Telangana TSBIE TS Inter 1st Year Commerce Study Material 1st Lesson Introduction to Business Textbook Questions and Answers.
TS Inter 1st Year Commerce Study Material 1st Lesson Introduction to Business
Long Answer Questions
Question 1.
Define Business. Explain its characteristic features.
Answer:
Meaning:
- Business means the state of being busy.
- Business is an economic activity involving production, exchange, distribution and sale of goods and services with an objective of making profits and maximization of wealth.
- The primary intention of business is making profits.
Definitions:
- L.H. Haney: Defined business as “A human activity directed towards producing or acquiring wealth through buying and selling of goods”.
- Stephen son: Defines business as, “The regular production or purchase and sale of goods undertaken with an objective of earning profits and acquiring wealth through the satisfaction of human wants”.
- According to keith and carlo: “Business is a sum of all activities involved in the production and distribution of goods and services for private profits”.
Business may be defined as an economic activity which involves regular transfer or exchange of goods or services for a price.
Characteristics (or) Features:
Following are the main characteristic features of business:
i) Economic Activity: Business is an economic activity. It is performed with the main motive of earning money or profit. It does not include the activities undertaken out of love, affection, charity and religious commitments etc.
ii) Deals with goods and services: Every business enterprise produces or buys goods and services with the intention of selling them to others, to earn profit. Goods deals in business, may be consumer goods or capital goods.
- Consumer goods are meant for direct use by the ultimate consumers, e.g. cloths, note books, tea, bread, etc.
- Capital goods also known as producer goods, which are not intended for direct consumption but used for production of other goods, Equipment, Tools, Raw mate-rials, Machinery etc.
Services like transport, warehousing, banking, insurance, etc. may be considered as intangible and invisible goods. Services facilitate buying and selling of goods by over coming various hindrances in trade.
iii) Creation of utilities: Business makes goods more useful to satisfy human wants. It adds, time, place, form and possession utilities to various types of goods.
For example: It carries goods from place of production to the place of consumption (place utility). It makes goods available for use in future through storage (time utility).
iv) Continuity in dealings: Dealings in goods and services become business only if undertaken on a regular basis. A single isolated transaction of purchase and sale does not constitute business.
Therefore, regulartity of dealings is an essential feature of business.
v) Sale, transfer or exchange: All business activities involve transfer or exchange of goods and services for some consideration. The consideration called price, which is expressed in terms of money.
For example: If a person cooks and serves food to his family, it is not business. But when he cooks food and sells it to others for a price, it becomes business.
vi) Profit motive: The primary objective of business is to earn profits. Profits are essential for the survival as well as growth of any business. Profits must be earned through legal and fair means. Business should never exploit any part of the society to make money.
vii) Risk and uncertainity: Risk means fear of loss. It implies the uncertainly of profit or the possibility of loss. Business enterprises function in uncertain and uncontrollable environment.
Changes in customers tastes and fashions, demand, competition, government policies etc., create risk, flood, fire, earthquake, strike by employees, theft etc., also cause loss. A businessman can reduce risks through correct forecasting and insurance.
viii) Business is also a social institution: Business is also a social institution because it helps to improve the living standards of people through effective utilisation of scarce resources of the society.
ix) Art as well as science: Business can be pressumed as an art as well as science. It is art because it requires personal skills and experience. It is also a science because it is based m certain principles and laws.
Question 2.
Describe various objectives of a business.
Answer:
“An objective is a goal or motive directed towards achievement of predetermined purpose or aim. Hence, every business enterprise has certain objectives. These objectives are broadly classified into four categories viz, economic objectives, social objectives, human objectives and national objectives.
I. Economic Objectives:
Business is basically an economic activity. Therefore, its primary objectives are economic in nature. The main economic objectives of business are as follows.
i) Earning profits:
- Any business enterprise is established for earning some profits. It is the main in-centive and hope to start business.
- Just as a person cannot live without food, a business firm cannot survive without profits.
