(a) Stability of tenure of personnel.
(b) Scientific selection and training of workers.
(c) Maximum output.
(d) Replacement of old rule of thumb method.
Answer:
Stability of tenure of personnel – It is the management principle developed by Henry Fayol. All others are Taylors Scientific management principles.

Question 3.
“Proper understanding of management principles makes the managers more realistic in their profession.” Explain the concept.(MARCH-2010)
Answer:
(1) Increase efficiency : The understanding of the management principles provides guidelines to the managers for handling effectively the complex problems.
(2) Meeting the changing environmental requirements: Management principles are flexible and can be modified to meet changing requirements of environment.

Question 4.
Superiors should be impartial while dealing with their subordinates? (MAY-2012)
(a) Which management principle is meant here?
(b) Who advocated this principle?
Answer:
(a) Equity
(b) Henry Fayol

Question 5.
Mr.Sam, working in production department always receive instructions from production manager only. (MARCH-2014)
(a) Which management principle is applicable here?
(b) Who advocated these principles?
Answer:
(a) Unity of command
(b) Henry Fayol

Plus Two Business Studies Principles of Management 3 Marks Important Questions

Question 1.
Group the following persons coming under planning -in-charge and production -in-charge based on F.W Taylor’s functional foremanship.(MARCH-2009)
Gang Boss, Instruction Card Clerk, Inspector, Disci-plinarian, Speed Boss, Route Clerk.
Answer:

Question 2.
Draw a figure showing functional foremanship as advocated by F.W.Taylor to ensure specialisation in the organisation.(MAY-2012)
Answer:

Question 3.
As the father of modern management, Henry Fayol has suggested some management principles. List out any six of them.(MARCH-2014)
Answer:
Fayol’s Principles of Management: Henry Fayol (1841-1925) is known as the ‘Father of General Management’. The 14 principles of management given by him are:
1) Division of Work : This principle states that a complex work should be divided into small tasks, and each task should be assigned a particular employee. Division of work leads to specialization.
2) Authority and Responsibility: Authority is the right to give orders to the subordinates and responsibility is the obligation to perform the work in the mannerdirected by authority. There should be a balance between authority and responsibility.

3) Discipline: it is the obedience to organizational rules and employment agreement which are necessary for working of the organization.
4) Unity of Command : The principle of unity of command statej that each employee should receive orders ffom one superior only. It helps to avoid confusion and conflict in the employees.
5) Unity of Direction : Each group of activities having the same objective must have one head and one plan. This ensures unity of action and co-ordination.
6) Subordination of Individual Interest to General Interest: The Interest of an organization should take priority over the interests of any one individual employee.
7) Remuneration of Employees: Remuneration should be just, equitable and fair to both employees and the organization.
8) Centralization and Decentralization: Centralisation means concentration of authority at the top management. Decentralisation means dispersal of authority to the lower levels in the organisation. There should be a balance between Centralisation and decentralization.
9) Scalar Chain: The formal lines of authority from highest to lowest ranks are known as scalar chain. According to this principle, communication should passthrough the established chain of command. It ensures unity of command and effective communication.
Gang Plank : According to the concept of gang plank persons of the same rank can cprnmunicate with each other especially in emergency situations. It helps to save a lot of time in communication and possibility of distortion of messages can be reduced.
10. Order: According to Fayol, “People and materials must be in suitable places at appropriate time for maximum efficiency.” ‘
11. Equity: This principle requires the managers to be kind and just to workers. Superiors should be impartial while dealing with their subordinates.
12.Stability of Personnel: According to Fayol, workers should not be moved from one job to another frequently. It helps to minimise labour tumoverin the organization.
13.Initiative: Workers should be encouraged to develop and carry out their plans for improvements.
14. Espirit De Corps (Union is strength): According to Fayol, Management should promote a team spirit of unity and harmony among employees.

Plus Two Business Studies Principles of Management 4 Marks Important Questions

Question 1.
Henry Fayol suggested that there should be one head and one plan fora group of activities having the same objective. (MAY-2009)
(a) Identify the management principle referred to here.
(b) Compare the same with the principle of unity of command.
Answer:
(a) Unity of direction
(b) Unity of Command : The principle of unity of command states that each employee should re-ceive orders from one superior only. It helps to avoid confusion and conflict in the employees.
Unity of Direction : Each group of activities having the same objective must have one head and one plan. This ensures unity of action and co-ordination.

Question 2.
Mr.Ramesh Menon is the proprietor of Modern Garments Centre, a readymade garments manufacturing unit. There are 40 workers in the unit and grouped them into 4 groups according to their skill and ability. Each group was given separate tasks like designing, measuring, cutting and stitching. Now, this is the leading garment manufacturing unit in the city. (MAY-2010)
(a) Identify the general management principle that caused the success of the unit. (1 mark)
(b) State any two merits of this principle. (3 marks)
Answer:
(a) Division of labour
(b) a) Division of work
(b) Benefits of Division of Work
(1) It brings specialisation.
(2) It helps to minimise wastage.

Question 3.
Fayol’s ‘Unity of Command’ and Tailor’s ‘Functional foremanship’ are contradictory.” – Do you agree ? Give reason. (MARCH-2011)
Answer:
Yes. in case of unity of command, every employee receives instructions from one boss only and he is responsible and accountable to him alone. In case of functional foremanship, every worker receives instructions from eight bosses, four from planning department and four from production department. In this way, unity of command stresses on centralisation and functional foremanship on decentralization.

Question 4.
‘Henry Fayol suggested short circuiting the chain of command where emergency decisionsare to be taken.” (MARCH-2011)
(a) Which management principle is reflected here?
(b) What technique is suggested by Fayol to short circuit the path of communication?
Answer:
(a) Scalar Chain
(b) GangPlank
(b) Gang Plank : According to the concept of gang plank persons of the same rank can communicate with each other especially in emergency situations. It helps to save a lot of time in communication and possibility of distortion of messages can be reduced.

Question 5.
Mr.Thomas is the proprietor of National Engineering Industries and employed 40 workers under him. He grouped the employees into 4 according to their skill and ability. Each group was given separate tasks like designing, turning, welding and painting. Now this is the leading engineering industrial unit in the city. (MAY-2011)
(a) Identify the general management principle . contributes to the success of firm.
(b) State any three merits of this principle.
Answer:
(a) Division of labour
(b) a) Division of work
b) Benefits of Division of Work
(1) It helps to minimize wastage.
(2) The quality and quantity of production will improve. .
(3) It helps increase the efficiency of employees.

Question 6.
F.W. Taylor, the father of scientific management developed various techniques to improve performance of business firms. Explain any four of such techniques. (MARCH-2015)
Answer:
Techniques of Scientific Management
foremanship is a technique in which planning and execution are separated. He classified 8 specialist foremen into two departments viz. Planning and Production department. Both departments have four foremen each. Functional foremanship is based on the principle of division of work.

a) Route clerk : To lay down the sequence of operations through which the raw materials have to pass in the production process.
b) Time & cost clerk: To lay down the standard time for completion of the work.
c) Instruction card clerk: He is expected to deal the instructions to be followed by workers in handling the job.
d) Disciplinarian: He maintains proper discipline in the factory.
e) Gang boss: He arranges material, machine, tool, etc. for operation.
f) Speed boss: He supervises matters relating to the speed of work.
g) Repair boss: He ensures repairs and maintenance of the tools and machines.
h) Inspector: He checksthe quality of work done.
2) Standardisation and simplification of work: Standardisation refers to the process of setting standards for every business activity. It includes use of standard tools and equipments, methods, working conditions, etc. for the maximisation of output. Simplification aims at eliminating unnecessary diversity of products. -It results in savings of cost of labour, machines and tools.
3) Method study: The objective of method study is to find out one best way of doing the job. The main objective is to minimize the cost of production and maximize the.quality of the work.
4) Motion study: Motion study involves close observation of the movements of the workers and machines to perform a particular job. It helps to eliminate unnecessary movements of men, materials and machine.
5) Time study: It determines the standard time taken to perform a well-defined job. The objective of time study is to determine the number of workers to be employed, frame suitable incentive schemes and determine labour costs.
6) Fatigue study: Fatigue study seeks to determine the amount and frequency of rest intervals in completing a task.
7) Differential piece wage system: Under this system of wage payment, two kinds of rates are laid down.
a) Higher rates are offered to those workers who produce more than standard output.
b) Lower rates for those who produce below standard output.
8) Mental revolution: It involves a change in the mental attitude of workers and management towards each other. Both the parties should realise each other’s importance and work towards the profit of the firm.

Plus Two Business Studies Principles of Management 5 Marks Important Questions

Question 1.
Mr. Godwin, the owner of a manufacturing unit, likes to implement scientific management techniques in his business. What are the important principles he has to follow?(MARCH-2012)
Answer:
Principles of Scientific Management
1) Science and not the rule of thumb : The first principle of scientific management requires scientific study and analysis of each element of job in orderto replace old rule of thumb approach.
2) Harmony, not discord : As per this principle, there should be complete harmony between the management and workers. Taylor called for complete mental revolution on the part of both management and workers. Both the parties should realize each other’s importance and work towards the profits of the firm.
3) Co-operation not individualism : There should be complete co-operation between the labour and the management instead of individualism. According to Taylor, there should be an almost equal division of work and responsibility between workers and management.
4) Development of each and every person to his or her greatest efficiency and prosperity : The growth and development of an organisation depends on the efficiency and prosperity of employees. The efficiency of employees can be developed by giving propertraining and development. This ensure the growth of an organisation.

Question 2.
Explain any 3 techniques of scientific management.(MARCH-2013)
Answer:
Techniques of Scientific Management
1) Functional foremanship: Functional foremanship is a technique in which planning and execution are separated. He classified 8 specialist foremen into two departments viz. Planning and Production department. Both departments have four foremen each. Functional foremanship is based on the principle of division of work.

a) Route clerk : To lay down the sequence of operations through which the raw materials have to pass in the production process.
b) Time & cost clerk: To lay down the standard time for completion of the work.
c) Instruction card clerk: He is expected to deal the instructions to be followed by workers in handling the job.
d) Disciplinarian: He maintains proper discipline in the factory.
e) Gang boss: He arranges material, machine, tool, etc. for operation.
f) Speed boss: He supervises matters relating to the speed of work.
g) Repair boss: He ensures repairs and maintenance of the tools and machines.
h) Inspector: He checksthe quality of work done.
2) Standardisation and simplification of work: Standardisation refers to the process of setting standards for every business activity. It includes use of standard tools and equipments, methods, working conditions, etc. for the maximisation of output. Simplification aims at eliminating unnecessary diversity of products. -It results in savings of cost of labour, machines and tools.
3) Method study: The objective of method study is to find out one best way of doing the job. The main objective is to minimize the cost of production and maximize the.quality of the work.
4) Motion study: Motion study involves close observation of the movements of the workers and machines to perform a particular job. It helps to eliminate unnecessary movements of men, materials and machine.
5) Time study: It determines the standard time taken to perform a well-defined job. The objective of time study is to determine the number of workers to be employed, frame suitable incentive schemes and determine labour costs.
6) Fatigue study: Fatigue study seeks to determine the amount and frequency of rest intervals in completing a task.
7) Differential piece wage system: Under this system of wage payment, two kinds of rates are laid down.
a) Higher rates are offered to those workers who produce more than standard output.
b) Lower rates for those who produce below standard output.
8) Mental revolution: It involves a change in the mental attitude of workers and management towards each other. Both the parties should realise each other’s importance and work towards the profit of the firm.

Question 3.
Henry Foyal made three distinct contributions to the theory of management, which have given him the title “The father of management Thought”. One of them is the development of management principles. Mention any 10 principles which had grown out of the thoughts of Fayol.(MAY-2013)
Answer:
Fayol’s Principles of Management: Henry Fayol (1841-1925) is known as the ‘Father of General Management’. The 14 principles of management given by him are:
1) Division of Work : This principle states that a complex work should be divided into small tasks, and each task should be assigned a particular employee. Division of work leads to specialization.
2) Authority and Responsibility: Authority is the right to give orders to the subordinates and responsibility is the obligation to perform the work in the mannerdirected by authority. There should be a balance between authority and responsibility.

3) Discipline: it is the obedience to organizational rules and employment agreement which are necessary for working of the organization.
4) Unity of Command : The principle of unity of command statej that each employee should receive orders ffom one superior only. It helps to avoid confusion and conflict in the employees.
5) Unity of Direction : Each group of activities having the same objective must have one head and one plan. This ensures unity of action and co-ordination.
6) Subordination of Individual Interest to General Interest: The Interest of an organization should take priority over the interests of any one individual employee.
7) Remuneration of Employees: Remuneration should be just, equitable and fair to both employees and the organization.
8) Centralization and Decentralization: Centralisation means concentration of authority at the top management. Decentralisation means dispersal of authority to the lower levels in the organisation. There should be a balance between Centralisation and decentralization.
9) Scalar Chain: The formal lines of authority from highest to lowest ranks are known as scalar chain. According to this principle, communication should passthrough the established chain of command. It ensures unity of command and effective communication.
Gang Plank : According to the concept of gang plank persons of the same rank can cprnmunicate with each other especially in emergency situations. It helps to save a lot of time in communication and possibility of distortion of messages can be reduced.
10. Order: According to Fayol, “People and materials must be in suitable places at appropriate time for maximum efficiency.” ‘
11. Equity: This principle requires the managers to be kind and just to workers. Superiors should be impartial while dealing with their subordinates.
12.Stability of Personnel: According to Fayol, workers should not be moved from one job to another frequently. It helps to minimise labour tumoverin the organization.
13.Initiative: Workers should be encouraged to develop and carry out their plans for improvements.
14. Espirit De Corps (Union is strength): According to Fayol, Management should promote a team spirit of unity and harmony among employees.

Question 4.
“Wages of employees should be fixed scientifically based upon their performance.” Identify and explain the principle mentioned here by F.W. Taylor.(MARCH-2016)
Answer:
a) Differential piece Rate system
b) Differential piece wage system: Under this system of wage payment, two kinds of rates are laid down.
a) Higher rates are offered to those workers who produce more than standard output.
b) Lower rates for those who produce below standard output.

Question 5.
Discuss about any five techniques of scientific man-agement as specified F.W. Taylor.(MAY-2016)
Answer:
Techniques of Scientific Management
1) Functional foremanship: Functional foremanship is a technique in which planning and execution are separated. He classified 8 specialist foremen into two departments viz. Planning and Production department. Both departments have four foremen each. Functional foremanship is based on the principle of division of work.

a) Route clerk : To lay down the sequence of operations through which the raw materials have to pass in the production process.
b) Time & cost clerk: To lay down the standard time for completion of the work.
c) Instruction card clerk: He is expected to deal the instructions to be followed by workers in handling the job.
d) Disciplinarian: He maintains proper discipline in the factory.
e) Gang boss: He arranges material, machine, tool, etc. for operation.
f) Speed boss: He supervises matters relating to the speed of work.
g) Repair boss: He ensures repairs and maintenance of the tools and machines.
h) Inspector: He checksthe quality of work done.
2) Standardisation and simplification of work: Standardisation refers to the process of setting standards for every business activity. It includes use of standard tools and equipments, methods, working conditions, etc. for the maximisation of output. Simplification aims at eliminating unnecessary diversity of products. -It results in savings of cost of labour, machines and tools.
3) Method study: The objective of method study is to find out one best way of doing the job. The main objective is to minimize the cost of production and maximize the.quality of the work.
4) Motion study: Motion study involves close observation of the movements of the workers and machines to perform a particular job. It helps to eliminate unnecessary movements of men, materials and machine.
5) Time study: It determines the standard time taken to perform a well-defined job. The objective of time study is to determine the number of workers to be employed, frame suitable incentive schemes and determine labour costs.
6) Fatigue study: Fatigue study seeks to determine the amount and frequency of rest intervals in completing a task.
7) Differential piece wage system: Under this system of wage payment, two kinds of rates are laid down.
a) Higher rates are offered to those workers who produce more than standard output.
b) Lower rates for those who produce below standard output.
8) Mental revolution: It involves a change in the mental attitude of workers and management towards each other. Both the parties should realise each other’s importance and work towards the profit of the firm.

