Category: Class 11

Students can download 11th Economics Chapter 2 Consumption Analysis Questions and Answers, Notes, Samcheer Kalvi 11th Economics Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus, helps students complete homework assignments and to score high marks in board exams.

Tamilnadu Samacheer Kalvi 11th Economics Solutions Chapter 2 Consumption Analysis

Samacheer Kalvi 11th Economics Consumption Analysis Text Book Back Questions and Answers

Part – A

Multiple Choice Questions:

Question 1.
Pick the odd one out …………………….
(a) Luxuries
(b) Comforts
(c) Necessaries
(d) Agricultural goods
Answer:
(d) Agricultural goods

Question 2.
The choice is always constrained or limited by the ________ of our resources.
(a) Scarcity
(b) Supply
(c) Demand
(d) Abundance
Answer:
(a) Scarcity

Question 3.
The chief exponent of the Cardinal utility approach was ……………………..
(a) JR Hicks
(b) R G D Allen
(c) Marshall
(d) Stigler
Answer:
(c) Marshall

Question 4.
Marginal Utility is measured by using the formula of
(a) TU_n -TU_n-1
(b) TU_n-TU_n+1
(c) TU_n+TU_n+1
(d) TU_n-TU_n+1
Answer:
(a) TU_n -TU_n-1

Question 5.
When marginal utility reaches zero, the total utility will be …………………..
(a) Minimum
(b) Maximum
(c) Zero
(d) Negative
Answer:
(b) Maximum

Question 6.
Gossen’s first law is known as.
(a) Law of Equi-marginal utility.
(b) Law of diminishing marginal utility
(c) Law of demand.
(d) Law of Diminishing returns.
Answer:
(b) Law of diminishing marginal utility

Question 7.
The basis for the law of demand is related to ……………………..
(a) Law of diminishing marginal utility
(b) Law of supply
(c) Law of equi-marginal utility
(d) Gossen’s Law
Answer:
(a) Law of diminishing marginal utility

Question 8.
The concept of consumer’s surplus is associated with
(a) Adam Smith
(b) Marshall
(c) Robbins
(d) Ricardo
Answer:
(b) Marshall

Question 9.
Given potential price is Rs.250 and the actual price is Rs.200. Find the consumer surplus ……………………….
(a) 375
(b) 175
(c) 200
(d) 50
Answer:
(d) 50

Question 10.
Indifference curve approach is based on
(a) Ordinal approach
(b) Cardinal approach
(c) Subjective approach
(d) Psychological approach
Answer:
(a) Ordinal approach

Question 11.
The concept of elasticity of demand was introduced by …………………….
(a) Ferguson
(b) Keynes
(c) Adam Smith
(d) Marshall
Answer:
(d) Marshall

Question 12.
Increase in demand is caused by
(a) Increase in tax
(b) Higher subsidy
(c) Increase in interest rate
(d) decline in population
Answer:
(b) Higher subsidy

Question 13.
The movement on or along the given demand curve is known as ………………………..
(a) Extension and contraction of demand
(b) Shifts in the demand
(c) Increase and decrease in demand
(d) All the above
Answer:
(a) Extension and contraction of demand

Question 14.
In case of relatively more elastic demand, the shape of the curve is
(a) Horizontal
(b) Vertical
(c) Steeper
(d) Flatter
Answer:
(d) Flatter

Question 15.
A consumer is in equilibrium when marginal utilities from two goods are …………………….
(a) Minimum
(b) Inverse
(c) Equal
(d) Increasing
Answer:
(c) Equal

Question 16.
Indifference curve was first introduced by
(a) Hicks
(b) Allen
(c) Keynes
(d) Edgeworth
Answer:
(d) Edgeworth

Question 17.
Elasticity of demand is equal to one indicates ………………………
(a) Unitary Elastic Demand
(b) Perfectly Elastic Demand
(c) Perfectly Inelastic Demand
(d) Relatively Elastic Demand
Answer:
(a) Unitary Elastic Demand

Question 18.
The locus of the points which gives the same level of satisfaction is associated with
(a) Indifference Curves
(b) Cardinal Analysis
(c) Law of Demand
(d) Law of Supply
Answer:
(a) Indifference Curves

Question 19.
Ordinal utility can be measured by …………………………
(a) Ranking
(b) Numbering
(c) Wording
(d) None of these
Answer:
(a) Ranking

Question 20.
The indifference curve is
(a) Vertical
(b) Horizontal
(c) Positive sloped
(d) Negatively sloped
Answer:
(d) Negatively sloped

PART – B

Answer the following in one or two sentences.

Question 21.
Define Utility?
Answer:
The utility is the capacity of a commodity to satisfy human wants.

Question 22.
Mention the classification of wants?
Answer:
Wants are broadly classified into three categories

1. Necessaries: Goods which are indispensable for human beings to exist in the world are called “Necessaries”. For example, food, clothing, and shelter.
2. Comforts: Goods which are not indispensable for life but to make our life easy, convenient and comfortable are called “Comforts”. Ex: TV, Fan, Refrigerator and Air conditioner.
3. Luxuries: Goods which are not very essential but are very costly are known as “Luxuries”. Ex: Jewellery, Diamonds, and ars. However, for people with higher income, they may look necessaries or comforts.

Question 23.
Name the basic approaches to consumer behavior.
Answer:
There are two basic approaches, namely:
1. Utility approach

• The utility approach involves the use of measurable (cardinal) utility to study consumer behaviour.
• Marshall is the chief exponent of the utility approach to the theory of demand. It is known as cardinal utility analysis or Marginal utility analysis or Marshallian utility analysis.

2. Indifference curve approach

• The indifference curve approach was the idea of comparable utility [ordinal utility] J.R. Hicks and R.G.D. Allen introduced the indifference curve approach.

Question 24.
What are the degrees of price elasticity of demand?
Answer:
1. The price elasticity of demand, commonly known as the elasticity of demand refers to the responsiveness and sensitiveness of demand for a product to the changes in its price. In other words, the price elasticity of demand is equal to
E_P =
Numerically, E_P = \(\frac { \Delta Q }{ \Delta P } \) × \(\frac{P}{Q}\)
where, ∆Q = Q₁ – Q₀, ∆P = P₁ – P₀
Q₁ = New quantity, P₁ = New price
Q₀ = Original quantity, P₀ = Original price

Question 25.
State the meaning of indifference curves.
Answer:

1. The Consumer is rational and his aim is to derive maximum satisfaction.
2. The utility cannot be cardinally measured but can be ranked or compared or ordered by an ordinal number such as I, II, III, and so on.
3. The indifference curve approach is based on the concept “Diminishing Marginal Rate of Substitution”.
4. The consumer is consistent. This assumption is called the assumption of transitivity.

Question 26.
Write the formula of consumer surplus?
Answer:
Consumer’s Surplus = Total utility
[Actual price × Units of commodity]
– TU – [P × Q]
= 20 – [2 × 5] = 20 – 10 = 10
Total utility = 20
Actual price = 2
Quantity = 5

Question 27.
What are Giffen goods? Why it is called that?
Answer:
Giffen Paradox: The Giffen good or inferior good is an exception to the law of demand. When the price of inferior goods, falls, the poor will buy less and vice versa.

Part – C

Answer the following questions in one paragraph.

Question 28.
Describe the feature of human wants?
Answer:
In ordinary language desire and want mean the same thing. But in economics, they have different meanings. Wants are the basis for human behaviour to buy and consume goods.

Characteristics of Human Wants:

• Wants are unlimited: Human wants are countless in number and various in kinds. When one wants is satisfied another wants to crop up. Human wants to multiply with the growth of civilization and development.
• Wants become habits: Wants become habits; for example, when a man starts reading the newspaper in the morning, it becomes a habit. The same is the case with drinking tea or chewing pans.
• Wants are Satiable: Though we cannot satisfy all our wants, at the same time we can satisfy particular wants at a given time. When one feels hungry, he takes food and that want is satisfied.
• Wants are Alternative: There are alternative ways to satisfy a particular want eg. Idly, dosa or chappati.
• Wants are Competitive: All our wants are not equally important. So, there is competition among wants. Hence, we have to choose more urgent wants than less urgent wants.
• Wants are Complementary: Sometimes, the satisfaction of a particular want requires the use of more than one commodity. Example: Car and Petrol, Ink and Pen.
• Wants are Recurring: Some wants occur again and again. For example, if we feel hungry, we take food and satisfy our wants. But after some time, we again feel hungry and want food.

Question 29.
Mention the relationship between marginal utility and total utility?
Answer:

Marginal utility	Total utility
1. Marginal utility goes on diminishing.	1. Total utility goes on Increasing.
2. Marginal utility becomes zero.	2. Total utility maximum.
3. Marginal utility becomes negative.	3. Total utility diminishes.

Question 30.
Explain the concept of consumer’s equilibrium with a diagram?
Answer:
Consumer Equilibrium: The consumer reaches equilibrium at the point where the budget line is tangent on the indifference curve.

‘T’ is the point of equilibrium as budget line AB is tangent on indifference curve IC₃ the uppermost IC which implies the maximum possible level of satisfaction.
At equilibrium point, the slope of IC refers to MRS_xy and the slope of BL (Budget Line) refers to the ratio of the price of x to the price of y.
i.e., \(\frac { P_{ x } }{ P_{ y } } \), Therefore MRS_xy = \(\frac { P_{ x } }{ P_{ y } } \)

Question 31.
Explain the theory of “consumer’s surplus”
Answer:
Alfred Marshall defines consumer’s surplus as “the excess of price which a person would be willing to pay a thing rather than go without the thing, over that which he actually does pay is the economic measure of this surplus satisfaction. This may be called consumer’s surplus”.

Question 32.
Distinguish between extension and contraction of demand?
Answer:

1. The changes in the quantity demanded a commodity due to the change in its price alone are called “ Extension and Contraction of demand”.
2. Buying more at a lower price and less at a higher price is known as “ Extension and Contraction of Demand”.

Question 33.
What are the properties of indifference curves?
Answer:
Indifference curves are subjective and unique to each person. Nevertheless, they have in common the following properties:

1. Indifference curve must have negative slope:
An indifference curve has a negative slope, which denotes that if the quantity of a commodity (y) decreases, the quantity of the other (x) must increase if the consumer is to stay on the same level of satisfaction.

2. Indifference curves are convex to the origin:
Indifference curves are not only negatively sloped but are also convex to the origin. The convexity of the indifference curves implies that not only two commodities are substitutes for each other but also the fact that the marginal rate of substitution (MRS) between the goods decreases as a consumer moves along an indifference curve.

3. Indifference curve cannot intersect:
IC₁ is a lower indifference curve denoting lesser satisfaction. Combination C and B Fallon IC₁.
IC₂ is the upper indifference curve denoting higher satisfaction. C and A combinations are on IC₂

At the point of intersection, C = B on IC₁ and C = A on IC₂. So A = B whereas, A is in upper IC and B is on lower IC.
This is not possible.

4. Indifference curves do not touch the horizontal or vertical axis.
If they touch the axis, it violates the basic assumption that the consumer purchases two commodities in a combination.

Question 34.
Briefly explain the concept of consumer’s equilibrium?
Answer:
Consumer’s equilibrium refers to a situation under which a consumer spends his entire income on the purchase of goods, in such a manner that it gives him maximum satisfaction.
The consumer reaches equilibrium at the point where the budget line is tangent on the indifference curve.
T is the point of Equilibrium as budget line AB is tangent on indifference curve IC₃, the upper IC implies a maximum level of satisfaction.

Part – D

Answer the following questions in about a page.

Question 35.
Explain the law of demand and its exceptions?
Answer:
Definitions:
The Law of Demand says as “the quantity demanded increases with a fall in price and diminishes with a rise in price”. – Marshall
“The Law of Demand states that people will buy more at lower price and buy less at higher prices, other things remaining the same”. – Samuelson Assumptions of Law of Demand:

1. The income of the consumer remains constant.
2. The taste, habit and preference of the consumer remain the same.
3. The prices of other related goods should not change.
4. There should be no substitutes for the commodity in the study.
5. The demand for the commodity must be continuous.
6. There should not be any change in the quality of the commodity’.

Given these assumptions, the law of demand operates. If there is change even in one of these assumptions, the law will not operate.

Explanation:
The law of demand explains the relationship between the price of a commodity and the quantity demanded of it. This law states that the quantity demanded of a commodity expands with a fall in price and contracts with a rise in price. In other words, a rise in the price of a commodity is followed by a contraction demand, and a fall in price is followed by an extension in demand. Therefore, the law of demand states that there is an inverse relationship between the price and the quantity demanded of a commodity.

Exceptions to the law of demand:
Normally, the demand curve slopes downwards from left to right. But there are some unusual demand curves which do not obey the law and the reverse occurs. A fall in price brings about a contraction of demand and a rise in price results in an extension of demand. Therefore the demand curve slopes upwards from left to right. It is known as the exceptional demand curve.

In the above diagram, DD is the demand curve which slopes upwards from left to right. It shows that when the price is OP₁ OQ₁, is the demand and when the price rises to OP₂, demand also extends to OQ₂.

Question 36.
Elucidate the law of diminishing marginal utility with a diagram?
Answer:
Introduction:
H.H.Gossen, an Austrian Economist was the first to formulate this law in Economics in 1854. Therefore Jevons called this law “ Gossen’s First Law of Consumption”. But credit goes to
Marshall, because he perfected this law on the basis of Cardinal Analysis. This law is based on the characteristics of human wants, i.e. wants are satiable.

Definition:
Marshall states the law as “ the additional benefit which a person derives from a given increase of his stock of a thing, diminishes with every increase in the stock that he already has”.

Assumptions:

1. The utility can be measured by cardinal numbers such as 1, 2, 3, and so on.
2. The marginal utility of money of the consumer remains constant.
3. The consumer should be a rational consumer and his aim is to attain maximum satisfaction .with minimum expenditure.
4. The units of the commodity consumed must be reasonable in size.
5. The commodity consumed should be homogeneous or uniform in character like weight, quality, taste, colour etc.
6. The consumption of goods must take place continuously at a given period of time.
7. There should be no change in the taste, habits preferences, fashions, income, and character of the consumer during the process of consumption.

Explanation:
The Law of Diminishing Marginal utility states that if a consumer continues to consume more and more units of the same commodity, its marginal utility diminishes. This means that the more we have of a thing, the less is the satisfaction or utility that we derive from the additional unit of it.

The Law of Diminishing Marginal utility:

1. In this table, we find that the total utility goes on increasing but at a diminishing rate.
2. The law can be explained with a simple illustration.
3. The consumer wants to consume 7 apples one after another.
4. The utility from the first apple is 20.
5. But the utility from the second apple will be less than that of the first [say 15].
6. The third less than that of the second [say 10] and so on.
7. Finally, the utility from the fifth apple becomes zero, and the utilities from the sixth and seventh apples are negative for disutility or disliking.
8. This tendency is called the “ The Law of Diminishing Marginal Utility”.
9. In this table we find on the other hand, marginal utility goes on diminishing.
10. When marginal utility becomes zero, the total utility is maximum and when marginal utility becomes negative, the total utility diminishes.

The X-axis represents the number of apples consumed
Y-axis represents total utility and marginal utility
TU – represents total utility
MU – represents marginal utility

Criticisms:

1. The utility cannot be measured numerically, because the utility is subjective.
2. This law is based on unrealistic assumptions.
3. This law is not applicable to indivisible commodities.

Question 37.
Explain the law of Equi – marginal utility?
Answer:
The law of the Equi-marginal utility:

1. The law of diminishing marginal utility is applicable only to the want of a single commodity.
2. The law of equity – marginal utility explains the behavior of a consumer when he consumes more than one commodity.
3. Wants are unlimited but the income which is available is limited.
4. This law explains how the consumer spends his limited income on various commodities to get maximum satisfaction.
5. Law of Equi-Marginal Utility is also known as “The Law of Substitution” (or) “The Law of Consumer’s Equilibrium ” (or) “Gossen’s Second Law” and “ The Law of Maximum Satisfaction”.

Definition:
Marshall states the law as,“ If a person has a thing which he can put to several uses, he will distribute it among these uses in such a way that it has the same marginal utility in all. For, if it had a greater marginal utility in one use than another he would gain by taking away some of it from the second use and applying it to first”.

Assumptions:

1. The consumer is rational in the sense that he wants to get maximum satisfaction.
2. The utility of each commodity is measurable in cardinal numbers.
3. The marginal utility of money remains constant.
4. The income of the consumer is given.
5. There is perfect competition in the market.
6. The prices of the commodities are given.
7. The law of diminishing marginal utility operates.

Illustration:
This Law can be illustrated with the help of a table. Let us assume that the consumer has a given income of ₹11. He wants to spend this entire income [i.e. ₹11 ] on Apple and Orange. The price of an Apple and the price of an Orange is each.

The law of the Equi – Marginal Utility

If the consumer wants to attain maximum utility, he should buy 6 units of apples and 5 units of oranges, so that she can get [92 + 58] = 150 units. No other combination of Apple and Orange can give higher than 150 utilities. \(\frac{MUA}{PA}\) = \(\frac{MUD}{PO}\) i.e; \(\frac{4}{1}\) = \(\frac{4}{1}\)

Here,

Diagrammatic Illustration:

1. In the diagram, X-axis represents the amount of money spent and Y-axis represents the marginal utilities of Apple and Orange respectively.
2. If the consumer spends ₹6 on Apple and ₹5 on Orange, the marginal utilities of both are equal, i.e. AA₁ = BB₁ [4 = 4], Hence, he gets maximum utility.

Criticisms:

1.  In practice, the utility cannot be measured, only be felt.
2. This law cannot be applied to durable goods.

Question 38.
What are the methods of measuring the Elasticity of demand?
Answer:
There are three methods of measuring the price elasticity of demand.

1. The Percentage method: e_p = \(\frac{∆Q}{∆P}\) × \(\frac{P}{Q}\)
It is also known as ratio method, when we measure the ratio as:
e_p = \(\frac { %\Delta Q }{ %\Delta P } \) where,
% ∆Q = Percentage change in demand
% ∆P = Percentage change in price

2. Total Outlay Method:
Marshall suggested that the simplest way to decide whether demand is elastic or inelastic is to examine the change in total outlay of the consumer or total revenue of the firm. Total Revenue = (Price × Quantity Sold)
TR = ( P × Q)

Where there is an inverse relation between Price and Total Outlay, demand is elastic. Direct relation means inelastic. Elasticity is unity when Total Outlay is constant.

3. Point or Geometrical Elasticity:
When the demand curve is a straight line, it is said to be linear. Graphically, the point elasticity of a linear demand curve is shown by the ratio of the segments of the line to the right and to the left of the particular point. Where ‘e’ stands for point elasticity, ‘L’ stands for the lower segment, and ‘U’ for the upper segment.

Point Elasticity =

e_p = L/U

Where ‘e_p’ stands for point elasticity, ‘L’ stands for the lower segment, and ‘U’ for the upper segment.

Samacheer Kalvi 11th Economics Consumption Analysis Additional Important Questions and Answers

PART – A

Multiple Choice Questions:

Question 1.
_________ is the beginning of Economic Science.
(a) Production
(b) Consumption
(c) Exchange
(d) Distribution
Answer:
(b) Consumption

Question 2.
Single commodity consumption mode is ………………………
(a) Production possibility curve
(b) Law of Equi – marginal utility
(c) Law of supply
(d) Law of diminishing marginal utility
Answer:
(d) Law of diminishing marginal utility

Question 3.
If total utility is maximum, then marginal utility is _________.
(a) Negative
(b) Zero
(c) Positive
(d) Maximum
Answer:
(b) Zero

Question 4.
An indifference curve is ……………………. to the origin.
(a) Convex
(b) Concave
(c) Narrow
(d) Cardinal
Answer:
(a) Convex

Question 5.
‘Diamond – Water paradox’ was given by
(a) Marshall
(b) Robbins
(c) Adam Smith
(d) Samuelson
Answer:
(c) Adam Smith

Question 6.
Human wants to have the capacity to get satisfied only ……………………..
(a) Permanent
(b) Substitute
(c) Satisfaction
(d) Temporarily
Answer:
(d) Temporarily

Question 7.
The exceptional demand curve _________.
(a) Slopes downward
(b) Vertical
(c) Slopes upward
(d) Horizontal
Answer:
(c) Slopes upward

Question 8.
What is called conventional necessities?
(a) Comforts
(b) Luxuries
(c) Necessaries
(d) Necessary
Answer:
(a) Comforts

Question 9.
Mathematically consumer’s surplus is _________
(a) TU-TU
(b) TR- (P x Q)
(c) TU – (P x Q)
(d) TC – (Q x P)
Answer:
(c) TU – (P x Q)

Question 10.
What is the other name for the law of equity-mangìnal utility?
(a) Gossen’s First law
(b) Gossen’s Second law
(c) Gossen’s Third law
(d) Gossen’s Fourth law
Answer:
(b) Gossen’s Second law

Part – B

Answer the following in one-two sentences.