- Profit is also necessary for the expansion and growth of business.
- Profit also serves as the barometer of economic stability, efficiency and progress of a business enterprise.
- Therefore, profit is essential for the survival of every business.
ii) Creating customers:
- A business man can earn profits only when there are enough customers to buy and pay for his goods and services.
- In the words of peter F. Drucker, “There is only one valid definition of business purpose; to create a customer.
- The customer is the foundation of business and keeps it in existence.
- In order to earn profits, business must supply better quality goods and services at reasonable prices. Therefore, creation and satisfaction of customers is an important economic objective of business.
iii) Innovation:
- Application and adoption of new methods, devices and technologies is called innovation. It also refers to creation of new things resulting from the study and experimentation, research and development.
- It comprises all efforts made in perfecting the product, minimising the costs and maximizing benefits to customers. Business firms invest money, time and efforts in Research and Development (R&D) to introduce innovation.
iv) Optimum Utilization of Resources:
- The best usage of resources like material, machine, men and money is called optimum utilization of resources. It is also one of the important economic objectives.
- Waste control and reprocessing mechanism, providing proper training to its workers and effective spending of money may prompt the business concern to reach the objective of optimum utilization of resources.
II. Social Objectives:
Business does not exist in a vaccum. It is part of society. It cannot survive and grow without the support of society. Business must therefore discharge social responsibilities in addition to earning profits.
According to Henry Ford, ‘The primary aim of business should be service and subsidiary aim should be earning of profits.”
The social objectives of business are as follows:
i) Supplying desired goods and Services at reasonable prices: Supply of goods and services to consumers at reasonable price with the accepted quality is the responsibility of any business entity. It is also the social obligation of business to avoid malpractices like, adulteration, smuggling, black marketing and misleading advertising.
ii) Fair Remuneration to employees: Business must give fair remuneration and compensation to employees for their work. In addition to wages and salary a reasonable part of profits should be distributed among employees by way of bonus. Such sharing of profits will help to increase the motivation and efficiency of employees. It is the obligation of business to provide healthy and safe work environment for employees.
iii) Employment creation: In a country like India unemployment Has become a serious problem and no government can offer jobs to all. Therefore, provision of adequate and full employment opportunities is a significant service to society.
iv) Promotion of social welfare: Business should provide support to social, cultural and religious, organisation. Biteiness enterprise can build schools, college, Libraria, dharmashalas, Hospitals, sports bodies, and research institutions. They can help non-government organisations (NGOs) like CRY (Child Relief and You), Help Age, and other which render services to weaker sections of society.
v) Payment of dues and Taxes to government: Every business enterprise should pay taxes and dues (income tax and GST) to the government honestly and at the right time.
III. Human objectives: Human objectives are concerned with the well being of labour, satisfaction of customers and shareholders. The human objective are as follows.
i) Welfare of workers or staff: The workers should be provided win physical comfort, appreciation and dignity of labour and conditions which will motivate the workers to give their best. Adequate provisions should be made for their health, safety and social security.
ii) Development of human resources: Human resources are the most valuable asset of business and their development will help in the growth of the business. This can be done by training the employees and conducting workshops on skill development and attitude.
iii) Labour participation: The workers should be allowed to take part in decision making process and helps them in their development.
iv) Labour management co-operation: The employees should be looked upon as human beings. The employees help in increasing probability and should be rewarded for their hardwork.
IV. National objectives: The following are the national objectives of the business.
i) Optimum utilisation of resources: Juditions allocation and optimum utilisation of scarce resources is essential for rapid economic growth of the country.
ii) National Self-reliance: It is the duty of the business to help the government, in increasing exports and in reducing dependence on imports. It will help nation to become self-reliant.
iii) Development of small scale industries and MSMEs : Small scale industries are necessary for generating employment opportunities and for providing inputs to large scale industries.
iv) Development of backward areas: In order to achieve balanced regional development, industries should be started at backward regions which helps to raise the standard of living in backward areas.