Question 6.
Explain briefly the techniques of Scientific Manage-ment as propounded by F.W. Taylor.(MARCH-2017)
Answer:
Techniques of Scientific Management
1) Functional foremanship: Functional foremanship is a technique in which planning and execution are separated. He classified 8 specialist foremen into two departments viz. Planning and Production department. Both departments have four foremen each. Functional foremanship is based on the principle of division of work.

a) Route clerk : To lay down the sequence of operations through which the raw materials have to pass in the production process.
b) Time & cost clerk: To lay down the standard time for completion of the work.
c) Instruction card clerk: He is expected to deal the instructions to be followed by workers in handling the job.
d) Disciplinarian: He maintains proper discipline in the factory.
e) Gang boss: He arranges material, machine, tool, etc. for operation.
f) Speed boss: He supervises matters relating to the speed of work.
g) Repair boss: He ensures repairs and maintenance of the tools and machines.
h) Inspector: He checksthe quality of work done.
2) Standardisation and simplification of work: Standardisation refers to the process of setting standards for every business activity. It includes use of standard tools and equipments, methods, working conditions, etc. for the maximisation of output. Simplification aims at eliminating unnecessary diversity of products. -It results in savings of cost of labour, machines and tools.
3) Method study: The objective of method study is to find out one best way of doing the job. The main objective is to minimize the cost of production and maximize the.quality of the work.
4) Motion study: Motion study involves close observation of the movements of the workers and machines to perform a particular job. It helps to eliminate unnecessary movements of men, materials and machine.
5) Time study: It determines the standard time taken to perform a well-defined job. The objective of time study is to determine the number of workers to be employed, frame suitable incentive schemes and determine labour costs.
6) Fatigue study: Fatigue study seeks to determine the amount and frequency of rest intervals in completing a task.
7) Differential piece wage system: Under this system of wage payment, two kinds of rates are laid down.
a) Higher rates are offered to those workers who produce more than standard output.
b) Lower rates for those who produce below standard output.
8) Mental revolution: It involves a change in the mental attitude of workers and management towards each other. Both the parties should realise each other’s importance and work towards the profit of the firm.

Question 7.
briefly explain about any 10 principles of management as contributed by Henry Fayol.(MAY-2017)
Answer:
Fayol’s Principles of Management: Henry Fayol (1841-1925) is known as the ‘Father of General Management’. The 14 principles of management given by him are:
1) Division of Work : This principle states that a complex work should be divided into small tasks, and each task should be assigned a particular employee. Division of work leads to specialization.
2) Authority and Responsibility: Authority is the right to give orders to the subordinates and responsibility is the obligation to perform the work in the mannerdirected by authority. There should be a balance between authority and responsibility.
–
3) Discipline: it is the obedience to organizational rules and employment agreement which are necessary for working of the organization.
4) Unity of Command : The principle of unity of command statej that each employee should receive orders ffom one superior only. It helps to avoid confusion and conflict in the employees.
5) Unity of Direction : Each group of activities having the same objective must have one head and one plan. This ensures unity of action and co-ordination.
6) Subordination of Individual Interest to General Interest: The Interest of an organization should take priority over the interests of any one individual employee.
7) Remuneration of Employees: Remuneration should be just, equitable and fair to both employees and the organization.
8) Centralization and Decentralization: Centralisation means concentration of authority at the top management. Decentralisation means dispersal of authority to the lower levels in the organisation. There should be a balance between Centralisation and decentralization.
9) Scalar Chain: The formal lines of authority from highest to lowest ranks are known as scalar chain. According to this principle, communication should passthrough the established chain of command. It ensures unity of command and effective communication.
Gang Plank : According to the concept of gang plank persons of the same rank can cprnmunicate with each other especially in emergency situations. It helps to save a lot of time in communication and possibility of distortion of messages can be reduced.
10. Order: According to Fayol, “People and materials must be in suitable places at appropriate time for maximum efficiency.” ‘
11. Equity: This principle requires the managers to be kind and just to workers. Superiors should be impartial while dealing with their subordinates.
12.Stability of Personnel: According to Fayol, workers should not be moved from one job to another frequently. It helps to minimise labour tumoverin the organization.
13.Initiative: Workers should be encouraged to develop and carry out their plans for improvements.
14. Espirit De Corps (Union is strength): According to Fayol, Management should promote a team spirit of unity and harmony among employees.

Plus Two Business Studies Principles of Management 8 Marks Important Questions

Question 1.
Explain Fayol’s principles of management.(FEBRUARY-2009)
Answer:
Fayol’s Principles of Management: Henry Fayol (1841-1925) is known as the ‘Father of General Management’. The 14 principles of management given by him are:
1) Division of Work : This principle states that a complex work should be divided into small tasks, and each task should be assigned a particular employee. Division of work leads to specialization.
2) Authority and Responsibility: Authority is the right to give orders to the subordinates and responsibility is the obligation to perform the work in the mannerdirected by authority. There should be a balance between authority and responsibility.

3) Discipline: it is the obedience to organizational rules and employment agreement which are necessary for working of the organization.
4) Unity of Command : The principle of unity of command statej that each employee should receive orders ffom one superior only. It helps to avoid confusion and conflict in the employees.
5) Unity of Direction : Each group of activities having the same objective must have one head and one plan. This ensures unity of action and co-ordination.
6) Subordination of Individual Interest to General Interest: The Interest of an organization should take priority over the interests of any one individual employee.
7) Remuneration of Employees: Remuneration should be just, equitable and fair to both employees and the organization.
8) Centralization and Decentralization: Centralisation means concentration of authority at the top management. Decentralisation means dispersal of authority to the lower levels in the organisation. There should be a balance between Centralisation and decentralization.
9) Scalar Chain: The formal lines of authority from highest to lowest ranks are known as scalar chain. According to this principle, communication should passthrough the established chain of command. It ensures unity of command and effective communication.
Gang Plank : According to the concept of gang plank persons of the same rank can cprnmunicate with each other especially in emergency situations. It helps to save a lot of time in communication and possibility of distortion of messages can be reduced.
10. Order: According to Fayol, “People and materials must be in suitable places at appropriate time for maximum efficiency.” ‘
11. Equity: This principle requires the managers to be kind and just to workers. Superiors should be impartial while dealing with their subordinates.
12.Stability of Personnel: According to Fayol, workers should not be moved from one job to another frequently. It helps to minimise labour tumoverin the organization.
13.Initiative: Workers should be encouraged to develop and carry out their plans for improvements.
14. Espirit De Corps (Union is strength): According to Fayol, Management should promote a team spirit of unity and harmony among employees.

Question 2.
The contributions of Henry Fayol and F.W.Taylorand Complementary to each other.” Do you agree? State your comments giving reason.(FEBRUARY-2010)
Answer:

Kerala State Board New Syllabus Plus Two Business Studies Chapter Wise Previous Questions and Answers Chapter 1 Nature and Significance of Management.

Kerala Plus Two Business Studies Chapter Wise Previous Questions Chapter 1 Nature and Significance of Management

Plus Two Business Studies Nature and Significance of Management 1 Mark Important Questions

Question 1.
Suggest the most suitable terminology to describe the process of integrating all the activities of a concern in order to facilitate its working and success. (FEBRUARY – 2009)
Answer:
Co-ordination.

Question 2.
Which among the following is not an element of co-ordination? (MARCH-2009)
(a) Integration
(b) Balancing
(c) Proper timing
(d) Directing
Answer:
(d)Directing

Question 3.
Which of the following is correct to the concept of the levels of management? (MAY-2009)
(a) Board of Directors come under the category of middle level management.
(b) Middle level management plans day-to-day activities
(c) Lower level management is also known as su-pervisory management.
(d) Top level management is accountable to employees.
Answer:
(c) Lower level management is also known as su-pervisory management.

Question 4.
Mr.Goutham Krishna is the production manager of a joint stock company and he is always, maintaining a closer watch on day to day performance of his department. (MAY-2010)
Identify the level of management he belongs to
Answer:
Middle level management

Question 5.
Which of the following is ‘not’ a function of Middle level management? (MARCH-2011)
(a) Reporting to top management
(b) Participate in the operational decisions. Operational decisions
(c) Lays down the objectives of the enterprise
(d) Directing the managers at lower-levels.
Answer:
(c) Lays down the objectives of the enterprise

Question 6.
Mr.Sethumadhavan is working as a Foreman in a shoe manufacturing company. He supervises 8 employees under him and makes the day-to-day production plan. Identify the level of management he belongs to.(MAY-2011)
Answer:
Lower Level Management.

Question 7.
Draw a diagram to show management as a process.(MARCH-2012)
Answer:

Question 8.
Foreman is an example __________ of level management.(MARCH-2013)
(a) Top
(b) Middle
(c) Lower
(d) Executive
Answer:
(c) Lower

Question 9.
Mr.Unnikrishnan is working as a foreman in a garment factory and he supervises 8 employees under him and makes the day to day production plan and other activities. In which level of management he belong to? (MAY-2013)
Answer:
Lower Level Management.

Question 10.
Mr. Siva Kumar, the sales officer of a firm maintains direct contacts with all the emplyees in his department.
Identify the level of management he belongs to.(MARCH-2015)
Answer:
Lower level

Question 11.
The process by which a manager synchronises the activities of different departments is known as _______.(MARCH-2016)
(a) Planning
(b) integration
(c) Direction
(d) Co-ordination
Answer:
(d) Co-ordination

Question 12.
The process by which a manager synchronises the , activities of departments is known as ________.(MAY-2016)
(a) Controlling
(b) Co-ordination
(c) Directing
(d) Organizing
Answer:
(b) Co-ordination

Question 13.
Spot the odd one (MARCH-2017)
(a) Production Manager
(b) Marketing Manager
(c) General Manager
(d) Personnel Manager
Answer:
(c) General Manager

Question 14.
What a manager does in India is the same as what a manager practices in US? Which characteristic of management well justifies the above statement? (MAY-2017)
(a) Goal orientation
(b) Pervasiveness
(c) Multidimensional approach
(d) Continuous nature
Answer:
(b) Pervasiveness

Plus Two Business Studies Nature and Significance of Management 2 Marks Important Questions

Question 1.
Match the following : (MARCH-2011)
i) Purchase Manager -(a) Top Level Management
ii) Accounts Officer – (b) Middle Level Management
– (c) Supervisory Level Management
Answer:
(i) Purchase Manager – Middle Level Management
(ii) Accounts Officer- Supervisory Level Management

Question 2.
Identify the odd one from the following and justify the answer. (MAY-2011)
(a) Notices
(b) Memos
(c) Orders
(d) Complaints
Answer:
Complaints.
All others are examples of downward communication.

Question 3.
Effectiveness and efficiency of management are two sides of the same coin. What are your arguments about the above statement? (MAY-2016)
Answer:
Efficiency and Effectivenss of Management.
Efficiency means doing the tasks correctly and with minimum cost. Effectiveness is concerned with doing the right task, completing activities and achieving goals. Management must try to achieve the goals by maintaining a balance between efficiency and effectiveness.

Question 4.
Do you agree that management has some charac-teristics of sciences? Substantiate. (MAY-2016)
Answer:
Management can be treated as science because –
(a) Management has a systematised body of knowledge.
(b) Its principles are based on cause and effect rela-tionship.
(c) Management principles are developed through experiments and observations.
(d) Management principles are applicable in all types of organisations.

Question 5.
Management is responsible for efficient utilisation of men and material resources for fulfilling the economic objectives of the business. Explain about these economic objectives. (MAY-2017)
Answer:
(a) Survival : Management must strive to ensure the survival of the organisation.
(b) Profit : Management has to ensure that the organization makes reasonable profit.

Question 6.
Madan and Sidan got into an argument “whether management is a profession or not”? Help them to resolve the conflict. (MAY-2017)
Answer:
(a) Management is a profession
(b) Management as a Profession : Profession means an occupation for which specialised knowledge and skills are required. The main features of profession are as follows.
(1) Well defined body of knowledge.
(2) Formal education and training.
(3) Professional Associations.

Plus Two Business Studies Nature and Significance of Management 4 Marks Important Questions

Question 1.
In a classroom debate you argue that management is a profession. What are the points you will raise to substantiate your arguments? (MARCH-2009)
Answer:
Management as a Profession : Profession means an occupation forwhich specialised knowledge and skills are required. The main features of profession are as follows.
(1) Well defined body of knowledge
(2) Formal education and training
(3) Professional Associations Management is a profession because:

(a) Management is based on a systematic body of knowledge comprising well defined principles.
(b) A manager acquires management skills through formal education and training.
(c) All professions are affiliated to a professional association which regulates entry and frame code of conduct relating to the profession.

Question 2.
Read the following arguments of two students. (MAY-2009)
Anil: “Management is an ordinary job, which doesn’t require any special knowledge and skill”,
Sunil: Management is a profession, which requires specialised knowledge and skill.”
(a) Whose argument do you favour?
(b) Justify your answer.
Answer:
(a) Sunil’s arguments correct. Management is a profession.
(b) (1) Management is based on a systematic body of knowledge comprising well defined principles.
(2) A manager acquires management skills through formal education and training.
(3) All professions are affiliated to a professional association which regulates entry and frame code of conduct relating to the profession.

Question 3.
In order to be recognized as a science, a subject should have the following features: (MAY-2011)
a) It should have a systematized body of knowledge.
b) It should establish cause anb effect relationship.
c) Its principles should be verifiable.
d) It should ensure predictable results.
By analyzing each of the above features of science, state whether management is a science or not.
Answer:
Management as a Science : Science is a systematised body of knowledge that is based on general truths. The features of science are as follows.

(1) Science is a systematic body of knowledge.
(2) Scientific principles are developed through experiments.
(3) Universal validity and application.
Management can be treated as a science because:
(a) Management has a systematized body of knowledge.
(b) Management principles are developed after scientific enquiry, experimentation and observation.
(c) Management principles are applicable to all types of organizations. So management is also called a science.

Question 4.
All the functional departmental heads come under this category of management.(MARCH-2012)
i) Identify the level of management.
ii) What are the general functions performed by this level of management?
Answer:
(a) Middle Level management
(b) Middle Management : All the functional department heads and branch managers come under the category of middle level managers. E.g. Production manager, Sales manager, Finance manager, etc.,
Functions of Middle Level Management
(1) Carry out the plans formulated by the top managers.
(2) To act as a link between Top Level Management and Lower Level Management.
(3) Assign necessary duties and responsibilities to the subordinates.
(4) Motivate them to achieve desired objectives.
(5) Co-operate with other departments.
(6) Reporting to top level management.

Question 5.
List out and explain various managerial functions to be performed. If you are appointed as manager in an organisation. (MARCH-2014)
Answer:
Functions of Management
1. Planning: Planning is the function of determining in advance what is to be done and who is to do it.
2. Organising : It is the management function of assigning duties, grouping tasks, establishing authority responsibility relationship and allocating resources required to carry out a specific plan.
3. Staffing: Staffing means finding the right people with the right qualifications to accomplish the goals ofthe organisation. It involves activities such as recruitment, selection, placement and training of personnel.
4. Directing: Directing involves leading, supervising, communicating and motivating the employees to perform the tasks assigned to them.
5. Controlling: It means monitoring organizational performance towards the attainment of organisational goals.

Question 6.
State any four points that validate management as a science. (MARCH-2015)
Answer:
Management as a Science : Science is a systematised body of knowledge that is based on general truths. The features of science are as follows.
(1) Science is a systematic body of knowledge.
(2) Scientific principles are developed through experiments.
(3) Universal validity and application.
Management can be treated as a science because:
(a) Management has a systematized body of knowledge.
(b) Management principles are developed after scientific enquiry, experimentation and observation.
(c) Management principles are applicable to all types of organizations.
So management is also called a science.

Question 7.
“Business today is dynamic and complex in nature; management helps people to adapt these changes”. In the light of this statement explain other significance of management. (MARCH-2016)
Answer:
Need and Importance of Management
1. Achieving Group Goals: Efficient management co-ordinates all the activities forthe achievement of organisational goals.
2. Increases Efficiency : Management helps to reduce costs and increase productivity through better planning, organising, directing, staffing and controlling the activities of the organisation.
3. Creates Dynamic Organisation : A good management enables the business to adapt and adjust according to the changes in the business environment.
4. Achieving Personal Objectives : Through motivation and leadership, the management helps individuals to develop team spirit, co-operation and commitment to group success.
5. Development of Society : Management helps to provide good quality products and services, creates employment opportunities, adopts new technology, etc., for the good of the people and the society.

Plus Two Business Studies Nature and Significance of Management 5 Marks Important Questions

Question 1.
Mr.Manoj is an officerof Madras Fertilizers Limited. He is entrusted with the task of taking key decisions in the organisation.(FEBRUARY-2009)
(a) Identify the level of management Mr.Manoj belongs.
(b) List out the functions he should perform in the organisation.
Answer:
Top Management: It consists of chairman, the Chief Executive Officer, Board of Directors, Managing Director, etc.
Functions of Top Level Management
(1) Lays down the objectives of the business
(2) Prepares strategic plans and policies
(3) Appoint middle level managers
(4) Issues necessary instructions to departmental heads.
(5) To maintain relations with outside agencies like govt., public, trade unions, etc.
(6) Co-ordinate and control all the departments in the organisation

Question 2.
Name the level of management which has direct con¬tact with operative employees. Also mention different functions performed by Managers at this level. (MARCH-2010)
Answer:
(a) Lower Level Management
(b) Lower / Supervisory / Operational Management : This level includes foremen, supervisors, finance and accounts officers, sales officers, etc. This level of managers have direct contact with employees.
Functions of Lower Level Management
1. Plan day-to-day production activities.
2. Assign workers to different jobs
3. Solve the problems of workers
4. Provide job training to workers
5. Looking after safety of workers.
6. Send periodical reports to middle level management.
7. Act as a link between management and employees.

