AMITY INTERNATIONAL SCHOOL, MAYUR VIHAR

XI BUSINESS STUDIES ASSIGNMENT(2023-24)

Chp- Forms of Business Organisation and Formation of Company

MULTIPLE CHOICE QUESTIONS

Q1. Suppose the total outside liabilities of XYZ dry cleaner, a sole proprietorship firm are Rs. 80,000 at the
time of dissolution, but its assets are Rs.60,000 only. What will be the remedy in such situation?

a) The owner will have to bring in Rs.20,000 from his personal sources.
b) The owner may have to sell her personal property to repay the firm‟s debts.
c) Both (a) and (b)
d) Outside liabilities of Rs.20,000 will remain unpaid.

Q2. Which of the following statement is not true for a Joint Hindu Family Business?

a) The business is controlled by the head of the family who is the eldest member.
b) All members have equal ownership right over the property of an ancestor.
c) Minors cannot be members of business.
d) The business can be terminated with the mutual consent of the members.

Q3. Which of the following is not a characteristic of the partnership form of business organisation?

a) The partnership form of business organisation is governed by the Indian Partnership Act, 1932.
b) Two people coming together for charitable purposes will constitute a partnership.
c) The partners are jointly and individually liable for payments of debts.
d) Decisions are generally taken with mutual consent.

Q4. According to section 464 of the Companies Act 2013, maximum number of partners in a partnership firm
can be _______________ subject to the number prescribed by the government.

a) 20
b) 50
c) 100
d) 10

Q5. As per Rule 10 of The Companies (miscellaneous) Rules 2014, at present the maximum number of
members can be ___________.

a) 20
b) 50
c) 100
d) 10

Q6. The written agreement which specifies the terms and conditions that govern the partnership is called the
____________.

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 a) Charter
b) Memorandum of association
c) Partnership Deed
d) Articles of Association

Q7. Which of the following point does not describe the advantage of a partnership firm?

a) Sharing of risks
b) Secrecy
c) Limited resources
d) Balanced decision making

Q8. Which of the following is not included in the partnership deed?

a) Investment made by each partner

b) Interest on capital and interest on drawings
c) Method of solving disputes
d) Conversion of partnership firm into private company

Q9. Which of the following statement is not true for a minor as a partner?

a) Since a minor is incompetent to enter into a valid contract with others, he cannot become a partner in
any firm.
b) A minor can be admitted to the benefits of a partnership firm with the mutual consent of all other
partners.
c) The liability of a minor partner will be limited to the extent of the capital contributed by him and in the
firm.
d) A minor partner will be eligible to take an active part in the management of the firm.

Q10. Which of the following is a consequence of non-registration of a partnership firm?

a) A partner of an unregistered firm cannot file a suit against the firm or other partners.
b) The firm cannot file a suit against third parties.
c) The firm cannot file a case against the partners.
d) All of the above

Q11. According to the _________________, the partners may get the firm registered with the ____________.

a) Indian Partnership Act, 1932; Registrar of firms

b) Indian Partnership Act, 2013; Registrar of firms
c) Rule 10 of The Companies (miscellaneous) Rules 2014; Registrar of firms
d) Section 464 of the Companies Act 2013; Registrar of Companies

Q12. Which of the following statement is not true in case of private company?

a) There is no need to issue a prospectus as public is not invited to subscribe to the shares of a private
company.
b) Allotment of shares can be done without receiving the minimum subscription.
c) A private limited company can start business as soon as it receives the certificate of incorporation.

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 d) A private company is required to keep an index of members.

