TN Board 11th Commerce Important Questions Chapter 4 Sole Proprietorship

Students get through the TN Board 11th Commerce Important Questions Chapter 4 Sole Proprietorship which is useful for their exam preparation.

TN State Board 11th Commerce Important Questions Chapter 4 Sole Proprietorship

Very short answer questions

Question 1.
Which form of business is suitable for the following types of business and why?
Answer:
(i) Beauty saloon, (ii) Garments shop.

1. Beauty saloon: Sole proprietor is the right form of business because:
   (a) It needs limited capital,
   (b) It is easy to form,
   (c) Entire profit will belong to the owner, (d) It requires personal attention.
2. Garments shop: Sole proprietor is the right form of business because:
   (a) It needs limited capital,
   (b) It is easy to form,
   (c) Entire profit will belong to the owner.

Question 2.
State the various kinds of non-corporate enterprises.
Answer:
A sole proprietorship or as a partnership or as joint Hindu family business may be classified as a types of non-corporate enterprise.

Question 3.
How does the wheeler define a sole tradership?
Answer:
According to Wheeler, “a business undertaking is a concern, company or enterprise which buys and sells, is owned by one person or a group of persons and is managed under a specific set of operating policies”.

Question 4.
How does a sole trader business enterprise help provide self-employment?
Answer:
Sole proprietorship provides self-employment opportunities to many persons with small resources. It offers a way of life for securing the means of livelihood to those who do not want to serve under others.
It makes people self-dependent by providing self-employment.

Question 5.
Why do sole traders lose the economics of large-scale production?
Answer:
Because of limited capital and skill, the sole traders have to work on a small-scale basis. Thus he is deprived of economic of large j scale operation.

Question 6.
Write a note on the corporate form.
Answer:
The ownership is separated from the management and the owners cannot take direct control over the business. Corporate business is:

1. Joint-stock company,
2. Co-operatives,
3. Government institutions.

Question 7.
Is registration is essential for sole trading business?
Answer:
No, registration is not necessary for a sole trading business. The person who has money can start the business. He obtains a license from the local authority like the municipality or panchayat.

Short answer questions

Question 1.
What is the flexibility of a sole trader?
Answer:
It is a highly flexible type of organization.
A sole proprietorship concern is generally run on a small-scale basis. A change in operation is possible without involving much expenditure. The proprietor can adapt adjust to the changing trends and market conditions; because the sole trader is the sole owner of his business.

Question 2.
Give the definition of the encyclopedia of business and commerce for sole trading.
Answer:
Encyclopedia of Business and Commerce defines sole trading concern as, “A form of organization, in which an individual alone invests his capital, uses his own skill and intelligence in the management of its affairs and is entitled to enjoy all the profits as also is solely responsible for all the risks of ownership”.

Question 3.
Write short notes on the uncertainty of a sole tradership.
Answer:
The life of the sole trader business is uncertain and unstable. The life of business depends upon the changes in taste and preferences of customers and changes in fashion, and technology. If the sole trader fails to cope with the latest development he will land in trouble.

Question 4.
Can a sole trader business enterprise obtain the benefits of specialization?
Answer:
The sole trader has to undertake all the work relating to business himself such as buying, selling, accounting, financing, advertising, etc. It would be difficult to avail the services of experts in his business because of small resources. So, the benefits of division of labour and specialization cannot be obtained in this type of business.

Long answer questions

Question 1.
Mention the various types of business suitable for a sole proprietorship.
Answer:
A sole proprietorship is suitable for the following business:

1. Where a small amount of capital is required, eg: Sweetshop, bakery shops, petty shop, etc.
2. Where quick decisions are very important, eg: Share-brokers, doctors etc.
3. Where limited risk is involved, eg: Automobile repair shop, small retail shop.
4. Where personal attention to individual tastes and fashions of customers is required, eg: Beauty parlors, tailoring shop, etc.
5. Where the demand is local seasonal or temporary, eg: Retail trade, laundry, fruit sellers, etc.

Question 2.
One man control is the best in the world provided that one man is big enough to take cure of everything.
Answer:
The points in favour of one-man control are:

1. The easy and quick formation,
2. Direct control,
3. Efforts and reward are linked,
4. Retaining business secrets,
5. Close contact with the consumers,
6. Enjoying all profits,
7. Inexpensive management,
8. No legal restrictions,
9. Direct contact with the employees,
10. Social desirability.