Question 3.
Discuss the social responsibility of business.
Answer:
Meaning: Every business operates within a society. It uses the resources of the society and depends on the society for its functioning. This creates an obligation on the part of the business to look after the welfare of the society. Therefore, all the activities of the business should be that they will protect and contribute to the interests of the society. Social responsibility of business refers to all such duties and obligations of business directed towards the welfare of the society.
Responsibility towards different interested groups: The business is associated with owners, employees, suppliers, customers, government and society. They are called as interested groups because, every activity of the business will affect the interests directly or indirectly. Various responsibilities of business towards different groups given below:
1) Responsibility towards owners: Owners are the persons who own the business. They contribute the capital and bears the business risks. The responsibilities of business towards them are:
- Running the business efficiently.
- Proper utilisation of capital and other resources.
- Growth and appreciation of capital
- Regular and fair returns on capital invested by way of dividends.
2) Responsibility towards employees: The future of the business depends on the efforts and efficiency of the employees. So, it is the responsibility of the take care of their interest. The responsibilities are:
- Regular and fair payment of their wages and salaries.
- Better working conditions and welfare amenities.
- To improve the skill and efficiency by providing proper training.
- Job security and social security like group insurance, pension, retirement benefits etc.
3) Responsibility towards suppliers: Suppliers are those persons who supply raw ma-terials and other items to the business. The responsibilites towards them are:
- Timely payment of dues.
- Dealing on fair terms and conditions.
- Availing reasonable credit period.
4) Responsibility towards customers: In order to survive, the business responsibility is to provide following facilities of customers:
- Providing qualitative goods and services.
- Charging reasonable prices.
- Giving delivery of goods within stipulated time.
- After sale service.
- Avoiding unfair means like under weighing the product, adulteration etc.
5) Responsibility towards government: Business is governed by the rules and regulations framed by the government. The responsibilities towards government are:
- Payment of fees, duties and taxes honestly and regularly.
- Setting up units as per guidelines of the government.
- Following the pollution control norms.
- Not to indulge in unlawful activities.
6. Responsibility towards society: Business, being a part of the society has to maintain relationship with other members of the society. The responsibility of business towards society is:
- To help weaker and backward sections of the society.
- To generate employment.
- To protect environment.
- To conserve natural resources and wild life.
- To promote sports, social and cultural values.
Question 4.
Classify and describe each type of Economic activities.
Answer:
All human activities are directed towards satisfying human wants. Depending upon the nature of wants, human activities may be categorised as economic and non-economic. Economic activities are undertaken to create utilities. Non – economic activities do not have economic values and these are primarily tend to satisfy social, religious, cultural or sentimental requirements of human beings.
Classification of economic activities: Economic activities are broadly classified into three. They are:
- Business
- Profession
- Employment
1) Business: The business is an activity which is primarily pursued with the object of earning profit. A business activity involves production, exchange of goods and services to earn profits or to earn a living. The word business literally means a state of being busy. Every person is engaged in some kind of occupation, a farmer works in the field, a worker works in the factory, a clerk does his work in the office, a teacher teaches in the class, a salesman is busy in selling the goods and an entrepreneur is busy in running his factory. The primary aim of all these persons is to earn their live¬lihood while doing some work.
2) Profession: Profession is an occupation involving the provision of personal services of a specialised and expert nature. The services are based on professional service of specialised nature. The service is based on professional education, knowledge, train¬ing etc. The specialised service is provided for a professional fees charged from the clients. For instance, a doctor helps his patients through his expert knowledge of the science of medicine and charges a fees for the service. Minimum educational qualifications are prescribed for entry into a profession and every profession requires a high degree of formal education and specialised training in a particular field. For example, a chartered accountant needs to be a member of the Institute of Chartered Accountants of India (ICA1). A person entering law profession has to acquire LL.B degree in order to become a lawyer.