Question 3.
In a group discussion conducted for the selection of students of MBA course of the university of Kerala on a topic, ‘Management discipline – a science or a profession’, Mr. Raju argued that it is a science as it possess all the characteristics of the science. But, Venu argued that it is a profession as it possesses all the features of a profession. (MAY-2010)
As the moderator of the discussion, how will you wind up this? Justify your arguments.
Answer:
Management can be treated as a science because:

(a) Management has a systematized body of knowledge.
(b) Management principles are developed after scientific enquiry, experimentation and observation.
(c) Management principles are applicable to all types of organizations.

Management is a profession because:

(a) Management is based on a systematic body of knowledge comprising well defined principles.
(b) A manager acquires management skills through formal education and training.
(c) All professions are affiliated to a professional association which regulates entry and frame code of conduct relating to the profession.

Question 4.
Volks Wagen, a famous car manufacturing company decided to call back some of its models due to poor pollution standards. By doing so they upheld one of the objectives of management. Briefly explain the objectives of management in the light of above action. (MARCH-2017)
Answer:
(a) Social Objectives of Management
(b) Social objectives: Social objectives are defined as the fulfilment of responsibility of an organisation towards society.
They are :

(a) Providing quality goods to consumers at reasonable price.
(b) Using environmental friendly methods of production.
(c) Giving employment opportunities to the society.
(d) Providing basic amenities like hospitals, schools, etc., to the employees and general public.
(e) Payment of taxes to the government.

Kerala State Board New Syllabus Plus Two Accountancy Chapter Wise Previous Questions and Answers Chapter 5 Dissolution of Partnership.

Kerala Plus Two Accountancy Chapter Wise Previous Questions Chapter 5 Dissolution of Partnership

Plus Two Accountancy Dissolution of Partnership 1 Marks Important Questions

Question 1.
On the dissolution of a firm, which of the following liability shall be paid first of all? (March 2012)
a) Creditors liability
b) Partner’s loan
c) Partner’s capital
d) None of the above
Answer:
a) Creditors liability

Question 2.
Realisation account is a account. (May 2013 (May)
a) Current
b) Personal
c) Real
d) Nominal
Answer:
d) Nominal

Question 3.
When realisation expenses are paid by a partner on behalf of the firm, A/c. is debited. (March 2016)
Answer:
Realisation A/c

Question 4.
Mention the name of account where profit or loss on realization is transferred. (March 2017)
Answer:
Partner’s capital account/ Partners current account

Question 5.
What journal entry will be passed if realization expenses are paid by a partner on behalf of the firm? (March 2017)
Answer:
Realisation A/c Dr
To partner’s capital A/c

Plus Two Accountancy Dissolution of Partnership 2 Marks Important Questions

Question 6.
On dissolution of a partnership in what order must the proceeds of the realization of assets be applied. (May 2016)
Answer:
i) Payment of third party liabilities
ii) Paying the loans from partners
iii) Paying the capital of the partners
iv) Surplus if any, is to be distributed to partners.

Question 7.
Anoop and Jony are partner’s in a firm, sharing profits and losses in the ratio of 3:2. The firm was decided to dissolve on 31st (March 2016). Mention any four ways of dissolution of the firm. (March 2017)
Answer:
a) Dissolution by agreement
b) Compulsory dissolution
c) Dissolution by notice
d) Dissolution by court

Plus Two Accountancy Dissolution of Partnership 5 Marks Important Questions

Question 8.
Anita and Binu were partners sharing profits in the ratio of 3:2. On the date of dissolution their capitals were: (March 2009)

Anita – Rs. 76,500 and Binu Rs. 43,000. The creditors amounted to Rs. 2,75,000. The balance of cash was Rs. 7,600. The assets realised Rs. 2,54,300, the expenses of realisation were Rs. 15,400. Anita and Binu were solvent. Close the books of the firm, showing the realisation account, capital accounts and cash account.

Hint: Book value of assets on the date of dissolution is to be ascertained by preparing a Balance Sheet.
Answer:
Opening Balance sheet

Realisation A/c

Capital A/c

Cash Amount

Question 9.
B, J & S are partners in a firm sharing profits and loses in the ratio of 3:2:3. They have decided to dissolve the firm. On the date of dissolution total creditors were Rs. 16,000 Bills discounted Rs. 2,650 during the year has become a real liability which has not paid, though this has not been recorded anywhere in the books of accounts. The capital account balances were: B Rs. 12,000, J Rs. 10,000, S Rs. 8,000. B advanced 14,000 besides his capital account. (May 2011)

Find out
a) Total Sundry Assets,
b) Profit or Loss on Realization,
c) Capital Balance of Partners.
Answer:
Calculation of total Sundry Asset Balance Sheet

b) Profit or Loss on Realisation
Realisation A/c

Partners Capital A/c

Question 10.
What entry would you pass for the following transaction on the dissolution of a firm having partners Vishal and Rakesh? (June 2012)
a) An unrecorded asset realised Rs. 6200.
b) Dissolution expenses amounted to Rs. 3200.
c) Creditors already transferred to Realisation account were paid Rs. 88,000.
d) Profit on Realisation Rs.48000 to be distributed between partners Vishal and Rakesh.
Answer:

Question 11.
A, B and C are the partners sharing profit and losses in their capital ratio. Balance sheet as on 31st (March 2012) were as follows: (March 2013)

Balance Sheet

The firm was dissolved on the above date. A took over investments and stock at Rs. 40,600. Joint Life policy was realised at surrender value. Furniture was sold at book value. Plant and Machinery were realised for Rs. 82,040. Creditors were paid in full settlement. Prepare Realisation Account, Bank Account and Partners Capital A/c.
Answer:
Realisation a/c

Capital A/c

Bank A/c

Question 12.
The Balance sheet of P, Q and R sharing profit and losses in the ratio 3:2:1 respectively. The balance sheet on 30th June 2010 was as follows: (March 2013)
Balance Sheet

Answer:
The firm was dissolved on that date. For the purpose of dissolution, the investments were valued at Rs. 18000 and Stock at Rs. 17500. ‘P’ took over investments and ‘Q’ to take over stock. ‘R’ took over furniture at book value. Debtors and buildings realised Rs. 57000 and Rs. 25000 respectively. Expenses of realisation amounted to Rs. 450. In addition one bill forRs. 500 under discount was dishonored and had to be taken up by the firm. Prepare Realisation A/c, Partners Capital a/c and Bank A/c.
Answer:
Realisation a/c

Capital A/c

Bank A/c

Question 13.
A and B were partners in a firm sharing profits and losses in the ratio of 3:2 respectively. They decided to dissolve the firm on 31st March, 2010. On that date, their capitals stood at Rs. 1,60,000 and Rs. 80.0 respectively. Amount owned by “B” to firm was Rs. 59,200 and there was a loan by “A” for Rs. 72,000. Creditors were Rs. 4,80,000, sundry, assets Rs. 6,89,600 and cash Rs. 43,200. Sundry assets realised Rs. 5,53,600. Realisation expenses amounted to Rs. 16,000. (March 2013)

Prepare realisation account, cash account and capital accounts of partners assuming that both the partners are solvent.
Answer:
Realisation A/c

Capital A/c

Cash A/c

Question 14.
Joy and Roy were in partnership, sharing profits and losses equally. Their Balance Sheet as on 31-03-2012 was as follows : (May 2013 (May)

Balance Sheet as on 31-03-2012

The firm was dissolved on the date of Balance Sheet. The assets realized as follows. Furniture Rs. 9,000; Debtors Rs. 8,500; Stock Rs. 7,000. Creditors were paid (in full settlement) Rs. 8,000. Realisation expenses amounted to Rs. 500. Prepare necessary Ledger Accounts to close the books of the firm.
Answer:
Realisation A/c

Partners Capital A/c

Bank A/c

Question 15.
Mibi and Maggie were in partnership, sharing profits and losses equally. Their Balance Sheet as on 31.03.2013 was as follows. (March 2014)
Answer:
Balance Sheet as on 31.03.2013

The firm was dissolved on the date of Balance Sheet. The assets realized as follows:
Furniture Rs. 8000 Debtors Rs. 6,500 Stock Rs. 5,000 Creditors were paid in full.
The Realisation expenses amounted to Rs. 500. Prepare necessary Ledger Accounts.
Answer:
Realisation a/c

Capital A/c

Bank a/c

Question 16.
What journal entries would you pass for the following transactions on the dissolution of the firm of partners X and Y? (May 2016)
i) Dissolution expenses 1800 were paid by ‘Y’
ii) An unrecorded asset realized 13,000.
iii) Stock 15,000 already transferred to realization account was taken over by ‘X’.
iv) Creditors already transferred to realization account were paid? 4000.
v) Loss on realization 13,000 was distributed among the partners X and Y in their profit sharing ratio 3:2.
Answer:
Realisation A/c Dr 800
To Y’s capital A/c 800

ii) Cash A/c Dr 3000
To realisation 3000

iii) X’s capital A/c Dr 5000
To realisation 5000

iv) Realisation A/c Dr 4000
To cash 4000

v) X’s capital A/c Dr 1800
Y’s capital A/c Dr 1200
To realisation 3000

Question 17.
A, B & C are partners sharing profit and losses in the ratio of 5:3:2. Their Balance Sheet as on 31st March 2015 was as follows: (March 2017)
Balance Sheet of A, B & Cas on 31st March 2015

The firm was dissolved on that date. Prepare realization account with the following information:

1) Building realized forRs. 1,20,000; Bills receivables realized for Rs. 70,000; Stock realized for Rs.40,000 and Machinery sold for Rs.33,000 and furniture Rs.60,000.
2) Bank loan was settled for Rs.70,000; Creditors and bills payable were settled at 10% discount.
3) Realisation expenses Rs.1,500.
Answer:
Realisation A/c

Plus Two Accountancy Dissolution of Partnership 8 Marks Important Questions

Question 18.
Arun, Basheerand Christy are in partnership with a profit-sharing ratio of 3:2:1. They decided to dissolve the firm. On the date of dissolution, their capitals were Rs. 20,000/-, Rs. 15,000/- and Rs. 10,000/-respectively. Their books of accounts showed the total creditors as Rs. 20,000/- and bills payables as Rs. 5,000/-. (June 2009 (May)

Christy advanced an additional Rs. 10,000/ be-sides his capital, to the firm. At the time of dissolution has an unrecorded liability for Rs. 4,000/-. The cost of dissolution amounted to Rs. 2,000/-. The firm is having a cash balance of Rs. 8,000/- as per records.

You are asked to find out:
(a) Sundry assets
(b) Profit or Loss on Realisation
(c) Amount to be received or brought in by each partner.
Answer:
Balance Sheet

Realisastion A/c

Capital Accounts

Cash A/c

Question 19.
Abu, Bibu and Cebu were sharing profits and losses in the ratio 2:1:1. Their Assets and Liabilities as on 31-12-2007 is as shown below: (June 2009 (May)

The assets realized on dissolution are :
Sundry Debtors 20,500
Furniture 10,000
Stock 10,000
Plant & Machinery 15,000
Cash at Bank 5,000
Provision for bad debts 500
Sundry Creditors 15,000
Bills Payables 3,000
Bank Overdraft 5,000

In addition to the above the firm had a general re serve for Rs. 4000/- and an accumulated loss of Rs. 2,000/-.

The Partners decided to dissolve the firm on the above said date and their capital balances on that date were:
Abu (Cr.) – Rs. 30,000/-
Bibu(Cr.) – Rs.15,000/-
and Cibu(Dr.) – Rs. 10,000/-

The assets realized on dissolution are:
Sundry Debtors – 18,000/-
Funiture – 15,000/-
Plant & Machinery – 20,000/-
Stock was taken over by Bibu at Rs. 8,000/-

The firm had an unrecorded investment of Rs. 5,000/- and there was a pending case for a claim of Rs. 2,000/- which was settled at Rs. 1,000/- Realisation expenses amounted to Rs. 500/-. The creditors are settled at a discount of 10%. Prepare Realisation ale, Capital a/cs and Bank a/c.
Answer:
Old Balance Sheet

Realisation A/c

Capital A/c

Cash A/c

Question 20.
a) Given below is an abstract of particulars related to a dissolved partnership firm on 31.3.2009 where Sam, Gopal and Rahim were partners sharing profits on 5:3:2. (June 2010)

Liabilities: Capital –
Sam : 200000
Gopal: 150000
Rahim:100000
Creditors – 50000
General Reserve- 100000

The firm collects the balance from the creditors after adjustment of fixtures taken over by them.

Prepare: Realisation Account, Capital accounts and Cash account.
Answer:
Realisation a/c

Capital A/c

Cash a/c

Note:
When a creditor accepts an asset which has a higher value than the amount due to him, then an entry will be passed only for receiving the excess amount from such creditor. Here, fixture taken over by creditor for Rs.60000, which is higher than the amount due to him ie. 50000. The excess amount Rs.10000/- (60000 – 50000) is credited to Realisation a/c.

Question 21.
Balance sheet of M/s. J3 is given below: (June 2010)

Balance Sheet as on 31.3.2009

On a dispute between the partners they decide to wind up the firm on the following terms:
1. Assets realised land and buildings -100000 Stock -10000
2. Jane took over Bills Receivable for Rs. 12000
3. A creditor accepts office equipment for Rs.8000 and the balance were paid in cash.
4. The Joint Life Policy was surrendered for Rs.9000.

Prepare: Realisation Account, Capital Accounts and Cash Account.
Answer:
Realisation a/c

Capital A/c

Cash A/c

Question 22.
Thara, Sony and Agnes started business on 1st April, 2002 with capitals of Rs. 1,00,000, Rs. 80,000 and Rs. 60,000 respectively sharing profits (losses) in the ratio of 4 : 3 : 3. For the year ending March 31st, 2003, the firm suffered a loss of Rs. 50,000. Each of the partners withdrew Rs. 10,000 during the year. On March 31st, 2003 the firm was dissolved, the creditors of the firm stood at Rs. 24,000 on that date and cash in hand was Rs. 4,000. The assets realised Rs. 3,00,000 and creditors were paid Rs. 23,500 in full settlement of their claim. Prepare realisation ac-count and show your workings clearly. (March 2010)

Hint: Book value of assets on the date of dissolution is to be ascertained by preparing a Balance Sheet.
Answer:
Opening Capital Accounts

Opening Balance Sheet

Realisation A/c

Question 23.
a) Anil and Sunil are partners sharing profits and losses in the ratio of 3:2. Their Balance Sheet as on 31st December 2010. (March 2012)

The firm dissolved on the above date. Following transaction took place:
1) Anil took over investments at Rs. 8,000 and also agreed to pay off his wife’s loan.
2) Other assets were realised as: Stock- 15,000, Debtors- 18,500, Fumiture-4,500, Machinery -25,000.
3) Realisation expenses were Rs. 1,100.
4) Creditors were paid off at a discount of 2.5%. Close the books of the firm.
Answer:
a) Realisation A/c

Capital A/c

Cash A/c

Question 24.
R and S are partners who share profits and losses in the ratio of 3 : 1. They decided to dissolve their partnership on 31 st December 2009, on which date their Balance Sheet stood as under: (March 2012)

Dissolution was effected on the following terms:
i) Mr. R agreed to pay off Mrs. R’s loan.
ii) Assets were realised as under:
Debtors – 44,000; Plant and Machinery – 28,000; Goodwill – 18,000; Furniture – 5,000; Stock – 11,000.
iii) Mr. S took away investments at Rs. 33,000 and bills receivable at 10% discount.
iv) Sundry creditors and Bills payable were settled at 5% discount.
v) Realisation expenses come to Rs. 2,500.