Q13. A private company which is a subsidiary of a public company is treated as a ____________.

a) Private company
b) Public company
c) Joint Stock company
d) One Person company

Q14. Match the columns and choose the correct alternative:

(Column I) (Column II)

(A) Dormant partner (i) Contributes capital, participate in management, shares profit and losses
and has unlimited liability towards creditors
(B) Secret partner (ii) Does not contribute capital, does not participate in management, does not
share profit and losses but has unlimited liability towards creditors
(C) Nominal partner (iii) Allows the use of his/her name by a firm, but does not contribute to its
capital.
(D) Partner by (iv) Contributes capital, shares profit and losses, has unlimited liability
estoppel towards creditors but does not participate in management

Select from the following options:

a) A-(i); B-(iv); C-(ii); D-(iii)

b) A-(iv); B-(iii); C-(i); D-(ii)
c) A-(ii); B-(i); C-(iii); D-(iv)
d) A-(iv); B-(i); C-(iii): D-(ii)

Q15. Match the columns and choose the correct alternative:

(Column I) (Column II)

(A) Partnership at will (i) It can continue as long as the partners want and is terminated when
any partner gives a notice of withdrawal from partnership to the firm.
(B) Particular partnership (ii) The liability of partners is unlimited and joint.
(C) General partnership (iii) Such a partnership does not get terminated with the death, lunacy or
insolvency of the limited partners.
(D) Limited Partnership (iv) It dissolves automatically when the purpose for which it was formed
is fulfilled or when the time duration expires.

Select from the following options:

a) A-(ii); B-(iv); C-(i); D-(iii)

b) A-(i); B-(iv); C-(ii); D-(iii)
c) A-(i); B-(iv); C-(iii); D-(iv)
d) A-(i); B-(ii); C-(iv): D-(iii)

Q16. Who undertakes the management and control of the affairs of the company on behalf of its owners?
a) The Board of Directors

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 b) Departmental Heads
c) Managing Directors
d) Vice President

Q17. Find out the liability of Divya, who is a shareholder in a company, holding 3000 shares of Rs. 10 each, if
she has already paid Rs. 6 per share.

a) Rs. 10,000
b) Rs. 1,20,000
c) Rs. 18,000
d) Rs. 12,000

Q18. Match the columns and choose the correct alternative:

(Column I) (Column II)

(A) Consumer‟s cooperative societies (i) It aims to fight against the big capitalists and enhance the
bargaining power of the small producers.
(B) Producer‟s cooperative societies (ii) Such societies provide loans to members out of the
amounts collected as capital and deposits from the members
and charges low rates of interest.
(C) Marketing cooperative societies (iii) It purchases goods in bulk directly from the wholesalers
and sells goods to the members, thereby eliminating the
middlemen.
(D) Credit cooperative societies (iv) It pools the output of individual members and performs
marketing functions like transportation, warehousing,
packaging, etc., to sell the output at the best possible price.

Select from the following options:

a) A-(iv); B-(i); C-(iii); D-(ii)

b) A-(i); B-(iii); C-(iv); D-(ii)
c) A-(iii); B-(i); C-(iv); D-(ii)
d) A-(i); B-(iii); C-(ii): D-(iv)

Q19. The main reason why the owners of many private limited companies convert into public limited
companies is because:

a) They do not want to remain in the private sector

b) They want to gain the benefits of limited liability
c) They want to keep the annual accounts secret
d) They want to raise additional capital to expand the business.

Q20. Which of the following statements about co-operative business organisations is true?

a) All co-operatives are only concerned with retailing.

b) Profits are shared equally amongst members.
c) They are owned by shareholders.
d) Workers have no say in decision-making.

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 TRUE/ FALSE. GIVE REASON

Q21. Every company must have Articles of Association.

Q22. Acts against the Memorandum of Association are ultra vires.

Q23. If a majority of its shareholders are dead, the company has to be wound up too.

Q24. It is necessary to get every company incorporated, whether private or public.

Q25. If two dacoits sign an agreement to operate together and share the loot, it is a partnership.

Q26. Cooperative societies are established with profit motive.

ASSERTION-REASONING

Read the following statements -Assertion(A) and Reason(R)

In the context of two statements, which of the following is correct.