Question 1.
What are the criticisms of the law of equity-marginal utility?
Answer:

1. The utility cannot be measured, only be felt.
2. This law cannot be applied to durable goods.

Question 2.
What is Human wants conditions?
Answer:
Human wants are countless in number and various in kinds. When one want is satisfied another want crops up. Human wants to multiply with the growth of civilization and development.

Question 3.
Mention the types of elasticity of demand.
Answer:

1. Price elasticity of demand.
2. Income elasticity of demand
3. Cross elasticity of demand.
4. Advertising elasticity of demand

Part – C

Answer the following questions in one paragraph.

Question 1.
Write a note on the Price line or Budget line?
Answer:
Demand for a good depends upon (z) preference for that good and (z’z) purchasing power.
The preference pattern is represented by a set of indifference curves. The purchasing power depends on his money income and the price of the goods. The money income and price level are represented by the budget line. The budget line is a downward sloping straight line connecting X-axis and Y-axis as follows.

OA- income, OA/OB price of X good. The budget line is the line joining various combinations of the two goods which the consumer can buy at given prices and income.

Question 2.
Enumerate the characteristics of demand.
Answer:
Price: Demand is always related to price.
Time: Demand always means demand per unit of time, per day, per week, per month or per year
Market: Demand is always related to the market, buyers, and sellers.
Amount: Demand is always a specific quantity that a consumer is willing to purchase.

Part – D

Answer the following questions in about a page.

Question 1.
Explain the Determinants of Elasticity of demand?
Answer:
There are many factors that determine the degree of price elasticity Of demand. Some of them are described below:

1. Availability of Substitutes:
If close substitutes are available for a product, then the demand for that product tends to be very elastic. If the price of that product increases, buyers will buy its substitutes; hence fall in its demand will be very large. Hence, price elasticity will be larger, e.g., Vegetables.

For salt no close substitutes are available. Hence even if the price of salt increases the fall in demand may be zero or less. Hence salt is price inelastic.

2. Proportion of consumer’s income is spent’ if the smaller proportion of consumer’s income is spent on particular commodity say X, price elasticity of demand for X will be smaller. Take for example salt, people spend a very small proportion of their income on salt. Hence, the salt will have small elasticity of demand, or inelastic.

3. Number of uses of commodity:
If a commodity is used for a greater number of uses, its price elasticity will also be larger. For example, milk is used as buttermilk, curd, ghee, and for making ice cream, etc. Hence, even the small fall in the price of milk will tempt the consumers to use more milk for many purposes. Hence milk has a greater price elasticity of demand.

4. Complementarity between goods:
For example, along with petrol, lubricating oil is also used for running automobiles. Here a rise in the price of lubricating oil may not reduce the demand for lubricating oil. Hence, the complementary good, here, lubricating oil, will be price inelastic.

5. Time:
In the long run, the price elasticity of demand for many goods will be larger. This is so because, in the long run many substitutes can be discovered or invented. Therefore, the demand is generally more elastic in the long run, than in the short run. In the short run bringing out new substitutes is difficult.

Question 2.
What is the Importance of Elasticity of demand?
Answer:
The concept of elasticity of demand is of much practical importance.

1. Price fixation: Each seller under monopoly and imperfect competition has to take into account the elasticity of demand while fixing the price for his product. If the demand for the product is inelastic, he can fix a higher price.
2. Production: Producers generally decide their production level on the basis of demand for the product.
3. Distribution: The elasticity of demand also helps in the determination of rewards for factors of production.
4. International trade: The elasticity of demand helps in finding out the terms of trade between two countries. Terms of trade depend upon the elasticity of demand for the goods of the two countries.
5. Public finance: The elasticity of demand helps the government in formulating tax policies. For example, for imposing a tax on a commodity.
6. Nationalization: The concept of elasticity of demand enables the government to decide over the nationalization of industries.

Students can download 11th Economics Chapter 1 Introduction to Micro Economics Questions and Answers, Notes, Samcheer Kalvi 11th Economics Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus, helps students complete homework assignments and to score high marks in board exams.

Tamilnadu Samacheer Kalvi 11th Economics Solutions Chapter 1 Introduction to Micro Economics

Samacheer Kalvi 11th Economics Introduction to Micro Economics Text Book Back Questions and Answers

PART – A

Multiple Choice Questions.

Question 1.
‘Economics is a study of mankind in the ordinary business of life’ – It is the statement of ………………………..
(a) Adam Smith
(b) Lionel Robbins
(c) Alfred Marshall
(d) Samuelson
Answer:
(c) Alfred Marshall

Question 2.
The basic problem studied in Economics is ……………………….
(a) Unlimited wants
(b) Unlimited means
(c) Scarcity
(d) Strategy to meet all our wants
Answer:
(c) Scarcity

Question 3.
Microeconomics is concerned with ……………………….
(a) The economy as a whole
(b) Different sectors of an economy
(c) The study of individual economic units behaviour
(d) The interactions within the entire economy
Answer:
(c) The study of individual economic units behaviour

Question 4.
Which of the following is a microeconomics statement?
(a) The real domestic output increased by 2.5 percent last year
(b) Unemployment was 9.8 percent of the labour force last year
(c) The price of wheat determines its demand
(d) The general price level increased by 4 percent last year
Answer:
(c) The price of wheat determines its demand

Question 5.
Find the odd one out.
(a) “An inquiry into the nature and the causes of the Wealth of Nations”
(b) “Principles of Economics”
(c) “Nature and Significance of Economic Science”
(d) “Ceteris paribus”
Answer:
(d) “Ceteris paribus”

Question 6.
The equilibrium price is the price at which ……………………….
(a) Everything is sold
(b) Buyers spend their money
(c) Quantity demanded equals quantity supplied
(d) Excess demand is zero
Answer:
(c) Quantity demanded equals quantity supplied

Question 7.
Author of “An Inquiry into the Nature and Causes of Wealth of Nations”.
(a) Alfred Marshall
(b) Adam Smith
(c) Lionel Robbins
(d) Paul A Samuelson
Answer:
(b) Adam Smith

Question 8.
“Economics studies human behaviour as a relationship between ends and scarce means which have alternative uses” is the definition of economics of …………………………
(a) Lionel Robbins
(b) Adam Smith
(c) Alfred Marshall
(d) Paul A Samuelson
Answer:
(a) Lionel Robbins

Question 9.
Who is the Father of Economics?
(a) Max Muller
(b) Adam smith
(c) Karl Marx
(d) Paul A Samuelson
Answer:
(b) Adam smith

Question 10.
“Economics is a science” The basis of this statement is …………………………
(a) Relation between cause and effect
(b) Use of deductive method and inductive method for the formations of laws
(c) Experiments
(d) All of the above
Answer:
(d) All of the above

Question 11.
Utility means ……………………..
(a) Equilibrium point at which demand and supply are equal
(b) Want – satisfying capacity of goods and services
(c) Total value of commodity
(d) Desire for goods and services
Answer:
(b) Want – satisfying capacity of goods and services

Question 12.
A market is ………………………
(a) Only a place to buy things
(b) Only a place to sell things
(c) Only a place where prices adjust
(d) A system where persons buy and sell goods directly or indirectly
Answer:
(d) A system where persons buy and sell goods directly or indirectly

Question 13.
Which one of the following is not a point in the Welfare Definition of Economics?
(a) Study of and ordinary man
(b) Economics does not focus on wealth alone
(c) Economics is the study of material welfare
(d) Economics deals with unlimited wants and limited means
Answer:
(d) Economics deals with unlimited wants and limited means

Question 14.
Growth definition takes into account ……………………….
(a) The problem of choice in the dynamic framework of Economics
(b) The problem of unlimited means in relation to wants
(c) The production and distribution of wealth
(d) The material welfare of human beings
Answer:
(a) The problem of choice in the dynamic framework of Economics

Question 15.
Which theory is generally included under micro economics?
(a) Price Theory
(b) Income Theory
(c) Employment Theory
(d) Trade Theory
Answer:
(a) Price Theory

Question 16.
……………………….. have exchange value and their ownership rights can be established and exchanged.
(a) Goods
(b) Services
(c) Markets
(d) Revenue
Answer:
(a) Goods

Question 17.
Identify the correct characteristics of utility ……………………..
(a) It is equivalent to ‘usefulness’
(b) It has moral significance
(c) It is the same as pleasure
(d) It depends upon the consumer’s mental attitude
Answer:
(d) It depends upon the consumer’s mental attitude

Question 18.
Who has given scarcity definition of economics?
(a) Adam Smith
(b) Marshall
(c) Robbins
(d) Robertson
Answer:
(c) Robbins

Question 19.
The process of reasoning from particular to the general is ………………………..
(a) Deductive method
(b) Inductive method
(c) Positive economics
(d) Normative economics
Answer:
(b) Inductive method

Question 20.
Total revenue is equal to total output sold multiplied by ………………………….
(a) Price
(b) Total cost
(c) Marginal revenue
(d) Marginal cost
Answer:
(a) Price

PART – B

Answer the following questions in one or two sentences.

Question 21.
What is meant by Economics?
Answer:
The term ‘Economics’ comes from oikonomikos which means ‘Management of households’. ‘Political Economy’ is renamed as ‘Economics’ by Alfred Marshall.

Question 22.
Define microeconomics?
Answer:

1. Microeconomics is the study of the economic actions of individual units say households, firms or industries.
2. It studies how business firms operate under different market conditions.
3. The combined actions of buyers and sellers determine prices.
4. Microeconomics covers:
   • Value theory [product pricing and factor pricing]
   • Theory of economic welfare.

Question 23.
What are goods?
Answer:
The materialistic things and services which satisfy human wants are called goods in economics.

Question 24.
Distinguish goods from services?
Answer:

Goods	Services
1. Free and Economic goods. Ex: air and sunshine	Intangible Ex: brand image 1 pen drive
2. Consumer goods. Ex: TV, Furniture, Automobile, etc.	Heterogeneous Ex: Music, Consulting physicians etc.
3. Capital goods also called producer goods. Ex: Machines	Inseparable from their makers Ex: Labour and Labourer
4. Perishable goods Ex: Fish, Fruits, Flower.	Perishable. Ex: A ticket for a cricket match once the match is over.
5. Durable Goods Ex: table, chair	–

Question 25.
Name any two types of utility?
Answer:

1. Time Utility: A sick man derives time utility from blood, not at the time of its donation. but only at the operation – time, i.e., when it is used.
2. Place Utility: A student derives place utility from a book not at the place of its publication (production centre) but only at the place of his education (consumption centre).

Question 26.
Define positive economics?
Answer:

1. An increase in money supply implies a price rise in an economy.
2. As the irrigation facilities and application of chemical fertilizers expand, the production of food- grains increases.
3. Increases in the birth rate and a decrease in the death rate reflect the rate of growth of the population.

Question 27.
Give the meaning of the deductive method?
Answer:

1. The deductive method is also named an analytical or abstract method.
2. It consists of deriving conclusions from general truths.
3. It takes a few general principles and applies them to draw conclusions.
4. The classical and neoclassical schools of economists notably, Ricardo, JS Mill, Malthus Marshall, Pigou applied the deductive method in their economic investigations.

PART – C

Answer the following questions in one paragraph.

Question 28.
Explain the scarcity definition of Economics and assess it?
Answer:

1. Lionel Robbins published a book “An Essay on the Nature and Significance of Economic Science” in 1932.
2. According to him, “Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.”

The major features of Robbins’ definition are

1. Ends refer to human wants.
2. Human beings have an unlimited number of wants.
3. Resources or means that go to satisfy the unlimited human wants are limited or scarce in supply.
4. The scarcity of a commodity is to be considered only in relation to its demand.
5. Further, the scarce means are capable of having alternative uses.
6. An individual grades his wants and satisfies first his most urgent want.
7. Economics, according to Robbins, is a science of choice.

Criticism:

1. Robbins does not make any distinction between goods conducive to human welfare and goods that are not.
2. Economics deals not only with the microeconomic aspects of resource allocation and the determination of the price of a commodity.
3. Robbins’ definition does not cover the theory of economic growth and development.

Question 29.
What are the crucial decisions involved in ‘what to produce’?
Answer:
Every society much decides on what goods it will produce and how much of these it will produce.
In this process, the crucial decisions include:

1. Whether to produce more food, clothing, and housing or to have more luxury goods.
2. Whether to have more agricultural goods or to have industrial goods and services.
3. Whether to use more resources in education and health or to use more resources in military services.
4. Whether to have more consumption goods or to have investment goods.
5. Whether to spend more on basic education or higher education.

Question 30.
Explain different types of economic activities?
Answer:
The seven types of economic activities are:

1. Micro – Economics:
Micro Economics is the study of the economic actions of individuals say households, firms, or industries.

Microeconomics covers:

• Value theory [product pricing and factor pricing]
• Theory of economic welfare.

2. Macro – Economics:

• Macroeconomics is the obverse of microeconomics.
• The general theory of employment, Interest, and money published by Keynes is the basis of modem macroeconomics.

3. International Economics:

• In the modem world, no country can grow in isolation.
• Every country is having links with other countries through foreign capital, investment [foreign direct investment], and international trade.

4. Public Economics:

• Public finance is concerned with the income or revenue-raising and expenditure incurring activities of the public authorities.
• The scope of public finance covers public expenditure, public revenue, public debt, and financial administration.

5. Developmental Economics:

• Development economics deals with features of developed nations, obstacles for development, economic and non-economic factors influencing development, various growth models, and strategies.

6. Health Economics:

• Health economics is an area of applied economics.
• It covers health indicators, preventive and curative measures, medical research and education, rural health mission, drug price control, neonatal care, maternity and child health, budgetary allocation for health.

7. Environmental Economics:

• Depletion of natural resources stock and pollution result from rapid economic development.
• Environmental economics is a study of interdisciplinary tools for the problems of ecology, economy, and environment.

Question 31.
Elucidate different features of services?
Answer:
Along with goods, services are produced and consumed. They are generally, possess the following:

1. Intangible:

• Intangible things are not physical objects but exist in connection to other things, for example, brand image, goodwill, etc.
• The intangible things are converted and stored into tangible items such as recording a music piece into a pen – drive.

2. Heterogeneous:

• Services vary across regions or cultural backgrounds.
• A single type of service yields multiple experiences, e.g., music, consulting physicians, etc.

3. Inseparable from their makers:

• Services are inextricably connected to their makes. For example, labour and labourers are inseparable.

4. Perishable:

• Services cannot be stored as inventories like assets.
• For example, it is useless to possess a ticket for a cricket-match once the match is over.
• It cannot be stored and it has no value-in-exchange.

Question 32.
What are the important features of utility?
Answer:
The important features of utility:

1. The utility is psychological. It depends on the consumer’s mental attitude. For example, a vegetarian derives no utility from mutton.
2. The utility is not equivalent to usefulness. For example, a smoker derives utility from a cigarette; but, his health gets affected.
3. The utility is not the same a pleasure. A sick person derives utility from taking medicine, but definitely, it is not providing pleasure.
4. The utility is personal and relative. An individual obtains varied utility from one and the same good in different situations and places.
5. The utility is the function of the intensity of human want. An individual consumer faces a tendency of diminishing utility.
6. The utility cannot be measured objectively. It is a subjective concept and it cannot be measured numerically.
7. The utility has no ethical or moral significance. For example, a cook derives utility from a knife using which he cuts some vegetables, and a killer wants to stab his enemy with that knife. In Economics, a commodity has utility if it satisfies a human want.

Question 33.
Distinguish between microeconomics and macroeconomics?
Answer:

Micro Economics	Macro Economics
1. It is that branch of economics which deals with the economic decision-making of individual economic agents such as the producer, the consumer, etc.	1. It is that branch of economics which deals with aggregates and averages of the entire economy. E.g., aggregate output, national income, aggregate savings, and investment, etc.
2. It takes into account small components of the whole economy.	2. It takes into consideration the economy of the country as a whole.
3. It deals with the process of price, determination in the case of individual products, and factors of production.	3. It deals with the general price-level in any economy.
4. It is known as price theory	4. It is also known as the income theory.
5. It is concerned with the optimization goals of individual consumers and producers	5. It is concerned with the optimization of the growth process of the entire economy.

Question 34.
Compare positive economics and normative economics?
Answer:

Positive Economics	Normative Economics
1. An increase in money supply implies a price-rise is an economy.	1. Inflation is better than deflation.
2. As the irrigation facilities and application of chemical fertilizers expand, the production of food grains increases.	2. More production of luxury goods is not good for a less-developed country.
3. An increase in the birth rate and a decrease in the death rate reflect the rate of growth of the population.	3. Inequalities in the distribution of wealth and incomes should be reduced.

PART – D

Answer the following questions in about a page.

Question 35.
Compare and contrast various definitions of Economics.
Answer:
1. Adam Smith – Wealth definition:

1. Adam Smith [1723 – 1790], in his book “An Inquiry into Nature and Cause of Wealth of Nations” [1776] defines “Economics as the science of wealth”
2. He explains how a nation’s wealth is created and increased.
3. He considers that the individual in the society wants to promote his own gain and in this process, he is guided and led by an “invisible hand”
4. Adam Smith favours the introduction of the “division of labor” to increase the quantum of output.
5. Severe competition in factories and society helps in bettering the product.
6. The supply force is very active and a commodity is made available to the consumers at the lowest price.

2. Alfred Marshall – Welfare definition:

1. Alfred Marshall [1842 – 1924] in his book “Principles of Economics” [1890] defines Economics thus “Political Economy” or Economics is a study of mankind in the ordinary business of life.
2. It examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of well-being.
3. Thus, it is on one side a study of wealth and on the other and more important side, a part of the study of man”.

The important features of Marshall’s definition are:

1. Economics does not treat wealth as the be-all and end-all of economic activities.
2. The man promotes primarily welfare and not wealth. ‘
3. The science of economics contains the concerns of ordinary people who are moved by love and not merely guided or directed by the desire to get the maximum monetary benefit.
4. Economics is a social science. It studies people in the society who influence one another.

3. Lionel Robbins – Scarcity definition:

1. Lionel Robbins published a book “An Essay on the Nature and Significance of Economic Science” in 1932.
2. According to him, “Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses”.

The major features of Robbins’ definition:

1. Ends refer to human wants. Human beings have an unlimited number of wants.
2. On the other hand, resources or means that go to satisfy the unlimited human wants are limited or scarce in supply.
3. The scarce means are capable of having alternative uses.
4. An individual grades his wants and satisfies first his most urgent want.
5. Economics, according to Robbins, is a science of choice.

4. Samuelson’s – growth definition:
Paul Samuelson defines Economics as “the study of how men and society choose, with or without the use of money, to employ scarce productive resources which could have alternative uses to produce various commodities over time, and distribute them for consumption, now and in the future among various people and groups of society”.

The major implications of this definition are as follows:

• Samuelson makes his definition dynamic by including the element of time in it.
• Samuelson’s definition is applicable also in a barter economy.
• His definition covers various aspects like production, distribution, and consumption.
• Samuelson treats Economics as a social science.
• Samuelson appears to be the most satisfactory.

Question 36.
Explain various Steps of Deductive and Inductive methods?
Answer:
Steps of the Deductive Method:

• Step 1: The analyst must have a clear and precise idea of the problem to be inquired into.
• Step 2: The analyst clearly defines the technical terms used in the analysis. Further, the assumptions of the theory are to be precise.
• Step 3: Deduce hypothesis from the assumptions taken.
• Step 4: Hypotheses should be verified through direct observation of events in the real world and through statistical methods, (eg) There exists an inverse relationship between price and quantity demanded of a good.

Steps of Inductive Method:

• Step 1: Data are collected about a certain economic phenomenon. These are systematically arranged and general conclusions are drawn from them.
• Step 2: By observing the data, conclusions are easily drawn.
• Step 3: Generalization of the data and then Hypothesis Formulation Step 4. Verification of the hypothesis (eg. Engel’s law)

Question 37.
Elaborate on the nature and scope of Economics?
Answer:
Nature of Economics:
The nature of a subject refers to its contents and how and why they find a place in the subject. This nature is understood by studying the various definitions given by Economists.
The nature of Economics can be clearly understood from the following definitions :

1. Adam Smith (classical Era) who considered Economics as a science of wealth gave wealth definition.
2. Alfred Marshall (Neo-classical era) considered Economics as a social science which studies wealth on one side and the material welfare of human beings on the other side.
3. Robbin’s Scarcity Definition (new age) He defined Economics as a science of choice.
4. Samuelson gave a growth definition which represents the modern age.
5. The scope of economics refers to the subject matter of economics. It throws light on whether it is an art or a science and science, whether positive or normative science.

