Ch#2 Forms Of Business Organisations

Question 1

Define sole proprietorship

Answer 1

Sole proprietorship refers to a form of business organisation which is owned and controlled by an individual who is the recipient of all profits and bearer of all risks

Question 2

What are the merits of sole proprietorship

Answer 2

Quick decision making
Confidentiality of information
Direct incentive
Sense of accomplishment
Ease of formation and closure

Question 3

What are the limitations of sole proprietorship

Answer 3

Limited resources
Limited life of a business concern
Unlimited resources
Limited managerial ability

Question 4

This business is a specific form of organisation found only in India

Answer 4

Joint hindu family

Question 5

Business controlled by the head of the family who is the eldest member is called

Answer 5

Karta

Question 6

All members who have equal ownership right over the property of an ancestor and they are known as

Answer 6

Co-parceners

Question 7

What are the merits of joint hindu family?

Answer 7

Effective control
Continued business existence
Limited liability of members
Increased loyalty and operations

Question 8

What are the limitations of joint hindu family?

Answer 8

Limited resources
Unlimited liability of karta
Dominance of karta
Limited managerial skills

Question 9

The relation between persons who have agreed to share the profit of the business carried on by all or any of them acting for all is called

Answer 9

Partnership

Question 10

What are the merits of partnership?

Answer 10

Ease of formation and closure
Balanced decision making
More funds
Sharing of risks
Secrecy

Question 11

What are the limitations of partnership?

Answer 11

Unlimited liability
Limited resources
Possibility of conflicts
Lack of continuity
Lack of public confidence

Question 12

What are the different types of partners?

Answer 12

Active partner
Sleeping partner
Secret partner
Nominal partner
Partner by estoppel
Partner by holding out

Question 13

Explain the partnership deed

Answer 13

The written agreement which specifies the terms and conditions that govern the partnership is called the partnership deed. It generally includes;
-name of firm
-nature of business and locations of business
-duration of business
-investment made by each partner
-distribution of profits and losses
-duties and obligations of the partners
-salaries and withdrawals of the partners
-terms governing admission, retirement and expulsion of a partner
-interest on capital and interest on drawings
-procedure for dissolution of the firm
-preparations of accounts and their auditing
-method of solving disputes

Question 14

What is registration

Answer 14

Registration of a partnership firm means the entering of the firms name along with relevant prescribed particulars in the register of firms kept with the registrar of firms

Question 15

What are the consequences of non registration of a firm

Answer 15

-A partner of an unregistered firm cannot file a suit against the firm or other partners
-the firm cannot file a suit against the third parties
-the firm file a case against the partners

Question 16

Define cooperative society

Answer 16

It is a voluntary association of persons who join together with the motive of welfare of the members. They are driven by the need to protect their economic interests in the face of possible exploitation at the hands of middlemen obsessed with the desire to earn greater profits

Question 17

What are the merits of cooperative society?

Answer 17

Equality in voting status
Limited liability
Stable existence
Economy in operations
Support from government
Ease of formation

Question 18

What are the limitations of cooperative society?

Answer 18

Limited resources
Inefficiency in management
Lack of secrecy
Government control
Differences of opinion

Question 19

What are the different types of cooperative society?

Answer 19

Consumers cooperative societies
Producers cooperative societies
Marketing cooperative societies
Farmers cooperative societies
Credit cooperative societies
Cooperative housing societies

Question 20

Define joint stock company

Answer 20

A company can be described as an artificial person having separate legal entity, perpetual succession and a common seal. The shareholders are the owners of the company while the board of directors is the chief managing body elected by the shareholders. Usually, the owners exercise an indirect control over the business. The capital of the company is divided into smaller parts called ‘shares’ which can be transferred freely from one shareholder to another person.

Question 21

What are the merits of joint stock company?

Answer 21

Limited liability
Transfer of interest
Perpetual existence
Scope for expansion
Professional management

Question 22

What are the limitations of joint stock company?

Answer 22

Complexity in formation
Lack of secrecy
Impersonal work environment
Numerous regulations
Delay in decision making
Oligarchic management
Conflict in interests

Question 23

What are the two types of companies?

Answer 23

Public company and private company