(a) Assertion (A) and Reason (R) are correct but the Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is not the correct explanation of Assertion
(A)
(c) Assertion is true, but reason is false
(d) Assertion is false, Reason is true

Q27. Assertion-: In the eyes of the law, no distinction is made between the sole trader and his business.

Reason- Business does not have an identity separate from the owner. The owner is held responsible for all the
activities of the business.

Q28. Assertion- Joint Hindu family business does not require any agreement.
Reason- Membership is by birth.

Q29. Assertion- The partners of a firm have unlimited liability.

Reason- Individually, each partner can be held responsible repaying the debts of the business.

Q30. Assertion- A Company enjoys perpetual succession.

Reason- Members may come and go, but the company continues to exist.

Q31. Assertion - Sole proprietorship may lead to timely capitalization of market opportunities as and when
they arise.
Reason- A sole proprietor enjoys considerable degree of freedom in making business decisions. Further the
decision making is prompt because there is no need to consult others.

Q32. Assertion- A minor cannot be admitted into a partnership firm.

Reason- A minor is incompetent to enter into a valid contract with others.

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 Q33. Assertion- Promotion is the first stage in the formation of a company.
Reason- It involves conceiving a business idea and taking an initiative to form a company so that practical
shape can be given to exploiting the available business opportunity.

STATEMENT BASED QUESTIONS

Read the following statements –Statement I and Statement II

In the context of two statements, which of the following is correct?

a) Statement I is correct, and statement II is wrong.

b) Statement II is correct, and statement I is wrong.
c) Both the statements are correct.
d) Both the statements are incorrect.

Q34. Statement I- Appointment of underwriters is necessary by a public company.

Statement II- As per the SEBI guidelines, the limit of minimum subscription is 90% of the size of issue.

Q35. Statement I- A private company can raise funds after issuing prospectus.

Statement II- A private company should appoint minimum 3 directors.

Q36. Statement I- It is necessary to get every company incorporated, whether private or public.

Statement II- Statement in lieu of prospectus can be filed by a public company going for a public issue.

Q37. Statement I- If a company is registered on the basis of fictitious names, its incorporation is invalid.

Statement II- Articles of association is the main document of the company.

Q38. Statement I- Promoters of a company enjoy a fiduciary position with the company, which they must not
misuse.

Statement II- Promoters are not legally entitled to claim the expenses incurred in the promotion of the
company.

Q39. Statement I- A nominal partner is one who allows the use of his/her name by a firm, but does not
contribute capital.

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Statement II- A sleeping partner has limited liability.

Q40. Statement I- On the basis of liability, partnership is classified into general partnership and limited
partnership.

Statement II- Registration of cooperative society is not compulsory.

3-4 MARKERS

Q1. Radhika Priya opened a boutique along with four workers. No problem of any type was faced in opening a
boutique. At her boutique special dresses made for marriages and parties are sold. Despite, there being a lot of
competition in the market, the boutique was earning the profit. Since all the profit went into her pocket,
Radhika Priya was getting inspired to work with great efficiency. With the increase in the workload, the
number of workers was increased from 4 to 6 by her. All of them were happy since the business was running
successfully. Unfortunately, one day the boutique caught fire due to a short circuit. Consequently, Radhika
Priya had to suffer a heavy loss. The circumstances deteriorated so much that she had to dispose off her
personal properties to repay the boutique‟s debts. In order to revive the boutique, she approached a bank which
did not extend a long-term loan to her.

a) Identify the form of business organisation discussed in the above para.

b) Explain any three merits of the form of business organisation identified in (a) by quoting the lines from
the above para.
c) Also explain any two limitations of the form of business organisation identified in (a) by quoting the
lines from the above para.