Economics: It’s the subject matter:

Related to society:

1. Economics focuses on the behaviour and interactions among economic agents, individuals and groups belonging to an economic system.
2. It deals with the consumption and production of goods and services and the distribution of income among the factors of production.

Related to scarce resources:

1. Economics studies the ways in which people use the available resources to satisfy their multiplicity of wants.

Human science or Social science:

1. Economics is concerned with the activities of human beings.
2. The action of one member affects those of the others in the society. Hence, economics is called human science or social science.

Related to wealth:

1. Economics constitutes all human activities related to wealth.
2. Human activities not related to wealth are not included in Economics.

Economics as an art:

1. Art is the practical application of knowledge for achieving particular goals.
2. Economics provides guidance to the solutions to all the economic problems.

Economics as a science:

1. Science is a systematic study of knowledge. Science develops the co-relation between cause and effect based on facts.
2. Economics examines the relationship between the cause and effect of the problems. Hence, it is rightly considered as both an art and a science.

Economics: Positive and Normative science:

1. Positive- Economics is concerned with how? and why? and normative Economics with ‘What ought to be’.
2. Economics is both a positive and normative science.

Question 38.
Explain basic problems of the economy with the help of the production possibility curve?
Answer:
1. The problem of choice between relatively scarce commodities due to limited productive resources with the society can be illustrated with the help of a geometric device, which is known as the production possibility curve.

The production possibility curve shows the menu of choice along which a society can choose to substitute one good for another, assuming a given state of technology and given total resources.

2. The explanation and analysis of the production possibility curve are based upon certain assumptions, some of them are the following:

• The time period does not change. It remains the same throughout the curve.
• Techniques of production are fixed.
• There is full employment in the economy.
• Only two goods can be produced from the given resources.
• Resources of production are fully mobile.
• The factors of production are given in quantity and quality.
• The low of diminishing returns operates in production.

3. Every production possibility curve is based upon these assumptions. If some of these assumptions change or neglected, then it affects the nature of the production possibility curve.

4. To draw this curve we take the help of the production possibilities schedule, as shown below.

5. The schedule suggests that if all resources are thrown into the production of food, a maximum of 500 tons of food can be produced, given the existing technology.

If on the other hand, all resources are instead used for producing cars, 25 cars can be produced. In between these two extreme possibilities exist. If we are willing to give up some food, we can have some cars.

6. We can obtain a production possibility curve by drawing the production possibilities schedule graphically. The quantity of food is shown on the x-axis and the number of cars is shown on the y-axis, the different six production possibilities are being shown as point P₁ P₂ P₃ P₄ P₅ & P₆

Problems of the economy

1. The problem of choice:
The problem of choice arises because of the given limited resources and unlimited wants, which may relate to the allocation of resources between the goods for the higher income group and the lower-income group and the goods for the defense and the civilians. Since PPC is the locus of the combination of the goods the problem of choice will not arise when we choose any point on PPC.

2. Solution of central problems:
The central problems of an economy can be explained with the help of PPC. The solution to the problem of what to produce involves the decision regarding the choice of location on the production possibility carves.

A production combination represented by any point inside the PPC indicates that the economy is using inefficient methods of production and an inefficient combination of resources.

Samacheer Kalvi 11th Economics Introduction to Micro Economics Additional Important Questions and Answers

Part – A

Multiple Choice Questions.

Question 1.
Alfred Marshall renamed “Political Economy” as “Economics” in
(a) 18th century
(b) 19th century
(c) 20th century
(d) 21st century
Answer:
(b) 19th century

Question 2.
Marshall definition of Economics is known as ………………………
(a) Wealth
(b) Welfare
(c) Scarcity
(d) Modem
Answer:
(b) Welfare

Question 3.
Alfred Marshall wrote “Principles of Economics” in
(a) 1776
(b) 1890
(c) 1776
(d) 1932
Answer:
(b) 1890

Question 4.
The term “micro” means ………………………..
(a) Small
(b) Big
(c) Normal
(d) Abnormal
Answer:
(a) Small

Question 5.
Examples of perishable goods
(a) Television, Furnishers
(b) Fish, Fruits, Flowers
(c) Table, Chair
(d) Vehicles, Capital goods
Answer:
(b) Fish, Fruits, Flowers

Question 6.
……………………… means a place where commodities are bought and sold.
(a) Market
(b) Price
(c) Cost
(d) Revenue
Answer:
(a) Market

Question 7.
The value of goods expressed in money terms is
(a) Price
(b) Revenue
(c) Market
(d) Cost
Answer:
(a) Price

Question 8.
…………………. goods directly satisfy human wants.
(a) Consumer
(b) Capital
(c) Economic
(d) Producer
Answer:
(a) Consumer

Question 9.
__________ is the assumption in economics that makes the economic laws hypothetical
(a) Other things remaining the same
(b) Time remaining the same
(c) Money remaining the same
(d) Wants to remain the same
Answer:
(a) Other things remaining the same

Question 10.
Who defined “Economics as the science of wealth”?
(a) Karl Marx
(b) Paul A. Samuelson
(c) Max Muller
(d) Adam Smith
Answer:
(d) Adam Smith

Part – B

Answer the following questions in one or two sentences.

Question 1.
What is the scope of Economics?
Answer:
The scope of the subject of Economics refers to the subject matter of Economics. It throws light on whether it is an art or a science and if science, whether it is a positive science or normative science.

Question 2.
Write a note on Distribution.
Answer:
Distribution studies about the pricing of factors of production.

Question 3.
Define macroeconomics?
Answer:

1. Macroeconomics is the obverse of microeconomics. It is concerned with the economy as a whole.
2. It is the study of aggregates such as national output, inflation, unemployment, and taxes.
3. The General Theory of Employment, Interest, and Money published by Keynes is the basis of modem macroeconomics.

Part – C

Answer the following questions in one paragraph.

Question 1.
Explain different types of utility?
Answer:
The different types of utility are:

1. Form utility: An individual consumer obtains utility from a good or service only when it is available in a particular form. Raw materials in their original form may not possess utility for a consumer.
2. Time utility: A sick man derives time utility from blood not at the time of its donation, but only at the operation-time (i.e.,) when it is used.
3. Place utility: A student derives place utility from a book not at the place of its publication but only at the place of his education.
4. Service utility: An individual consumer derives service utility a service made available at the time when he most needs it.
5. Possession utility: When a student buys a book or dictionary from a bookseller, then only it gives utility.
6. Knowledge utility: It is the utility derived by having knowledge of a particular thing. Advertisement serves as a source of information on an object.
7. Measurability of utility: Wants of a person are satisfied by the act of consumption. The consumer derives utility, measured in terms of ‘Utils’. A “Util” is a unit of measurement of utility.

Question 2.
What are the major implications of Samuelson’s growth definition?
Answer:

1. Like Robbins, Samuelson states that the means which have alternative uses are scarce in relation to unlimited ends.
2. His definition is dynamic by including the element of time and it covers the theory of economic growth.
3. This definition is applicable also in a non-monetary, barter economy.
4. His definition covers various aspects like production, distribution, and consumption.
5. Samuelson treats economics as a social science.

Question 3.
What is the importance of microeconomics?
Answer:

1. To understand the operation of an economy.
2. To provide tools for economic policies.
3. To examine the condition of economic welfare.
4. Efficient utilization of resources.
5. Useful in international trade.
6. Useful in decision making.
7. Optimal resources allocation.
8. The basis for prediction.
9. Price determination.

Part – D

Answer the following questions in about a page.

Question 1.
What is the nature of economic laws?
Answer:

1. A Law expresses a causal relation between two or more than two phenomena.
2. Marshall states that the Economics laws are statements of tendencies and those social laws, which relate to those branches of conduct in which the strength of the motives chiefly concerned can be measured by money price.
3. In natural sciences, a definite result is expected to follow from a particular cause.
4. In Economics science, the laws function with cause and effect.
5. The consequences predicted by the data, necessarily and invariably follow.
6. Economics laws are not as precise and certain as the laws in the physical sciences.
7. A physical scientist carrying out controlled experiments in his laboratory can test the scientific laws very easily by changing the conditions obtaining there.
8. Change in Economics science cannot be brought about easily.
9. Unpredictability is invariably associated with Economic laws.
10. Economics laws are not assertive but they are indicative.
11. The use of the assumption “other things remaining the same” in economics makes the economics laws hypothetical.
12. The hypothetical elements in-laws are a little less pronounced than in the laws of physical sciences.
13. As the value of the measuring-rod money is not constant, there are always hypothetical elements surrounding the laws of Economics.
14. Some economics laws are simply truisms.
15. For example, saving is a function of income.
16. Another example of truism is human wants are unlimited.

Question 2.
Explain the types of economics.
Answer:
1. Micro-Economics:
Microeconomics is the study of the economic actions of individual units say households, firms, or industries.

2. Macro-Economics:
Macroeconomics is concerned with the economy as a whole. It is the study of aggregates such as national output, inflation, unemployment, and taxes.

3. International economics:
No country can grow in isolation, every country is having links with other countries through foreign capital, investment, and international trade.

4. Public economics:
Public finance is concerned with the income or revenue-raising and expenditure incurring activities of the public authorities. It covers public expenditure, public revenue, public debt, and financial administration.

5. Developmental economics:
Development economics deals with features of developed nations, obstacles for development. Economic and non-economic factors influencing development, various growth models, and strategies.

6. Health economics:
Health economics is an area of applied economics. It covers health indicators, preventive and curative measures, medical research, and education. Rural health and budgetary allocation for health etc.

7. Environmental economics:
Environmental economics analyses the interrelationship between economy and environment. It is a study of interdisciplinary tools for the problems of ecology, economy, and environment.

ACTIVITY

Meet ten of your classmates and prepare a report on the advantages of studying Economics?
Advantages of Studying Economics:

Student: 1

1. Economic policy is financial supporters.
2. Many treatments of economics are inexact and can contradict each other.
3. These is analytic or mathematical theories.
4. The Economic subject in a logical and Pseudo-Scientific manner.
5. The future of our daily lives in regards to the economic status and happenings of the world.
6. Economics is basically called the “Queen Subject” of all subjects of social sciences.
7. Economics is one of the most useful of all sciences.
8. To learn how to distribute scarce resources efficiently.
9. To understand how the market will react to certain actions.
10. Economics is described as the study of production, distribution, and consumption of goods and services, along with the transfer of wealth.

Student: 2

1. People like it.
2. It studies people’s behaviors in different markets.
3. They make economics a social study.
4. Economics is a study of how money is distributed.
5. Economic policies are good.
6. Its connection to human behavior is clear.
7. They save, spend, or invest funds.
8. It studies how market decisions are made.
9. In Economics you will study how to work in the financial and learn how to manage money.
10. Economics is the study of Economic Activities.
11. The resources that are needed to satisfy everyone’s wants.
12. Economics studies how scarcity causes people to make different choices.
13. They like the analysis.
14. It is an empirical study.

Student: 3

1. Economics is the study of the effects of social, emotional, and cognitive factors on the economic decisions of people and companies.
2. Economics enables us to understand money.
3. Economics makes a nation prosper.
4. It makes a person educated in a real sense.
5. Economics is defined as the science of money.
6. The most important factor in modem man’s life.
7. It is most important to study.
8. Economics addresses many interesting problems in modem society.
9. We encourage growth in developing countries.
10. An opportunity to get an education.
11. To prove to a prospective employer.
12. The primacy of Economic life.
13. Economics studies the way the world works as a human society.
14. The priorities of its wants and needs.
15. It is a huge subject covering natural resources.
16. The contributions of humans.
17. The contributions of investors.

Student: 4

1. I am interested in economics.
2. Economics addresses many interesting problems in modem society.
3. The valuation of nonmarket goods.
4. We encourage growth in developing countries.
5. A business relevant analytical skillset.
6. An opportunity to get an education to prove to a prospective employer.
7. Economics teaches you how to know what is needed and wanted.

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1. The question paper comprises of four parts.
2. You are to attempt all the parts. An internal choice of questions is provided wherever applicable.
3. All questions of Part I, II, III and IV are to be attempted separately.
4. Question numbers 1 to 20 in Part I are Multiple Choice Questions of one mark each.
   These are to be answered by choosing the most suitable answer from the given four alternatives and writing the option code and the corresponding answer
5. Question numbers 21 to 30 in Part II are two-mark questions. These are to be answered in about one or two sentences.
6. Question numbers 31 to 40 in Part III are three-mark questions. These are to be answered in above three to five short sentences.
7. Question numbers 41 to 47 in Part IV are five-mark questions. These are to be answered in detail Draw diagrams wherever necessary.

Time: 3:00 Hours
Maximum Marks: 90

PART – I

Answer all the questions. Choose the correct answer: [20 × 1 = 20]

Question 1.
Two or more business units forming a single entity is known as ……………………….
(a) Joint
(b) Merger
(c) Link
(d) Compound
Answer:
(b) Merger

Question 2.
……………………… is irrecoverable debts.
(a) Debtors
(b) Creditors
(c) Bad debts
(d) Loan
Answer:
(c) Bad debts

Question 3.
The word convention refers ………………………
(a) Traditions
(b) Trade
(c) Business
(d) Accounting
Answer:
(a) Traditions

Question 4.
Outsider’s equity is otherwise called as ………………………
(a) Capital
(b) Liabilities
(c) Debtors
(d) Assets
Answer:
(b) Liabilities

Question 5.
Owner’s equity is otherwise called as ………………………..
(a) Capital
(b) Creditors
(c) Debtors
(d) Assets
Answer:
(a) Capital

Question 6.
Net position of an account can be ascertained from ……………………….
(a) Journal
(b) Ledger
(c) Trial balance
(d) Balance sheet
Answer:
(b) Ledger

Question 7.
Total of credit > total of debit = ……………………….
(a) Debit balance
(b) Credit balance
(c) Nil balance
(d) Trial balance
Answer:
(b) Credit balance

Question 8.
Which one of the following account would usually have a debit balance?
(a) Account payable
(b) Cash
(c) Owner equity
(d) Bank loan
Answer:
(b) Cash

Question 9.
Which of the following will be placed in the credit column of the trial balance?
(a) Purchases
(b) Accounts payable
(c) Salaries payable
(d) None
Answer:
(d) None

Question 10.
Suspense account in the trial balance is entered in the …………………….
(a) Trading A/c
(b) Profit & loss A/c
(c) Balance sheet
(d) None
Answer:
(c) Balance sheet

Question 11.
Goods are returned by customers are recorded in ……………………….
(a) Sales book
(b) Sales returns book
(c) Journal proper
(d) Purchase book
Answer:
(b) Sales returns book

Question 12.
If a cheque sent for collection is dishonoured, the debit is given to ……………………….
(a) Suppliers A/c
(b) Bank A/c
(c) Customers A/c
(d) None
Answer:
(c) Customers A/c

Question 13.
A bank pass book is a copy of ……………………….
(a) The cash column of a customer’s cash book
(b) The bank column of a customer’s cash book
(c) The customer’s account in the bank’s ledger
(d) None
Answer:
(c) The customer’s account in the bank’s ledger

Question 14.
Generally, one – sided errors are revealed by ………………………
(a) Credit balance
(b) Debit balance
(c) Trial balance
(d) Balance sheet
Answer:
(c) Trial balance

Question 15.
When a transaction is incorrectly recorded, it is known as ……………………….
(a) Error of principle
(b) Error of commission
(c) Error of omission
(d) Compensating error
Answer:
(b) Error of commission

Question 16.
Straight line method otherwise called ………………………..
(a) Original cost method
(b) Written down value method
(c) Annuity method
(d) Depletion method
Answer:
(a) Original cost method

Question 17.
Which one is matched correctly?
(a) Land purchased – capital expenditure
(b) Goods purchased – capital expenditure
(c) Issue of debentures – revenue receipts
(d) Rent received – Capital receipts
Answer:
(a) Land purchased – capital expenditure

Question 18.
Which one is not matched correctly?
(a) Trading account – wages
(b) Profit and loss account salaries
(c) Capital – asset
(d) Creditors liabilities
Answer:
(c) Capital – asset

Question 19.
Interest on capital is to be debited in ………………………
(a) Profit and loss A/c
(b) Capital A/c
(c) Balance sheet
(d) Trading A/c
Answer:
(a) Profit and loss A/c

Question 20.
There are three components namely input unit, CPU and ……………………….
(a) Data
(b) Secondary storage
(c) Output unit
(d) Primary storage
Answer:
(c) Output unit

PART – II

Answer any seven questions in which question No. 30 is compulsory: [7 × 2 = 14]

Question 21.
List any two functions of accounting?
Answer:

1. Measurement and
2. Forecasting

Question 22.
Define book – keeping?
Answer:
“Book-keeping is an art of recording business dealings in a set of books”. – J.R. Batli boi.

Question 23.
What is meant by journalising?
Answer:
Record of business transactions in the journal is known as Journal entry. The process of recording the transactions in journal is called as journalising.

Question 24.
Complete the accounting equation?

1. Assets = Capital + liabilities; ₹1,00,000 = ₹80,000 + ?
2. Assets = Capital + liabilities; ₹2,00,000 = ? + ₹40,000

Answer:
Assets = Capital + liabilities

1. ₹1,00,000 = ₹80,000 + ₹20,000
2. ₹2,00,000 = ₹1,60,000 + ₹40,000.

Question 25.
Prepare furniture account from the following transactions?

Answer:

Question 26.
What is trade discount?
Answer:
Trade discount is a deduction given by the supplier to the buyer on the list price or catalogue price of the goods.

Question 27.
What is meant by rectification of errors?
Answer:
Depending on the stage at which errors are located, they are subsequently rectified at the respective stage itself.

Question 28.
A firm purchased a plant for ₹40,000. Erection charges amounted to ₹2,000. Effective life of the plant is 5 years. Calculate the amount of depreciation per year under straight line method?
Answer:
Amount of depreciation =
= Cost of plant + erection charges
= ₹40,000 + 2,000
= ₹42,000
= \(\frac{42,000-0}{5 years}\)
= ₹8,400

Question 29.
What is Capital receipt?
Answer:
Receipt which is not revenue in nature is called capital receipt. It is non-recurring in nature.

Question 30.
What are wasting assets?
Answer:
These are the assets which get exhausted gradually in the process of excavation.
Example: mines and quarries.

PART – III

Answer any seven questions in which question No. 40 is compulsory. [7 × 3 = 21]

Question 31.
What are the methods of codification?
Answer:

1. Sequential codes
2. Block codes
3. Mnemonic codes

Question 32.
The trial balance on March 31, 2016 shows the following:
Sundry debtors ₹30,000; Bad debts ₹1,200. It is found that 3% of sundry debtors is doubtful of recovery andis to be provided for Pass adjusting entry and show it how will be appeared in final accounts?
Answer:

Question 33.
Find out the amount of sales from the following information:
Opening stock ₹30,000; Purchases less returns ₹2,00,000; Closing stock ₹20,000; Gross profit margin (oh sales) 30%?
Answer:
Cost of goods sold = opening stock + net purchases – closing stock
= 30,000 + 2,00,000 – 20,000 = 2,10,000

Therefore, percentage of gross profit on cost of goods sold is 30/70 × 100 = 42.85%.
Gross profit = ₹2,10,000 × 30/70
= ₹90,000.
Sales = Cost of goods sold + Gross profit = 2,10,000 + 90,000 = 3,00,000.

Question 34.
A company has purchased a machinery for ₹1,80,000 and spent ₹10,000 for its installation. The estimated life of the machinery is 5 years with a residual value of ₹15,000. Find out the amount of depreciation to be provided every year?
Answer:
Amount of depreciation =  = \(\frac{1,90,00-15,000}{5}\)
= \(\frac{1,75,00}{5}\)
= ₹35,000 per year.

Question 35.
State the account/s affected in each of the following errors:

1. Goods sold to Vasu on credit for ₹1,000 was not recorded in the sales book.
2. The total of sales book ₹2,500 was posted twice.

Answer:

1. Sales account should be credited with ₹1,000.
2. Sales account should be debited with ₹2,500.

Question 36.
Classify the following into personal, real and nominal accounts,

1. Capital
2. Buildings
3. Carriage inwards
4. Cash
5. Commission received
6. Bank

Answer:

1. Capital – Personal account
2. Buildings – Real account
3. Carriage inwards – Nominal account
4. Cash – Real account
5. Commission received – Nominal account
6. Bank – Personal account

Question 37.
Prepare Machinery A/c from the following transactions:

Answer:

Question 38.
State which account should be debited and which account should be credited?

1. Carriage outwards
2. Carriage inwards
3. Sales
4. Purchases
5. Bad debts
6. Interest paid

Answer:

1. Carriage outwards – debited
2. Carriage inwards – debited
3. Sales – credited
4. Purchases – debited
5. Bad debts – debited
6. Interest paid – debited

Question 39.
Mention the subsidiary books in which the following transactions are recorded?