Prepare Realisation Account, Capital Account and Bank Account.
Answer:
a) Realisation A/c

Capital A/c

Bank A/c

Question 25.
The following is the Balance Sheet of Jack and Jill as on 31 st December 2007. (Score 4) (June 2012)

The firm was dissolved on 31st December 2007 on the following terms:
a) Jack promised to pay off Mrs. Jack loan and took away stock Rs.8000.
b) Jill took away half of the investment at 10% discount.
c) Debtors realised Rs.38000
d) Creditors and bills payable were due on an average basis, one month after 31st December, but they are paid immediately on 31 st December at 6% discount p.a.
e) Plant realised Rs.50000, buildings Rs.80000, goodwill Rs.12000 and remaining investments Rs.9000.
f) There was a old typewriter in the firm which had been written off completely from the books. It is now estimate^ to realise Rs.600. It was taken away by Jill at this estimated price.
g) Realisation expenses were Rs.2000. You are required to give the necessary ledger account. (8 scores)
Answer:
Realisation A/c

Capital A/c

Cash a/c

Working Note
1. Investment = 20000 x 1/2 x 10/100 = 1000 Taken over by Jill = 10000 -1000 = 9000
2. Creditors & Bills payable paid off = (76000 x6/100×1/12) = 380 76000-380 = 75620

Question 26.
Black and White are equal partners of a firm, the Balance sheet of which is given below as on 31st March 2011, the date at which they decide to dissolve the partnership. (May 2013 (May)

a) Assets were realized as follows: Stock Rs. 22,000, Debtors 9,500, Machinery Rs.21,000, Buildings rs. 30,000.
b) White took over the furniture at Rs. 7,000.
c) Black agreed to accept Rs. 2,500 in full settlement of his loan account.
d) Dissolution expenses amounted to Rs. 2500.

Prepare Realisation Account, Partner’s Capital Account and Bank Account.

Realisation account, Partner’s Capital Account, Bank Account.
Answer:
a) Realisation a/c

Capital A/c

Bank a/c

Note: Balance of Black’s loan a/c Rs. 500 (3000 – 2500) being profit will be transferred to the Realisation a/c.

Question 27.
A) Saji, Stephen and Sunil were partners sharing profits and losses in the ratio of 1:2:2. Their Balance Sheet as on 31st March 2013 was as follows: (March 2014).

The partners agreed to dissolve the firm on the following terms:
a) Assets realised as – Land and Buildings – Rs.120000, Stock – Rs. 40000, Accounts receiv-able – Rs.15,000.
b) Expenses on dissolution – Rs. 3000
c) A creditor accepts office equipment for Rs.7000 and the remaining creditors were paid in full by cheque.
d) The Joint Life Insurance Policy was surrendered for Rs.9,000. Prepare realization a/c, capital accounts and bank account.
Answer:
Realisation a/c

Capital A/c

Bank a/c

Question 28.
Jack and Jill are partners sharing profits in the ratio of 3:2. They decided to close the firm and their Balance Sheet is given below: (March 2014)

Assets realised as follows:
Buildings Rs. 32000
Debtors Rs.28000
Furniture Rs.36000

Liabilities settled as follows:
Plant has been taken over by Bank at Rs. 66,000 in respect of the loan granted by the Bank and the rest has been paid in cash.
Creditors are settled at Rs. 30,000
Realisation expenses came to Rs. 1000 which have been met by Jill.
Prepare necessary accounts to dissolve the firm and ascertain the amount due to ordue from the partners.
Answer:
Realisation a/c

Capital A/c

Bank a/c

Question 29.
Green and Red sharing profits as 3:1 and they agree upon dissolution. The Balance Sheet as on 31-03-2014 is as under: (March 2016)

Balance Sheet as on 31-03-2014

Green took over plant and machinery at an agreed value of Rs. 60,000. Stock and furniture were sold for Rs. 42,000 and Rs.13,900 respectively. Debtors were taken over by Red at Rs.69,000. Creditors were paid at a discount of Rs.900. Green agreed to pay the loans. Realisation expenses were Rs.1,600. Prepare necessary Ledger A/cs.
Answer:
Realisation A/C

Capital A/c

Cash A/c

Kerala State Board New Syllabus Plus Two Accountancy Chapter Wise Previous Questions and Answers Chapter 4 Reconstitution of a Partnership Firm – Retirement/Death of a Partner.

Kerala Plus Two Accountancy Chapter Wise Previous Questions Chapter 4 Reconstitution of a Partnership Firm – Retirement/Death of a Partner

Plus Two Accountancy Reconstitution of a Partnership Firm – Retirement/Death of a Partner 1 Marks Important Questions

Question 1.
Section – 37 of the Partnership Act provides interest on the amount left by the retiring or deceased partner at (March 2010)
a) 5%
b) 6%
c) Bank rate
Answer:
b) 6%

Question 2.
W,X, Y and Z are partners sharing profit and losses in the ratio of 1/3, 1/6, 1/3 and 1/6 respectively. Y retires and W, X and Z decided to share the profit and losses equally. Calculate the gaining ratio. (March 2013)
Answer:
Gaining ratio – New rato – old ratio
Old ratio = \(1 / 2: 1 / 6: 1 / 3: 1 / 6\)
ie. \({ }^{2} /{ }_{6}: 1 /{ }_{6}:{ }^{2}{ }_{6}: 1 /{ }_{6}\)
New ratio = 1 : 1 : 1
W’s gain = \(1 / 3-2 / 6=0 / 6\)
Z’s gain = \(1 / 3-1 / 6=1 / 6\)
Z’s gain = \(1 / 3-1 / 6=1 / 6\)
Gaining ratio = 0:1:1

Question 3.
Retiring Partner’s Capital is transferred to account. (May 2013 (May))
a) Current
b) Loan
c) Profit & Loss
d) Memorandum Revaluation
Answer:
b) Loan account

Question 4.
Profit or loss on revaluation at the time of retirement must be transferred to the partners in (May 2016)
a) Capital ratio
b) Old profit sharing ratio
c) Equally
d) Gaining ratio
Answer:
b) old profit sharing ratio

Question 5.
Write a journal entry for recording unrecorded liability at the time of retirement of a partner. (March 2017)
Answer:
Up Revaluation A/c Dr

Plus Two Accountancy Reconstitution of a Partnership Firm – Retirement/Death of a Partner 2 Marks Important Questions

Question 6.
In which case the following journal entries are required? (March 2010)
i) Retiring partner’s Capital account Dr To Retiring partner’s Loan account
ii) Deceased partner’s executor’s account Dr To Cash/Bank account
Answer:
i) The amount due to the retiring partner is transferred to his loan a/c.
ii) The amount due to the deceased partner is immediately paid to the executors in cash.

Question 7.
Manju, Daniel and Joseph are partners in a firm. Joseph decides to retire from the firm due to ill health. You, as their accountant, explain to them the adjustments required in accounts on the retirement of a partner. (March 2011)
Answer:
The following adjustment are required in accounts on the retirement of a partner.
a) Calculation of gaining ratio
b) Revaluation of assets and reassessment of liabilities
c) Treatment of goodwill
d) Adjustment of reserves and accumulated profits or loss.
e) Ascertainment of profit or loss up to the date of retirement.
f) Settlement of the accounts of a retiring partner.

Question 8.
A, B and C are partners sharing profits in the ratio of 4:3:2. ‘C’ retires from the frim. Calculate new profit sharing ratio and gaining ratio. (March 2012)
Answer:
Old ratio = 4:3:2
New ratio after the retirement of C = 4: 3
Gaining ratio \(A=\frac{4}{7}-\frac{4}{9}=\frac{8}{63}\)
\(B=\frac{3}{7}-\frac{3}{9}=\frac{6}{63}\)
Gaining ratio = 8:6 = 4 : 3

Question 9.
Chithra, Pavitha and Geetha are partners in a firm, Pavitha retires from the firm, on the date of retirement, Rs. 30,000 is due to her. Chithra and Geetha promise to repay the amount in three equal instalments at the end of every year. Prepare Pavitha’s loan a/c if they agreed to pay in three equal yearly instalments together with interest @ 10%. (March 2013)
Answer:
Pavitha’s Loan a/c

Question 10.
The amount due to the retiring partner may be transferred to a Loan Account ¡n his name to be gradually paid off with interest. In this connection give journal entries. (March 2013)
a) for transfer to Loan A/c.
b) for interest
c) for payment of an instalment
Answer:
1) Retiring partner’s capital a/c Dr.
To Retiring partner’s loan a/c.

ii) Interest a/c Dr.
To Retiring partners Loan a/c.

iii) Retiring partners loan a/c Dr.
To cash a/c

Question 11.
Sachin, Rahul and Lakshmanan are partners in the ratio of 2:1:1. Lakshmanan retires and Sachin and Rahul acquire his share equally. Calculate the new ratio and gaining ratio. (March 2014)
Answer:
Ratio of Sachin, Rahul and Lakshmanan = 2:1:1
Retiring partner – Lakshmanan’s share 1/4 is taken up by Sachin & Rahul equally ie. 1/8 each.
New share of Sachin \(=\frac{2}{4}+\frac{1}{8}=\frac{4+1}{8}=\frac{5}{8}\)
New share of Rahul \(=\frac{1}{4}+\frac{1}{8}=\frac{2+1}{8}=\frac{3}{8}\)

New Ratio = 5:3
Gaining ratio = 1:1

Question 12.
Petya, Pd) and VIJI are panels, shading profit and losses in the ratio 014:32. Pdjl retired and goodwill has valued a Rs. 63,000. Play and Viji are decided to share future profits and losses in the ratio of 5:3. Record necessary Journal entry, when goodwill Is raised at Its full value and wrItten off Immediately. (March 2017)
Answer:
Journal

Plus Two Accountancy Reconstitution of a Partnership Firm – Retirement/Death of a Partner 3 Marks Important Questions

Question 13.
Mr. Krishnan died on 1st (March 2011) who was an – active partner in the firm. The other partners were Syam and Sathyan. The books of account reveal the following: (March 2013)
General reserve Rs. 12,000
Capital of Krishnan Rs. 40,000
P & LA/c (Dr.) Rs. 18,000
Drawings of Krishnan Rs. 10,000
Krishnan’s loan to firm Rs. 20,000
Int. on loan due to Krishnan Rs. 2,000
Value of goodwill Rs. 24,000

They share profit and losses equally. Calculate the amount due to his legal heirs.
Answer:
Krishnan’ Capital a/c

Krishnan’s loan to firm = 20000
Krishnan’s Interest on loan = 2000
Total amount due to Krishnan’s legal heirs = Capital a/c balance + Krishnan’s loan + Interest on loan = 36000 + 20000 + 2000 = 58000

Question 14.
Give three distinctions between ‘gaining’ and ‘sacrificing’ ratio. (March 2013)
Answer:
The distinction between gaining ratio and sacrificing ratio.

Question 15.
Sreekuttan, Dhaneesh and Sahil were in partnership and were sharing profits in the ratio of 2:2:1. On 31.03.2013, Sahil left the firm as per their agreement. The following details are available from their books. (March 2014)

Balance Sheet as on 31.03.2013

Land and Buildings had been valued at Rs. 140000. The Plant and Machinery was revalued at Rs.22000 and it was agreed that the provision of Rs. 1,000 be created for doubtful debts. Prepare Revaluation Account.
Answer:
Revaluation A/c

Question 16.
A, B and C were in partnership, sharing profits equally. ‘C’ agreed to retire from the partnership on 30th June, 2007, His share of profits to the date of retirement has to be calculated on the basis of the average profits of the preceding three accounting years. The books showed the profits of the last five accounting years (ending on 31st March) as follows: (May 2016)

2002 – 03 = ₹ 12,650
2003 – 04 = ₹ 15,400
2004 – 05 = ₹ 9,900
2005 – 06 = ₹ 8,800
2006 – 07 = ₹ 11,000
Calculate C’s share of profit.
Answer:
Profit for the last three years = 9900+8800+11,000 = 29,700
Average profit \(=\frac{29,700}{3}=9900\)
Profit from the date of last balance sheet to the date of retirement \(=9900 \times \frac{3}{12}=2475\)
C’s share of profit \(=2475 \times \frac{1}{3}=825\)

Question 17.
K, L, M, N and O are in partnership sharing profits and losses as \(\frac{6}{25}, \quad \frac{8}{25}, \quad \frac{4}{25}, \quad \frac{2}{25}\) and \(\frac{5}{25}\) respectively. ‘K’ retires and others continue to share with their ratios immediately before the retirement of K. Calculate the new profit sharing ratio. (March 2016)
Answer:
New profit sharing ratio is 8:4:2:5

Plus Two Accountancy Reconstitution of a Partnership Firm – Retirement/Death of a Partner 5 Marks Important Questions

Question 18. (March 2009)
Mr. Ajithkumar, a partner in a profit-earning partnership firm, retired voluntarily due to ill health. He is very eager to know the amount due from the firm. As an accountant, how will you calculate the amount due to him? Explain the procedure by preparing his capital account using imaginary figures, assuming that he had retired on June 30th and the accounts are closed every year on March, 31st.
Answer:
Ajith Kumar’s Capital A/c

Question 19.
Anu, Manu, & Vinu are partners sharing profits and losses in the ratio 3:2:1. Anu retires from the firm and his share is taken over by Manu and Vinu in the ratio 3 : 2. (June 2009 (May)

On Anu’s retirement, the goodwill of the firm is valued at Rs. 1,20,000/- Finally the amount due to Anu is ‘ transferred to his executor’s loan account. Your valuable suggestions are requested, regarding.

(1) The new profit sharing ratio and gaining ratio.
(2) Treatment of Goodwill on retirement and
(3) Settling the accounts of a retiring partner.
Answer:
Old ratio of Anu, Manu and Vina = 3:2:1
Calculation of gaining ratio.

Anu’s share taken over by Manu \(=3 / 6 \times 3 /{ }_{5}=9 /{ }_{30}\)
Anu’s share taken over by Vinu \(=3 / 6 \times 2 /{ }_{5}=6 /_{30}\)
∴ Gaining ratio \(=9 /{ }_{30}:{ }^{6} /{ }_{30}\)
New ratio = Old ratio + gaining ratio
New ratio of Manu \(=\frac{2}{6}+\frac{9}{30}=\frac{10+9}{30}=\frac{19}{30}\)
New ratio of Vinu \(=\frac{1}{6}+\frac{6}{30}=\frac{5+6}{30}=\frac{11}{30}\)
New ratio = 19:11

Total goodwill of the firm = 1,20,000
Anus share of goodwill = 1,20,000 x 3/6 = 60,000
Manu’s capital Dr. 36,000
Vin us capital Dr. 24,000
To Anus capital 60,000

(Being goodwill adjusted in the gaining ratio)

The amount due Anu can be paid in cash at the time of his retirement or amount can be transferred to his loan account or it can be partly paid in cash and the balance amount can be transferred to his loan account.

Question 20.
Anne, Allyn and Anita are partners sharing profits and losses in 5: 3: 2 ratio. Anita retires from the business. On Anita’s retirement, the respective capitals of Anne and Allyn are Rs. 38,000 and Rs. 24,000 after making all adjustments. The new profit sharing ratio betweenAnneandAllynwillbeequal. It was decided that the capital of the new firm will be Rs. 70,000 and it will be in the new profit sharing ratio. The partners will bring in additional capital or withdraw the excess capital as the case may be. Calculate the amount of capital to be brought in or withdrawn by Anne and Allyn and also draw the necessary journal entries for the same. (March 2010)
Answer:
Total capital of the new firm = Rs. 70,000
New ratio = 1: 1
New Capital of Anne = 70,000 x 1/2 = 35,000
New capital of Allyn = 70,000 x 1/2 = 35,000
Required capital of Anne = 35000
Balance existing in account = 38000
Surplus capital withdraw by Anne = +3000
Required capital of Allyn = 35000
Balance existing in account = 24000
Amount to be brought in by Allyn = -11000

Jurnal

Question 21.
On the date of retirement of C, the Balance Sheet of A, B and C shows the following position: (June 2010)

Balance Sheet

(i) Profits shares in the ratio of capitals.
(ii) Profit and Loss is to be credited to the extent of C, through capital adjustment of partners.
(iii) Bills receivables are collected through a debt collection agency at Rs.9000/-
(iv) Depreciate all fixed assets @ 10%.
Find the amount due to the retiring partner.
Answer:
C’s Capital a/c

Revaluation a/c

Note:
1. Profit and Loss = 24000
C’s share of profit = 24000 x 3/11 = 6545 Rs.6545 is to be credited to the capital a/c of ‘C’ through capital adjustment of A and B.
A’s capital a/c (6545 x 5/8) Dr. 4091
B’s capital a/c (6545 x 3/8) Dr. 2454
To C’s capital a/c 6045

Question 22.
Antony, Basheerand Chandu were partners in a firm sharing profits & losses in the ratio of 5 : 3 : 2. The Balance Sheet of the firm as on 31-03-2008 stood as under: (March 2011)

Basheer has decided to retire from the firm subject to the following conditions.
(1) Provission for doubtful debts be 5%.
(2) Value of building be appreciated by 10%.
(3) Stock be depreciated by Rs. 2,000.
(4) Goodwill of the firm be valued atRs, 35,000.
(5) Basheer shall be paid by bringing sufficient amount by Antony and Chandu so that their capital will be in the profit-sharing ratio.
(6) Bank A/c. shall be maintained with a balance of Rs. 5,000 to meet working capital requirements.