HINT: Sole proprietorship- merits and demerits

Q2. Gopal Sharma and Balram Sharma are two brothers, who inherited some ancestral property. They decided
to form a Hindu Undivided Family (HUF) business consisting of four male members. Gopal Sharma is the
elder brother. So, he became „karta‟. The business took a loan of Rs. 20 lakhs from Punjab National Bank
having maturity period of 5 years. Due to poor financial position of the business, they were unable to repay the
loan. They sold the ancestral property for Rs. 10 lakhs and paid the same to bank. They could not pay the
balance amount of loan with interest. The bank filed a case for recovery of the balance amount. Gopal Sharma
pleaded the court that the loan was taken for the purpose of business, therefore, all the members of the business
were liable to repay the loan. The court held that all other members were responsible only to the extent of their
share in business and the business property was already sold. However, Gopal Sharma, being „Karta‟ would
have to repay the balance amount even by selling his personal properties. Gopal Sharma had to sell some of his
personal assets to repay the balance amount of bank loan.

a) Is the court‟s decision justified? Give reasons in support of your answer.

b) State any three other features of HUF Business.

HINT: Yes, it is justified as karta has unlimited limited while coparceners have limited liability.

Q3. A group of people in a locality of Delhi used to go for a walk in the morning. After the walk, they would
often sit together and discuss the subjects like Politics, Demonetisation, Elections, Market prices of different
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goods etc. There were about fifty persons in this group. One day, instead of other subjects, their focus of
discussion was „Market prices of different goods‟. During the discussion, the emphasis laid on the point was
that goods become very costly by the time they reach the consumers after getting transported from the
producers. Consequently, everyone‟s budget is getting disturbed. To get rid of this problem some people
suggested that they should join together to form a society. The society would sell the goods to all the members
as per their requirements after buying them in large quantities directly from the producers. This suggestion was
appreciated by all of them. They all became members of the society and encouraged other people also to
become its members. In no time, 100 members assembled and the society was formed. The idea of forming the
society immediately proved to be successfully. Now their budget became balanced. A special characteristic of
this society was that apart from its members, it also sold goods to the other people of the society at cheaper
rates. All of them were very happy with the formation of the society.

a) Identify and explain the type of the society formed by them?

i) Consumer‟s Cooperative Societies

ii) Producer‟s Cooperative Societies
iii) Marketing Cooperative Societies
iv) Credit Cooperative Societies

b) Under what Act, the society must have been formed?

i) The Companies Act, 2013

ii) The Partnership Act, 1932
iii) The Cooperative Societies Act, 1912
iv) None of these

c) What is the liability of the members of the society so formed?

i) Limited Liability
ii) Unlimited liability
iii) Several and Joint liability
iv) All of these

d) Which of the following is NOT a merit of the society so formed?

i) Ease of formation
ii) Stable existence
iii) Support from government
iv) Limited resources

Q4. A, B, C and D are partners in a firm with unlimited liability. But after 1991, A, B and C decided that they
did not want to bear unlimited risk. With the consent of D, they made amendments in the partnership deed and
changed their liability. Now, A, B and C are responsible for the losses only to the extent of the capital invested
by them.

On the basis of the given information, answer the following questions:

a) Name the two types of partnership formed before and after 1991.
b) State any three points of differences between them.

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 HINT: General and Limited partnership- difference between these two on the basis of meaning, act
governed, registration, liability

Q5. Good Looks Pvt. Ltd. was promoted in the year 2000 by a group of four friends. As business of the
company has grown considerably over the years, its management is now planning to convert it into a public
company and raise funds in next six months to finance its future expansion plans in health care business. On
the basis of the given information, state any four privileges that the company will have to forgo as a private
company after conversion.

HINT: Privileges- less number of members, no need to issue prospectus, allotment can be done without
minimum subscription, less number of directors, index of members not required.

Q6. The business assets of an organization amount to Rs70,000 but the debts that remain unpaid are
Rs1,00,000. What course of action can the creditors take if:

a) The organization is a sole proprietorship firm.

b) The organization is a partnership firm with Umang and Tamanna as partners, who share profits and
losses equally. Which of the two partners can the creditors approach for payment of debt? Explain
giving reasons.