1. Sale of goods for cash
2. Sale of goods on credit
3. Asset purchased on credit

Answer:

1. Sale of goods for cash – cash book
2. Sale of goods on credit – sales book
3. Asset purchased on credit – j oumal proper

Question 40.
From the following particulars of Veera traders, prepare a bank reconciliation statement as on 31^st December, 2017?

1. Credit balance as per bank statement ₹6,000.
2. Amount received by,bank through NEFT for ₹3,500 entered twice in the cash book.
3. Cheque dishonoured amounting to ₹2,500, not entered in cash book.

Answer:

PART – IV

Answer all the questions: [7 × 5 = 35]

Question 41 (a).
Write any five objectives of Accounting?
Answer:

1. To keep a systematic record of financial transactions and events.
2. To ascertain the profit or loss of the business enterprise.
3. To ascertain the financial position or status of the enterprise.
4. To provide information to various stakeholders for their requirements.
5. To protect the properties of an enterprise.

[OR]
(b) What are the differences between Book-keeping and Accounting?
Answer:

Question 42 (a).
Journalise the following transactions in the books of Ramesh who is dealing in computers:

Answer:

[OR]

(b) Show the accounting equation on the basis of the following transactions for Rani, who is dealing in automobiles.

1. Started business with cash ₹80,000.
2. Goods bought on credit from Ramesh ₹10,000.
3. Purchased furniture for cash ₹6,000.
4. Paid creditors by cash ₹8,000.
5. Paid rent by cash ₹500.

Answer:

Question 43 (a).
Prepare direct ledgers from the following transactions?

Answer:

[OR]

(b) Prepare Trial Balance of Murali as on 31.03.2017 from the following information?

Answer:

Question 44 (a).
From the following transactions write up the Sales Day Book of Kamala Stores, a furniture shop?

Answer:

[OR]

(b) Enter the following transactions in a simple cash book of Kunal:

Answer:

Question 45 (a).
From the following information, prepare Bank Reconciliation Statement to find out balance as per bank statement as on 31^st March, 2017?

Answer:

[OR]

(b) Rectify the following errors:

1. Sales book is undercast by ₹100.
2. Sales book is overcast by ₹200.
3. Purchase book is undercast by ₹300.
4. Purchase book is overcast by ₹400.
5. Purchase return boojt is undercast by ₹100.

Answer:

1. Sales account should be credited with ₹100,
2. Sales account should be debited with ₹200.
3. Purchase account should be debited with ₹300.
4. Purchase account should be credited with ₹400.
5. Purchase return account should be credited with ₹100.

Question 46 (a).
A firm purchased a machine for ₹1,00,000 on 01.07.2015. Depreciation is written off at 20% on reducing balance method. The firm closes its books on 31st December each year. Show the Machinery account upto 31.12.2017?
Workings:

Answer:

[OR]

(b) Prepare Trading and Profit and Loss account for the year ended 31^st March, 2016 and the Balance Sheet as on that date from the following informations?

Adjustments:

1. Closing Stock on 31st March, 2016 ₹2,100.
2. Commission received in advance ₹400.
3. Advertisement paid in advance ₹150.
4. Wages outstanding ₹2,000.

Answer:

Question 47 (a).
Enter the following transactions in the three column cash book of Chozhan?

Answer:

[OR]

(b) Prepare Analytical Petty Cash Book from the following particulars under Imprest system?

Answer:

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• Chapter 11 Tamil Nadu Economy
• Chapter 12 Mathematical Methods for Economics

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TN State Board 11th Accountancy Model Question Paper 4 English Medium

General Instructions:

1. The question paper comprises of four parts.
2. You are to attempt all the parts. An internal choice of questions is provided wherever applicable.
3. All questions of Part I, II, III and IV are to be attempted separately.
4. Question numbers 1 to 20 in Part I are Multiple Choice Questions of one mark each.
   These are to be answered by choosing the most suitable answer from the given four alternatives and writing the option code and the corresponding answer
5. Question numbers 21 to 30 in Part II are two-mark questions. These are to be answered in about one or two sentences.
6. Question numbers 31 to 40 in Part III are three-mark questions. These are to be answered in above three to five short sentences.
7. Question numbers 41 to 47 in Part IV are five-mark questions. These are to be answered in detail Draw diagrams wherever necessary.

Time: 3:00 Hours
Maximum Marks: 90

PART – I

Answer all the questions. Choose the correct answer: [20 × 1 = 20]

Question 1.
On the basis of ledger balances the …………………….. are prepared.
(a) Trading A/c
(b) Financial statement
(c) Profit and loss A/c
(d) Balance sheet
Answer:
(b) Financial statement

Question 2.
Accounting is a basic necessity for all ……………………
(a) Human being
(b) Governments
(c) Enterprises
(d) Customers
Answer:
(c) Enterprises

Question 3.
What is GAAP?
(a) Generally Accepted Accounting Principles
(b) Government Accepted Accounting Principles
(c) Generally Accounting and Accountancy Principles
(d) None of these
Answer:
(a) Generally Accepted Accounting Principles

Question 4.
……………………… concept assumes that business enterprise and its owners are two separate independent entities.
(a) Business concern
(b) Business entity concepts
(c) Going Concern concept
(d) Matching concept
Answer:
(b) Business entity concepts

Question 5.
Which of the following is a personal account?
(a) Debtors
(b) Stationary
(c) Cash
(d) Sales
Answer:
(a) Debtors

Question 6.
Which of the following is a real account?
(a) Wages
(b) Salaries
(c) Bank account
(d) Shares and debentures of companies
Answer:
(d) Shares and debentures of companies\

Question 7.
Which of the following accounts is expected to have a debit balance?
(a) Assets
(b) Loss
(c) Expense
(d) All of these
Answer:
(d) All of these

Question 8.
A collection or group of all accounts of a business enterprises is known as …………………………
(a) Balance sheet
(b) Trial balance
(c) Ledger
(d) Journal
Answer:
(c) Ledger

Question 9.
Which account usually has debit balance?
(a) Discount received
(b) Purchase returns
(c) Purchases
(d) Owner equity
Answer:
(c) Purchases

Question 10.
A trial balance is a …………………… ?
(a) Nominal account
(b) Personal account
(c) Real account
(d) None
Answer:
(d) None

Question 11.
Which of the following is not only a subsidiary books of account?
(a) Purchase book
(b) Sales book
(c) Purchase return book
(d) Cash book
Answer:
(d) Cash book

Question 12.
If a cheque issued by us is dishonoured the credit is given to ……………………..
(a) Customer’s A/c
(b) Bank A/c
(c) Supplier’s A/c
(d) None
Answer:
(c) Supplier’s A/c

Question 13.
Cheques issued but not presented to bank …………………….
(a) Cash book – Add
(b) Cash book (Cr) – Add
(c) Bank statement (Cr) – Add
(d) Bank statement (Dr) subtract
Answer:
(a) Cash book – Add

Question 14.
Generally, one – sided errors are revealed by ……………………..
(a) Credit balance
(b) Debit balance
(c) Balance sheet
(d) Trial balance
Answer:
(d) Trial balance

Question 15.
Two – sided errors are not revealed by ……………………..
(a) Debit balance
(b) Trial balance
(c) Credit balance
(d) Balance sheet
Answer:
(b) Trial balance

Question 16.
The amount which is expected to be realised at the end of the estimated useful life of an asset is known as ………………………….
(a) Life of an asset
(b) Actual cost of asset
(c) Other factors
(d) Scrap value of an asset
Answer:
(d) Scrap value of an asset

Question 17.
There are various methods used for providing depreciation on …………………………
(a) Life of an asset
(b) Actual cost of asset
(c) Fixed asset
(d) Other factors
Answer:
(c) Fixed asset

Question 18.
Revenue receipts are ……………………. in the business.
(a) Non – recurring
(b) Recurring
(c) Neither of the above
(d) All the above
Answer:
(b) Recurring

Question 19.
Income statement is divided into …………………….. parts.
(a) One
(b) Two
(c) Three
(d) Four
Answer:
(b) Two

Question 20.
Components of CAS can be classified into ………………………. categories.
(a) One
(b) Two
(c) Six
(d) Three
Answer:
(c) Six

PART – II

Answer any seven questions in which question No. 21 is compulsory: [7 × 2 = 14]

Question 21.
Discuss briefly the branches of accounting?
Answer:
The various branches of accounting are:

1. Financial Accounting:
It involves recording of financial transactions and events.

2. Cost Accounting:
It involves the collection, recording, classification and appropriate allocation of expenditure for the determination of the costs of products or services and for the presentation of data for the purposes of cost control and managerial decision making.

3. Management Accounting:
It is concerned with the presentation of accounting information in such a way as to assist management in decision making and in the day-to-day operations of an enterprise.

4. Social Responsibility Accounting:
It is concerned with presentation of accounting information by business entities and other organizations from the view point of the society by showing the social costs incurred such as environmental pollution by the enterprise and social benefits such as infrastructure development and employment opportunities created by them.

5. Human Resources Accounting:
It is concerned with identification, qualification and reporting of investments made in human resources of an enterprise.

Question 22.
State the principles of double entry system of book – keeping?
Answer:

1. In every business transaction, there are two aspects.
2. The two aspects involved are the benefit or value receiving aspect and benefit or value giving aspect.
3. These two aspects involve minimum two accounts; atleast one debit and atleast one credit.
4. For every debit, there is a corresponding and equivalent credit. If one account is debited . the other account must be credited.

Question 23.
Journalise the following transactions?

Answer:

Question 24.
What are the objectives of preparing trial balance (any two)?
Answer:

1. Test of arithmetical accuracy: Trial balance is the means by which the arithmetical accuracy of the book-keeping work is checked.
2. Basis for preparing final accounts: Financial statements, namely, trading and profit and loss account and balance sheet are prepared on the basis of summary of ledger balances obtained from the trial balance.

Question 25.
What is Journal proper?
Answer:
Journal proper is a residuary book which contains records of transactions, which do not find a place in the subsidiary »books such as cash book, purchases book, sales book, purchases returns book, sales returns book, bills receivable books and bills payable book.

Question 26.
What is Cash Book?
Answer:
Cash book is the book in which only cash transactions are recorded in the chronological order. The cash book is the book of original entry or prime entry as cash transactions are recorded for the first time in it. Cash transactions here may include bank transactions also.

Question 27.
Give any two expenses which may be paid by the banker as per standing instruction?
Answer:

1. Insurance premium paid by the bank as per the standing instruction.
2. Loan instalment, paid by the bank as per the instruction.

Question 28.
What is meant by error of partial omission?
Answer:
When the accountant has failed to record a part of the transaction, it is known as error of partial omission. This error usually occurs in posting. This error affects only one account.

Question 29.
What is Sinking Fund method?
Answer:
This method is adopted especially when it is desired not merely to write off an asset but also to provide enough funds to replace an asset at the end of its working life.

Question 30.
What is capital expenditure?
Answer:
It is an expenditure incurred during an accounting period, the benefits of which will be available for more than one accounting period.

PART – III

Answer any seven questions in which question No. 31 is compulsory: [7 × 3 = 21]

Question 31.
Write any three differences among the readymade software, customised software and tailor made software?
Answer:

Basis	Readymade Software	Customised Software	Tailor made Software
1. Nature of business	Small, conventional business	Large, medium business	Large
2. Cost of installation and maintenance	Low	Relatively high	High
3. Expected level of secrecy (software and data)	Low	Relatively high	Relatively high

Question 32.
Abstracts from the trial balance as on 31^st March, 2016?
Answer:

Adjustments:

1. Additional bad debts ₹2,000.
2. Create 5% provision for bad and doubtful debts. You are required to pass adjusting entries.

Answer:

Question 33.
A firm purchased a plant for ₹40,000. Erection charges amounted to ₹2,000. Effective life of the plant is 5 years. Calculate the amount of depreciation per year under straight line method?
Answer:
Caluculation of amount of depreciation:

Question 34.
Complete the missing items:

Answer:

Question 35.
Give journal entries for the following transactions and post them to cash A/c and sales A/c?

Answer:

Question 36.
The following balances are extracted from the books of Murali, as on 31^st March, 2017. Prepare Trial balance?

Answer:

Question 37.
Enter the following transactions in the purchase book of M/s. Subhashree Electric Co., which deals in electric goods?

Answer:

Question 38.
Briefly explain about contra entry with examples?
Answer:
When the two accounts involved in a transactions are cash account and bank account, then both the aspects are entered in cash book itself. As both the debit and credit aspect of a transaction are recorded in the cash book, such entries are called contra entries.

Example: When cash is paid into bank, it is recorded in the bank column on the debit side and in the cash column on the credit side of the cash book.

Question 39.
Rectify the following errors:

1. Sales returns book is overcast by ₹1,000.
2. Purchases book is undercast by ₹2,000.
3. Purchase returns book is overcast by ₹500.

Answer:

1. Sales returns account should be credited with ₹1,000.
2. Purchases account should be debited with ₹2,000.
3. Purchase returns account should be debited with ₹500.

Question 40.
Classify the following receipts into capital and revenue:

1. Sale proceeds of goods ₹75,000.
2. Loan borrowed from bank ₹2,50,000.
3. Sale of investment ₹1,20,000.

Answer:

1. Revenue
2. Capital
3. Capital

PART – IV

Answer all the questions: [7 × 5 = 35]

Question 41(a).
Jayaseeli is a sole proprietor having a provisions store. Following are the transactions?

Answer:

[OR]

(b) Show the accounting equation on the basis of the following:

1. Started business with cash ₹60,000
2. Purchased goods fof cash ₹20,000
3. Sold goods for cash (costing ₹10,000) for ₹15,000
4. Paid rent by cash ₹500
5. Cash withdrawn for personal use ₹5,000

Answer:

Question 42 (a).
Pass journal entries and prepare ledger accounts in the books of Thamizhanban?

Answer:

`

[OR]

(b) Prepare Trial balance from the following ledger abstract of Rathna Kumar?

Answer:

Question 43 (a).
Record the following transactions in the purchases book of Shanthi furniture mart:

Answer:

[OR]

(b) Enter the following transactions of Fathima in the cash book with cash, bank and discount columns for the month of May, 2017?

Answer:

Question 44 (a).
From the following information, prepare bank reconciliation statement as on 31^st December, 2017 to find out the balance as per bank statement?

Answer:

[OR]

(b) Rectify the following errors:

1. Sales book is undercast by ₹100
2. Sales book is overcast by ₹200
3. Purchases book is undercast by ₹300
4. Purchases book is overcast by ₹400
5. Purchases returns book is undercast by ₹500

Answer:

1. Sales account should be credited with ₹100
2. Sales account should be debited with ₹200
3. Purchases account should be debited with ₹300
4. Purchases account should be credited with ₹400
5. Purchases returns account should be credited with ₹500

Question 45 (a).
On 1^st April 2015, Kumar purchased a machine for ₹80,000 and spent ₹20,000 on its installation. The residual value at the end of its expected useful life of 8 years is estimated at ₹4,000. On 30^th September 2017, the machine is sold for v50,000. Depreciation is to be provided according to straight line method. Prepare machinery account. Accounts are closed on 31^st December every year?
Answer:

= Total  cost = Cost price of machine + installation
= 80,000 + 20,000
= 1,00,000
= \(\frac{12,000}{1,00,000}\) × 100
= 12%

[OR]

(b) State whether the following are capital, revenue or deferred revenue?

1. Legal fees paid to the lawyer after acquiring a land ₹20,000.
2. Heavy advertising cost of ₹12,00,000 spent on introducing a new product.
3. Renewal of factory licence ₹12,000.
4. A sum of ₹4,000 was spent on painting the factory.
5. Carriage paid on goods sold.

Answer:

1. Capital
2. Deferred revenue
3. Revenue
4. Revenue
5. Revenue

Question 46 (a).
The following is the extract of a trial balance as on 31^st December, 2017. Prepare Trading account:

Answer:

(b) From the following information, prepare profit and loss account for the year ended 31^st December, 2017?

Answer:

Question 47 (a).
From the following information, prepare final account of Mr. Jain for the year ended 31^st December, 2016?

Adjustments:

1. Salaries outstanding ₹600
2. Depreciation on furniture ₹1,000
3. Interest on capital₹1,000
4. Closing Stock ₹14,000

Answer:

[OR]

(b) What are the differences among the three types of software? (Any five)
Answer:

Students can Download Tamil Nadu 11th Accountancy Model Question Paper 3 English Medium Pdf, Tamil Nadu 11th Accountancy Model Question Papers helps you to revise the complete Tamilnadu State Board New Syllabus, helps students complete homework assignments and to score high marks in board exams.

TN State Board 11th Accountancy Model Question Paper 3 English Medium

General Instructions:

1. The question paper comprises of four parts.
2. You are to attempt all the parts. An internal choice of questions is provided wherever applicable.
3. All questions of Part I, II, III and IV are to be attempted separately.
4. Question numbers 1 to 20 in Part I are Multiple Choice Questions of one mark each.
   These are to be answered by choosing the most suitable answer from the given four alternatives and writing the option code and the corresponding answer
5. Question numbers 21 to 30 in Part II are two-mark questions. These are to be answered in about one or two sentences.
6. Question numbers 31 to 40 in Part III are three-mark questions. These are to be answered in above three to five short sentences.
7. Question numbers 41 to 47 in Part IV are five-mark questions. These are to be answered in detail Draw diagrams wherever necessary.

Time: 3:00 Hours
Maximum Marks: 90

PART – I

Answer all the questions. Choose the correct answer: [20 × 1 = 20]

Question 1.
One of the major role of an accountant is ……………………..
(a) Record keeper
(b) Owner
(c) Employee
(d) Investors
Answer:
(a) Record keeper

Question 2.
…………………….. is the amount invested by the owner or proprietor in an organisation.
(a) Capital
(b) Drawings
(c) Goods
(d) Asset
Answer:
(a) Capital

Question 3.
………………………… is analytical in nature.
(a) Book – keeping
(b) Accounting
(c) Journal
(d) Ledger
Answer:
(b) Accounting

Question 4.
………………………. Accounts are closed at the end of accounting period.
(a) Periodicity
(b) Dual aspect
(c) Matching
(d) Cost
Answer:
(a) Periodicity

Question 5.
……………………. is a negotiable instrument.
(a) Pay – in – slip
(b) Cheque
(c) Voucher
(d) Invoice
Answer:
(b) Cheque

Question 6.
Rectifying entries are passed to make correction of errors in ……………………… accounting.
(a) Single entry
(b) Opening entry
(c) Rectifying entry
(d) Closing entry
Answer:
(c) Rectifying entry

Question 7.
A journal entry has more than one debit or more than one credit or both is called as ………………………
(a) Single entry
(b) Opening entry
(c) Compound entry
(d) Closing entry
Answer:
(c) Compound entry

Question 8.
…………………….. is normally prepared at the end of the accounting period.
(a) Trial balance
(b) Journal
(c) Ledger
(d) Proper journal
Answer:
(a) Trial balance

Question 9.
The page number of the ledger in which the supplier’s account appears is recorded in …………………….. column.
(a) Date
(b) Particulars
(c) Invoice number
(d) Ledger folio
Answer:
(d) Ledger folio

Question 10.
……………………… motivates the debtor to make the payment at an earlier date to avail discount facility.
(a) Trade discount
(b) Cash discount
(c) Sales
(d) Purchases
Answer:
(b) Cash discount

Question 11.
The two accounts involved in a transaction are cash account and bank account is called as ………………………
(a) Contra entry
(b) Single entry
(c) Compound entry
(d) Opening entry
Answer:
(a) Contra entry

Question 12.
…………………….. are recorded on the debit side of cash book.
(a) Cash receipts
(b) Cash payments
(c) Expenses paid
(d) Salary paid
Answer:
(a) Cash receipts

Question 13.
Favourable balance as per bank statement will appear as a …………………………
(a) Credit balance
(b) Debit balance
(c) Unfavourable
(d) Cash book
Answer:
(a) Credit balance

Question 14.
Sales book is overcast by ? 200 is an example of …………………………
(a) Errors of casting
(b) Principle error
(c) Compensating error
(d) Suspense account
Answer:
(a) Errors of casting

Question 15.
Fixed installment method is otherwise called ………………………….
(a) Straight line
(b) Written down value
(c) Diminishing balance
(d) Annuity
Answer:
(a) Straight line

Question 16.
……………………. gives benefit for more than one accounting period.
(a) Capital expenditure
(b) Revenue expenditure
(c) Revenue receipt
(d) None of these
Answer:
(a) Capital expenditure

Question 17.
……………………… are assets of a relatively permanent nature used in the operations of business and not intended for sale.
(a) Fixed assets
(b) Current assets
(c) Liquid assets
(d) None of these
Answer:
(a) Fixed assets

Question 18.
Goodwill is an example of ………………………
(a) Intangible fixed asset
(b) Fixed asset
(c) Current asset
(d) Furniture
Answer:
(b) Fixed asset

Question 19.
The decrease in book value of fixed assets due to usage or passage of time is called ………………………….
(a) Depreciation
(b) Prepaid
(c) Accrued
(d) Bad debts
Answer:
(a) Depreciation

Question 20.
Which one is matched correctly?
(a) Finacle – banking software
(b) DOS – programming software
(c) COBOL – operating software
(d) MS – Office – specific purpose software
Answer:
(a) Finacle – banking software

PART – II

Answer any seven questions in which question No. 21 is compulsory: [7 × 2 = 14]

Question 21.
Who are the parties interested in accounting information?
Answer:

1. Internal users and
2. External users

Question 22.
What is meant by accounting concepts?
Answer:
Accounting concepts are the basic assumptions or conditions upon which accounting has been laid. Accounting concepts are the results of broad consensus. The word concept means a notion or abstraction which is generally accepted.