The points limitations of one-man control:

1. Limited capital,
2. Limited managerial ability,
3. Unlimited liability,
4. Risk decision,
5. Uncertainty.

Question 3.
Demerits of a sole trading concern. Explain.
Answer:

1. Limited capital: The resources of a sole proprietor are limited. He depends only on his personal resources and his borrowing capacity. The borrowing capacity depends on his assets and creditworthiness. The financial resources of a single person will be insufficient for business expansion. Therefore, the size of the firm remains small.
2. Limited managerial ability: The managerial ability of a sole trader is limited because a person may not be an expert in every field of business such as purchasing, selling, accounting etc. The sole proprietor may not be able to use the service of experts for want of resources. The limited managerial capacity may hinder the growth of the business.
3. Unlimited liability: The unlimited liability of a sole proprietor may affect his enthusiasm and restrict introducing novel ideas in business.
4. Short life: Anything which affects the personal life of a sole trader affects his business also. Prolonged illness or death of the sole trader brings the affairs of his business to a standstill. If his children are interested and efficient to run the business, the sole trader business can be continued. Otherwise, it will be closed. The closure of a business will cause inconvenience to the consumers and may also result in social loss.
5. Hasty decisions: Decisions arrived at, – after deep deliberations and discussions are sure to be better than that of a decision taken by one man. The chances of wrong decision-making are quite high in a sole trader business. This is because of the fact that the sole trader takes all decisions of the business himself without any assistance. This may lead to wrong decisions which may result in loss and affect the sole trader.
6. Lack of specialization: The sole trader has to undertake all the work relating to business himself such as buying, selling, accounting, financing, advertising, etc. It would be difficult to avail the services of experts in his business because of small resources. So, the benefits of division of labour and specialization cannot be obtained in this type of business.
7. Uneconomic size: Because of limited capital and skill, the sole traders have to work on a small-scale basis. Thus he is deprived of economies of large-scale operation.
8. Lack of consultation: He has no one else to consult before taking any important decisions except his family members. This may result in a heavy loss if his decisions go wrong.

Question 4.
Explain the role of sole trading concerns in society.
Answer:
Role of sole proprietorship in society: Consumers are the kings. They decide the success of a business. Their needs, desires, expectations are to be satisfied by the businessmen. Sole proprietorship occupies a pivotal role in satisfying the multifarious needs of consumers regarding goods and services. The day-to-day requirements of the consumers such as food items, cloth, stationaries, laundry, provisions, books and newspapers, medicines, etc., are supplied by the sole trader form of organization. Thus the sole traders promote the welfare of society. Its social necessity arises due to the following ways.

1. The solution to the unemployment problem: Sole trader business organization gives large employment opportunities to the less educated and uneducated persons and helps to reduce the unemployment problem in the society.
2. Provides investment avenues: Sole trader organization provides a chance for small investors who have a small amount of capital to utilize their savings in the product line.
3. Provision of goods at a low price: Goods are sold by sole traders at a price lesser than the maximum retail price ( MRP ) mentioned on the packages of the goods. This is possible due to inexpensive management.
4. Helps small producers: Most of the goods sold by sole traders are procured locally from local producers. Thus small local producers are benefited from the sole traders.
5. Supply of quality goods: Sole-traders sell goods of high quality nowadays to maintain their reputation. They even accept the return of defective goods. This ensures enhancing the welfare of the public.
6. Philanthropic activities: Sole-traders form small trading organizations among themselves and undertake many social welfare activities such as conducting eye camps, blood donation camps, maintaining parks, provision of barricades on the roads, supplying furniture to schools and constituting charitable trust, etc.
7. Equal distribution of income and wealth: Equal distribution of income and wealth is ensured as there is more entry of sole proprietors in trading activities.
8. Helpful to consumers: The Sole-traders supply the goods to the consumers at their doorsteps. So the time and energy of the consumers are saved.

For Own Thinking

Question 1.
How to start a snack manufacturing unit at home?
Answer:
First, we select snacks- eg: Vada, Popcorn.
One man is enough for preparing Vada and Popcorn.

1. We want to buy black gram Dhall onion and green chili. A small amount is enough.
2. We want to buy maize for preparing popcorn using the machine.

Question 2.
Dried Fish-Trading Explain.
Answer:
Small scale trading.

1. First, we have to buy fresh fishes.
2. Next, we have to try it in the open air.
3. The try-in ready and we can sell them in the fish market.

Question 3.
Individual – Independent software companies run by New graduates.
Answer:
B.E. Software graduates start this type of company with a small amount of capital and two employees as helpers.