Prepare Revalution a/c, capital A/c and balance Sheet after retirement.
Answer:
Revaluation A/c

Capital A/c

Balance Sheet

Note : Gaining ratio = 5:2
Basheer’s share of Goodwill = 35,000 x 3/10 = 10,500

Question 23.
Anil, Sunil and Vimal were sharing profits and losses in the ratio of 2:2:1. On 31st December 2010. (March 2012)

Vimal decided to retire from the business. The goodwill of the firm is valued at 3 years purchase of the average profit of the proceeding 3 years. The profits for the last 3 years were Rs. 10,000, Rs. 15,000 and Rs. 20,000. Find out Vimal’s share of goodwill and also show the journal entry to adjust his share of goodwill.
Answer:
Calculation of Goodwill (Using Average Profit Method)

Question 24.
Tom, Dick and Harry were in partnership, who were sharing profits and losses in the ratio of 2:2:1. On 31-03-2012, Harry left the firm as per agreement. From the following details available from their books prepare Revaluation Account. (May 2013 (May)

Balance Sheet as on 31-03-2012

Land and Buildings had been valued at Rs. 1,60,000. The Plant and Machinery was revalued at Rs. 32,000. The firm has an unrecorded investment of Rs. 5,000 and it was agreed that a provision of Rs. 1,000 be created doubtful debts.
Answer:
Revaluation A/c

Question 25.
Renjith, Sumesh and Aneesh are partners in a firm. Sumesh retires from the firm. On the date of retirement of Sumesh, Rs, 45,000 become due to him. Renjith and Aneesh promise to pay the amount in instalments. Prepare Sumesh’s loan account, when they agree to pay three yearly instalments of Rs. 15,000 including interest at 12% p.a. on the outstanding balance during the first 3 years and the balance including interest in fourth year. (March 2017)
Answer:
Sumesh’s Loan A/c

Plus Two Accountancy Reconstitution of a Partnership Firm – Retirement/Death of a Partner 8 Marks Important Questions

Question 26.
M, N and O are partners in a firm sharing profits in the ratio of 3:2:1. Their Balance Sheet as on 31 st December, 2008 was as under: (March 2012)

Balance Sheet as on 31st December 2008

N retires on 1st January, 2009 on the following terms:
i) Provision for doubtful debts will be raised by Rs. 1,000.
ii) Stock will be depreciated by 10% and furniture by 5%.
iii) There is an outstanding claim for damages of Rs. 1,100 and it is to be provided for in the books.
iv) Creditors will be written back by Rs. 6,000.
v) Goodwill of the firm is valued at Rs. 22,000, which is not to be shown in the books of the new firm.
vi) N is paid in full with the cash brought in by M and O in such a manner that their capitals are in proportion to their profit-sharing ratio 3 : 2.

Prepare Revaluation Account, Partner’s Capital Account and Balance Sheet of M and O.
Answer:
Revaluation A/c

Note : If creditors Rs. 6000/- is taken on the credit side of the Revaluation A/c, Revaluation profit will be Rs. 600/-.)

Capital A/c

Balance Sheet

Note:
N’s Share of goodwill = 22000×2/6 = 7333
New ratio = 3:2, Old ratio = 3:2:1
Gaining ratio = New ratio – old ratio
M’s gain = 3/5 – 3/6 = 3/30
O’sgain = 2/5 – 1/6 = 7/30

Question 27.
The Balance sheet of Ajith, Babu and Chandu as on 31st March 2008 is given below: (June 2012)

The partners have been sharing profits and losses in 3:2:1. Ajith died on 1st April 2008 and the following adjustments are to be made in the books of accounts.
a) A supplier for Rs. 14000 included in creditors is settled at Rs. 20,000.
b) Salary outstanding Rs.7000 is to record.
c) Creditors of Rs.4000 will not be claimed.
d) Bad debts amounting to Rs.3000 be written off.
e) The entire capital of the firm fixed at Rs. 150000 between Babu and Chandu in their new profit sharing ratio by bringing in or paying off cash as the case may be.
f) Rs.40000 is paid to Ajith by arranging a loan from the bank. The balance is transferred to his Executor’s Loan A/c.

Prepare Revaluation Account, Partners Capital Ac-count, Bank Account and the Balance Sheet as on 1st April 2008.
Answer:
Revaluation a/c

Capital A/c

Bank a/c

Balance sheet

Working Note
1. New Profit sharing ratio = 2:1
2. The total capital of the new firm = 150000
New capital of Babu = 150000 x 2/3 = 100000
New capital of Chandu = 150000 x 1/3 = 50000

Required capital of Babu = 100000
Balance existing in account = 77333
(75000 + 6333-4000)
Amount to be brought in by babu = – 22667

Required capital of Chandu = 50000
Balance existing in account = 61167
(60000 + 3167-2000)
Surplus capital withdrawing by Chandu= +11167

3.

Less creditors will not be claimed 4000
Amount to be shown in the Balance sheet = 34000

Question 28.
A, B and C were sharing profits losses in the ratio of 3:2:1 and their Balance sheet as on 31st December. 2011 was as follows: (May 2013 (May)

B retires from the business on 31st December 2011 on the following terms.
a) Goodwill of the firm should be valued at Rs. 30000 and retiring partners share to be adjusted in the capital accounts of other partners.
b) Motor van to be valued at Rs.60000 and Stock to be valued at Rs. 58,900.
c) Provision for doubtful debts to be increased to 5% of debtors.
d) Creditors include Rs.3000 not likely to be claimed and hence be written back.
e) There was the furniture of the value Rs. 2000 to be brought into books.
f) There is a liability of Rs. 2000 for accident compensation to be paid.
g) The relative profit sharing ratio between A and C is to be maintained.

Give journal entries; prepare Ledger Accounts and Balance Sheet of A and C.
Answer:
Revaluation a/c

Capital A/c

Balance sheet

Journal

Note:
1. Old ratio = 3:2:1, As the relative ratio is not changed, the new ratio between A & C is 3:1.

2. Goodwill of the firm = 30000
B’s share of goodwill = 30000 x 2/6 = 10000
Gaining ratio = 3:1

3. Provision for doubtful debts
= 30000 x 5/100 = 1500

Question 29.
P, Q and R are partners in a firm. Q retires. On his date of retirement, Rs.60,000 becomes due to him. P and R promise to pay him in instalments every year at the end of the year. Prepare Q’s Loan A/c. in the following cases: (March 2016)

a) When the payment is made four yearly instalments plus interest @12% p.a. on the unpaid balance.
b) When they agree to pay three-yearly instalments of Rs. 20,000 including interest @ 12% p.a. on the outstanding balance during the first three years and the balance including interest in the fourth year.
Answer:
a) Q’s Loan A/C

Note: Amount of instalment in each year = 60,000/4 = 15,000
Amount paid each year= Rs.15000 + interest

b) Q’s Loan A/C

Question 30.
A, B and C are in partnership sharing profits in their capital ratio. The Balance sheet on 15th March, 2013 is given below. (March 2014)

Further information on the retirement of B on 15th June, 2013.
Profits for 3 months Rs. 9000
Drawings-
A Rs. 1,000
B Rs. 2,000
C Rs. 3,000
Interest on Capital @ 5% p.a.
Salary to B Rs. 300 p.m.

The firm had a fixed deposit worth Rs.3000 which has not accounted so far has to be brought into the books. Marketable scrips were valued at Rs. 23,000. Prepare Profit and Loss Appropriation account, Capital account and Balance Sheet after ‘B’s retirement.
Answer:
Profit and Loss Appropriation a/c

Revaluation a/c

Capital A/c

Balance sheet

Kerala State Board New Syllabus Plus Two Accountancy Chapter Wise Previous Questions and Answers Chapter 3 Reconstitution of a Partnership Firm – Admission of Partner.

Kerala Plus Two Accountancy Chapter Wise Previous Questions Chapter 3 Reconstitution of a Partnership Firm – Admission of Partner

Plus Two Accountancy Reconstitution of a Partnership Firm – Admission of Partner 1 Marks Important Questions

Question 1.
While transferring the reserves or accumulated profits of the firm on reconstitution, the account to be – credited is (March 2010)
a) New partner’s capital account
b) Old partner’s capital account
c) All partner’s capital account
Answer:
b or c (Old Partner’s capital a/c or All Partner’s capital a/c)

Question 2.
“Profit available in the Balance sheet at the time of admission of a partner is to be credited to all partners’ capitals in new profit sharing ratio.” – Justify this argument. (June 2010)
Answer:
The statement is wrong, because profit available in the balance sheet at the time of admission of a partner is credited only to old partners capital account in old ratio.

Question 3.
At the time of reconstitution of the firm, the value of machinery is found less by 10%. What journal entry will be passed for giving effect to the above? (June 2010)
Answer:
Revaluation a/c Dr.
To Machinery A/c

Question 4.
At the time of admission of a partner in a firm, unrecorded assets will be (March 2012)
a) Debited to Revaluation Account
b) Credited to Revaluation Account
c) Credited to Asset Account
d) None of the above
Answer:
b) Credited to Revaluation Account

Question 5.
Which of the following case do not result in the re-constitution of a firm? (March 2012)
a) Change in profit sharing ratio
b) Change in the location of business
c) Retirement of a partner
d) Amalgamation of two partnership firms
Answer:
b – Change in location of business

Question 6.
Share of Goodwill brought in cash by the new partner is called (March 2012)
Answer:
Premium / Goodwill / Premium for goodwill

Question 7.
Which one of the following is not an occasion for the reconstitution of a partnership firm? (May 2013) (May)
a) Admission of a new partner.
b) Retirement of an existing partner
c) Death of an existing partner
d) Dissolution of the firm
Answer:
d) Dissolution of the firm

Question 8.
On the date of admission of Mr. Vivek as an equal partner, Mr. Vimal an existing partner has taken over the Plant and Machinery worth Rs. 10,000 at Rs. 12,000. Identify from the following journal entry to record thisiransaction. (May 2013) (May)

i) Vimai’s Capital A/c Dr 12,000
Plant and machinery A/c 10,000
Revaluation A/c 2,000

ii) Vimai’s Capital A/c Dr 12,000
Plant and machinery A/c 12,000

iii) Plant and Machinery A/c Dr 12,000
Vimai’s Capital A/c 12,000

iv) Vimai’s Capital A/c Dr 12,000
Revaluation A/c 12,000
Answer:
i) Vimal’s Capital A/c Dr 12,000
Plant and machinery A/c 10,000
Revaluation A/c 2,000

Question 9.
Which of the following is not an element of reconstitution of partnership? (March 2013)
a) Admission
b) Change in profit sharing
c) Death
d) Dissolution of firm
Answer:
d) Dissolution of firm

Question 10.
Biju and Lijo are partners in a firm sharing profits and losess in the ratio of 5:3. They admit Rajan for 1/6 share. The total goodwill of the firm is Rs. 50,000. Existing goodwill is Rs. 25,000. Find the share of goodwill to be brought in by Rajan.  (March 2013)
Answer:
Goodwill to be brought in by Rajan = 50,000 x 1/6 = 8,333

Question 11.
X, Y and Z are partners in a firm. If ‘B’ is to be admitted as a new partner.  (March 2013)
a) Old partnership has to be dissolved.
b) Old firm has to be dissolved.
c) Both old firm and partnership have to be dissolved.
d) Neither firm nor partnership needs to be dissolved.
Answer:
a) Old partnership has to be dissolved.

Question 12.
Consider the following information and ascertain the value of Goodwill.  (March 2014)
Total Capital Employed Rs. 5,00,000
Normal Rate of Return 8%
Average Profit the last 5 years Rs. 60,000
Remuneration to partners Rs. 15,000
Goodwill is estimated at 3 years purchase of super-profits.
Answer:
Average profit = 60000
Remuneration to partner = 15000
Average actual profit = 60000 – 15000 = 45000
Normal profit = Capital employed x Normal rate of Return
= 500000×8/100 = 40000
Super profit = Average Actual profit – Normal Profit
= 45000 – 40000 = 5000
Goodwill = Super profit x No. of years purchase
= 5000×3 = 15000

Question 13.
Which one of the following term is used to denote a chnage in the relationship among the partners which leads to change in the constitution of partnership?  (March 2014)
i) Amalgamation
ii) Reconstitution
iii) Dissolution
iv) Revaluation
Answer:
ii) Reconstitution

Question 14.
Find the odd one out: (March 2014)
A) Superprofit B) Average Profit
C) Capitalization Method
D) Weighted Capitalisation Method
Answer:
D) Weighted Capitalisation Method

Question 15.
The ratio in which the old partners agree to sacrifice their share of profit in favour of incoming partner is (March 2017)
a) New ratio
b) Old ratio
c) Sacrificing ratio
d) Gaining ratio
Answer:
c) Sacrificing ratio

Question 16.
Sanu and Binu are partners in a firm sharing profit and losses in the ratio of 3:1. They admit Jinu for 3/ 7 share. Calculate the new profit sharing ratio. (March 2017)
Answer:
3:1:3

Plus Two Accountancy Reconstitution of a Partnership Firm – Admission of Partner 2 Marks Important Questions

Question 17.
Balamony, a Plus Two student, prepared the follow-ing journal entries in connection with the reconstitu-tion of partnership firm.  (March 2009)

(i) For increase in the value of assets.
Revaluation Account Dr.
Asset Account

(ii) For decrease in the value of liability
Liability Account Dr.
Revaluation Account

(iii) For recording unrecorded asset Partner’s
Capital Account Dr.
Revaluation account

(iv) For transferring loss on revaluation on Partner’s
Capital account.
Cash Account Dr.
Old Partner’s Capital Account

After evaluating the above journal entries, make necessary corrections (if any) and rewrite them. (Score:2)
Answer:
a. Asset A/c Dr
To Revaluation A/c

b. Liability A/c Dr
To Revaluaton A/c

c. Asset A/c Dr
To Revaluaton A/c

d. Old Partner’s
Capital A/c Dr
To Revaluaton A/c

Question 18.
A firm runs by Akhil, Nikhii and Mukil earns a net profit of Rs. 12,000/- per year. Normally the firms in same type of business earns at a rate of 10%. If the firm’s total assets are of Rs. 1,50,000/- and external liabilities are for Rs. 50,000, what will be its value of Goodwill?  (June 2009) (May)
Answer:
Value of goodwill = Total value of business – Net assets
Total value of business
Net Assets = Assets – Liabilities
= 1,50,000 – 50,000 = 1,00,000
Goodwill = 1,20,000 -1,00,000 = 20,000

Question 19.
Merin and Mallu are partners sharing profits in the ratio 3:2. They admit Dillan as a partner for 1 /6th share and he brings Rs.40000 as his capital and could not bring any amount as goodwill. Even then the share of goodwill of Dillan is valued at Rs.10,000/-.  (June 2010)

Pass necessary entries regarding the above.
Answer:
Journal

Note: Since the ratio of the old partner’s does not change, the sacrificing ratio issimilarto old ratio ie. 3:2.
Dillan’s share of goodwill = 10000
Merin’s share of goodwill = 10000 x 3/5 = 6000
Mallu’s share of goodwill = 10000×2/5 = 4000

Question 20.
“At the time of admission of a partner revaluation of assets and liabilities will always benefit old partners”. Is this statement correct? Why?  (March 2010)
Answer:
Yes, when a partner admitted, he acquires the ownership rights of the assets and also makes himself responsible for the firms liabilities. He should not get any benefit from any appreciation in the value of assets or reduction of liabilities nor should he suffer because of any fall or depreciation in the value of assets or -increase of liabilities as on the date of admission. The result of revaluation (May be either profit or loss. It should be credited or debited to Old Partners Capital Account in their old ratio. It must be clearly understood that result of revalution does not concern the new partner, it always goes to old partners.

Question 21.
In the event of admission whether the incoming partner is entitled to the profit on revaluation of assets effected as on the data of admission. Offer your comments.  (March 2011)
Answer:
No. The profit or loss on revaluation should be . transformed to old partners capital account in old profit sharing ratio.

Question 22.
Fill up the empty boxes with correct answers.  (March 2013)

Answer:
I) Assets A/c Dr.
To Revaluation A/c

ii) LiabilityAlc Dr.
To Revaluation a/c.

iii) Asset A/c Dr.
To Revaluation a/c.

iv) Old partners capital a/cl Partners capital a/c Dr.
To Revaluation A/c.