3) Employment or Service: Employment or service involves working under a contract of employment for or under someone known as employer in return for a wage or salary. The person engaged under employment works as per the directions of the employer. There is an employer – employee relationship. A professional may also work under the contract of employment. A Chartered Accountant may be employed by the company The service may be of government department or in a private organisation.
Short Answer Questions
Question 1.
What are the Business objectives?
Answer:
Business objectives are classified as economic, Social, human and national objectives.
1. Economic objectives:
- Earning profit
- Creation of customers
- Innovation
- Optimum utilization of resources.
2. Social objectives:
- Supplying desired goods and services at reasonable prices.
- Fair remuneration to employees
- Creation of employment opportunities
- Promotion of social welfare
- Payment of dues and taxes to Government.
3. Human objectives:
- Welfare of workers or staff
- Development of human resources
- Labour participation in management
- Labour management co-operation.
4. National objectives:
- Optimum utilisation of natural resources
- Self-reliance.
- Development of small scale industries and MSMES
- Development of backward regions.
Question 2.
What are the economic activities.
Answer:
Economic activities are broadly classified into business, profession and employment.
Business: The word business literally means a state of being busy. Every person is engaged in some kind of occupation or other work. The business is an activity which is primarily pursued with the object of earning profit. So, a business activity involves production, exchange of goods and services to earn profits or to earn a living.
Profession: Profession is an occupation involving the provision of personal services of a specialised and expert nature. The service is based on professional education, knowledge, training etc. The specialised service is provided for a professional fees charged from the clients. For example, a doctor helps his patients through his expert knowledge of science of medicine and charges a fees for the service.
Employment: Employment involves working under a contract of employment for or under someone known as employer in return for a salary. The person engaged under employment works as per the directions of the employer.
Question 3.
What are the social objectives?
Answer:
Business does not exist in a vaccum. It is a part of society. It cannot survive and grow without the support of society. Business must therefore discharge social responsibilities in addition to earning profits.
According to Henry Ford, “The primary aim of business should be service and subsidiary aim should be earning of profit”.
The social objectives of business are as follows:
i) Supplying desired goods and services at reasonable prices: Supply of goods and services to consumers at reasonable price with the accepted quality is the responsibility of any business entity. It is also the social obligation of business to avoid malpractices like, adulteration, smuggling, black marketing and misleading advertising.
ii) Fair Remuneration to employees: Business must be given fair remuneration and compensation to employees for their work. In addition to wages and salary a reasonable part of profits should be distributed among employees by way of bonus. Such sharing of profits will help to increase the motivation and efficiency of employees. It is the obligation of business to provide healthy and safe work environment for employees.
iii) Employment Generation: In a country like India unemployment has become a serious problem and no government can offer jobs to all. Therefore, provision of adequate and full employment opportunities is a significant service to society.
iv) Promotion of social welfare: Business should provide support to social, cultural and religious organisations. Business enterprise can build schools, colleges, libraries, dharamashalas, hospitals, sports bodies and research institutions. They can help NGO’s like CRY (Child Relief and You). Help Age, and others which render services to weaker sections of society.
v) Payment of dues and taxes to government: Every business enterprise should pay taxes and dues (income tax and GST) to the government honestly and at the right time.
Question 4.
What are the National objectives?
Answer:
National objectives of business are as follows:
i) Optimum utilisation of resources: Business should use the nation’s resources in the best possible manner. Judicious allocation and optimum utilisation of scarce resources is essential for rapid and balanced economic growth of the country.
ii) National self-reliance: It is the duty of business to help the government in increasing exports and in reducing dependance on imports. This will help a country to achieve economic independence.
iii) Development of MSMEs: Big business firms are expected to encourage growth of micro, small and medium enterprises (MSMEs) which are necessary for generating employment. MSMEs can be developed as ancillaries which provide inputs to large scale industries.
iv) Development of backward classes: Business is expected to give preference to the industrialisation of backward regions of the country. It will also help to raise standard of living in backward areas. Balanced regional development is necessary for peace and progress in the country. Government offers special incentives to the businessmen who setup factories in notified backward areas.