Question 23.
What is real account?
Answer:
All accounts relating to tangible and intangible properties and possessions are called real accounts. In case of real accounts, the rule is debit what comes in and credit what goes out.

Question 24.
What is a ledger?
Answer:
Ledger is known as principal book of accounts. It is a book which contains all sets of accounts, namely, personal, real and nominal accounts.

Question 25.
What is trial balance?
Answer:
Trial balance is a statement containing the debit and credit balances of all ledger accounts on a particular date. It is arranged in the form of debit and credit columns placed side by side and prepared with the object of checking the arithmetical accuracy of entries made in the books of accounts and to facilitate preparation of financial statements.

Question 26.
Give the format of Purchase Book?
Answer:

Question 27.
What is Cash discount?
Answer:
Cash discount is allowed to the parties making prompt payment within the stipulated period of time or early payment. It is discount allowed (loss) for the creditor and discount received (gain) for the debtor who makes payment.

Question 28.
Rectify the following errors?

1. Sales book was undercast by ₹100.
2. Purchases returns book was overcast by ₹200.

Answer:

1. Sales account should be credited with ₹100.
2. Purchases returns account should be debited with ₹200

Question 29.
A company purchased a building for ₹50,000. The useful life of the building is 10 years and the residual value is ₹2000. Find out the amount and rate of depreciation under straight line method?
Answer:

Question 30.
From the following information, prepare Trading account for the year ended 31.12.2016. Opening stock ₹10,000; Purchases ₹26,100; Sales ₹40,600; Closing Stock ₹13,500?
Answer:

PART – III

Answer any seven questions in which question No. 31 is compulsory: [7 × 3 = 21]

Question 31.
What are the components of computerised accounting system?
Answer:

1. Hardware
2. Software
3. People
4. Procedure
5. Data and
6. Connectivity

Question 32.
The following are the extracts from the trial balance. Sundry debtors ₹30,000; bad debts ₹5,000;
Additional information:

1. Write off bad debts ₹3,000.
2. Create 10% provision for bad and doubtful debts. You are required to pass necessary adjusting entries and show how these items will appear in profit and loss account and balance sheet.

Answer:

Question 33.
Classify the following items into capital and revenue:

1. ₹50,000 spent for railway siding.
2. Loss on sale of old furniture.
3. Carriage paid on goods sold.

Answer:

1. Capital
2. Revenue
3. Revenue

Question 34.
A firm purchased a plant on 01.01.2018 for ₹9,000 and spent ₹1,000 as erection charges. Calculate the amount of depreciation for the year 2018 @ 15% per annum under the written down value method. Accounts are closed on 31^st March every year?
Answer:
Original cost = 9,000 + 1,000 = 10,000
Rate of depreciation = 15%
Date of purchase = 01.01.2018
Number of months used = 01.01.2018 to 3 1.03.2018 = 3 months
Amount of depreciation = 15% on 10,000 for 3 months
= 10,000 × 15/100×3/12
= ₹375.

Question 35.
Rectify the following errors discounted after the preparation of the trial balance:

1. Rent paid was carried forward to the next page ₹500 short.
2. Wages paid was carried forward ₹250 excess.
3. The sales book was overcast by ₹1,500.

Answer:

1. Rent account should be debited with ₹500.
2. Wages account should be credited with ₹250.
3. Sales account should be debited with ₹1,500.

Question 36.
Expand the following terms:

1. ATM
2. CDM
3. POS
4. NEFT
5. RTGS
6. L.F

Answer:

1. Automated Teller Machine (ATM)
2. Cash Deposit Machine (CDM)
3. Point of Sale (POS)
4. National Electronic Funds Transfer (NEFT)
5. Real Time Gross Settlement (RTGS)
6. Ledger folio (L.F.)

Question 37.
Complete the followings:

1. Total of debit > Total of credit = ?
2. Total of credit > Total of debit = ?
3. Total of debit = Total of credit = ?

Answer:

1. Debit balance
2. Credit balance
3. Nil balance

Question 38.
Define bill of exchange?
Answer:
According to the Negotiable Instruments Act, 1881, “Bill of exchange” is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of a certain person or to the bearer of the instrument.

Question 39.
Write any three advantages of Petty cash book?
Answer:

1. There can be better control over petty payments.
2. There is saving of time of the main cashier.
3. Cash book is not loaded with many cash payments.

Question 40.
From the followings prepare a bank reconciliation statement of Jayakumar as on 31^st December, 2016?

1. Balance as per cash book ₹7,130.
2. Cheque deposited but not cleared ₹1,000.
3. A customer has deposited ₹800 into the bank directly.

Answer:

PART – IV

Answer all the questions: [7 × 5 = 35]

Question 41 (a).
Complete the missing informations:

Answer:

[OR]

(b) Prepare Ledger accounts directly from the following informations:

Answer:

Question 42 (a).
Show the effect of following business transactions on the accounting equation:

1. Anbu started business with cash ₹20,000; goods ₹12,000; and machine ₹8,000;
2. Goods purchased from Ramani on credit ₹7,000;
3. Payment made to Ramani’s in full settlement ₹6,900;
4. Sold goods to Rajan on credit costing ₹5,400 for ₹6,000;

Answer:

(b) From the following balances extracted from the books of Raj an a trader on automobiles, prepare Trial Balance as on 31^stMarch, 2017?

Answer:

Question 43 (a).
Prepare Purchases Book and Sales Book in the books of Santhosh Textiles Ltd., from the following transactions given for April, 2017?

Answer:

[OR]

(b) Enter the following transactions in a single column Cash Book of Pradeep for April, 2017?

Answer:

Question 44 (a).
From the following data, ascertain the cash book balance as on 31^st December, 2017?

Answer:

[OR]

(b) Pass journal entries to rectify the following errors located after the preparation of the trial balance. Assume that there exists a suspense account?

1. The total of sales book was undercast by ₹2,000.
2. The purchase of machinery for ₹3,000 was entered in the purchases book.
3. A credit sale of goods for ₹45 to Mathi was posted in his account as ₹54.
4. The purchases returns book was overcast by ₹200.
5. The total of sales book ₹1,122 were wrongly posted in the ledger as ₹1,222.

Answer:

Question 45 (a).
M/s Ramco Textile Mills purchased machinery on 1^st April, 2014 for 2,00,000 on credit from M/s. Nila and Co., and spent ₹10,000 on its installation. Depreciation is provided at 10% per annum on the written down value method. Prepare machinery account and depreciation account for the first three years. Books are closed on 31^st March every year?
Answer:

[OR]

(b) State whether the following are capital or revenue items:

1. ₹5,000 spent towards addition to buildings.
2. Second-hand motor car purchased for ₹30,000 and paid ₹2,000 as repairs immediately.
3. ₹10,000 was spent on painting the new factory.
4. Freight and cartage on the new machine ₹150, erection charges ₹200.
5. ₹150 spent on repairs before using a second-hand car purchased recently.

Answer:

1. Capital expenditure
2. Capital expenditure
3. Capital expenditure
4. Capital expenditure
5. Capital expenditure

Question 46 (a).
From the following particulars, prepare Profit and Loss account for the year ended 31^st December, 2017?

Answer:

[OR]

(b) What are the features of Capital Expenditure?
Answer:
The following are the features of Capital expenditure:

1. It gives benefits for more than one accounting period.
2. It includes acquisition of fixed assets and all expenditure incurred upto the point an asset is ready for use.
3. It contributes to the revenue earning capacity of the business.
4. It is non-recurring in nature.
5. It is shown on the assets side of the balance sheet.

Question 47 (a).
The following balances were extracted from the books of Thomas as on 31^st March, 2018. Dr?

Adjustments:

1. Closing Stock ₹9,000.
2. Provide depreciation @ 10% on machinery.
3. Interest accrued on investments ₹2,000

Prepare Trading A/c, Profit and Loss A/c and Balance Sheet as on 31^st March, 2018. In the Books of Thomas
Dr. Trading A/c and Profit and Loss Account for the year ended 31^st March, 2018 Cr.

Answer:

[OR]

(b) Write any five advantages of computerised accounting system?
Answer:

• Faster Processing: Computers require far less time than human beings in performing a particular task. Therefore, accounting data are processed faster using a computerised accounting system.
• Accurate Information: There is less space for error because only one account entry is needed for each transaction unlike repeated posting of the same accounting data in manual system.
• Reliability: Computer systems are immune to boredom, tiredness or fatigue. Therefore, these can perform repetitive functions effectively and are highly reliable.
• Easy Availability of Information: The data are easily available and can be communicated to different users at the same time.
• Up-to-date Information: Account balances will always be up-to-date since the records are automatically updated as and when accounting data are entered or stored.

Students can Download Tamil Nadu 11th Accountancy Model Question Paper 2 English Medium Pdf, Tamil Nadu 11th Accountancy Model Question Papers helps you to revise the complete Tamilnadu State Board New Syllabus, helps students complete homework assignments and to score high marks in board exams.

TN State Board 11th Accountancy Model Question Paper 2 English Medium

General Instructions:

1. The question paper comprises of four parts.
2. You are to attempt all the parts. An internal choice of questions is provided wherever applicable.
3. All questions of Part I, II, III and IV are to be attempted separately.
4. Question numbers 1 to 20 in Part I are Multiple Choice Questions of one mark each.
   These are to be answered by choosing the most suitable answer from the given four alternatives and writing the option code and the corresponding answer
5. Question numbers 21 to 30 in Part II are two-mark questions. These are to be answered in about one or two sentences.
6. Question numbers 31 to 40 in Part III are three-mark questions. These are to be answered in above three to five short sentences.
7. Question numbers 41 to 47 in Part IV are five-mark questions. These are to be answered in detail Draw diagrams wherever necessary.

Time: 3:00 Hours
Maximum Marks: 90

PART – I

Answer all the questions. Choose the correct answer: [20 × 1 = 20]

Question 1.
Which one of the following is not a branch of accounting?
(a) Financial accounting
(b) Management accounting
(c) Human resources accounting
(d) None of the above
Answer:
(d) None of the above

Question 2.
Financial position of a business is ascertained on the basis of ……………………….
(a) Journal
(b) Trial balance
(c) Balance sheet
(d) Ledger
Answer:
(c) Balance sheet

Question 3.
The profounder of double entry system of book – keeping?
(a) J.R. Batli boi
(b) Luca Pacioli
(c) Old Kesal
(d) Menhar
Answer:
(b) Luca Pacioli

Question 4.
The concept which assumes that a business will last indefinitely is ………………………..
(a) Business entity
(b) Going concern
(c) Periodicity
(d) Conservation
Answer:
(b) Going concern

Question 5.
A firm has assets of ₹1,00,000 and the external liabilities of ₹60,000. Its capital would be ………………………….
(a) ₹1,60,000
(b) ₹60,000
(c) ₹1,00,000
(d) ₹40,000
Answer:
(d) ₹40,000

Question 6.
The incorrect accounting equation is ………………………
(a) Assets = Liabilities + Capital
(b) Assets = Capital + Liabilities
(c) Liabilities = Assets + Capital
(d) Capital = Assets – Liabilities
Answer:
(c) Liabilities = Assets + Capital

Question 7.
J.F means ………………………….
(a) Ledger page number
(b) Journal page number
(c) Voucher number
(d) Order number
Answer:
(b) Journal page number

Question 8.
The process of finding the net amount from the totals of debit and credit columns in a ledger is known as ……………………….
(a) Casting
(b) Posting
(c) Journalising
(d) Balancing
Answer:
(d) Balancing

Question 9.
The trial balance contains the balances of ………………………..
(a) Only personal accounts
(b) Only real account
(c) Only nominal accounts
(d) All accounts
Answer:
(d) All accounts

Question 10.
Which of the following is/are the objective(s) of preparing trial balance?
(a) Serving as the summary of all the ledger accounts.
(b) Helping in the preparation of final accounts.
(c) Examining arithmetical accuracy of accounts.
(d) (a), (b) and (c)
Answer:
(d) (a), (b) and (c)

Question 11.
Sales book is used to record ……………………..
(a) All sales of goods
(b) All credit sales of assets
(c) All credit sales of goods
(d) All sales of assets and goods
Answer:
(c) All credit sales of goods

Question 12.
The total of the sales book is posted periodically to the credit of ………………………
(a) Sales account
(b) Cash account
(c) Purchases account
(d) Journal proper
Answer:
(a) Sales account

Question 13.
When a firm maintains a simple cash book, it need not maintain ………………………..
(a) Sales a/c in the ledger
(b) Purchases a/c in the ledger
(c) Capital a/c in the ledger
(d) Cash a/c in the ledger
Answer:
(d) Cash a/c in the ledger

Question 14.
Debit balance in the bank column of the cash book means …………………………
(a) Credit balance as per bank statement
(b) Debit balance as per bank statement
(c) Overdraft as per cash book
(d) None of the above
Answer:
(a) Credit balance as per bank statement

Question 15.
The difference in trial balance is taken to ……………………….
(a) The capital a/c
(b) The trading a/c
(c) The suspense a/c
(d) The Profit and loss a/c
Answer:
(c) The suspense a/c

Question 16.
Under the written down value method of depreciation, the amount of depreciation is …………………………
(a) Uniform in all the years
(b) Decreasing every year
(c) Increasing every year
(d) None of the above
Answer:
(b) Decreasing every year

Question 17.
Interest on bank deposits is ………………………..
(a) Capital receipt
(b) Revenue receipt
(c) Capital expenditure
(d) Revenue expenditure
Answer:
(b) Revenue receipt

Question 18.
Net profit of the business increases the …………………………
(a) Drawings
(b) Receivables
(c) Debts
(d) Capital
Answer:
(d) Capital

Question 19.
Closing stock is valued at ………………………
(a) Cost price
(b) Market price
(c) Cost price or market price whichever is higher
(d) Cost price or net realisable value whichever is lower
Answer:
(d) Cost price or net realisable value whichever is lower

Question 20.
Which one is not a component of computer system?
(a) Input unit
(b) Output unit
(c) Data
(d) CPU
Answer:
(c) Data

PART – II

Answer any seven questions in which question No. 21 is compulsory. [7 × 2 = 14]

Question 21.
Mention two objectives of Accounting?
Answer:

1. To keep a systematic record of financial transactions and events.
2. To ascertain the profit or loss of the business enterprise.

Question 22.
What is Compound entry?
Answer:
Compound entry is an entry in which more than two accounts are involved. Either more than one account is debited or more than one account is credited or both.

Question 23.
What is Balance method?
Answer:
In this method, the balance of every ledger account either debit or credit, as the case may be, is recorded in the trial balance against the respective accounts. The balance method is widely used, as it helps in the preparation of financial statements.

Question 24.
Who is drawee?
Answer:
The person who has to make the payment or who accepts to make the payment is called the drawee, i.e., a debtor.

Question 25.
What are the types of petty cash book?
Answer:

1. Simple petty cash book
2. Analytical petty cash book.

Question 26.
Write two examples for error of principle?
Answer:

1. Sale of old furniture on credit for ₹500 was entered in the sales book.
2. Wages of ₹600 paid for installation of a new machine is debited to wages account,

Question 27.
Write any two objectives of providing depreciation?
Answer:

1. To find out the true profit or loss.
2. To present the true and fair view of financial position.

Question 28.
Write any two examples of revenue receipt?
Answer:

1. Rent received
2. Proceeds from sale of goods.

Question 29.
What is outstanding expenses?
Answer:
Expenses which have been incurred in the accounting period but not paid till the end of the accounting period are called outstanding expenses.

Question 30.
Write any four features of computerised accounting system (CAS)?
Answer:

1. Simple and integrated
2. Speed
3. Accuracy
4. Reliability

PART – III

Answer any seven questions in which question No. 31 is compulsory. [7 × 3 = 21]

Question 31.
Explain the meaning of accounting?
Answer:
Accounting is the systematic process of identifying, measuring, recording, classifying, summarising, interpreting and communicating financial information. Accounting gives information on;

1. The resources available
2. How the available resources have been employed, and
3. The results achieved by their use.

Question 32.
Show accounting equation from the following information:

1. Started business with cash ₹80,000.
2. Goods bought on credit from Raj ₹10,000.
3. Purchased furniture for cash ₹6,000.

Answer:

Question 33.
Enter the following transactions in a single column cash book of Pandeeswari for the month of June, 2017?

Answer:

Question 34.
Prepare a Sales Account from the following transactions?

Answer:

Question 35.
From the following balances of Arjun, prepare the Trial Balance as on 31^st March, 2018?
Answer:

Question 36.
From the following particulars of Siva and Company, prepare a bank reconciliation statement as on 31^st December, 2017?

1. Credit balance as per cash book ₹12,000.
2. A cheque of ₹1,200 issued and presented for payment to the bank, wrongly credited in the cash book as ₹2,100.
3. Debit side of bank statement was undercast by ₹100.

Answer:

Question 37.
The following errors was detected before preparation of trial balance. Rectify them?

1. The total of rent received account is carried forward ₹900 short.
2. The total of salary account is carried forward ₹1,100 short.
3. Sales returns book is over cast ₹800.

Answer:

1. Rent received account is to be credited with ₹900.
2. Salary account is to be debited with ₹1,100.
3. Sales returns account should be credited with ₹800.

Question 38.
Find out the rate of depreciation under straight line method from the following details: Original cost of the asset ₹10,000; Estimated life of the asset 10 years; Estimated scrap value at the end ₹2,000?
Answer:

Question 39.
State whether they are capital and revenue:

1. Construction of buildings ₹10,00,000.
2. Repairs to furniture ₹50,000.
3. White – washing the building ₹80,000.

Answer:

1. Capital expenditure
2. Revenue expenditure
3. Revenue expenditure

Question 40.
Pass adjusting entries for the following?

1. The Closing stock was valued at ₹5,000;
2. Outstanding salaries ₹150;
3. Insurance prepaid ₹450;

Answer:

PART – IV

Answer all the questions. [7 × 5 = 35]

Question 41 (a).
Bragathish is a trader dealing in electronic goods who commenced his business in 2015, for the following transactions took place in the month of March, 2018. Pass Journal entries?

Answer:

[OR]

(b) The following errors were located after the preparation of the trial balance. Assume that there exists a suspense account. Pass journal entries to rectify them?

1. The total of purchases book was undercast by ₹100.
2. The total of the discount column on the debit side of cash book ₹575 were not posted.
3. The total of one page of the sales book for ₹5,975 were carried forward to the next page as ₹5,795.
4. Salaries ₹1,800 were posted as ₹18,000.
5. Purchase of goods on credit from Mukilan for ₹150 have been posted to his account as ₹1,500.

Answer:

Question 42 (a).
Show the effect of following business transactions on the accounting equation:

1. Anbu started business with cash ₹20,000; goods ₹12,000 and machine ₹8,000.
2. Purchased goods from Ramani on credit ₹7,000.
3. Payment made to Ramani in full settlement ₹6,900.
4. Sold goods to Raj an on credit costing ₹5,400 for ₹6,000.
5. Received from Raj an ₹5,800 in full settlement of his account.

Answer:

(b) A furniture costing ₹5,000 was purchased on 01.01.2016, the installation charges being ₹1,000. The furniture is to be depreciated @ 10% p.a. on the diminishing balance method. Pass Journal entries for the first two years?
Answer:

Question 43 (a).
Journalise the following transactions and past them to the ledger?

Answer:

[OR]

(b) Classify the following receipts into capital or revenue?

1. Sale proceeds of goods ₹75,000
2. Loan borrowed from hank ₹2,50,000
3. Sale of investment ₹1,20,000
4. Commission received ₹30,000
5. ₹1,400 wages paid in connection with the erection of new machinery

Answer:

1. Revenue
2. Capital
3. Capital
4. Revenue
5. Capital

Question 44 (a).
Prepare trail balance as on 31^st January, 2017?