Q7. A, B & C were partners in a financing firm. B&C had gone for a meeting in America for analyzing
business prospects in that country. In the meanwhile, A invested a huge amount of money in buying shares of a
new company by borrowing money from Mr. X. This turned out to be a bad deal as the share prices soon fell.
When B&C came back, they said they were not liable to pay to Mr. X as they did not take the money. Were
B&C right in doing so? Under which aspect of partnership are they bound?

Q8. Mohan and Radha want to start a shop to sell Rajasthani Sweets. They did not know how to develop the
agreement for this purpose. So, they approached a Chartered Accountant who advised them to prepare a
document which may stipulate the terms and conditions of the agreement.

On the basis of given information, answer the following questions:

a) Name the document about which the chartered accountant advised Mohan and Radha.
b) State any three important items they should be included in the agreement besides the name, nature and
place of business.

Q9. Shivi Ltd. invited general public to subscribe for its public issue of Rs10crore (10 lakh shares of Rs100
each) through issue of prospectus. However, the company received applications for Rs8 lakh shares. Can the
company proceed with allotment of shares? Give reasons in support of your answer.

HINT: No, minimum subscription of 90% not received.

Q10. Kumkum Ltd. was issued certificate of incorporation by the Registrar on 10th February 2018. However,
the date mentioned on the certificate was 1st February 2018. The company entered into a contract for purchase
of land with Ruchi Ltd. on 5th February 2018. Now Ruchi Ltd is not interested to sell the land as it is getting
higher price from another buyer. Can Kumkum Ltd. file a case against Ruchi Ltd.? Give reasons in support of
your answer.

5-6 MARKERS

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Q1. Sahara India Pariwar owns many companies. Sahara India Life Insurance Company Limited is the first
wholly Indian owned private life insurance company. It offers an exhaustive range of competitive plans that
cater to everyone from all segments along with prompt and quality customer services and support. Sahara
Asset Management Company Pvt. Ltd. is a professional mutual fund house which manages many mutual fund
schemes.

On the basis of the given information about Sahara India Pariwar, answer the following questions:

a) Sahara India Pariwar owns both public and private companies. How is a public company different from a
private company?
b) Give two similarities between company and cooperative society form of business organisations.

Q2. Indian Coffee House is a restaurant chain in India. It has strong presence across India with nearly 400
coffee houses. These are governed by managing committees elected by employees. These are completely
owned and managed by employees only. These have also received appreciation and support from Government
and public. The voting rights in these are neither tied to investment nor patronage.

On the basis of the given information about Indian Coffee House, answer the following questions:

a) Which form of business organisation is highlighted in the above case?

b) Discuss any two merits and demerits of the business organisation identified above.
c) Name any two types of business organisation identified in part (a) above?

HINT: Cooperative societies- Merits, demerits and types

Q3. Dev runs a successful Transport Company in Bengaluru. Private commuters, tourists and business clients
are among his customers. Dev has a daily bus service between Bengaluru and Mysore for some years, which
has proved to be the most popular service provided by his business to commuters. He is currently operating as
a sole proprietor. However, he is considering the option of entering into a partnership with his friend Natasha,
who is physically challenged. Natasha is very good in managing company‟s accounts but is unable to find a
job.

On the basis of the given information, answer the following questions:

a) State two disadvantages of the form of business organisation which Dev is currently undertaking.
b) State any three merits of the form of business in which Dev is planning to enter with his friend,
Natasha.
c) Identify the values communicated by Dev to the society by forming partnership with his physically
challenged friend. (any two)

HINT: a) disadvantages of sole proprietorship; b) Merits of Partnership

Q4. Sushant is running a general store in a small shop in a premium location. The shop next door is on sale.
His friend advises him to buy the shop but Sushant does not have the necessary capital. His friend offers him
the money but Sushant is not in a position to take a loan of such a large amount. So his friend makes a proposal
where he offers to become a part owner of the business. He also suggests that they should have a written
understanding wherein the role of both the owners is clearly spelled out and there is no confusion later on.
After a lot of contemplation Sushant refuses to accept his friend‟s offer.