Question 23.
Consider the following information and calculate Goodwill by super profit method.  (May 2013) (May)
1) Total capital employed
2) Normal Rate of Return 8%
3) Average Profit for the last 5 years Rs. 12,000
4) Remuneration to partners Rs. 3,000
5) Goodwill is estimated at 3 years purchase of super profits.
Answer:
Goodwill = Super profit x No. of years of purchase.
Superprofit = Average profit-Normal profit
Average profit = 12000-3000 (Remuneration) = 9000
Normal profit = Capital x Rate /100
= 100000×8/100 = 8000
Super profit = 9000 – 8000 = 1000
Goodwill = 1000×3 = 3000

Question 24.
On the date of admission of Mr.Baby Raj as an equal partner, Mr. Santhosh an existing partner has taken over the Plant and Machinery worth Rs. 30,000 at Rs. 36,000. The journal entry to record this will be (March 2014)

i) Santhosh’s Capital A/c Dr. Rs. 36,000
Plant and Machinery Rs. 30,000
Revaluation a/c Rs. 6,000

ii) Santhosh’s Capital A/c Dr. Rs. 30,000
Revaluation A/c Dr. Rs. 6,000
Plant and Machinery Rs.36,000

iii) Plant and Machinery Dr. Rs. 36,000
Santhosh Capital A/c Rs. 30,000
Revaluation A/c Rs. 6,000

iv) Santhosh’s Capital A/c Dr. Rs. 36,000
Revaluation A/c Rs.36,000
Answer:
i) Santhosh’s Capital A/c Dr. Rs. 36,000
Plant and Machinery Rs. 30,000
Revaluation a/c Rs. 6,000

Question 25.
General Reserve of ₹ 24,000 and Profit and Loss Account (Debit Balance) of ₹ 6,000 appearing in the balance sheet of partner’s P and Q on the admission of R is to be adjusted. Give the journal entries assuming that P and Q are equal partners. (May 2016)
Answer:
i) General reserve a/c Dr 24,000
P’s capital a/c Q’s capital a/

ii) P’s capital a/c Dr 3000
Q’s capital a/c Dr 3000
To P/L a/c

Plus Two Accountancy Reconstitution of a Partnership Firm – Admission of Partner 3 Marks Important Questions

Question 26.
The capital balances of Ram & Gopal at the time of admission of Menon stood as follows: (June 2009) (May)
Capital (Cr.)
Ram – 25,000/-
Gopal – 15,000/-
Other Relevant information:
General Reserve – 10,000/-
Profit & Loss A/c (Dr.) – 5000/-
Profit on revaluation – 3,850/-
Premium forgoodwill contributed by Menon – 5000/-

Profit sharing ratio of Ram & Gopal before the admission of Menon -3 : 2.
Agreed share of profit to Menon – 1/6.

If Ram & Gopal asked Mr. Menon to bring in sufficient cash for capital on the basis of their capitals and new profit sharing ratio, find the capital to be brought in by Menon.
Answer:
Capital accounts of Ram and Gopal

Old ratio = 3:2
New Partner (Menon)s share = 1/6
Ram’s new ratio = 5/6 x 3/5 = 15/30
Gopal’s new ratio = 5/6 x 2/5 = 10/30
Menon’s share = 1/6 = 5/30
Newratio= 15 : 10 : 5 = 3:2:1
Capitals of Ram and Gopal = 6/6 = 33310 + 20540 = 53850
Total capital = 53850 x 6/5 = 10770 x 6 = 64620
Capital to be brought In by Menon = 64620 – 5380 = 10770

Question 27.
Basheer and Firos started business by contributing capitals in the ratio 3: 2, which is their profit sharing ratio too.
TheirAsset – Liability position as on 31 March 2007 is as shown below:  (June 2009 (May)
Fixed Assets – 43,000
Current Assets (including cash Rs. 5,000) – 37,000
Current Liabilities – 30,000
They admit James into Partnership on the date of the Balance Sheet for 1 I 6 share, and agreed the following:
Capital to be contributed by James – 20,000
Revalued figures of Assets & Liabilities:
Fixed Assets – 43,200
Current assets excluding cash – 39,000
Current liabilities – 28,500
Unrecorded items: lnvements – 3,000
Repair bill outstanding – 800
Find the revaluation P & L
Answer:
Revaluation

Question 28.
Prepare a revaluation account from the following:  (June 2010)
Assets:
Plant and Machinery – 10000
Furniture – 3000
Patents – 7000
Stock – 3000
Liabilities: Creditors – 15000

The above items were revalued as follows:
a) Fixed assets revalued at 10% less.
b) Stock damaged wholly by a fire occurred and become valueless.
c) Claims received against the loss of value of stock Rs.2000.
d) Repair bill of Rs.1000 is not in the books of accounts remain unpaid.
Answer:
Revaluation a/c

Question 29.
List out the circumstances in which reconstitution of partnership firm can take place. (March 2011)
Answer:
a) Change in the profit sharing ratio of the existing partners
b) Admission of a new partner
c) Retirement of an existing partner
d) Death of a partner.
e) Amalgamation of two partnership firms.

Question 30.
Profits of Amco Ltd. for the year ended 31st March for the last five years were given below: (May 2011)
Year – Profit
1999 – 25,000
2000 – 40,000
2001 – 75,000
2002 – 35,000
2003 – 45,000
Calculate the value of the Goodwill on the basis of 3 years purchase of the weighted average profit, after weights 1, 2, 3, 4 & 5 respectively to the profit for 1999, 2000, 2001, 2002 & 2003.
Answer:
Goodwill= Weighted Average Profit x No. of years of purchase

Weight Average Profit = \(\frac { 695000 }{ 15 } =\quad 46333\)
Goodwill = 46333 x 3 = 138999

Question 31.
A, B, C are partners in a firm sharing profits and losses in the ratio of 3:2:1, D is admitted into partnership for a %th share in the future profits, which he gets 1/8the form A and 1/8th form B. The total capital of the firm is agreed upon Rs. 1,20,000 and D is to bring in cash equivalent 1/4th of this amount as his capital. The capital of other-partners are to be adjusted in the ratio of their respective shares in the profit and losses. The respective capital of partners after all adjustment have been : A Rs. 40,000, B Rs. 35,000 & C Rs. 30,000. Calculate Final Capital of A, B & C.  (May 2011)
Answer:
New Ratio

18 : 10 : 8 : 12 → 9 : 5 : 4 : 6 Total Capital = 120000 Balance c/d = Total Capital x New Ratio
A = 120000 x 9/24 = 45000
B = 120000 x 5/24 = 25000
C = 120000 x 4/24 = 20000
D = 120000 x 6/24 = 30000
Final Capital of A, B & C
A = 45000 B = 25000 C = 20000

Question 32.
Aditya and Arjun are partners in a firm, sharing profits/ losses in the ratio of 3 : 2. They admitted Abhishek in the partnership for 1/6th share in future profit. Abhishek brought Rs. 24,000/- as his share of goodwill. Out of this goodwill, half of the amount was withdrawn by Aditya and Arjun. (March 2012)

Pass necessary journal entries in the books of the firm.
Answer:
Journal

Question 33.
The profits of Mahesh and Co. for the last five years were: (March 2013)
2005 – Rs. 35,000
2006 – Rs. 30,000
2007 – Rs. 27,500
2008 – Rs.25,000
2009 – Rs.20,000

The capital employed in the firm is Rs. 5,00,000. You are required to calculate the goodwill at 3 years purchase of super-profits. The normal rate of return on capital employed is 5%.
Answer:
Average Profit = \(\frac { 35000 + 30000 + 27500 + 25000 + 20000 }{ 5 }\)
= 27500
Capital employed = 500000
Normal Profit = Capital employed x Normal Rate of Return
= 500000 x 5/100 = 25000
Super Profit = Average Profit – Normal Profit
= 27500 – 25000 = 2500
Goodwill = Super profit x No. of years purchase
= 2500 x 3 = 7500

Question 34.
Menon and Varma are partners sharing profits and losses in the ratio 2:3. They admit Jyothi for2/5th shares which she acquired equally from Menon and Varma. Calculate the new ratio and sacrificing ratio. (May 2013) (May)
Answer:
Old ratio = 2:3
Jyothi’s share of profit = 2/5
Menon’s sacrifice = \(\frac { 2 }{ 5 } +\frac { 1 }{ 2 } +\frac { 2 }{ 10 }\)
Varma’s sacrifice = \(\frac { 2 }{ 5 } +\frac { 1 }{ 2 } +\frac { 2 }{ 10 }\)
Menon’s new share = old share – his sacrifice

Question 35.
A business has earned average profits of Rs.1,44,000 during the last few years and the normal rate of return in similar type of business is 12%. The net assets of the firm are Rs, 8,20,000. Arun dnd company are decided to acquire the business. Help him to calculate the goodwill of the business by capitalization method. (March 2014)
Answer:
Goodwill calculation by Capitalisation of Averacie profit
Goodwill = Total value of the business – Net assets

Question 36.
A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. They decide to admit ‘C’ into partnership with 1/4 share in profits. C brings in Rs.30,000 for capital and the requisite amount of premium in cash. The goodwill of the firm is valued at Rs.20,000. The new profit sharing ratio is 2.: 1:1. A and B withdraw their share of goodwill. Give necessary journal entries. (March 2016)
Answer:
The good will of the firm = 20,000
C’s share of good will = 20,000 x 1/4 = 5000
Old ratio = 3:2
New ratio = 2:1:1
A’s sacrifice = \(\frac { 3 }{ 5 } +\frac { 2 }{ 4 } +\frac { 12-10 }{ 20 } =\quad \frac { 2 }{ 20 }\)
B’s sacrifice = \(\frac { 2 }{ 5 } -\frac { 1 }{ 4 } =\frac { 8-5 }{ 20 } =\frac { 3 }{ 20 }\)
Sacrificing ratio: 2:3

Journal Entries

Question 37.
Anju and Manju are partners sharing profits in the ratio of 2:1. Sanju is admitted into the firm for 1/4 share of profits. Sanju brings in Rs.20,000 in respect of his capital. The capitals of old partners Anju and Manju, after all adjustments relating to goodwill, revaluation of assets and liabilities etc., are Rs. (March 2016)

45.0 and Rs.15,000 respectively. It is agreed that partners capitals should be according to the new profit sharing ratio.

Determine the new capitals of Anju and Manju and record the necessary journal entries assuming that the partner whose capital falls short, brings in the amount of deficiency and the partner who has an excess, withdraws the excess amount.
Answer:
New ratio = Balance share x old ratio
Anju’s new share \(=3 / 4 \times \frac{2}{3}=\frac{6}{12}\)
Manju’s new share \(=\frac{3}{4} \times \frac{1}{3}=\frac{3}{12}\)
Sanju’s share of profit \(=\frac{1}{4}=\frac{3}{12}\)
New ratio = 6:3:3 = 2:1:1
Total capital of the new firm = 20,000 x 4/1 = 80,000
Anju’s new capital = 80,000 x 2/4 = 40,000
Manju’s new capital = 80,000 x 1/4 = 20,000
The existing capital of Anju = 45000
Excess (Anju) = 5000
The existing capital of maju = 15,000
Deficit (Maju) = 5000

Journal Entries

Question 38.
The capital of the firm of Mohan and Rissam is Rs. 75,0 and the rate of interest is 15%. Annual salary to partners is Rs. 5,000 each. The profit forthe last 3 years were Rs.36,000,38,000 and 31,000. Goodwill is to be valued at 2 years purchase of the last 3 years average super profits. Calculate goodwill of the firm. (March 2017)
Answer:
Goodwill = Super profit x No. of years purchase.
Super profit = Actual /Average profit – Normal Profit
Average profit = \(\frac{36,000+38,000+31,000}{3}\)
= 35,000
Normal profit = Interest on capital + Partner’s salary

Plus Two Accountancy Reconstitution of a Partnership Firm – Admission of Partner 5 Marks Important Questions

Question 39.
Suma and Josephine carried on business in partnership since 1995 sharing profits and losses in the ratio of 2:1 respectively. They admitted John on 1st April, 1999 for 2/7 share. The actual value of goodwill, however, on that date was Rs. 21,000. John contributed the following assets towards payment of his capital and goodwill. (March 2010)

Cash – Rs. 1,000
Sundry Debtors – Rs. 5,000
Stock – Rs. 6,000 and
Goodwill – Rs. 5,000

Pass necessary journal entries to give effect to the above. Also give the new profit sharing ratio of the new partners.

Calculation of New Profit sharing ratio Old ratio = 2:1
New partners share of profit = 2/7
New ratio = Old ratio x Balance share
New ratio of Suma = 2/3 x 5/7 = 10/21
New ratio of Josephine = 1 /3 x 5/7 = 5/21
John’s ratio = 2/7 = 6/21
New ratio = 10 : 5 : 6

Journal

Question 40.
M and N are partners sharing profits and losses in the ratio of 2:1. Their Balance Sheet as on 31st December 2010) was as follows: (March 2012)

Balance Sheet

‘P’ is admitted into the firm with %th share in profits on the following terms.
a) Market value of Investments are to be taken at Rs. 4,500.
b) Claim on account of workmen’s compensation is estimated at Rs. 250.
c) Accrued Income not appearing in the books Rs. 100.
d) Building were found undervalued by Rs. 5,000.
e) Patents should be written off
f) Provision for doubtful debts be increased to 10% of debtors
g) P bring Rs. 30,000 as capital and Rs. 10,000 as his share of goodwill.

Pass Journal entries and prepare the Revaluation Account and ascertain the revaluation profit.
Answer:
Journal

Revaluation A/c

Qn. 41.
Violet’ and indigo’ are partners in a flim shanng proirts and losses in the ratio of 5:3 with a capital of Rs. 45,000 and Rs. 35,000 respectively. They admit ‘blue’ as a partner and the new profits sharing ratio becomes 5:3:2. Blue is asked to contribute to proportionate capital. (March 2013)

a) Calculate the amount of capital to be contributed by ‘Blue’.
b) What adjustments are to be made in the capitals of ‘Violet’ and ‘Indigo’ if it is agreed that the capitals of Violet and Indigo, as between themselves, are also to be adjusted in profit sharing ratio by either paying in or withdrawing cash?

Hint: Calculate the total capital of the firm. Then find out the shortage or surplus in the capitals of ‘Violet’ and ‘Indigo’.
Answer:
Total capital of violet and Indigo = 45000 + 35000 = 80000

Question 42.
P & Q are partners sharing profits and losses in the ratio of 3:2. On 1st Jan. 2012) they admitted ‘R’ into the firm. ‘R’ brought in Rs. 2,00,000 for his capital, but he was not in a position to bring his share of goodwill. The goodwill of the firm was valued at Rs. 3.0. 000. Existing goodwill in the book is for Rs. 6.0. 000. The new profit sharing ratio is 2:1:1. Pass necessary entries at the time of admission. (March 2013)
Answer:
Sacrificing ratio = old ratio – new ratio
\(P’s sacrifice =3 /{ }_{5}-2 / 4=2 / 20
Q’s sacrifice =2 /{ }_{6}-1 /{ }_{4}={ }^{3} /{ }_{20}\)
R’s ratio = 1/4
Sacrificing ratio = 2:3
R’s share of goodwill = 300000 x 1/4 = 75000

Question 43.
Anju and Manju were in partnership, who were sharing profits and losses equally. Their Balance Sheet as on 31 -03-2012 was as follows : (May 2013) (May)

Balance Sheet as on 31-03-2012

Sanju is admitted as a partner on 31-03-2012) on the following terms.
a) Sanju will bring in Rs. 40,000 as his capital
b) Plant and Machinery will be increased by Rs. 5,000
c) Furniture should be appreciated by 20%
d) Stock should be reduced by Rs. 3,000
e) Creditors be reduced by Rs. 1000
Answer:
Revaluation A/c

Partners Capital A/c

Question 44.
J and K are partners in a firm, sharing profit and losses in the ratio of 3:2. (March 2017)

Balance sheet of J & K as on 1st April, 2016

L is admitted on the following terms:
1) L will bring Rs. 15,000 as capital and Rs.5,000 as premium for goodwill for 1/6 share.
2) The value of stock is reduced by 10% and plant and machinery increased by 5%.
3) Investment worth Rs.1,500 (not mentioned in the Balance Sheet) is to be taken into account. Prepare revaluation account and capital account of partners.
Answer:
Revaluation A/c

Plus Two Accountancy Accounting for Not For Profit Organisation 8 Marks Important Questions

Question 45.
Asif, Biju and Britto trading in partnership and sharing profits and losses in the proportion of 1/2,1/3 and 1/ 6 respectively desire to keep up a working partner when their balance sheet stood as follows: (March 2009)

They agreed to admit Pradeep into partnership and give him 1/10 share on the following terms.
(i) That Pradeep should bring in Rs. 30,000 as good-will and Rs. 1,28,000 as his capital.
(ii) That machinery is depreciated at 12%.
(iii) That stock be revalued at Rs. 2,61,000.
(iv) That a reserve of 5% be created fordoubtful debts.
(v) That the value of land and buildings be brought upto Rs. 6,20,000.
(vi) That after making the above adjustments the capital accounts of the old partners be adjusted on the basis of proportion of Pradeep’s Capital to his share in the business, (i.e. actual cash to be paid off or to be brought in by old partners, as the case (May be)

Prepare necessary ledger accounts and the balance sheet of the firm as newly constituted. Show your workings regarding determination of new profit shar-ing ratio and capital balances.