Answer:

(b) From the following information, prepare Trading and Profit & Loss A/c of Abdul Rahuman for the year ending 31^st December, 2016 and Balance Sheet as on that date. The closing stock on 31^st December, 2016 was valued ₹2,000?

Answer:

Question 45 (a).
Prepare purchase book and Purchase returns book from the following of Robert Funiture Mart?

Answer:

[OR]

(b) The following trial balance was extracted from the books of Arun Traders as on 31^st March, 2018?

Adjustments:

1. Depreciate plant & machinery @ 20%.
2. Wages outstanding amounts to ₹750.
3. Half of repairs and maintenance paid is for the next year.
4. Closing stock was valued at ₹15,000.
   Prepare Trading and Profit and Loss A/c for the year ending 31^st March, 2018 and Balance sheet as on that date.

Answer:

Question 46 (a).
Prepare Three Column Cash book in the books of Thiru Durairaj?

Answer:

[OR]

(b) Enter the following transactions in Ahamed’s Cash book discount and Cash columns?

Answer:

Question 47 (a).
From the following particulars of Raheem traders, prepare a bank reconciliation statement as on 31^st March, 2018?

1. Overdraft as per cash book ₹2,500.
2. Debit side of cash book was undercast by ₹700.
3. Amount received by bank through RTGS amounting ₹2,00,000 omitted in the cash book.
4. Two cheques issued for ₹1,800 and ₹2,000 on 29^th March 2018. Only the second cheque is presented for payment,
5. Insurance premium on car for ₹1,000 paid by the bank as per standing instructions not recorded in the cash book.

Answer:

[OR]

(b) Prepare an analytical petty cash book under imprest system?

Answer:

Students can Download Tamil Nadu 11th Accountancy Model Question Paper 1 English Medium Pdf, Tamil Nadu 11th Accountancy Model Question Papers helps you to revise the complete Tamilnadu State Board New Syllabus, helps students complete homework assignments and to score high marks in board exams.

TN State Board 11th Accountancy Model Question Paper 1 English Medium

General Instructions:

1. The question paper comprises of four parts.
2. You are to attempt all the parts. An internal choice of questions is provided wherever applicable.
3. All questions of Part I, II, III and IV are to be attempted separately.
4. Question numbers 1 to 20 in Part I are Multiple Choice Questions of one mark each.
   These are to be answered by choosing the most suitable answer from the given four alternatives and writing the option code and the corresponding answer
5. Question numbers 21 to 30 in Part II are two-mark questions. These are to be answered in about one or two sentences.
6. Question numbers 31 to 40 in Part III are three-mark questions. These are to be answered in above three to five short sentences.
7. Question numbers 41 to 47 in Part IV are five-mark questions. These are to be answered in detail Draw diagrams wherever necessary.

Time: 3:00 Hours
Maximum Marks: 90

PART – I

Answer all the questions. Choose the correct answer: [20 × 1 = 20]

Question 1.
Which one is the function of Accounting?
(a) Decision making
(b) Systematic records
(c) Legal evidence
(d) Preparation of balance sheet
Answer:
(a) Decision making

Question 2.
………………….. is the capability of a person or an enterprise to pay the debts.
(a) Solvency
(b) Creditor
(c) Bad debts
(d) Income
Answer:
(a) Solvency

Question 3.
The first step in the accounting process is …………………….. and recording.
(a) Book – keeping
(b) Identifying
(c) Accountancy
(d) Journal
Answer:
(b) Identifying

Question 4.
………………………. concept implies that only those transactions, which can be expressed in terms of money are recorded in the accounts.
(a) Money measurement concept
(b) Business entity concept
(c) Going concern concept
(d) Cost concept
Answer:
(a) Money measurement concept

Question 5.
CDM expands ……………………..
(a) Cash Deposit Machine
(b) Credit Debts Method
(c) Commerce Document Mode
(d) None of these
Answer:
(a) Cash Deposit Machine

Question 6.
Which one is the owner’s equity?
(a) Creditors
(b) Bank
(c) Capital
(d) Debtors
Answer:
(c) Capital

Question 7.
The process of recording in the ledger is called ………………………
(a) Journal
(b) Journalising
(c) Ledger
(d) Posting
Answer:
(d) Posting

Question 8.
Total of debit = Total of credit = ?
(a) Debit balance
(b) Credit balance
(c) Nil balance
(d) To balance bld
Answer:
(c) Nil balance

Question 9.
Which one is in correct order (ascending)?
(a) Journal, ledger, trial balance
(b) Trial balance, journal, ledger
(c) Ledger, journal, trial balance
(d) Trial balance, ledger, journal
Answer:
(a) Journal, ledger, trial balance

Question 10.
Subsidiary books (special journal) for entering ……………………..
(a) Cash transactions
(b) Non – cash transactions
(c) Both
(d) Journal proper
Answer:
(b) Non – cash transactions

Question 11.
………………………. serves as both journal and ledger.
(a) Cash book
(b) Sales book
(c) Purchases book
(d) All of these
Answer:
(a) Cash book

Question 12.
Cash book shows debit balance means ……………………..
(a) Favourable balance
(b) Overdraft
(c) Negative balance
(d) None of these
Answer:
(a) Favourable balance

Question 13.
The total of sales book ₹9,240 was debited in the sales account as ₹9,420.
(a) Error of commission
(b) Error of omission
(c) Error of partial omission
(d) Error of principle
Answer:
(a) Error of commission

Question 14.
……………………… assets have a long span of life.
(a) Bank
(b) Cash
(c) Debtors
(d) Fixed assets
Answer:
(d) Fixed assets

Question 15.
The amount of depreciation goes on decreasing year after year …………………….
(a) Revaluation method
(b) Written down value method
(c) Straight line method
(d) Depletion method
Answer:
(b) Written down value method

Question 16.
Overhaul expenses is an example for …………………………
(a) Capital expenditure
(b) Revenue expenditure
(c) Deferred revenue expenditure
(d) Capital receipts
Answer:
(a) Capital expenditure

Question 17.
……………………….. is the arrangement of various assets and liabilities in a proper order.
(a) Marshalling
(b) Balance sheet
(c) Assets
(d) Liabilities
Answer:
(a) Marshalling

Question 18.
Income tax paid by the business is not a business expenditure and is treated as ………………………..
(a) Capital
(b) Drawings
(c) Revenue
(d) Expense
Answer:
(b) Drawings

Question 19.
……………………….. is the programming software.
(a) DOS
(b) Windows
(c) UBUNTU
(d) PASCAL
Answer:
(d) PASCAL

Question 20.
………………………. is the application software.
(a) PASCAL
(b) COBOL
(c) DOS
(d) MS – Office
Answer:
(d) MS – Office

PART – II

Answer any seven questions in which question No. 21 is compulsory: [7 × 2 = 14]

Question 21.
Define Accounting?
Answer:
American Accounting Association has defined accounting as “the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information.”

Question 22.
What are source documents?
Answer:
Source documents are the authentic evidences of financial transactions. These documents show the nature of transactions the date, the amount and the parties involved. Source documents include cash receipts, invoice, debit note, credit note, pay-in-slip, salary bills, wage bills, cheque record slips etc.

Question 23.
What are the methods of preparation of trial balance?
Answer:

1. Balance method
2. Total method
3. Total and balance method

Question 24.
Mention four types of subsidiary books?
Answer:

1. Purchases book
2. Sales book
3. Purchases return book
4. Sales return book

Question 25.
What is meant by Bank overdraft?
Answer:
It is not possible to have unfavourable cash balance in the cash book. But, it is possible to have unfavourable balance in the bank account. When the business is not having sufficient money in its bank account, it can borrow money from the bank.

Question 26.
What is meant by rectification of errors?
Answer:
Correction of errors in the books of accounts is not done by erasing, rewriting or striking the figures which are incorrect. Correcting the errors that has occured is called rectification. Appropriate entry is passed or suitable explanatory note is written in the respective account or accounts to neutralise the effect of errors.

Question 27.
What is meant by depreciation?
Answer:
The process of allocation of the relevant cost of fixed asset over its useful life is known as depreciation. It is an allocation of cost against the benefit derived from a fixed asset during an accounting period.

Question 28.
What is meant by revenue expenditure?
Answer:
The expenditure incurred for day to day running of the business or for maintaining the earning capacity of the business is known as revenue expenditure. It is recurring in nature. It is incurred to generate revenue for a particular accounting period.

Question 29.
Prepare Trading account in the books of Siva Shankar from the following figures:
Opening Stock ₹1,500; Šales ₹4,600; Purchases ₹3,500; Closing Stock ₹1,300:
Answer:

Question 30.
What is CAS?
Answer:
Computerised Accounting System (CAS) refers to the system of maintaining accounts using computers. It involves the processing of accounting transactions through the use of hardware and software in order to keep and produce accounting records and reports.

PART – III

Answer any seven questions in which question No. 31 is compulsory: [7 × 3 = 21]

Question 31.
How can we classify the components of CAS?
Answer:

1. Hardware
2. Software
3. People
4. Procedure
5. Data
6. Connectivity

Question 32.
Classify the following items into capital or revenue?

1. ₹50,000 spent for railway siding.
2. Loss on sale of old furniture ₹200.
3. Carriage paid on goods sold ₹500.

Answer:

1. Capital
2. Revenue
3. Revenue

Question 33.
An asset is purchased for ₹50,000. The rate of depreciation is 15% p.a. Calculate the annual depreciation for the first two years under diminishing balance method?
Answer:
Caluculation of depreciation for first two years. (On diminishing balance method).

Question 34.
On 1^st January, 2016, provision for doubtful debts account had a balance of ₹3,000. On December 31, 2016 sundry debtors amounted to ₹80,000. During the year, bad debts
to be written off were ₹2,000. A provision for 5% was required for next year. Pass adjusting journal entries?
Answer:

Question 35.
The following errors were located after the preparation of the trial balance. Rectify them.

1. Paid ₹50 to Anitha was wrongly debited to Vanitha account.
2. Sale of furniture for ₹500 was credited to sales account.
3. Purchased goods from Natarajan on credit for ₹750 was wrongly passed through sales book.

Answer:

Question 36.
From the following particulars of Siva and company, prepare a bank reconciliation statement as on 31^st December, 2017.

1. Credit balance as per cash book ₹12,000.
2. A cheque of ₹1,200 issued and presented for payment to the bank, wrongly credited in the cash book as ₹2,100.
3. Debit side of bank statement was undercast by ₹100.

Answer:
Bank Reconciliation Statement of Siva & company as on 31^st December, 2017

Question 37.
Enter the following transactions in a single column cash book of Seshadri for May, 2017?

Answer:

Question 38.
Prepare the trial balance from the following information:
Bank loan ₹3,00,000; Stock ₹2,70,000; Capital ₹2,50,000; Purchases ₹1,80,000; Debtors ₹4,00,000; ₹Sales 3,00,000.
Answer:

Question 39.
Prepare Anand’s account from the following data:

Answer:

Question 40.
Complete the followings:

Answer:
Completed informations:

PART – IV

Answer all the questions: [7 × 5 = 35]

Question 41 (a).
Mr. Vivek took a loan of ₹2,00,000 from State Bank of India, Chennai and number of installments is 84 months. Calculate the rate assuming payments ₹3,300 per month using appropriate function?
Answer:
Procedure:
1. Open a new spread sheet in MS – Excel

2. Enter values in the cells as given below

3. Compare RATE in the cell B6 by the formula
= RATE (B1, B2, B3, B4, B5) * 12
Answer 10%

[OR]

(b) From the following information, prepare bank reconciliation statement as on 31^st December, 2017 to find out the balance as per bank statement?

Answer:

Question 42 (a).
From the following information prepare an analytical Petty cash book under imprest system?

Answer:

[OR]

(b) Rectify the following errors assuming that the trial balance is yet to be prepared?

1. Sales book was undercast by ₹400.
2. Sales returns book was overcast by ₹500.
3. Purchases book was undercast by ₹600.
4. Purchases returns book was overcast by ₹700.
5. Bills receivable book was undercast by ₹800.

Answer:

1. Sales account should be credited with ₹400.
2. Sales returns account should be credited with ₹500.
3. Purchases account should be debited with ₹600.
4. Purchases returns account should be debited with ₹700.
5. Bills receivable account should be debited with ₹800.

Question 43 (a).
From the following transactions prepare three column cash book of Udhayakumar?

Answer:

[OR]

(b) Ramu Brothers purchased a machine on 1^st July 2016 at a cost of ₹14,000 and spent ₹1,000 on its installation. The firm writes off depreciation at 10% of original cost every year. The books are closed on 31^st December every year. Give journal entries and prepare machinery account and depreciation account for 2 years?
Answer:

Question 44 (a).
Prepare necessary subsidiary books in the books of Niranjan from the following transactions for the month of February, 2017?

Answer:

(b) Classify the following receipts into capital and revenue?

1. Sale proceeds of goods ₹75,000.
2. Loan borrowed from bank ₹2,50,000.
3. Sale of investment ₹1,20,000.
4. Commission received ₹30,000.
5. ₹1,400 wages paid in connection with the erection of new machinery.

Answer:

1. Revenue
2. Capital
3. Capital
4. Revenue
5. Capital

Question 45 (a).
Prepare the trial balance from the following balances of Babu as on 31^st March, 2016?

Answer:

(b) From the following information, prepare Profit & Loss account for the year ending 31^st December,2016?

Answer:

Question 46 (a).
Prepare Anand’s account from the following details?

Answer:

[OR]

(b) From the following adjustments, pass adjusting entries?

1. Outstanding wages ₹5,000.
2. Depreciation on machinery ₹1,000.
3. Interest on capital @ 5% on capital ₹20,000.
4. Interest on drawings ₹50.
5. Write off bad debts ₹500.

Answer:

Question 47 (a).
Pass Journal entries for the following transactions for the month of March, 2018?

Answer:

[OR]

(b) Prepare accounting equation from the following transactions and show balance sheet also?

1. Raj started business with cash ₹40,000.
2. Opened bank account with a deposit of ₹30,000.
3. Bought goods from Han on credit for ₹12,000
4. Raj withdrew cash for personal use ₹1,000.
5. Bought furniture by using debit card ₹10,000.

Answer:

Students can Download Tamil Nadu 11th Commerce Model Question Paper 5 English Medium Pdf, Tamil Nadu 11th Commerce Model Question Papers helps you to revise the complete Tamilnadu State Board New Syllabus, helps students complete homework assignments and to score high marks in board exams.

TN State Board 11th Commerce Model Question Paper 5 English Medium

General Instructions:

1. The question paper comprises of four parts.
2. You are to attempt all the parts. An internal choice of questions is provided wherever applicable.
3. All questions of Part I, II, III and IV are to be attempted separately.
4. Question numbers 1 to 20 in Part I are Multiple Choice Questions of one mark each.
   These are to be answered by choosing the most suitable answer from the given four alternatives and writing the option code and the corresponding answer
5. Question numbers 21 to 30 in Part II are two-mark questions. These are to be answered in about one or two sentences.
6. Question numbers 31 to 40 in Part III are three-mark questions. These are to be answered in above three to five short sentences.
7. Question numbers 41 to 47 in Part IV are five-mark questions. These are to be answered in detail Draw diagrams wherever necessary.

Time: 2:30 Hours
Maximum Marks: 90

PART – I

Choose the correct answer. Answer all the questions. [20 × 1 = 20]

Question 1.
The document which authorises to deliver the goods either in part or full is called …………………..
(a) Warehouse warrant
(b) Dock receipt
(c) Dock warrant
(d) None of these
Answer:
(c) Dock warrant

Question 2.
Which of the following is not correctly matched?
(a) Franchisee – An agent who buys the accounts receivables
(b) Factor – Trade mark of the seller
(c) Logistics – Knowledge process outsourcing
(d) BPO – Extension of transportation
Answer:
(d) BPO – Extension of transportation

Question 3.
WTO was established on ……………………..
(a) 1-1-1996
(b) 1-1-1997
(c) 1-1-1995
(d) 1-1-1994
Answer:
(c) 1-1-1995

Question 4.
Charter Party is a document related to which of the following transport?
(a) Air Transport
(b) Ocean Transport
(c) Railway Transport
(d) Motor transport
Answer:
(b) Ocean Transport

Question 5.
Charter party may also be known as ………………………
(a) Bill of lading
(b) Voyage charter
(c) Airway note
(d) Way bill
Answer:
(b) Voyage charter

Question 6.
Occupation of a bank official is …………………………
(a) Employment
(b) Business
(c) Profession
(d) Sole trader
Answer:
(a) Employment

Question 7.
Who is not an intermediary in the export trade from the following?
(a) Indent house
(b) Forwarding agent
(c) Commission agent
(d) Export trading house
Answer:
(a) Indent house

Question 8.
What is IGST?
(a) Integrated Goods and Services Tax
(b) Indian Goods and Services Tax
(c) Initial Goods and Services Tax
(d) All the above
Answer:
(a) Integrated Goods and Services Tax

Question 9.
Dock Receipt is a document issued by ………………………….
(a) Dock authorities
(b) Warehouse keeper
(c) Owner of the goods
(d) Manufacturer
Answer:
(a) Dock authorities

Question 10.
………………………… is not a type of general insurance.
(a) Marine insurance
(b) Life insurance
(c) Fidelity insurance
(d) Fire insurance
Answer:
(b) Life insurance

Question 11.
Trade middleman who acts as a link between wholesaler and customers refers to a ………………………..
(a) Producer
(b) Broker
(c) Retailer
(d) Customer
Answer:
(c) Retailer

Question 12.
……………………… are mobile traders who deal in low priced articles with no fixed place of business.
(a) Shopping malls
(b) Super markets
(c) Street stalls
(d) Itinerant traders
Answer:
(d) Itinerant traders

Question 13.
Public deposits are the deposits which are raised directly from ………………………
(a) The public
(b) The director
(c) The auditors
(d) The owners
Answer:
(a) The public

Question 14.
Income Tax is ………………………..
(a) A business tax
(b) A direct tax
(c) An indirect tax
(d) None of these
Answer:
(a) A business tax

Question 15.
Which bank has the power to issue bank notes?
(a) Central bank
(b) Commercial bank
(c) Co – operative banks
(d) Foreign banks
Answer:
(a) Central bank

Question 16.
The compensation given for a breach of contract is …………………………..
(a) Damage
(b) Remuneration
(c) Money
(d) Cheque
Answer:
(a) Damage

Question 17.
Which one of the following is not correctly matched?
(a) Sony Corporation – MNC
(b) Post and Telegraph – Departmental undertaking
(c) IDBI – Agricultural bank
(d) Steel Authority of India Ltd – Government company
Answer:
(c) IDBI – Agricultural bank

Question 18.
Find out which is not the classification of manufacturing Industries?
(a) Micro industries
(b) Synthetic industry
(c) Processing industry
(d) Assembling industry
Answer:
(a) Micro industries

Question 19.
Match List – I with List – II and select the correct answer using the codes given below:

List – I	List – II
(i) Indian Bank	1. Private sector bank
(ii) Karur vysya bank	2. Government company
(iii) Indian Airlines	3. Nationalised bank
(iv) Coal India Ltd	4. Public corporation

Answer:
Codes:

Question 20.
Socially responsible business provides goods at ……………………..
(a) High price
(b) Low price
(c) Reasonable price
(d) Moderate price
Answer:
(c) Reasonable price

PART – II

Answer any seven questions in which question No. 30 is compulsory. [7 × 2 = 14]

Question 21.
Give the meaning of crop insurance?
Answer:
This policy is to provide financial support to fanners in case of a crop failure due to drought or flood. It generally covers all risks of loss or damages relating to production of rice, wheat, millets, oil seeds and pulses etc.

Question 22.
Mention any four examples of public corporation?
Answer:
Examples of public corporation:

1. Life Insurance Corporation of India
2. The Indian Airlines
3. The Air India International
4. Food Corporation of India

Question 23.
What is meant by foreign bank?
Answer:
Banks which have registered office in a foreign country and branches in India are called foreign banks.

Question 24.
What is GATT?
Answer:
The General Agreement on Tariffs and Trade. (GATT) was signed at Geneva on 30th October 1947 by 23 countries. It came into effect on 1^st January 1948.

Question 25.
Describe any two advantages of water transport?
Answer:
Advantages of water transport:

1. It is the cheapest mode of transport.
2. It is most suitable for heavy loads.

Question 26.
A transport which is useful in hilly and remote areas. It is a means of transport in naval lifting device. What does it mean?
Answer:
It is the type of transport called pack animals. Animals like horse, mule, donkey, camel and elephant are known as pack animals. They are used for carrying small loads in backward areas, hilly tracks, forest regimes and deserts. They serve areas which are inaccessible to modem means of transport.