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On the basis of the given information, answer the following questions:

a) What does “written understanding” refer to? Explain.

b) Why do you think Sushant refuses his friend‟s offer? Explain four reasons

Q5. Rahul and Sanchali felt that there was an opportunity of business in providing a service of
online grocery stores for working people. They analyzed the idea in terms of technical, financial
and economic liability. Once they found all the aspects satisfactory, they decided to start a
company called 'convenience @ home' private Ltd. They got the name registered with the
registrar.
a) Which steps of formation of company are being referred to here?
b) Also write the next 3 steps associated with it.
HINT: Stage of Promotion and its steps

Q6. Aditya is promoting a company. Before the company is formed, he enters into a contract
with DLF for purchase of land and also agreed to pay 10 crores within a period of 2 months. The
company was formed within 1 month. On the basis of the facts, answer the following
a) Which type of contract is entered by Aditya? Explain.
b) Is the contract legally binding on the company? Give reason.
c) Can DLF Ltd. hold Aditya liable for the payment money?
d) What can the company do to prevent Aditya from such a situation? Discuss.

Q7. The two friends, Soniya and Raman started a business by the name of „Fancy Dress Shop‟.
Both of them invested equal capital in the business. At the start of the business, Soniya had placed one
condition before Raman that if unfortunately, they suffered a heavy loss in their business, she would not be
able to give anything except the capital invested in the business.
Raman had accepted this condition on the terms and conditions that Soniya would not enjoy the
right to participate in the management of the firm. Their business was gradually growing well
and they were fully satisfied with their business.
a) To what form of business organisation is concerned the above para? Discuss.
b) Identify and explain any four features of the type of the form of organisation identified in a) part.

Q8. You are a business consultant Mr. Madanpal has recently retired from government
service. He is 60 years old and he wants to set up a factory to manufacture plastic goods. He
has come to consult you so that you may suggest to him the most suitable form of business
organisation. The following are his main expectations from the business organisation:
a) Ease in formation
b) Flexibility in operations
c) Sharing of profits with limited persons
d) Sufficient persons to look after various business activities
Which form of business organisation will you suggest to Mr. Madanpal? Give reasons in support of your
answer.

Q9. Miss Jyoti, Rishi and Vijay are running a firm in partnership. The main objective of their firm is to make
high-quality wheat available to the public at a cheap rate. A special characteristic of this firm is that the
liability of all the partners is unlimited.
The second special characteristic of the firm is that Miss Jyoti has a capital investment in the company. She
gets the share in profit and loss as well as remains active in management. But the outsiders are not aware of her
being a partner.

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Mr. Rishi spends more time than the other partners in business. This is the very reason that he gets ₹ 1 lakh
extra on account of his salary per month.
Vijay introduced capital in the business but does not take part in the management of the company. The
business of the firm is growing fast. With the increase in the size of the business, the number of partners is also
increasing. By now, its number has reached 20.

a) Identify the type of partnership highlighted in the given case:

i) General partnership
ii) Limited partnership
iii) Partnership at will
iv) Particular partnership

b) Which of the following types of partners is Miss Jyoti?

i) Active partner
ii) Sleeping partner
iii) Secret partner
iv) Nominal partner

c) Identify the agreement on the basis of which Rishi gets his salary:
i) Partnership deed
ii) Memorandum of association
iii) Both (i) and (ii)
iv) None of the above

d) Which of the following type of partner is Vijay?

i) Active Partner
ii) Sleeping Partner
iii) Secret Partner
iv) Partner by Estoppel

e) Which of the following types of partners is Mr. Rishi?

i) Active Partner
ii) Sleeping Partner
iii) Secret Partner
iv) Nominal partner

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