Question 5.
What is the role of profit in business?.
Answer:
Earning profit is necessary not only to pay adequate returns to the investors, but also to maintain the stability of the business. The role of profit in business is given below:
- Profits ensure adequate funds for future expansion and innovation, there by increasing the wealth of country.
- Profits are also helpful to attract new capital from outside sources like banks, Financial Institutions and Investors.
- Profits are serves as the barometer of economic stability, efficiency and progress of a business enterprise.
- Profits enable a businessman to stay in business by maintaining intact the wealth producing capacity of its resources.
- Profits ensure continuous flow of capital for the modernisation of business.
Just as a person cannot line without food, a businesss firm cannot survive without profit. Therefore, profits are essential for every business organisation.
Question 6.
Explain the History of commerce.
Answer:
Commerce is a wider system which is the custome of a gradual evolution spread over a long period of human history and it passes through the following different stages.
i) Household economy: This is the first stage of economic development. At this stage, division of labour was unknown concept at the family level. There was no commercial inter relationship between families. While men engaged in jobs like hunting, fishing, making weapons for hunting etc, women were engaged in fruit gathering, cultivation of lands etc. Therefore, commerce was unknown at this stage.
ii) Primitive Barter Economy: Gradually the need of the families increased and families started specializing in different occupations and the need for exchange of goods, etc., between different families. Thus, commerce originated with introduction of barter systesms. In barter system, the goods are exchanged only. Hence barter system was considered as a popular element of commerce.
iii) The raise of trade: In course of time, the needs of people increased. In the begining, goods were exchanged at particular fixed places, but gradually trade appeared on the scene. Home trade began to develop and assume importance and money appeared as an instrument and medium of exchange. Further, the systems of weights and measurement also came into existence.
iv) Town Economy: At this stage, trade began to be undertaken for catering to the needs of local markets which gradually developed into large town. Further, traders were divided into wholesale and retail merchants. Division of labour become significant and prices for goods began to be fixed regularly and traders started using the credit system in their transactions.
v) International Trade: At this stage, goods were produced not only for selling in the local markets but also in foreign markets. This expansion of trade was due to the industrial revolution which made large scale manufacturing of goods possible. Commercial banks, insurance companies, transport companies, warehousing companies etc began to setup.
vi) E-commerce: It is an innovative business idea in the modem economy e-commerce means electronic commerce. It is the process of buy and sell the goods and services through an electronic medium electric commerce emerged in the early 1990s, and its use has increased at a rapid rate.
Question 7.
What are the economic objectives of the business?
Answer:
Economic objectives:
Business is basically an economic activity. Therefore, its primary objectives are economic in nature. The main economic objectives of business are as follows:
i) Earning profits: Any business enterprise is established for earning some profits. It is the main incentive and hope to start business. Just as a person cannot live without food, a business firm cannot survive without profit. Profit also serves as the barometer of economic activity, efficiency and progress of a business enterprise. Therefore profit is essential for the survival of every business.
ii) Creating customers: A business man can earn profits only when there are enough customers to buy and pay for his goods and services. In the words of Peter F. Drucker, ‘There is only one valid definition of business purpose, to create a customer. The customer is the foundation of business and keeps it in existence. In order to earn profit, business must supply better quality, goods and services at reasonable prices. Therefore, creation and satisfaction of customers is an important economic objective of business.
iii) Innovation: Application and Adoption of new methods, devices and technologies is called Innovation. It also refers to creation of new things resulting from the study and experimentation, research and development. It comprises all efforts made in prefecting the product, minimising the costs and maximizing benefits to customers. Business firms invest money, time and efforts in Research and Development (R and D) to introduce innovation.
iv) Optimum Utilization of Resources: The best usage of resources like material, machine men and money is called optimum utilization of resources. It is also one of the important economic objectives waste control and reprocessing mechanism, providing proper training to its workers and effective spending of money may prompt the business concern to reach the objective of optimum utilization of resources.