Question 27.
What is unlimited liability?
Answer:
The liability of the proprietor for the debts of the business is unlimited. The creditors have the right to recover their dues even from the personal property of the proprietor in case the business assets are not sufficient to pay their debts.

Question 28.
What are the services included in service business?
Answer:
Educational, medical, hospitality and banking are the services included in service businesses. Bank service is the nerve center of industry and commerce in a country.

Question 29.
What is meant by Marine Insurance?
Answer:
Marine insurance is a contract of insurance under which the insurer undertakes to indemnify the insured against marine losses. The insured pays the premium for the insurer’s guarantee to make good the looses arising from marine perils. Marine perils may be damage of ship, fire, etc.

Question 30.
What is credit co – operatives?
Answer:
Co – operative credit societies are societies formed for providing short-term financial help to their members. Agriculturists, artisans, industrial workers, salaried employees, etc., form these credit societies.

PART – III

Answer any seven questions in which question No. 40 is compulsory. [7 × 3 = 21]

Question 31.
The functions of commercial banks are:
(a) Primary functions
(b) Secondary functions. Secondary functions may be of agency and general utility functions? Describe any three utility services?
Answer:
General utility functions:

1. Accepting bills on behalf of customers: Banks accept bills on behalf of customers and make payments to the foreign exporter.
2. Issue of demand drafts and Banker’s cheques: Demand drafts and banker’s cheques are issued to the public and customers.
3. Safety lockers: Valuable documents, jewels can be kept in a vault provided by the bank for rent.

Question 32.
Goods are manufactured in one place and it may be demanded throughout the world. Goods may reach the consumers by a number of middlemen. Who is the first middleman in the trade? Explain any three features of that middleman?
Answer:
The first middleman in the trade or distribution is called wholesaler. A wholesaler buys goods directly from manufacturers and sells them to the retailers.

Features:

1. Wholesalers buy goods directly from producers.
2. Wholesalers buy goods in large quantities and sell in small quantities.
3. Wholesalers sell different varieties of a particular kind of product.

Question 33.
The importer places the order either directly or through an indent house. It is known as indent. Indent may be of three types. What are the three types of indents? Explain?
Answer:
There are three types of indent:

1. Open Indent: It gives complete freedom to exporter to choose type of goods, price, quality, method of packing, etc.
2. Closed Indent: It does not give any freedom to exporter. Importer specifies the type of goods, price, quality, etc.
3. Confirmatory Indent: An indent is to be confirmed by importer/his agent and the final indent is sent by importer thereafter.

Question 34.
Explain the differences between Direct tax and Indirect tax?
Answer:

Question 35.
Mention the importance of banking service?
Answer:
Banking service is the nerve center of industry and commerce in a country. It plays a vital role by providing the money required for their regular functioning and development. There are many types of banks rendering different types of services.

Question 36.
This organisation is useful to the farmers in a village. It helps in the purpose of cultivation. Identify the form of organisation and briefly explain about it?
Answer:
This form of organisation is ‘co-operative farming societies’. The societies in a village collect their land together for the purpose of cultivation, purchase the inputs for cultivation and market the crops for the sales.

Question 37.
State the meaning of retail trade?
Answer:
Retail trade deals with the distribution of goods in small quantities to the end consumers. It represents the final stage in the distribution where goods are transferred from the hands of manufacturers or wholesalers to the users. If the sales are made directly to the end consumers it will be considered as retailing.

Question 38.
What is the classification of foreign trade?
Answer:
Types of Foreign Trade:

1. Import Trade: Import trade means buying goods from a foreign country for domestic use.
2. Export Trade: Export trade means the sale of domestic goods to foreign countries.
3. Entrepot Trade: Entrepot trade means importing of goods from one country and exporting the same to foreign countries.

Question 39.
What are the various rules regarding damages?
Answer:
Generally in the following cases, the court grants specific performance:

1. When the act agreed to be done is such that compensation in money for its non-performance is not sufficient.
2. When it is probable that compensation in money cannot be received for the non-performance of the act agreed to be done.
3. When there is no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done.

Question 40.
The scheme was introduced by the RBI in August 1996. These are small private sector banks established in rural and semi urban areas. What is the name of the bank? Explain?
Answer:
Local Area Bank (LAB) scheme was introduced by the RBI in August 1996. LABs are small private sector banks established in rural and semi-urban areas. Each bank serves two or three adjoining districts only. Their main objective is to mobilise rural savings (accept deposits) and invest them in the same areas.

Examples:

1. Coastal Local Area Bank, Vijayawada, Andhra Pradesh.
2. Subhadra Local Area Bank Limited, Kolhapur, Maharashtra

PART – IV

Answer all the questions. [7 × 5 = 35]

Question 41.
(a) Discuss the advantages of transport?
Answer:
Advantages of railway transport:

1. Railways are well suited for carrying heavy and bulky goods over long distances.
2. It can provide long distance travel throughout the day and night with unbroken services.

Advantages of inland waterways:

1. It is considered as the cheapest mode of transport among the other modes of transport.
2. It is most suitable for heavy loads.

Advantages of air transport:

1. It provides a regular, convenient, efficient and quick service.
2. Perishable goods like fruits, vegetables, egg, meat, etc., can be transported quickly.

[OR]

(b) Discuss the causes of risk?
Answer:
Business risk arises due to a variety of causes which are classified as follows:
1. Natural Causes:
Human beings have little control over natural calamities like flood, earthquake, lightning, heavy rains, famine, etc. These result in heavy loss of life, property, and income in business.

2. Human Causes:
Human causes include such unexpected events like dishonesty, carelessness or negligence of employees, stoppage of work due to power failure, strikes, riots, management inefficiency, etc.

3. Economic Causes:
These include uncertainties relating to demand for goods, competition, price, collection of dues from customers, change of technology or method of production, etc. Financial problems like rise in interest rate for borrowing, levy of higher taxes,, etc., also come under this type of causes as they result in higher unexpected cost of operation of business.

4. Other Causes:
These are unforeseen events like political disturbances, mechanical failures such as the bursting of boiler, fluctuations in exchange rates, etc. which lead to the possibility of business risks.

Question 42 (a).
Sole proprietorship is a form of business organisation in which an individual introduces his own capital, uses his own skill and intelligence in the management of the business? Explain the characteristics of a sole trader?
Answer:
Business owned and controlled by a single person is known as sole trading business.

The following are the characteristics of a sole trader:

1. Ownership by one man: This is owned by single person. The sole trader contributes the required capital.
2. Freedom of work and Quick decisions: The sole trader is the owner, so he need not consult with others. Hence he can take quick decision.
3. Unlimited liability: When his business assets are not sufficient to pay off the business debts he has to pay from his personal property.
4. Enjoying Entire Profit: All the benefits earned by the sole trader is enjoyed by him alone.
5. Absence of Government Regulation: A sole trading concern is free from Government regulations. No legal formalities are to be observed in its formation and management.
6. Maintenance of Secrecy: Since the trader manages all the affairs of the business, the secrecy can be maintained easily.

[OR]

(b) Partnership is the relation between persons who have agreed to share the profits of a business carried on by all. It is the result of an agreement. Closing of business is also by an agreement. It is called Dissolution of Partnership. Explain the dissolution of partnership firm without the order of the court?
Answer:
Dissolution of a partnership firm takes place in two ways:

1. Without the order of the court and
2. By the order of the court

1. Without the order of the court:

1. By agreement or mutual consent: A firm may be dissolved when all the partners agree to close the affairs of the firm.
2. By insolvency of all the partners but one: If any one of the partners is adjudged as insolvent, it is necessary to dissolve the firm.
3. When the objective becomes illegal: When the business carried on by the partnership becomes illegal, the partnership firm is automatically dissolved.
4. By notice of dissolution: In the case of partnership at will, if any partner gives in writing to close the firm, the firm will be dissolved.
5. On certain contingencies:
   • On the expiry of the period of the firm.
   • On the completion of a business.
   • On the death of a partner.
   • On the retirement of a partner.
   • On the insolvency of a partner.

Question 43 (a).
What are the features of public corporation?
Answer:
1. Special Statute:
A public corporation is created by a special Act of the Parliament or the State Legislature. The Act defines its powers, objectives, functions and relations with the ministry and the Parliament (or State Legislature).

2. Separate Legal Entity:
A public corporation is a separate legal entity with perpetual succession and common seal It has an existence, independent of the Government. It can own property; can make contracts and file suits, in its own name.

3. Capital Provided by the Government:
The capital of a public corporation is provided by the Government or by agencies controlled by the government. However, many public corporations have also begun to raise money from the capital market.

4. Financial Autonomy:
A public corporation enjoys financial autonomy. It prepares its own budget; and has authority to retain and utilize its earnings for its business.

5. Management by Board of Directors:
Its management is vested in a Board of Directors, appointed or nominated by the Government. But there is no Governmental interference in the day-to-day working of the corporation.

[OR]

(b) Partnership is formed according to Partnership Act. There are various kinds of partners based on capital and administration. Explain any five kinds of partners?
Answer:
Partnership is formed by agreement. In this partnership, the member in a firm is called as partner. There are various kinds of partners. They are as follows:

1. Active partner:
A partner who takes an active part in the conduct of the partnership business is known as an active partner.

2. Sleeping or Dormant partner:
A partner contributes capital and shares in the profits or losses of the firm, but does not take part in the management of the business is known as sleeping partner.

3. Nominal partner:
Such a partner neither contributes any capital nor is he entitled to manage the affairs of the business. He lends only his name to strengthen the firm.

4. Partner in profits only:
When a person joins a firm as a partner on the condition that he is entitled to share profits in the firm, he is called as a partner in profits only.

5. Secret partner:
A secret partner is one whose association is not known to the general public.

Question 44 (a).
Explain various types of insurance?
Answer:
Insurance covers various types of risks. All contract of insurance can be broadly classified as follows:

1. Life Insurance (or) Life Assurance
2. Non – life Insurance (or) General Insurance

It can be further classified into:

1. Fire Insurance
2. Marine Insurance
3. Health Insurance and
4. Miscellaneous Insurance

1. Life Insurance:
Life Insurance may be defined as a contract in which the insurance company called insurer undertakes to insure the life of a person called assured in exchange of a sum of money called premium which may be paid in one lump sum or monthly, quarterly, half yearly or yearly and promises to pay a certain sum of money either on the death of the assured or on expiry of certain period.

2. Non – Life Insurance or General insurance:
It refers as the insurance not related to human but related to properties.

3. Fire Insurance:
Fire insurance is a contract whereby the insurer, in consideration of the premium paid, undertakes to make good any loss or damage caused by a fire during a specified period upto the amount specified in the policy.

4. Marine Insurance:
Marine insurance is a contract of insurance under which the insurer undertakes to indemnify the insured in the manner and to the extent thereby agreed against marine losses. The insured pays the premium in consideration of the insurer’s (underwriter’s) guarantee to make good the losses arising from marine perils or perils of the sea.

5. Health Insurance:
In mid 80’s, most of the hospitals in India were government owned and treatment was free of cost. With the advent of Private Medical Care, the need for Health Insurance was felt and various Insurance Companies introduced Health Insurance as a Product. Presently the health insurance exists primarily in the form of ‘Mediclaim policy’.

[OR]

(b) Explain the functions of retailers?
Answer:

1. Buying: A retailer buys a wide variety of goods from different wholesalers after estimating customer’s demand.
2. Storage: A retailer maintains a ready stock of goods and displays them in the shop.
3. Selling: The retailer sells the goods in small quantities according to the demand taste and preference of consumers.
4. Grading and Packing: The retailer grades the goods which are not graded by manufacturers and wholesalers.
5. Risk – bearing: A retailer always keeps stock of goods in anticipation of demand and bears the risk of loss due to fire, theft, spoilage, price fluctuations, etc.
6. Transportation: Retailers often carry goods from manufacturers to their retail outlets.
7. Financing: Some retailers grant credit facilities to his customers and provide the facility of return or exchange of goods.

Question 45 (a).
Explain any four personal investment avenues?
Answer:
1. Public Provident Fund (PPF):
It is the safest long – term investment option for the investors in India. It is totally tax – free. PPF account can be opened in bank or post office. The money deposited cannot be withdrawn before 15 years and an investor can earn compound interest from this account.

However the investor can extend the time frame for the next five years if the investor does not opt to withdraw the amount matured for payment at maturity date. PPF investor can take loan against PPF account when he/she experiences financial difficulties.

2. Mutual Funds:
An individual investor who wants to invest in equities and bond with a balance of risk and return generally can invest in mutual funds. Nowadays people invest in stock markets through a mutual fund. Systematic investment plan is one of the best investment options in India.

3. Direct Equity or Share Purchase:
An individual can opt for investment in shares. But he has to analyse the market price of various shares traded in stock exchange, reputation of the company, consistency in the payment of dividend, the nature of the project undertaken by the company, growth prospects of industry in which a company is operating, before investing in shares. If the investment is made for a long time, it may yield good return.

4. Real Estate Investment:
Real estate is one of the fastest growing sectors in India. Buying a flat or plot is supposed to be the best decision amongst the investment options. The value of the real asset may increase substantially depending upon the area of location and other support facilities available therein.

[OR]

(b) Explain any four warehousing documents?
Answer:
Warehouses means a place where goods are stored for future use. For keeping the goods, the various documents are needed; they are as follows:

1. Warehousing Warrants: It is a document issued in favour of goods by the warehouse keeper. It is also used as a document of title to goods.
2. Warehouse Keeper’s receipt: It is a document issued by the warehouse keeper, which acknowledges there receipt of goods from the owner of the goods.
3. Dock Warrant: Dock warrant is a document of title of goods issued by the dock authorities. This document certifies that the dock authorities hold the goods.
4. Dock Receipt: Dock receipt is an acknowledgement of receipt of goods issued by the dock authorities to the owner of the goods. It is not a document of title to goods.
5. Delivery Order: This is a document through which the depositor directs the warehouse keepers to deliver the goods to the party mentioned in the document.

Question 46 (a).
Industry means, which is connected with conversion of raw materials into finished goods. It may be of various types. Explain: (a) Analytical industry (b) Genetic industry and (c) Construction industry?
Answer:

1. Analytical Industry: It analyses and separates different elements from the same materials, as in the case of oil refinery.
2. Genetic Industries: These industries remain engaged in breeding plants and animals for their use in further reproduction. The seeds, nursery companies, poultry, diary, piggery, hatcheries, nursery, fisheries, apiary etc are classic examples of genetic industries.
3. Construction Industries: These industries are involved in the ,construction of building, dams, bridges, roads, as well as tunnels and canals.

[OR]

(b) Explain the procedure for the registration of partnership firm?
Answer:

1. Name of the firm.
2. The principal place of business.
3. Name of other places where the firm carried on business.
4. Names and addresses of all the partners.
5. The date on which each partner joined the firm.
6. The duration of the firm.

This statement signed by all the partners should be produced to the Registrar of Firms along with the necessary registration fee of Rs.3. Any change in the above particulars must be communicated to the Registrar within 14 days of such alteration.

Question 47 (a).
Partnership is formed by agreement. It is desirable to have a written agreement. What is the name of the agreement? Explain the contents of it?
Answer:

1. Name: Name of the Firm.
2. Nature of Business: Nature of the proposed business to be carried on by the partners.
3. Duration of Partnership: Duration of the partnership business whether it is to be run for a fixed period of time or whether it is to be dissolved after completing a particular venture,
4. Capital Contribution: The capital is to be contributed by the partners. It must be remembered that capital contribution is not necessary to become a partner for, one contribute his organizing power, business acumen, managerial skill etc., instead of capital.
5. Withdrawal from the Firm: The amount that can be withdrawn from the firm by each partner.
6. Profit/Loss Sharing: The ratio in which the profits or losses are to be shared. If the profit sharing ratio is not specified in the deed, all the partners must share the profits and bear the losses equally.
7. Interest on Capital: Whether any interest is to be allowed on capital and if so, the rate of interest.
8. Rate of Interest on Drawing: Rate of interest on drawings, if any.
9. Loan from Partners: Whether loans can be accepted from the partners and if so the rate of interest payable thereon.
10. Account Keeping: Maintenance of accounts and audit.
11. Salary and Commission to Partners: Amount of salary or commission payable to partners for their services. (Unless this is specifically provided, no partner is entitled to any salary).
12. Retirement: Matters relating to retirement of a partner. The arrangement to be made for paying out the amount due to a retired or deceased partner must also be stated.
13. Goodwill Valuation: Method of valuing goodwill on the admission, death or retirement of a partner.
14. Distribution of Responsibility: Distribution of managerial responsibilities. The work that is entrusted to each partner is better stated in the deed itself.
15. Dissolution Procedure: Procedure for dissolution of the firm and the mode of settlement of accounts thereafter.
16. Arbitration of Dispute: Arbitration in case of disputes among partners. The deed should provide the method for settling disputes or difference of opinion. This clause will avoid costly litigations.

[OR]

(b) Explain any five principles of co – operatives?
Answer:
1. Voluntary and Open Membership:
Co – operatives are voluntary organisations, open to all people able to use its services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.

2. Democratic Member Control:
Co – operatives are democratic organisations controlled by their members those who buy the goods or use the services of the co – operative who actively participate in setting policies and making decisions.

3. Member’s Economic Participation:
Members contribute equally to, and democratically control, the capital of the co – operative. This benefits members in proportion to the business they conduct with the co-operative rather than on the capital invested.

4. Autonomy and Independence:
Co – operatives are autonomous, self – help organisations controlled by their members. If the co – operative enters into agreements with other organisations or raises capital from external sources, it is done so based on terms that ensure democratic control by the members and maintains the co – operative’s autonomy.

5. Education, Training, and Information:
Co – operatives provide education and training for members, elected representatives, managers and employees so they can contribute effectively to the development of their cooperative. Members also inform the general public about the nature and benefits of cooperatives.

Students can Download Tamil Nadu 11th Commerce Model Question Paper 4 English Medium Pdf, Tamil Nadu 11th Commerce Model Question Papers helps you to revise the complete Tamilnadu State Board New Syllabus, helps students complete homework assignments and to score high marks in board exams.

TN State Board 11th Commerce Model Question Paper 4 English Medium

General Instructions:

1. The question paper comprises of four parts.
2. You are to attempt all the parts. An internal choice of questions is provided wherever applicable.
3. All questions of Part I, II, III and IV are to be attempted separately.
4. Question numbers 1 to 20 in Part I are Multiple Choice Questions of one mark each.
   These are to be answered by choosing the most suitable answer from the given four alternatives and writing the option code and the corresponding answer
5. Question numbers 21 to 30 in Part II are two-mark questions. These are to be answered in about one or two sentences.
6. Question numbers 31 to 40 in Part III are three-mark questions. These are to be answered in above three to five short sentences.
7. Question numbers 41 to 47 in Part IV are five-mark questions. These are to be answered in detail Draw diagrams wherever necessary.

Time: 2:30 Hours
Maximum Marks: 90

PART – I

Choose the correct answer. Answer all the questions. [20 × 1 = 20]

Question 1.
……………………….. is a special type of bond issued in the currency other than the home currency.
(a) Government bond
(b) Foreign currency convertible bond
(c) Corporate bond
(d) Investment bond
Answer:
(b) Foreign currency convertible bond

Question 2.
……………………. acts as connective link between the producer and the consumer.
(a) Trade
(b) Industry
(c) Commerce
(d) Business
Answer:
(a) Trade

Question 3.
From the following which is not a recent trend in transportation?
(a) Metro rail
(b) Pipeline transport
(c) Bullock carts
(d) Ropeway transport
Answer:
(c) Bullock carts

Question 4.
Minimum how much amount can be transferred through RTGS?
(a) Any amount
(b) Rs 50,000
(c) Rs 2 lakhs
(d) Rs 5 Lakhs
Answer:
(c) Rs 2 lakhs

Question 5.
Goods are imported for the purpose of exporting to another country is termed as ……………………….
(a) Import trade
(b) Export trade
(c) Entrepot trade
(d) Internal trade
Answer:
(c) Entrepot trade

Question 6.
Agriculture income earned in india is ………………………..
(a) Fully taxable
(b) Fully exempted
(c) Not considered for income
(d) None of the above
Answer:
(b) Fully exempted

Question 7.
An …………………………. is a document prepared by the importer and sent to the exporter to buy the goods.
(a) Invoice
(b) Indent
(c) Enquiry
(d) Charter party
Answer:
(b) Indent

Question 8.
Which of the parties cannot demand performance of promise?
(a) Promisee
(b) Any of the joint promisees
(c) Death of a promisee, his legal representative
(d) Stranger to the contract
Answer:
(d) Stranger to the contract

Question 9.
The income paid to the (mercantile agent), broker is ………………………..
(a) Profit
(b) Brokerage
(c) Commission
(d) Salary
Answer:
(b) Brokerage

Question 10.
Ethics is important for ……………………….
(a) Top management
(b) Middle – level management
(c) Non – managerial employees
(d) All of them
Answer:
(d) All of them

Question 11.
……………………. is the oldest form of transport found in hilly areas, forest areas in remote places.
(a) Bullock carts
(b) Road transport
(c) Motor lorries
(d) Pathways transport
Answer:
(d) Pathways transport

Question 12.
The document which invites the public to buy the shares and debentures is known as …………………………
(a) Memorandum of Association
(b) Articles of Association
(c) Prospectus
(d) Partnership articles
Answer:
(c) Prospectus

Question 13.
Which one of the following is not correctly matched?
(a) Minimum two members – Partnership firm
(b) Minimum paid up capital Rs 100000 – Private company
(c) Voluntary Membership – Co – operatives
(d) 51% of paid up capital – Foreign company
Answer:
(d) 51% of paid up capital – Foreign company

Question 14.
ABC jointly promised to pay Rs. 50000 to D. Before performance of the contract, ‘C’ dies. Here the contract ………………………
(a) Becomes void on C’s death.
(b) Should be performed by A and B along with C’s legal representative.
(c) Should be performed by A and B alone.
(d) Should be renewed between A, B and D.
Answer:
(b) Should be performed by A and B along with C’s legal representative.