Answer:
(a) Revaluation Account

Capital Accounts

New Ratio = 9:6:3:2
Total Capital = 12,80,000

Balance Sheet

Question 46.
The Balance Sheet of Sheena and Shyja who were sharing profits in the ratio of 5:3 respectively as on 31st March, 2007 was as follows: (March 2009)

On the above date, Bindu was admitted on the fol-lowing terms:
(a) Bindu was to get 1/5 share in the profits.
(b) Bindu was to pay Rs. 50,000 as Capital and Rs. 16,0 for her share of goodwill.
(c) Machinery was to be depreciated by 10% and buildings was to be appreciated by 20%.
(d) Stock was revalued at 25% above cost. It was to be brought into the books of the new firm at cost price..
(e) There was a liability for repairs to furniture amounting to Rs. 600, the same was to be recorded in books.
(f) Capital accounts of the old partners were to be adjusted in the new profit sharing ratio by open-ing the necessary current accounts.

Prepare Revaluation Account, Capital Accounts and the initial Balance Sheet of the new firm. Scores:8
Answer:
Revaluation Ale

Capital Account

Balance Sheet

Question 47.
Vinu and Sonu are in partnership sharing in proportion of 3/5 and 2/5 respectively. Their balance sheet as on 31-03-2009) stood as under: (March 2011)

They admit Minu for 1/3 share of the firm upon the condition that she is to pay Rs. 1,000 for goodwill and sufficient capital to give her 1/3 share of the total capital of the new firm. Bad dept provision is to be reduced to Rs. 100, that the stock be revalued at Rs. 2,000 and plant be revalued at Rs. 500.

Pass journal entries to give effect to the above and show Balance Sheet of the new firm.
Answer:
Journal

Balance Sheet

Note:
Sacrificing ratio = 3: 2
New ratio calculation = Balance share x old ratio

Calculation of capital to be brouaht in by Minu based on old partners capital account.
Vinu’s capital after adjustment = 2990
Sonu’s capital after adjustment = 1660
Total capital of Vinu and Sonu = 4650
For 2/3 share in profit, capital required is = 4650
Therefore, total capital of the new firm should be

Question 48.
Sachin and Ganguly are partners in a firm sharing profits and losses equally. (June 2012)

The Balance Sheet on 31 st (March 2008 is given below:

On this date, they admitted Dravid as partner on the following terms:
a) Dravid should bring Rs. 20000 as capital for 1/3 share and Rs.10000 for goodwill.
b) Land and Buildings is revalued at Rs.100000 and Stock at 10% less than book value.
c) Debtors be provided Rs.2500 for doubtful debts. Prepare Revaluation a/c, Capital a/cs and Bal-ance sheet after the admission of Dravid.
Answer:
Revaluation a/c

Capital A/c

Balance sheet

Question 49.
Following is the Balance Sheet of A and B who were sharing profits in the ratio of 3 : 2. (March 2012)

Balance Sheet as on 1st July 2009

On that day C is admitted into the partnership on the following terms:
a) C should bring Rs. 40,000 as capital and Rs. 10,0 as premium for goodwill for 1/6th share of future profit.
b) Value of plant and machinery be reduced by 10%.
c) Stock in trade is revalued at Rs. 30,000.
d) Value of furniture is increased by Rs. 4,000.
e) It was found that creditors included a sum of Rs. 3,000 which was not to be paid.
f) A provision for doubtful debt is to be created on sundry debtors at 5% and Rs. 1,600 is to be created in respect of outstanding printing bill.

Show required journal entries and prepare Revalua-tion and Capital Accounts of Partners.
Answer:
Journal

Revaluation A/c Dr

Capital A/c

Question 50.
Given below is the Balance sheet of Jacob and Joseph who are sharing profits in the ratio of 3:2 as on March 31st 2011.

James is admitted as a new partner on the above date on the following terms: (May 2013) (May)
a) James will bring Rs.10000 for his capital and the necessary amount of premium in cash for 2/7th share in future profits. The goodwill of the firm has been valued at Rs. 140000.
b) Stock revalued at Rs. 70,000.
c) Write down plant and machinery by 10%.
d) Provision for bad and doubtful debts should be increased to Rs. 3000
e) Unexpired insurance of Rs. 1500 should be brought into record.

Record the necessary journal entries and prepare Revaluation Account and Partners Capital Account and show the Balance Sheet after the admission of James.
Answer:
Revaluation A/c

Capital A/c

Balance sheet

Old ratio = 3:2
James’ share of profit = 2/7
Sacrificing ratio = 3:2
The Goodwill of the firm = 140000
James’ share of goodwill = 140000 x 2/7 = 40000
Share of Goodwill credited to Jacob’s capital a/c = 40000 x 3/5 = 24000
Share of Goodwill credited to Joseph’s capital a/c = 40000 x 2/5 = 16000

Question 51.
Aneesh and Akhil were in partnership, who were sharing profits and losses equally. Their Balance Sheet as on 31.03.2013) was as follows: (March 2014)

Balance Sheet as on 31.03.2013

Ajith is admitted as a partner on the date of the Balance Sheet on the following terms:

• Ajith will bring in Rs. 80000 as his capital.
• Plant and Machinery will be increased by Rs. 10,000
• Furniture should be appreciated by 20%.
• Stock should be reduced by Rs. 6,000.
• A provision for bad and doubtful debts is to be created at 5% on debtors.
• Creditors be reduced by Rs. 2,000.

Prepare Revaluation Account and Capital Accounts.
Answer:
Revaluation A/c

Capital A/c

Balance Sheet

Question 52.
Salim and Karim are partners in a firm sharing Profit and Losses equally. Their Balance sheet as on 31st (March 2013) was as follows: (March 2014)

On this day they admitted Rahim as a partner on the following terms:
a) Rahim should bring Rs.20,000 as capital for 1/3 share and Rs. 10,000 for goodwill.
b) Land and Buildings is revalued at Rs.100000 and stock at 10% less than book value.
c) Debtors are provided Rs.2,500 for Doubtful debts. Give journal entries and prepare Revaluation Account, Capital Account and Balance Sheet afterthe admission of Rahim.
Answer:
Journal

Revaluation A/c

Capital A/c

Balance Sheet

Question 53.
a) Dany, Johny and Shony are in partnership, sharing profits in the proportion of 4:3:3 respectively. The partnership agreement states that the goodwill of the firm shall be equal to three times of the average profits of the four years to the date of change. No goodwill account is to be maintained in the books. Profits of the firm have been: (May 2016)
2001 – 12,000
2002 – 9,000
2003 – 15,000
2004 – 16,000
Glady was admitted in to the partnership on 1-01-2005 and the new profit sharing ratios were : Dany 3/10, Johny 3/10, Shony 2/10, and Gladyio 2/10.

Glady brought in to the partnership a Capital of 30,000. The Capital account balances of the old partners on 01-01-2005, were:

Dany ₹ 40,000
Johny ₹ 40,000
Shony ₹ 30,000

You are required to show the Capital accounts of the partners after the admission of Glady.
Answer:
Calculation of good will
Good will = Average profit x 3 years purchase Average Profit

Question 54.
A and B sharing profits and losses in the ratio of 3:2, admit ‘C’ as a partner who is asked to contribute ₹ 30,000 as capital for – share in the future profits of the firm. A and B have capitals of ₹ 60,000 and ₹ 25,000 respectively, after making all adjustments. It is agreed that capital contribution of each partner will be in the profit-sharing ratio taking ‘C’s contribution as basis.Any excess or deficit should be adjusted in cash. Calculate the amounts to be brought in by, or to be paid off to A and B. Also give journal entries for the above adjustments. (May 2016)
Answer:
Total capital of the firm = 30,000 x 4 = 1,20,000
Old ratio = 3:2,

New capital of B = 1 ,20,000 x 6/20 = 36OOO
Existing capital of A = 60,000
A has surplus = 60,000 – 54000 = 6000
Existing capital of B = 25,000
B has deficit = 25000 – 36000 = 11,000

Journal Entry

Kerala State Board New Syllabus Plus Two Accountancy Chapter Wise Previous Questions and Answers Chapter 2 Accounting for Partnership – Basic Concepts.

Kerala Plus Two Accountancy Chapter Wise Previous Questions Chapter 2 Accounting for Partnership – Basic Concepts

Plus Two Accountancy Accounting for Partnership – Basic Concepts 1 Marks Important Questions

Question 1.
Which of the following is not an item in the profit and loss appropriation account? (June 2010)
a) Interest on capital
b) Salary paid to partner
c) Interest allowed to partner’s loan.
d) None of the above
Answer:
d) None of the above

Question 2.
Find the odd one and state reason, (May 2011)
a) Interest on Capital
b) Interest on Loan
c) Salary to partners
d) Bonus to partners
Answer:
b) Interest on Loan – Charge againt profit – All others are appropriation of profit.

Question 3.
Which of the following account is credited with inter-est on capital under fixed capital method? (March 2012)
a) Profit and Loss Appropriation Account.
b) Profit and Loss Account
c) Capital Account
d) Current Account
Answer:
d) Current Account

Question 4.
Partners Salary is debited to a/c (May 2013)
a) Trading
b) Profit and Loss
c) Capital
Answer:
d) Profit and Loss Appropriation p d. Profit and Loss Appropriation a/c

Question 5.
In the absence of any agreement partners will share profit and losses in the ratio. (May 2013)
a) Gaining
b) Equal
c) Sacrificing
d) Capital
Answer:
b-Equal ratio

Question 6.
Under fixed capital method, interest on drawings is debited in A/c. (March 2016)
Answer:
Partner’s current A/c

Question 7.
What is the journal entry to be passed for transferring partners salary to partner’s capital account? (March 2016)
Answer:
Partner’s salary A/c Dr To partner’s capital A/c

Question 8.
If partners are entitled to interest on capital as per agreement, such interest is payable (May 2016)
a) Only out of bank balance
b) Only out of capital
c) Only out of profits
d) Only out of sales
Answer:
c) Only out of profits

Question 9.
Firoz and Shahin are partners in a firm. The firm did not have any partnership deed. Specify how the following situations are treated. (March 2017)
a) Sharing of profit and losses.
b) Interest on advance given by Firoz to the firm.
Answer:
a) Profits and losses are to be shared equally among partners.
b) Firoz is entitled to get an interest of 6% p.a.

Question 10.
Partners capital account and current account are not maintained separately under ………………. method of maintaining capital account. (March 2017)
Answer:
Fluctuating capita method

Plus Two Accountancy Accounting for Partnership – Basic Concepts 2 Marks Important Questions

Question 11.
Partner of a firm withdraw Rs. 6,000/- during the year. The accountant changed Rs, 300/- as interest on the same at 10% rate of interest. If it correct? Show the calculation. (June 2009)
Answer:
Correct
Interest on drawings = Amount of drawings x Rate of interest x 6/12
= 6000 x 10/100 x 6/12 = 300

Assumption : The date of drawings is not given. In such case the interest should be 6 months on the whole of the amount.

Question 12.
Analyse the following table and fill up the blank columns: (March 2010)

Answer:
a) Drawing
b) Part of capital
c) Reduces Profit
d) Considered to calculate interest on drawing

Question 13.
Dileep and Vipin are partners. Dileep’s capital is Rs. 10,000 and Vipin’s capital is Rs. 6,000. Interest is payable @ 6% p.a. Vipin is entitled to a salary of Rs. 300 per month. Profit for the current year before interest and salary to Vipin is rs. 8,000. Divide the profit between Dileep and Vipin. (March 2009)
Answer:
P & L Appropriation A/c

Question 14.
Anu, Minu & Sinu are in Partnership with a profit sharing ratio of 2:1 :1, but Sinu is given a guarantee to get a minimum profit of Rs. 20,000/. During the year the firm get a net profit of Rs. 1,00,000/- then what will be the share of profit due to Sinu? (June 2009) (May)
Answer:
A:M:S = 2:1:1
Guaranteed amount of profit = 20,000
Net Profit = 1,00,000
Sinu’s share = 1/4 = 1,00,000x 1/4 = 25,000
Sinu should get her actual share of profit ie.
Rs. 25,000. Since her actual share of profit is more than the guaranteed amount of Rs. 20,000/-.

Question 15.
Kiran and Keerti are partners sharing profits in the ratio 3:2. Their capital accounts as on the closing date of the year was Rs.60,000 and Rs.40000 respectively. During the year they made a net profit of Rs.50,000, it was subsequently found that the interest on capital entitled to the partners @ 6% per annum is omitted to record in the books. During the year they withdrew Rs.10000 and Rs.5000 respectively. Find the amount of interest on capital. (June 2010)
Answer:
Calculation of opening capital

Interest on capital
Kiran = 40000 x 6/100 = 2400
Keerthi = 25000 x 6/100 = 1500

Question 16.
A, B & C are partners haring profits and losses in the ratio of 3:2:1 arid their Profit and Loss A/c showed a credit balance of Rs. 24,000. But, on 1st July of the same yearthey decided to share profits and losses equally. What adjusting entry need be made to make necessary effect without closing the profit and loss account?  (May 2011)
Answer:

Question 17.
Prasanth and Janish are partners. They do not have any partnership agreement. What should be done in the following cases? (May 2016)
i) Prasanth spends twice the time that Janish de-votes to business. Prasanth claims that he should get a salary of?3,000 per month for his extra time spent.
ii) Prasanth wants to introduce his son Shenoi as a partner. Janish objects to it.
Answer:
i) No salary will be paid to Prasant
ii) Shenoi will not be admitted as a partner

Plus Two Accountancy Accounting for Partnership – Basic Concepts 3 Marks Important Questions

Question 18.
What is a Partnership Deed? Give any four items to be included in it. (March 2016)
Answer:
Partnership deed is a written document which contains the rules and regulations regarding the conduct of business.

Contents of partnership deed:-

• Name and address of the firm
• Name and address of partner
• Nature of business
• Duration of partnership
• Capital contributions

Question 19.
Anwar a partner in Akbar Travels withdraw money during the year ending 31st (March 2016) from his capital account for his personal use. Calculate interest on drawings on the following situations if rate of interest is 9% p.a.. (March 2017)
a) If he withdrew Rs. 2,500 per month at the begin-ning of the month.
b) If the amount withdrawn were on 1-6-2015, Rs.7,500, on 31-8-2015 Rs. 3,000 and 30-9-2015 Rs. 6,500
Answer:
a) Total amount withdrawn by Anwar = 2500 x 12 = 30,000
Interest on drawings = Total drawings x Rate x Average Period
Average period = \(\frac { 12+1 }{ 2 } =6.5\) months Interest on drawings
= 30,000 x \(\frac { 9 }{ 100 }\) x \(\frac { 6.5 }{ 12 }\) = 1462.50
b)

Interest on drawings = 1,35000 x \(\frac { 9 }{ 100 }\) = 12,150
Interest for one month = 12,150 x \(\frac { 1 }{ 12 }\) = 1012.50

Plus Two Accountancy Accounting for Partnership – Basic Concepts 5 Marks Important Questions

Question 20.
Alim and Methew made a serious discussion about the possibilities of starting a bakery shop as a partnership firm. Alim pointed out several peculiar features that their business should have. Mathew insisted for a written partnership deed and put forward _ some contents to be included in it. Imagine their discussion: (March 2009)
(a) Write two points raised by Alim.
(b) Justify Mathew’s argument.
Answer:
(a) 1) Partnership is the relation between two or more persons.
2) Partnership are governed by Indian Partnership Act, 1932.

(b) Partnership deed is a written document containing the rules and regulations regarding the conduct of business. It contains.

