I.Com (Intermediate in Commerce) Principles of Commerce Syllabus

How does warehousing aid trade?

Warehousing provides storage of goods until they are demanded, removing the hindrance of time by bridging the gap between production and consumption.

What hindrance of trade does transportation remove?

Transportation removes the hindrance of place by carrying goods from the place of production to the place of consumption.

List the key considerations in setting up a business.

Selection of line/nature of business, amount of capital required, choosing the form of ownership, location of business, size of business, market demand, and government policy/legal requirements.

What factors influence the choice of the form of business ownership?

Amount of capital needed, degree of risk/liability, extent of control desired, legal formalities, continuity of business, and tax considerations.

What are the main factors affecting the location of a business?

Nearness to raw materials, availability of labour, nearness to market, transport facilities, availability of power and water, banking and finance facilities, and government incentives.

Why is nearness to raw material important for some businesses?

Industries using bulky or perishable raw materials (e.g. sugar, cement) locate near raw material sources to reduce transport costs and avoid spoilage.

Why might a business locate near its market?

Businesses producing perishable, fragile, or bulky finished goods locate near the market to reduce distribution costs, deliver quickly, and stay close to customers.

Name the main sources of business finance classified by time period.

Short-term sources, Medium-term sources, and Long-term sources of finance.

Give examples of short-term sources of business finance.

Trade credit, bank overdraft, cash credit, short-term bank loans, and bills of exchange/discounting — usually for up to one year.

Give examples of long-term sources of business finance.

Owner's capital/equity, issue of shares, debentures, retained earnings (ploughing back of profits), and long-term loans from financial institutions.

What is 'ploughing back of profits' as a source of finance?

Retaining a part of the business's earned profits and reinvesting them in the business instead of distributing them — an internal long-term source of finance.

Define a sole proprietorship.

A sole proprietorship is a business owned, financed, controlled, and managed by a single individual who bears all risks and enjoys all profits.

List the key features of a sole proprietorship.

Single ownership, unlimited liability, no separate legal entity, sole management and control, all profits to owner, easy formation and dissolution, and limited capital.

What does 'unlimited liability' mean in a sole proprietorship?

The owner is personally responsible for all business debts; if business assets are insufficient, the owner's personal property can be used to pay creditors.

State the main merits (advantages) of a sole proprietorship.

Easy and inexpensive formation, full control by owner, quick decision-making, all profits to owner, business secrecy, direct customer relations, and easy dissolution.

State the main demerits (disadvantages) of a sole proprietorship.

Limited capital, unlimited liability, limited managerial skills, lack of continuity (dies with owner), and the owner bears all losses and risk alone.

Define a partnership.

A partnership is an association of two or more persons who agree to carry on a business together and to share its profits and losses in an agreed ratio.

List the essential features of a partnership.

Two or more persons, an agreement, a lawful business, sharing of profits and losses, mutual agency, unlimited liability, and no separate legal entity from partners.

What is the minimum and maximum number of partners allowed under the Partnership Act?

Minimum is 2 partners; maximum is 20 for ordinary business and 10 for banking business.

What is meant by 'mutual agency' in a partnership?

Each partner is both an agent and a principal — a partner can bind the firm and other partners by his acts done in the ordinary course of business.

Name the kinds of partners in a partnership.

Active (working) partner, sleeping (dormant) partner, nominal partner, partner by estoppel/holding out, minor partner, and secret partner.

What is a sleeping (dormant) partner?

A partner who contributes capital and shares profits/losses but does not take part in the management or day-to-day running of the business.

What is a nominal partner?

A partner who only lends his name and reputation to the firm without contributing capital or sharing profits, but is liable to third parties.

What are the main kinds of partnership?

Partnership at will, particular partnership, limited partnership, and general partnership.

What is a 'partnership at will'?

A partnership with no fixed duration that continues at the will of the partners and can be dissolved by any partner giving notice at any time.

Define a partnership deed.

A partnership deed is a written agreement that contains the terms and conditions governing the relationship among the partners and the conduct of the partnership business.

What are the main contents of a partnership deed?

Name and address of firm and partners, nature of business, capital contribution, profit/loss sharing ratio, duties and rights of partners, interest on capital/drawings, salaries, and rules for admission, retirement, and dissolution.

State the main rights of a partner.

Right to take part in management, right to share profits, right to be consulted, right to inspect books of accounts, right to interest on capital/advances, and right to share in firm's property.

State the main duties of a partner.

To act in good faith, work for the common benefit, share losses, render true accounts, not carry on a competing business, and indemnify the firm for losses caused by fraud or negligence.

What is meant by 'dissolution of partnership'?

Dissolution of a partnership is the termination of the relationship among all partners, ending the firm — the business is closed and its assets and liabilities are settled.

State the main modes of dissolution of a partnership firm.

Dissolution by agreement, compulsory dissolution (illegality/insolvency), dissolution on the happening of contingencies, dissolution by notice (partnership at will), and dissolution by order of the court.