Question 15.
Airport Authority of India, is a public enterprise. Identify the form of organisation.
(a) Statutory corporations
(b) Departmental undertakings
(c) Multi – national corporations
(d) State – owned company
Answer:
(b) Departmental undertakings

Question 16.
Debenture holders are entitled to a fixed rate of ………………………
(a) Dividend
(b) Profits
(c) Interest
(d) Ratio
Answer:
(c) Interest

Question 17.
The State Bank of India came into being in ………………………
(a) 1995
(b) 1945
(c) 1955
(d) 1965
Answer:
(c) 1955

Question 18.
Match List – I with List – II and select the correct answer using the codes given below:

List – I	List – II
(i) Assembling industry	1. Sugar
(ii) Processing industry	2. Computer
(iii) Analytical industry	3. Fishery
(iv) Genetic industry	4. Oil industry

Answer:
Codes:

Question 19.
An ……………………… is a document prepared by the importer and sent to the exporter to buy the goods.
(a) Invoice
(b) Indent
(c) Enquiry
(d) Charter party
Answer:
(b) Indent

Question 20.
Point out the wrong statement from the following.
(a) Extractive industries extract products from natural resources.
(b) Genetic industries are engaged in breeding plants and animals for their use in further reproduction
(c) Manufacturing industries are engaged in producing goods through processing of raw material.
(d) Construction industries are involved in the successive stages for manufacturing sugar and paper, etc.
Answer:
(d) Construction industries are involved in the successive stages for manufacturing sugar and paper, etc.

PART – II

Answer any seven questions in which question No. 30 is compulsory. [7 × 2 = 14]

Question 21.
It is the oldest form of organisation in public enterprises. It is run by the particular department. What is the name of the organisation? How is it controlled?
Answer:
Departmental form of organisation of managing state enterprises is the oldest form of organisation. Under departmental form of organisation, a public enterprise is run as a separate full – fledged ministry or as a major sub-division of a department of the Government.

Question 22.
Banks which do not provide regular service, and are controlled by stock exchange, What is the name of the bank? Write a short note about the bank?
Answer:
The name of the bank is Merchant bank. A commercial bank or its subsidiary may offer services like project counselling, underwriting etc for starting a company. It is called merchant banking.

Question 23.
What is meant by chartered company?
Answer:
Chartered companies are established by the King or Queen of a country. Powers and privilege of chartered company are specified in the charter. Power to cancel the charter is vested with King/Queen.

Question 24.
Some co – operative societies are formed for providing short term finance to the members. It is useful to the farmers especially. What is the name of the society?
Answer:
Cooperative credit societies are societies formed for providing short-term financial help to their members. Agriculturists, artisans, industrial workers, salaried employees, etc., form these credit societies.

Question 25.
Give any two functions of warehouses?
Answer:

1. Storage
2. Price stabilization
3. Equalization of demand and supply

Question 26.
Define the term‘factoring’?
Answer:
The term ‘factoring’ is derived from a Latin term ‘facere’ which means ‘to make or do’. Factoring is an arrangement wherein the trade debts of a company are sold to a financial institution at a discount.

Question 27.
State the meaning of Mail order business?
Answer:
Mail order business means that the buying and selling is through mail. There is no personal contact between the buyers and sellers in this type of trading.

Question 28.
Explain the term – Credit card?
Answer:
Banks issue credit cards to customers and other eligible persons. With this card, the holder can purchase goods and services on credit at any shop in India.

Question 29.
What is meant by consumer co-operatives?
Answer:
Consumer co – operatives are organised by consumers. The aim of the consumers co-operative is to supply the quality goods at fair prices. They also supply essential commodities through Public Distribution System (PDS).

Question 30.
What is mutual funds?
Answer:
An individual investor who wants to invest in equities and bond with a balance of risk and return generally can invest in mutual funds. Nowadays people invest in stock markets through a mutual fund.

PART – III

Answer any seven questions in which question No. 40 is compulsory. [7 × 3 = 21]

Question 31.
What are the advantages of company? Explain any three?
Answer:
1. Large Capital:
A company can secure large capital compared to a sole trader or partnership. Large amount of capital is necessary for conducting business on a large scale.

2. Limited Liability:
The liability of a shareholder is limited. The risk of loss is limited to the unpaid amount on the face value of shares held. In the case of a company limited by shares, the liability of a shareholder is restricted to the unpaid amount on the shares held by him.

3. Transferability of Shares:
Transaction of Shares between two individuals is easy. So there is liquidity of investment. Any shareholder can easily convert his shares into money by selling his shares.

Question 32.
What is the necessity for Entrepot trade?
Answer:
Entrepot is necessary because of the following reasons:

1. The country may not have any accessible trade routes connecting the importing country.
2. The goods imported may require further processing or finishing before exporting, and these facilities may be lacking in the exporting or importing country.
3. There may not have any bilateral trade agreement between both the countries.

Question 33.
This is a loan taken by depositing document of title to the property with the banker. What is the name of the loan? Also how the banker grants the loan to the customers?
Answer:
The name of the loan is ‘hypothecation’. In this type of loan, the customer has to deposit the document of title to the property with the banker. But the physical possession of the property is with the borrower. If the loan is not paid, the lender will sell the property and can receive the loan amount.

Question 34.
What are the objectives of GST?
Answer:

1. To create a common market with uniform tax rate in India. (One Nation, One Tax, One Market)
2. To eliminate the cascading effect of taxes, GST allows set – off of prior taxes for the same transactions as input tax credit.
3. To boost Indian exports, the GST already collected on the inputs will be refunded and thus there will be no tax on all exports.
4. To increase the tax base by bringing more number of tax payers and increase tax revenue.
5. To simplify tax return procedures through common forms and avoidance of visiting tax departments.
6. To provide online facilities for payment of taxes and submission of forms.

Question 35.
Cargo vessels which do not follow set routes and timetable?
What is the kind and name of the transport?
Answer:
The name of the transport is Tramps. They are a kind of ocean going ships. They are essentially cargo vessels. They have no set routes. They do not follow any timetable. They sail only when they get sufficient load.

Question 36.
What is Gross Total Income?
Answer:
Income from the five heads, namely – Salaries, House Property, Profits and Gains of Business or Profession, Capital Gains, and Other Sources – is computed separately according to the provisions given in the Act. Income computed under these heads shall be aggregated after adjusting past and present losses and the total so arrived at is known as ‘Gross Total Income’.

Question 37.
The retailers having permanent establishment and deal in large scale are called fixed shop large scale retailers. There are various types of large scale retailers. What is telemarketing? Explain the types?
Answer:
Purchasing and selling of goods through telephones are called Telemarketing. It is divided into two types.

1. Telephonic marketing:
Potential customers are contacted through mobile to provide information about the products. Willing customers visit the office and place orders.

2. Television marketing:
In this method, customers are attracted by providing all information of product or service through TV demonstrations. Customers can contact through phone or website to place order.

Question 38.
Distinguish between hire purchase system and installment system of selling?
Answer:

Question 39.
Explain any three features of Self Help Groups?
Answer:
Self Help Group is a small informal voluntary association created for the purpose of enabling members to reap economic benefit out of mutual help, solidarity, and joint responsibility. Features of Self Help Groups:

1. The motto of every group members should be “saving first – credit latter”.
2. Self Help Group is homogeneous in terms of economic status.
3. The groups need not be registered.

Question 40.
What are the objectives of GST?
Answer:

1. To create a common market with uniform tax rate in India. (One Nation, One Tax, One Market)
2. To eliminate the cascading effect of taxes, GST allows set-off of prior taxes for the same transactions as input tax credit.
3. To boost Indian exports, the GST already collected on the inputs will be refunded and thus there will be no tax on all exports.
4. To increase the tax base by bringing more number of tax payers and increase tax revenue.
5. To simplify tax return procedures through common forms and avoidance of visiting tax departments.
6. To provide online facilities for payment of taxes and submission of forms.

PART – IV

Answer all the questions. [7 × 5 = 35]

Question 41 (a).
Write short notes on:

1. Owner’s funds
2. Borrowed funds

Answer:
1. Owner’s Funds:
Owner’s funds mean funds which are provided by the owner of the enterprises who may be an individual, or partners or shareholders of a company.

The profits reinvested in the business (ploughing back of profit or retained earnings) come under owner’s funds. These funds are not required to be refunded during the life time of business enterprise. It provides the owner the right to control the management of the enterprise.

2. Borrowed Funds:
The term ‘borrowed funds’ denotes the funds raised through loans or borrowings. For example debentures, loans from banks and financial institutions, public deposits, trade credit, lease financing, commercial papers, factoring, etc., represent borrowed funds.

1. These borrowed sources of funds provide specific period before which the fund is to be returned.
2. Borrower is under legal obligation to pay interest at given rate at regular intervals to the lender.
3. Generally borrowed funds are obtained on the security of certain assets like bonds, land, building, stock, vehicles, machinery, documents of title to the goods, and the like.

[OR]

(b) What are the advantages of sole trading?
Answer:

1. Easy Formation: No legal formalities are required to initiate a sole trading concern. Any person capable of entering into a contract can start it, provided he has the necessary resources for it.
2. Incentive to Work hard: There is a direct relationship between effort and reward. The fact that the entire profit can be taken by himself without sharing with anybody else induces him to work ceaselessly.
3. Small Capital: Small capital is an important as well as specific advantage of sole proprietorship. Sole proprietor can start business with small capital.
4. Credit Standing: Since his private properties are held liable for satisfying business debts, he can get more financial assistance from others.
5. Personal Contact with the Customers: Since sole proprietor knows each and every customer individually he can supply goods according to their taste and preferences. Thus he can cultivate personal relationship with the customers.
6. Flexibility: The sole trader can easily adjust himself to the changing requirements of his business.

Question 42 (a).
Explain the contents of Articles of Association?
Answer:
Contents of Articles of Association (AOA):

1. Amount of shares, capital, value and type of shares.
2. Rights of each class of shareholders regarding voting, dividend, return of capital
3. Rules regarding issue of shares and debentures
4. Procedures as well as regulations in respect of making calls on shares
5. Manner of transfer of shares
6. Declaration of dividends
7. Borrowing powers of the company
8. Rules regarding the appointment, remuneration, removal of directors
9. Procedure for conducting proxy, quorum, meetings, etc.
10. Procedures concerning keeping of books and audits
11. Seal of the company
12. Procedures regarding the winding up of the company.

[OR]

(b) What are the primary functions of commercial banks?
Answer:
The primary functions of a commercial bank are of three types. They are:

1. Accepting Deposits:
The basic deposit accounts offered by commercial banks are listed below:

A. Demand Deposits:
These deposits are repayable on demand on any day. These consist of –

• Savings Deposits: General public deposit their savings into this account. This account can be opened in one individual’s name or more than one name.
• Current Deposits: This account is suitable for business institutions. Individuals too can open this account. A higher minimum balance should be kept in this account.

B. Time Deposits:
These are repayable after a period. These include –

• Fixed Deposits (FD): Certain amount is deposited for a fixed period for a fixed rate of interest.
• Recurring Deposits (RD): Certain sum is deposited into the account every month for one year or five years or the agreed period. Interest rate is more than savings deposits and almost equal to fixed deposits.

2. Granting Loans and Advances:
Commercial banks lend money in order to earn interest.

A. Advances:

• Overdraft: It is a credit facility extended mostly to current account holding business community customers.
• Cash Credit: It is a secured credit facility given mostly to business institutions. Stock in hand, raw materials, other tangible assets, etc. are provided as collateral.
• Discounting of Bills: Business customers approach banks to discount the commercial bills of exchanges and provide money

B. Loans- Short term and medium term loans are provided by commercial banks against eligible collaterals to business concerns. Examples- housing loan, consumer loan, vehicle loan, educational Loan, jewel loan, etc.

3. Creation of Credit- Apart from the currency money issued by the RBI, the credit money in circulation created by commercial banks influence economic activities of a country to a large extent. Credit money of commercial banks is far greater in volume than the currency money.

Question 43 (a).
What are the disadvantages of MNC?
Answer:

1. Danger for Domestic Industries: MNCs, because of their vast economic power, pose a danger to domestic industries; which are still in the process of development. Domestic industries cannot face challenges posed by MNCs.
2. Transfer of Outdated Technology: Where MNCs transfer outdated technology to host nation, it serves no purpose.
3. No Benefit to Poor People: MNCs produce only those things, which are used by the rich. Therefore, poor people of host countries do not get, generally, any benefit, out of MNCs.
4. Danger to Independence: Initially MNCs help the Government of the host country, in a number of ways; and then gradually start interfering in the political affairs of the host country.
5. Deprivation of Job Opportunity of Local People: MNCs may not generate job opportunities to the people of home country.

[OR]

(b) Explain the organisational structure of RBI?
Answer:
The head office of the RBI is situated in Mumbai. This central office has 33 departments in 2017. It has four zonal offices in Mumbai, Delhi, Calcutta and Chennai functioning under local boards with deputy governors as their heads. It also has 19 regional offices and 11 sub-offices (2017).

The RBI is governed by a central board of directors. The 21 member board is appointed by the Government of India. It consists of:

1. One Governor and four deputy governors appointed for a period of four years,
2. Ten Directors from various fields
3. Two Government officials
4. Four Directors – one each from local boards.

Question 44 (a).
Distinguish between internal and international trade?
Answer:

[OR]

(b) State the features of departmental stores?
Answer:

1. Large Size: A department is a large scale retail showroom requiring a large capital investment by forming a joint stock company managed by a board of directors.
2. Wide Choice: It acts as a universal provider of a wide range of products from low priced to very expensive goods (Pin to Car) to satisfy all the expected human needs under one roof.
3. Departmentally organized: Goods offered for sale are classified into various departments.
4. Facilities provided: It provides a number of facilities and services to the customers such as restaurant, rest rooms, recreation, packing, free home delivery, parking, etc.
5. Centralised purchasing: All the purchases are made centrally and directly from the manufacturers and operate separate warehouses whereas sales are decentralised in different departments.

Question 45 (a).
What are the different types of transportation? Explain?
Answer:
Types of transportation:

(A) Land Transport:
Transport of people and goods by land vehicles is known as Land transport. It is also called as‘Surface Transport’.

• Pack Animals: Animals like horse, mule, donkey, camel, elephant etc., are used for carrying small loads in backward areas, hilly tracks, forest regions and deserts.
• Bullock Carts: It constitutes the predominant form of rural road transport in India for goods traffic and to some extent for passengers’ traffic.
• Road Transport: It is one of the most promising and potent means suitable for short and medium distances.
• Motor lorries and Buses: From the dawn of civilization, people have been endeavoring to form roads and use wheeled vehicles to facilitate transport of men and materials.
• Tramways: Tramways were initially horse drawn, later stearmpowered and now they are electrically operated.
• Railway Transport: The invention of steam engine by James Watt, revolutionized the mode of transport all over the world.
• Recent Trends in Transport: Metro Rail, Monorail, Bullet train, Pipeline Transport, Conveyor Transport, Ropeway transport and Hyper loop transport.

(B) Water Transport:

1. Inland Waterways: Inland Waterways comprise of rivers, canals and lakes. It is also known as internal water transport.
2. Ocean or Sea Transport: Ocean transport has been playing a significant role in development of economic, social and cultural relations among countries of the world.

• Coastal shipping
• Overseas shipping:
• Liner
• Tramps

(C) Air Transport:
Air transport is the fastest and the costliest mode of transport. Commercial air transport is now one of the most prominent modes of overseas transport. Domestic and International flights are the air travels.

[OR]

(b) Explain the principles of insurance?
Answer:
1. Utmost Good Faith:
According to this principle, both insurer and insured should enter into contract in good faith. Insured should provide all the information that impacts the subject matter. Insurer should provide all the details regarding insurance contract.

2. Insurable Interest:
The insured must have an insurable interest in the subject matter of insurance. Insurable interest means some pecuniary interest in the subject matter of the insurance contract.

3. Indemnity:
Indemnity means security or compensation against loss or damages. In insurance, the insured would be compensated with the amount equivalent to the actual loss and not the amount exceeding the loss.

This principle ensures that the insured does not make any profit out of the insurance. This principle of indemnity is applicable to property insurance alone.

4. Causa Proxima:
The word ‘Causa proxima’ means ‘nearest cause’. According to this principle, when the loss is the result of two or more cause, the proximate cause, i.e. the direct. The direct, the most dominant and most effective cause of loss should be taken into consideration. The insurance company is not liable for the remote cause.

5. Contribution:
The same subject matter may be insured with more than one insurer then it is known as ‘Double Insurance’. In such a case, the insurance claim to be paid to the insured must be shared on contributed by all insurers in proportion to the sum assured by each one of them.

6. Subrogation:
Subrogation means ‘stepping the shoes on others’. According to this principle, once the claim of the insured has been settled, the ownership right of the subject matter of insurance passes on to the insurer.

7. Mitigation: In case of a mishap, the insured must take off all possible steps to reduce or mitigate the loss or damage to the subject matter of insurance.

Question 46 (a).
Elucidate any five features of Income Tax?
Answer:
Features of Income Tax in India:
1. Levied as Per the Constitution Income tax is levied in India by virtue of entry No. 82 of list I (Union List) of Seventh Schedule to the Article 246 of the Constitution of India.

2. Levied by Central Government Income tax is charged by the Central Government on all incomes other than agricultural income. However, the power to charge income tax on agricultural income has been vested with the State Government as per entry 46 of list II, i.e., State List.

3. Direct Tax Income tax is direct tax. It is because the liability to deposit and ultimate burden are on same person. The person earning income is liable to pay income tax out of his own pocket and cannot pass on the burden of tax to another person.

4. Annual Tax Income tax is an annual tax because it is the income of a particular year which is chargeable to tax.

5. Tax on Person It is a tax on income earned by a person. The term ‘person’ has been defined under the Income tax Act. It includes individual, Hindu Undivided Family, Firm, Company, local authority, Association of person or body of Individual or any other artificial juridical persons. The persons who are covered under Income tax Act are called ‘assessees’.

[OR]

(b) Write down the functions of IMF?
Answer:

1. It acts as short term credit institution at the international level.
2. It provides machinery for ordinary adjustments of exchange rates.
3. It has a reservoir of currencies of the member countries from which a borrower can borrow currencies of other nations.
4. It promotes economic stability and global growth by encouraging countries adopt sound economic and financial policies.
5. It offers technical assistance and training to help member countries strengthen and implement effective policies. Technical assistance is offered in formulating banking, fiscal, monetary and exchange policies.
6. It helps member countries correct their imbalance in balance of payment.

Question 47 (a).
Describe the importance of international finance?
Answer:

1. International finance helps in calculating exchange rates of various currencies of nations and the relative worth of each and every nation in terms thereof.
2. It helps in comparing the inflation rates and getting an idea about investing in international debt securities.
3. It helps in ascertaining the economic status of the various countries and in judging the foreign market.
4. International Financial Reporting System (IFRS) facilitates comparison of financial statements made by various countries.
5. It helps in understanding the basics of international organisations and maintaining the balance among them.

[OR]

(b) What are the advantages of Railway transport?
Answer:

1. Railways are well suited for carrying heavy and bulky goods over long distances.
2. It provides long distance travel throughout the day and night service.
3. It can provide better production and safety to the goods than motor transport.
4. Though initial investment is large, in the long run the operating expenses will be very low in railways and it will prove a cheaper mode of transport.
5. It has regular schedule of timing and is available throughout the year.
6. It provides unaffected services whether rainy or sunny weather conditions.