ISC Commerce Previous Year Question Paper 2013 Solved for Class 12
- Candidates are allowed additional 15 minutes for only reading the paper. They must NOT start
writing during this time.
- Answer Question 1 from Part I and seven questions from Part II.
- The intended marks for questions are given in brackets [ ].
Part – I (30 Marks)
Answ er briefly each of the questions (i) to (xv): [15 × 2]
(i) Define a Public Limited Company.
(ii) What is meant by Discounting of a Bill?
(iii) Give two disadvantages of written communication.
(iv) Define the term market.
(v) Give the significance of Association Clause of the Memorandum of Association.
(vi) Give any two factors that influence the price determination of a product.
(vii) What is meant by Cumulative Preference Shares?
(viii) Explain Joint Ventrue in relation to multinational corporations.
(ix) State any two differences between savings deposit and fixed deposit.
(x) Mention the steps involved in the organising function of management.
(xi) State any two features of ‘labelling’ in relation to marketing.
(xii) What is Certificate of Commencement?
(xiii) What is Economic and Non-economic environment of business?
(xiii) Expand the terms:
(b) EXIM Bank
(xiv) Explain management as a group.
(i) Out of syllabus
(ii) While discounting a bill, the Bank buys the bill (i.e. Bill of Exchange or Promissory Note) before it is due and credits the value of the bill after a discount charge to the customer’s account. The transaction is practically an advance against the security of the bill and the discount represents the interest on the advance from the date of purchase of the bill until it is due for payment.
(iii) Out of Syllabus
(iv) A market is any place where the sellers of a particular good or service can meet with the buyers of that goods and service where there is a potential for a transaction to take place. The buyers must have something they can offer in exchange for there to be a potential transaction.
(v) Out of syllabus
(vi) Factors determining the price of a product are:
While fixing the prices of a product, the firm should consider the cost involved in producing the product. This cost includes both the variable and fixed costs. Thus, while fixing the prices, the firm must be able to recover both the variable and fixed costs.
While fixing the price of the product, the firm needs to study the degree of competition in the market. If there is high competition, the prices may be kept low to effectively face the competition, and if competition is low, the prices may be kept high.
(vii) Cumulative preference shares are those preference shares which earn the right to receive arrears of dividend before a dividend is paid to the equity shareholders.
For example, a company has 10,000. 8% of preference shares of ₹ 100 each and dividend for the years 20013-2014 which has not been paid up.
Now the company has earned sufficient profits in 2015. Now the company shall pay ₹ 2,40,000 as a dividend for three years to the preference shareholders.
(viii) Out of syllabus
(ix) Out of Syllabus
(x) Steps in organization function of management:
Identification and classification of required activities
Grouping of activities necessary for the attainment of objectives
Assigning each group to a manager with the authority (delegation) necessary to supervise it. The provision for coordination horizontally (on the same organizational level) and vertically (in various division and departments)
(xi) (a) Labelling gives definiteness to the product and therefore identification of a product is easy.
(b) It stresses the standard and other special features of the product which are advertised.
(c) It enables to give clear instructions to the consumer as to the proper use of a product.
(xii) Out of syllabus
(xiii) The economic environment of business has reference to the broad characteristics of the economic system in which the business firm operates. The economic environment of the country includes economic system, macroeconomic parameters, and stages of the business cycle, financial system and economic policies of the government.
The non-economic environment includes political system, government policies, legal framework social system, cultural values, demographic factors, technological development and natural environment of the country.
The non-economic environment exercises a strong influence on the business. Normally the non-economic environmental factors are the key factors for all kinds of business activities in India.
(xiv) Out of Syllabus
(xv) Management as a group refers to all those persons who perform the task of managing an enterprise. As a group, management will include all managers from the chief executive to the first-line managers (lower-level managers). But in common practice management includes only top management i.e. Chief Executive, Chairman, General Manager, Board of Directors etc. In other words, those who are concerned with making important decisions, these persons enjoy the authorities to use resources to accomplish organizational objectives & also a responsibility for their efficient utilization.