• Name and address of the firm
• Names and addresses of partners
• Duration of Partnership
• Nature of business
• Salary, commission etc. payable to partners
• Profit-sharing ratio

Question 21.
Zeema and Neemsa are partners from 1st Jan, 2008 without partnership agreement and they introduced capitals of Rs. 70,000 and Rs. 40,000 respectively. On 1st July, 2008 Zeema advances Rs. 15,000 by way of loan to the firm without any agreement as to interest. The profit and loss account for the year 2008 discloses a profit of Rs. 16,450, but the partners cannot agree upon question of interest or upon the basis of division of profits. You are required to divide the profit between them giving reasons for your method. (March 2010)

Hint: Prepare Profit and Loss Appropriation Account.
Answer:
Profit as per P/L a/c – Rs. 16450
Less: interest on loan to the firm (15000 x 6/100 x 6/12) – Rs. 450
Actual Profit – Rs. 16000
Zeema’s share of profit = 16000 x 1/2 = 8000
Neema’s share of profit = 16000 x 1/2 = 8000

If any partner has given a loan to the firm is addition to his/her share capital, he/she shall be entitled to

interest on such loan @ 6% p.a. Such interest shall be paid even if the firm making any profit. If there is no written agreement, profits and losses are to be shared equally among partners.

Question 22.
Sumi and Mini are partners sharing profits in the ratio of 3: 2. Their capital stood at Rs. 50,000 and Rs. 30,000 respectively. As per the deed interest on capital is payable at 6% p.a. Mini is entitled to an annual salary of Rs. 2,500. The firm has reported a profit of Rs. 12,500 before charging interest on capital but after charging Mini’s salary for the year ending on 31-03-2009). (March 2011)

Towards Manager’s Commission a provision of 5% is to be made.

Prepare P & L Appropriation Account and partner’s Capital A/c.
Answer:
Profit and Loss Appropriation A/c

Capital A/c

Question 23.
Using the following information prepare the Capital Account of Sri. Ganesh and find out his share of profit. (March 2012)

Capital on 1 -4-2009. Rs. 1,00,000
Capital on 31-3-2010. 2,00,000
Drawings during the year 30,000
Interest on drawings 1,500
Additional capital introduced 50,000
Interest on capital 2,500
Salary and commission 3,750
Answer:
Ganesh’s Capital A/c

Question 24.
P, Q and R are partners in a firm sharing profits/ losses in the ratio of 5:3:2. But R is guaranteed with a minimum amount of Rs. 15,000/- as his share of profit every year. Any deficiency arising on that account shall be met by Q. The profits for the 2 years ending on 31st December 2008 and 2009) were Rs. 60,000 and Rs. 90,000 respectively.  (March 2012)

Prepare Profit and Loss Appropriation Account for the two years.
Answer:
Profit and Loss Appropriation A/c for the year 2008 & 2009)

Note:
P’s Share of profit in the year 2008 – 60000 x 5/10 = 30000
P’s Share of profit in the year 2009) – 90000 x 5/100 = 45000
Q’s Share of profit in the year 2008 – 60000 x 3/100 = 18000
Less : Guaranteed amount 15000, 3000
Q’s Share of profit in the year 2009) – 90000 x 3/100 = 27000

Question 25.
Anil and Sunil commenced business as partners on 1st April 2008. Anil contributed Rs. 125000 and Sunil contributed Rs.75000 as their share of capital. The partners decided to share profits and losses in the ratio of 2:1. Anil was entitled a salary of Rs.1500 per month. Interest on capital was to be provided @ 6% p.a.  (June 2012)

The drawings of Anil and Sunil forthe year ending 31st (March 2009) were Rs. 12000 and Rs.24000 re-spectively. The profits of the firm after providing for Anil’s salary and interest on capital were Rs.36000. Draw up the capital accounts of the partners when;
a) Capital are fluctuating
b) Capital are fixed.
Answer:
a) Capital are fluctuating
Partner’s Capital A/c

b) Capital are fixed
Partner’s Capital A/c

Partner’s Current A/c

Question 26.
Arya and Meera are partners. They do not have any partnership agreement. What should be done in the following cases?  (March 2013)
a) Arya wants to introduce her son Hari into the business. Meera objects to it.
b) Meera wants that profits should be distributed in the ratio of capitals but Arya wants that it should be distributed equally. Give reasons for your answer.
Answer:
a) Hari will not be admitted as a partner. According to the Indian partnership Act, a new partner can be admitted into the firm only with the consent of all the existing partners unless otherwise agreed upon.
b) Profit will be distributed equally.
Reason:- In the absence of any written agreement between partners, the profits and losses will be shared equally.

Question 27.
R and S started business on 1st January 2009). On first January 2012), R had a capital balance of Rs.80000 and S had Rs.60000 as capital. According to partnership deed interest on Capital and drawings are 12% and 10% respectively. R and S are to get Rs.2000 and Rs.3000 as salary per month.The profits for the year ending 31st December 2012) before making the above appropriation was Rs. 100300. Drawings of R and S were Rs.40000 and 50000 respectively. Interest on Drawings amounted to Rs.2000 for R and Rs.2500 for S. Prepare Profit and Loss Appropriation Account and Capital Accounts assuming the Capitals are fluctuating. Profits are shared in the ratio 4:3.  (May 2013) (May)
Answer:
Profit and Loss Appropriation A/c

Capital A/c

Kerala State Board New Syllabus Plus Two Accountancy Chapter Wise Previous Questions and Answers Chapter 1 Accounting for Not For Profit Organisation.

Kerala Plus Two Accountancy Chapter Wise Previous Questions Chapter 1 Accounting for Not For Profit Organisation

Plus Two Accountancy Accounting for Not For Profit Organisation 1 Marks Important Questions

Question 1.
Statement for the calculation of revenue of a non¬profit concern is known as ……………………. . (March 2009)
a) Profit & Loss account
b) lncofne& Expenditure account
c) Receipts & Payments account
d) Balance Sheet
Answer:
b) Income & Expenditure account

Question 2.
Income and Expenditure A/c reveals: (March 2010, March 2014)
a) surplus or deficit
b) cash in hand
c) capital fund
d) cash at bank
Answer:
a) surplus or deficit

Question 3.
Receipts and payment account starts with an opening balance of cash or bank – True or False. (March 2010)
Answer:
True

Question 4.
Donation received for a special purpose will be taken to the …………………….. . (March 2010)
a) Income and Expenditure
b) Asset side of the Balance sheet
c) Liability side of the Balance sheet
Answer:
c) Liability side of the Balance sheet

Question 5. March 2010
Income and Expenditure a/c is a
a) Real a/c
b) Nominal a/c
c) Personal a/c
Answer:
b) Nominal a/c

Question 6.
Receipts and payment a/c is a nominal a/c – True or False. (March 2010)
Answer:
False. Real a/c

Question 7.
Subscription received in 2009, relating to the year 2010, will not be shown in the Receipts and Payment account for the year 2010 – True or False. (March 2011)
Answer:
True.

Question 8.
Opening balance of subscription outstanding from members is a/an …………………….. to the club. (March 2012)
a) Liability
b) Asset
c) Income
d) Expenditure
Answer:
b. Asset

Question 9.
State the following items as Revenue Receipt or Capital Receipt  (Sep – 2012)
a) Specific Donation
b) Legacies
Answer:
a) Capital Receipt,
b) Capital Receipt

Question 10.
Which one of the following equivalent to the summary of a cash book? (March 2013)
a) Income and Expenditure a/c
b) Profit and Loss a/c
c) Balance Sheet
d) Receipts and Payment A/c ]
Answer:
d) Receipts and Payment A/c

Question 11.
Subscription received in advance is …………………….. . (March 2013)
a) Income
b) Expense
c) An asset
d) A liability
Answer:
d) A liability

Question 12.
The life membership fee is an …………………….. . (Aug 2014)
a) Capital receipt
b) Revenue receipt
c) Revenue expense
d) Specific donation
Answer:
a) Capital receipt

Question 13.
Any revenue expense for which a separate funds is available will be …………………….. . (May 2016)
a) Credited to the separate fund.
b) Debited to Income and Expenditure Account.
c) Capitalised and shown in the balance sheet.
d) Debited to the separate fund.
Answer:
d) debited to separate fund

Question 14.
Outstanding subscription of a club is its …………………….. . (May 2016)
a) liability
b) asset
c) asset or liability
d) bad debts
Answer:
b) asset

Plus Two Accountancy Accounting for Not For Profit Organisation 2 Marks Important Questions

Question 15.
The details of stationery for a manufacturing unit is given below:  (March 2012)
Opening stock of stationery 500
Stationery purchase 1,200
Closing stock of stationery 700
Determine the amount of stationery to be debited in the Profit and Loss account.
Answer:
Opening stock of stationery – 500
(+) Purchases – 1,200
– 1,700
(-) Closing stock of stationery – 700
Amount to be debited – 1,000

Question 16.
Ascertain the amount of wages to be debited in the Income and Expenditure account for the year ending 31.12.2011. (March 2013)
Wages paid during the year 2011, ₹ 5,000.
Wages outstanding at the beginning of the financial year, ₹ 500.
Wages outstanding at the end of the financial year, ₹ 600.
Answer:

Question 17.
Amount paid for stationery during 2010 is ₹ 880. Stock of stationery at the end of the year is ₹ 90. What amount will be posted to Income and Expenditure account during the year 2010? (Sep 2013)
Answer:
Amount paid for stationery
during the year – 880
(-) Stock of stationery at the end – 90
Amt. to be posted to income
and expenditure A/c – 790

Question 18.
“Income and Expenditure account begins with an opening balance of cash.” State whether the above statement is true or false, if false correct the same. (May 2016)
Answer:
False. Receipts & Payment a/c begins with an opening balance of cash.

Question 19.
Anand sports club received Rs. 175000 as subscription for the year ended 31 st March 2016. Consider the following adjustments and mention whether we should add or deduct each items to find out subscription for the year. (March 2017)
Answer:
a) Subscription outstanding on 31st March 2016 Rs. 15,000.
b) Subscription outstanding on 1st April 2015 Rs. 20,000.
c) Subscription received in advance as on 1st April 2015 Rs. 16,000
d) Subscription received in advance as on 31st March 2016 Rs. 12,000
Answer:
a) Subscription outstanding on 31st March 2016 Rs.15000-Add
b) Subscription outstanding on 1st April 2015 Rs. 20,000 – Deduct
c) Subscription received in advance as on 1st April 2015 Rs. 16000-Add
d) Subscription received in advance as on 3181 March 2016 Rs, 12,000-Deduct

Plus Two Accountancy Accounting for Not For Profit Organisation 3 Marks Important Questions

Question 20.
From the following information find out of the amount of subscription to be credited to Income and Expenditure account for the year ending 31st December 2010. (Sep – 2012)
a. Subscription received during the ₹
year 2010 – 12,000
b. Subscription outstanding on
31/12/2010 – 1,500
b. Subscription outstanding on
31/12/2009 – 1,200
d. Subscription received in advance
on 31/12/2010 – 1,800
e. Subscription received in advance
on 31/12/2009 – 750

Plus Two Accountancy Accounting for Not For Profit Organisation 2 Marks Important Questions

Question 15.
The details of stationery for a manufacturing unit is given below: (March – 2012)
Opening stock of stationery – 500
Stationery purchase – 1,200
Closing stock of stationery – 700
Determine the amount of stationery to be debited in the Profit and Loss account.
Answer:
Opening stock of stationery – 500
(+) Purchases – 1,200
– 1,700
(-) Closing stock of stationery – 700
Amount to be debited – 1,000

Question 16.
Ascertain the amount of wages to be debited in the Income and Expenditure account for the year ending 31.122011. (March – 2013)
Wages paid during the year 2011, ₹ 5,000.
Wages outstanding at the beginning of the financial year, ₹ 500.
Wages outstanding at the end of the financial year, ₹ 600.
Answer:

Question 17.
Amount paid forstationery during 2010 is ₹ 880. Stock of stationery at the end of the year is ₹ 90. What amount will be posted to Income and Expenditure account during the year 2010? (Sep – 2013)
Answer:
Amount paid for stationery during the year – 880
(-) Stock of stationery at the end – 90
Amt. to be posted to income and expenditure A/c – 790

Question 18.
“Income and Expenditure account begins with an opening balance of cash.” State whether the above statement is true or false correct the same. (May 2016)
Answer:
False. Receipts & Payment a/c begins with an opening balance of cash.

Question 19.
Anand sports club received Rs. 175000 as subscription for the year ended 31st March 2016. Consider the following adjustments and mention whether we should add or deduct each items to find out subscription forthe year. (March – 2017)
a) Subscription outstanding on 31st March 2016 Rs. 15,000.
b) Subscription outstanding on 1st April 2015 Rs. 20,000.
c) Subscription received in advance as on 1st April 2015 Rs.16,000
d) Subscription received in advance as on 3131 March 2016 Rs. 12,000
Answer:
a) Subscription outstanding on 31st March 2016 Rs. 15000-Add
b) Subscription outstanding on 1st April 2015 Rs. 20,000 – Deduct
c) Subscription received in advance as on 1st April 2015 Rs. 16000-Add
d) Subscription received in advance as on 3151 March 2016 Rs, 12,000-Deduct

Plus Two Accountancy Accounting for Not For Profit Organisation 3 Marks Important Questions

Question 20.
From the following information find out of the amount of subscription to be credited to Income and Expenditure account for the year ending 31st December 2010. (Sep – 2012)
a. Subscription received during the ₹
year 2010 – 12,000
b. Subscription outstanding on
– 31/12/2010 – 1,500
c. Subscription outstanding on
31/12/2009 – 1,200
d. Subscription received in advance
on 31/12/2010 – 1,800
e. Subscription received in advance
on 31/12/2009 – 750
Answer:

Question 21.
From the given particulars, ascertain the amount to be credited to the Income and Expenditure account for the year ending 2012. (March – 2013)
Subscription received during the year – 18,000
Subscription outstanding on 01.01.2012 – 1,000
Subscription received in advance on 01.01.2012 – 500
Subscription received in advance on 31.12.2012 – 300
Subscription outstanding on 31.12.2012 – 200
Answer:

Question 22.
Your are given the various receipts and payments of a hospital. Classify them into capital and revenue. (March – 2013)
a) Consultation fees
b) Payment of salaries
c) Conveyance expense
d) Purchase of medicine
e) Purchase of surgical instruments
f) Life membership subscription for health plan
Answer:
Capital
e) Purchase of surgical instruments (expenditure)
f) Life membership subscription for health plan (receipts)

Revenue
a) Consultation fees (receipts)
b) Payment of salaries (payments)
c) Conveyance expense (payments)
d) Purchase of medicine (payments)

Question 23.
Given below is the data taken from Rupa Sports Club, Kochi during the year 2012. Subscription ₹ 12,000 was received during 2012. (March 2014)
(This includes ₹ 900 related to the last year’s outstanding subscription and also advance subscription ₹ 1,200 from the members forthe next year)
During 2011, subscription advanced was ₹ 2,000 Subscription outstanding in 2012 is ₹ 1,050 How much amount has to be credited to the Income and Expenditure account by way of subscription?
Answer:

Question 24.
In the case of a not-for-profit organization, capital fund represents its excess of ………… over ……….. . The excess of income over expenditure is called ………… and the closing balance of Receipts and Payments account represents ……….. . (May – 2016)

Fill in the above blanks with appropriate words (s).
Answer:
i) Assets, Liabilities
ii) Surplus
iii) Cash in hand/Cash at bank/Bank over draft

Plus Two Accountancy Accounting for Not For Profit Organisation 5 Marks Important Questions

Question 25.
The Yuvadhara Arts and Sports Club furnishes the following information before you, seeking your help for preparation of receipts and payments account. Help them to prepare receipts and payments account as a commerce student. (August 2009)

Answer:

Receipts and Payments Account
The Yuvadhara Arts and Sports Club

Dr.

Question 26.
a) Calcutta Sports Association extracts the following Receipts and Payments Account forthe year ended 31st December, 2004. After considering additional information, prepare the Income and Expenditure Account forthe year ended 31st December, 2004. (March – 2010)
Receipts and Payments Account for the year ending31st december, 2004

Answer:
(a) Income and Expenditure A/c for the year ended 31.12.04

Note: If the entrance fee is treated as revenue income, Deficit will be Rs. 1660.

Question 27.
From the following particulars of Gandhi Memorial Sports Club, prepare the Income and Expenditure account for the year ended 31st March 2010. (March – 2012)
₹
a. Subscription collected 70,000
(₹ 1,000 for 2009 and ₹ 3,000 for 2011)
b. Subscription due but not received for March, 2010 8,000
c. Donation for constructing building 50,000
d. Entrance fees (60% capitalized) 6,000
e. Salary paid (including ₹ 4,000 for 2009) 16,000
f. Purchase of sports equipment 4,000
g- Sale of old ball and equipment 200
h. Printing, Stationery and Rent 1,000
Adjustments : 50% on sports equipment is written off
Answer:

Question 28.
Given below is the Receipts and Payments account of Riders Club for the year ending 31st December, 2012, which was formed on January, 2012. (March – 2013)

Receipts and Payments Accounts for the year ending 31-12-2012