Case Study

Rajendran has done his B.Com., this year. He wants to do some good business now. Kesavan, his father, is a Sole-proprietor of a small Banian – manufacturing plant in Salem and asks Rajendran to join the business with him as a partner. However, Rajendran likes to go in for an independent venture. A discussion follows between them on this issue. Meanwhile, Mr. Arul, an advocate, and friend of Rajendran’s father, comes there and gives comments on both of them. Assume the role of Rajendran, Kesavan, and Arul and state and defend your positions.
Answer:
Mr. Kesavan: He is a sole proprietor.
Mr. Rajendran: Rajendran likes to go in for an independent venture. He gives large employment opportunities to uneducated and less educated persons and reduces the unemployment problem in society.
Mr. Arul: He is an advocate. He gives suggestions to both the father and son. Because reduce unemployment problem in the society.

For Future learning

Question 1.
Mahesh is a young graduate who has. inherited a sum of Rs. 1,00,000 by way of family savings. He also has a family house to which he has the sole title as the only son of his father. He is thinking of starting a small factory for the manufacture of plastic toys. What form of ownership organization will you advise him to choose?
Answer:
Sole proprietorship.

Question 2.
Amar started a business on his own. He has his father helping him with the accounts and his brother helps him with looking after customers in the evening. Amar pays a monthly salary to his father and brother. Identify the form of business organization.
Answer:
Sole trading form of business. Because he engaged father and brother as an employee.

Multiple choice questions

1. Sole trading business can be started by:
(a) at least two persons
(b) at least 7 persons
(c) anyone person
(d) at least 10 persons
Answer:
(c) anyone person

2. Choose the type of business in which sole proprietorship is very suitable:
(a) CA firm
(b) beauty pan our
(c) a shopping mall
(d) all of these
Answer:
(b) beauty pan our

3. The liability of a sole trader is:
(a) limited only to his investment in the business
(b) limited to the total property of the business
(c) unlimited
(d) unlimited to the business assets
Answer:
(c) unlimited

4. Which of the following has unlimited liability in business?
(a) Sole proprietor
(b) Karta
(c) Partners
(d) All of the above
Answer:
(d) All of the above

5. What is the advantage of a sole proprietorship?
(a) Small capital.
(b) Hasty decision.
(c) Limited capital.
(d) Limited managerial ability.
Answer:
(c) Limited capital.

6. A sole trader uses in business:
(a) his own savings only
(b) loans obtained from government
(c) funds from non-resident Indians
(d) his own savings or funds borrowed from friends and relatives.
Answer:
(d) his own savings or funds borrowed from friends and relatives.

7. A sole proprietorship is a:
(a) cannot keep his own business secrets
(b) can keep his business secrets
(c) both (a) and (b)
(d) none of the above
Answer:
(b) can keep his business secrets

8. For a sole proprietorship the capital is provided by the:
(a) owner himself
(b) government
(c) financial institution
(d) none
Answer:
(a) owner himself

9. No legal formality is required to start a ………. business.
(a) sole trader
(b) partnership
(c) joint-stock companies
(d) co-operatives
Answer:
(a) sole trader

10. ……. are the kings.
(a) Debtors
(b) Creditors
(c) Banker
(d) Customer
Answer:
(d) Customer

11. Sole proprietorship is suitable for …… business.
(a) large scale
(b) small scale
(c) medium-scale
(d) all
Answer:
(b) small scale

12. Decision-making process in sole trading business is:
(a) quick
(b) slow
(c) neither quick nor slow
(d) all the above
Answer:
(a) quick

13. The legal entity of the enterprise is distinct from that of its owners in:
(a) non-corporate form
(b) corporate form
(c) sole-tradership
(d) none of the above
Answer:
(b) corporate form

14. The enterprise and its owners are considered as having the same entity in:
(a) noncorporate form
(b) corporate form
(c) joint-stock company
(d) all the above
Answer:
(a) noncorporate form

15. The resources of a sole proprietor are:
(a) unlimited
(b) limited
(c) restricted
(d) expanded
Answer:
(b) limited

16. “He owns all and risks all” The principle is followed in:
(a) sole tradership
(b) partnership
(c) MNC
(d) company
Answer:
(a) sole tradership

17. ……… is found in each and every country in the world.
(a) Sole tradership
(b) Partnership
(c) Company
(d) Co-operatives
Answer:
(a) Sole tradership

18. A sole trading concern is owned by:
(a) an individual
(b) two persons
(c) three persons
(d) the government
Answer:
(a) an individual

19. The absence of …….. with the employees paves the way for the smooth running of the business.
(a) salaries
(b) conservative
(c) friction
(d) flexible
Answer:
(c) friction

20. The chances of ………. decision making are quite high in a sole trader business.
(a) right
(b) wrong
(c) wasteful
(d) None of the above
Answer:
(b) wrong