Part – II (70 Marks)
(Answer Any Seven Questions)
(a) Explain any four advantages that host countries derive from multinational corporations. 
(b) Discuss any six privileges enjoyed by a Private Limited company. 
(a) Out of Syllabus
(b) Out of Syllabus
(a) Why should business assume social responsibilities ? Give any four reasons in support of your answer. 
(b) Discuss any six responsibilities of a business concern towards the consumers. 
(a) Out of Syllabus
(b) Out of Syllabus
(a) Distinguish between bonus shares and right-shares. [4|
(b) Define debentures. Describe any four types of debentures. 
|Bonus Shares||Right Shares|
|1. Bonus shares are issued free of cost to the existing shareholders in proportion to their holdings.||1. These shares are issued at a price.|
|2. These shares are fully paid.||2. These shares may be partly paid also.|
|3. Bonus issues are generally issued by profit-making companies by capitalizing the free reserves.||3. These are issued at a price. The price offered are usually discounted from the trading price, that is the benefit to existing shareholders.|
|4. A shareholder cannot renounce the offer.||4. A shareholder may renounce all or a part of the offer.|
(b) A debenture is a medium or long term debt format that large companies use to borrow money. It is normally a loan that should be repaid on a specific date, but some debentures are irredeemable securities (sometimes referred to as perpetual debentures).
The majority of debentures come with a fixed interest rate. This interest must be paid before dividends are paid to shareholders.
Types of Debentures:
Redeemable Debentures: Redeemable debentures earn, a specific date of redemption on the certificate. The company is legally bound to repay the principal amount to the debenture holders on that date.
Irredeemable (Perpetual) Debentures
On the other hand, irredeemable debentures, also known as perpetual debentures, do not cam any date of redemption. This means that there is no specific time of redemption of these debentures. They are redeemed either on the liquidation of the company or when the company chooses to pay them off to reduce their liability by issues a due notice to the debenture holders beforehand.
Convertible Debentures: Convertible debenture holders have an option of converting their holdings into equity shares. The rate of conversion and the period after which the conversion will take effect are declared in the terms and conditions of the agreement of debentures at the time of issue.
Non Convertible Debentures: Non-convertible debentures are simple debentures with no such option of getting converted into equity. Their state will always remain of debt and will not become equity at any point in time.
Briefly discuss any five principles of management as formulated by Fayol. 
Fayol believed that all employees of his company, from the foremen to the CEO, should receive some type of managerial training. He developed a list of principles of management. He believed that there were more than fourteen of them, but chose to focus on those he found to be the most useful in his own career.
The fourteen principles that Fayol concentrated on were:
(i) Division of Work: Work should be divided among individuals and groups to ensure that effort and attention are focused on special portions of the task. Fayol presented work specialization as the best way to use the human resources of the organization.
(ii) Authority: The concepts of Authority and responsibility are closely related. Authority was defined by Fayol as the right to give orders and the power to exact obedience. Responsibility involves being accountable and is therefore naturally associated with authority. Whoever assumes authority also assumes responsibility.
(iii) Discipline: A successful organization requires the common effort of workers. Penalties should be applied judiciously to encourage this common effort.
(iv) Unity of Command: Workers should receive orders from only one manager.
(v) Unit of Direction: The entire organization should be moving towards a common objective in a common direction.
(a) Discuss any four advantages of using e.mails as a device of business communication. 
(b) Distinguish between informal communication and formal communication. 
(a) Out of Syllabus
(b) Out of Syllabus
(a) Describe any four objectives of advertisement. 
(b) What is the marketing mix? Explain the elements of the marketing mix. 
(a) Out of Syllabus
(b) The marketing mix refers to the set of actions, or tactics, that a company uses to promote its brand or product in the market. The 4Ps make up a typical marketing mix – Price, Product, Promotion and Place.