Question 8.
What is profession and explain features and objectives of profession.
Answer:
Profession: A profession is an occupation or vocation intended to render personal service of a specialised and expert nature. Profession is based on educational qualification, knowledge and competencies. For providing this service, the service provider may be a doctor, an engineer, lawyer, or a chartered accountant will charge fee on their clients which will be their primary earning.
Following are the salient features of profession:
- A person enters into any particular profession should have Specialized qualification, knowledge and training in that respective profession.
- Person enters into the specialized profession must be the member of respective professional body.
Ex: Doctors in IMA (Indian Medical Association), Lawyers in Indian Bar Council and chartered Accountant in ICA (Institute of Charatered Accountants of India). - Person choosing the profession must follows the ethics.
- Professional fee from the clients for providing their specialized services.
- Rendering service legibly is the key factor in any profession.
- Service motive must be an integral part of any profession.
- Some professionals instead of work on their own may also work in organizations as employees and consultants.
Following are the important objectives of any profession:
- To secure respected position in the society.
- To spread the efficiency, skill and knowledge possessed, for the needy people.
- To build career and register growth and development in their respective field.
- To render service.
- To enjoy the freedom of work at the cost low risk.
Question 9.
What is employment and explain the features and objectives of employment.
Answer:
Employment: An employment is a contract of service. A person who works under the contract for a salary or wage is called an employee and the person who has given the job to the employee is called employer. An employee works under an agreement as per the rules of service and performs tasks assigned to him by the employer.
The relationship between two parties will be employer – employee. Working in Banks, offices, hotels, schools and companies are the examples of employment.
Following are the important features of employment:
- Employment contract commences when employee signs the agreement and joins organisation.
- It involves rendering service for periodical remuneration called wage or salary.
- Employment is the contractual relationship between employee and employer.
- Employment will have very low risk and uncertainty, when compared with other economic activities.
- Employee need not invest any capital.
- Employees need to follow service rules and regulations framed by the employer strictly.
- Certain employments required necessary qualifications too.
- There are certain terms and conditions, of work like hours of work, duration of work, leave facility, salary / wages and place of worts in employment, which must be followed by the both employer and employee.
The important object of employment can be prevented as under:
- The basic objective of employment is to earn for their livelihood and support family.
- To get secured and assured wages and salaries.
- To free from risk and uncertainty.
- To keep away from disputes, conflicts and devastations.
- To focus on skill development and career paths for job seekers.
Very Short Answer Questions
Question 1.
Business.
Answer:
- Business means the state of being busy.
- Business is an economic activity involving production, exchange, distribution and sale of goods and services with an objective of making profits and maximization of wealth. The primary intension of business is making profits.
Definition: L.H.Maney defined business as “a human activity directed towards producing or acquiring wealth through buying and selling of goods”.
Question 2.
Human activities.
Answer:
- The activities performed by the human being in their daily life are called human activities. These are undertaken by them to fulfill their needs, desires, wants and luxuries.
- Human activities are divided into two types:
- Economic activities
- Non-economic activities.
Question 3.
Profession.
Answer:
- A profession is an occupation or vocation intended to render personal service of a specialized and expert nature. It is part of economic activities undertaken by the human being.
- Always profession is based on educational qualification, knowledge and competencies. A fee is charged for providing professional service.
Question 4.
Employment.
Answer:
- Employment is the relationship between two parties. One party render this service on contractual basis for the remuneration wage or salary.
- Hence the relationship between these two parties will be employer – employee.
Question 5.
Risk and uncertainity.
Answer:
- Risk means fear or loss. It implies the uncertainity of profit or the possibility of loss. Business enterprises function is uncertain and uncontrollable environment.
- Changes in customers tastes and fashions, demand, competition, Government policies etc., create risk. Flood, fire, earthquake, strike by employees, theft etc., also cause loss. A businessman can reduce risks through correct forecasting and insurance.