Price refers to the value that is put for a product. It depends on costs of production, segment targeted, the ability of the market to pay, supply-demand and a host of other direct and indirect factors. There can be several types of pricing strategies, each tied in with an overall business plan. Pricing can also be used as a demarcation, to differentiate and enhance the image of a product.
Product refers to the item actually being sold. The product must deliver a minimum level of performance; otherwise, even the best work on the other elements of the marketing mix won’t do any good.
Place refers to the point of sale. In every industry, catching the eye of the consumer and making it easy for her to buy it is the main aim of a good distribution or ‘place’ strategy. Retailers pay a premium for the right location. In fact, the mantra of a successful retail business is location, location, location’.
Promotion refers to all the activities undertaken to make the product or service known to the user and trade. This can include advertising, word of mouth, press reports, incentives, commissions and awards to the trade. It can also include consumer schemes, direct marketing, contests and prizes.
(a) Explain any four advantages of borrowing funds from financial institutions. 
(b) Explain any six advantages of investing in mutual funds. 
Advantages of Borrowing Funds from Finacial Institutions
Immediate Infusion of Cash
The main benefit of borrowing money from a financial institution is the ability to obtain a large amount of money quickly. This money can be used for necessary purchases and investments, including investments in your own education. Financial institutions can lend more money than most friends and family members can.
Interest Rates: Financial institutions attach interest rates to the principal amount borrowed. An interest rate can either be positive or negative. Borrowers with good credit can attain a loan with a lower interest rate. This, in turn, makes the loan less expensive in the long run. Borrowers with poor credit scores can likely only attain a loan at higher interest rates. This can make borrowing money an expensive decision and possibly unattractive as a financial option. Interest rates also fluctuate. As such, borrowers should watch interest rates to borrow when rates are low. A strong credit score and favourable market interest rates produce a favourable borrowing environment.
Collateral: Collateral is a legal interest, otherwise known as a lien, that a financial institution places on an asset in case you default on your loan. A common form of this interest is the home mortgage. Collateral removes the risks a financial institution takes on when lending out large sums of money (a house mortgage or car loan, for example). Upon default, the financial institution takes control of the asset and sells it for a profit to cover any losses. This secures the institution against losses and creates the freedom to lend out larger amounts. Loans backed by collateral, also known as secured loans, offer lower interest rates but present the clear danger of losing your property.
Traditional Banks and Credit Unions: Traditional banks and credit unions offer different benefits to borrowers. Traditional banks offer services to all potential customers. Even though anyone can potentially use the financial services of traditional banks, these financial institutions often offer loans ai high-interest rates.
Credit unions, on the other hand, are open to specific groups of people, usually people who live in a specific geographical location or those who belong to certain professions. These financial institutions often offer their members lower interest rates, but. unlike a bank, not everyone can become a customer.
(b) Out of syllabus.
(a) What is the significance of the Articles of Association for a Join Stock Company? Give any three contents of the Articles of Association.
(b) Explain any six qualities of a good salesman.
(a) Out of Syllabus
(b) Out of syllabus.
Write short notes on:
(a) Audio-visual media of advertisement. 
(b) Ploughing back of profits 
(c) Technological environment of a business concern. 
(a) Out of syllabus
(b) Ploughing back of profits is an important source of internal financing by a company. It refers to the process of retaining a part of the company’s net profits for the purpose of reinvesting in the business itself. In other words, the savings generated internally by a company in the form of ‘retained earnings’ are ploughed back into the company for diversification of its business. This reduces their dependence on funds from external sources in order to finance their regular business needs. Such a source of finance may be used by the company for the following purposes:
- For expansion and growth of the business
- For strengthening the financial position of the company
- For meeting various working capital requirements of the company
- For redemption of old debts
- For replacement of obsolete assets and modernization.
(c) Technology has revolutionized the way companies conduct business. Small businesses can implement business technology and level the playing field with larger organizations. Small businesses use computers, servers, websites and personal digital products to develop competitive advantages in the economic marketplace. Small business owners should consider implementing technology in their planning process. This allows owners to create operations using the best technology’ available.