NTS NAT-ICOM Commerce and Business Studies Syllabus

What is a nominal partner and a partner by estoppel?

A nominal partner lends only their name/reputation to the firm without contributing capital or sharing profits. A partner by estoppel (holding out) is treated as a partner because their conduct/words led others to believe they are one, making them liable to third parties.

How is liability shared in a general partnership?

Partners have unlimited, joint and several liability—each partner is personally liable for all the firm's debts, and creditors may recover the full amount from any one partner.

State two advantages and two disadvantages of a partnership over a sole proprietorship.

Advantages: more capital and combined skills/judgment; shared risk. Disadvantages: unlimited liability; risk of disagreement among partners and lack of continuity (dissolves on a partner's death/retirement).

Define a Joint Stock Company.

A joint stock company is an artificial legal person created by law, having a separate legal entity, perpetual succession, a common seal, and capital divided into transferable shares held by members with limited liability (governed in Pakistan by the Companies Act/Ordinance).

Distinguish a private limited company from a public limited company by membership.

A private limited company has a minimum of 2 and a maximum of 50 members and restricts share transfer. A public limited company has a minimum of 7 members with no upper limit and freely transferable shares.

What is the minimum number of directors for a private and a public company?

A private limited company requires at least 2 directors and a public limited company requires at least 3 directors.

What is the Memorandum of Association?

The Memorandum of Association is the charter/principal document of a company defining its relationship with the outside world. Its clauses are: Name, Registered Office (situation), Objects, Liability, Capital, and Subscription (Association) clause.

What are the Articles of Association?

The Articles of Association are the rules and regulations governing the internal management of the company (e.g., conduct of meetings, rights of shareholders, duties of directors, dividends), framed within the limits of the Memorandum.

What is a prospectus?

A prospectus is a formal invitation issued by a public company to the general public to subscribe for its shares or debentures; it discloses information about the company so investors can make informed decisions.

What is the difference between a share and a debenture?

A share is a unit of ownership capital; shareholders are owners and receive dividends (variable). A debenture is a loan to the company; debenture-holders are creditors and receive fixed interest, repayable on maturity, with priority over shares.

Distinguish ordinary (equity) shares from preference shares.

Ordinary/equity shares carry voting rights and a fluctuating dividend paid after preference shares. Preference shares get a fixed dividend paid first and priority in capital repayment on winding up, but usually carry no voting rights.

What are the two key documents needed to begin and to commence business for a company?

A company begins on registration when it receives the Certificate of Incorporation; a public company must also obtain a Certificate of Commencement of Business before starting operations (a private company may start immediately after incorporation).

State two advantages and two disadvantages of a joint stock company.

Advantages: limited liability of members and large capital with perpetual succession. Disadvantages: complex/expensive formation and legal formalities, and lack of secrecy/possible separation of ownership from control.

Define a cooperative society.

A cooperative society is a voluntary association of persons (usually with limited means) who join together on the principle of self-help and mutual help to promote their common economic interests rather than to maximize profit.

What is the minimum membership and the voting rule in a cooperative society?

A cooperative society needs a minimum of 10 members, and voting follows the principle of 'one member, one vote' regardless of the number of shares held (democratic management).

Name four common types of cooperative societies.

Consumer cooperatives, producer cooperatives, marketing cooperatives, credit/finance cooperatives, housing cooperatives, and farming cooperatives.

How are profits (surplus) distributed in a cooperative society?

Surplus is distributed as a 'dividend on purchases' (patronage)—in proportion to members' patronage/transactions with the society—rather than in proportion to capital contributed; a portion is also kept in reserves.

Define home trade and its two divisions.

Home trade (internal/domestic trade) is the buying and selling of goods within the boundaries of one country. Its two divisions are wholesale trade and retail trade.

Distinguish a wholesaler from a retailer.

A wholesaler buys goods in large quantities from producers and sells in smaller lots to retailers. A retailer buys from wholesalers and sells in small quantities directly to final consumers.

List four services a wholesaler provides to the manufacturer.

Buying in bulk and providing a ready market, bearing the risk of price fluctuations/storage, providing finance through advance payment, warehousing/storing goods, and giving market information/feedback.

Give examples of small-scale and large-scale retailers.

Small-scale retailers: hawkers, peddlers, street stalls, general stores. Large-scale retailers: departmental stores, chain/multiple shops, supermarkets, mail-order houses.

What is a departmental store and a chain (multiple) store?

A departmental store is a large retail store under one roof selling a wide variety of goods in separate departments. A chain/multiple store is a series of identical shops in different locations under one ownership selling a limited range of standardized goods.

Define foreign trade and its three types.

Foreign trade (external/international trade) is trade between two or more countries. Its three types are: import trade (buying from abroad), export trade (selling to other countries), and entrepot/re-export trade (importing to re-export to a third country).

State three differences between home trade and foreign trade.

Home trade is within one country, uses one currency, and has fewer documents/restrictions; foreign trade is between countries, involves different currencies and exchange rates, customs duties, and many documents (invoice, bill of lading, etc.).

What is the difference between balance of trade and balance of payments?

Balance of trade is the difference between the value of a country's visible exports and visible imports only. Balance of payments records all economic transactions (visible + invisible + capital flows) between a country and the rest of the world.

Name four important documents used in foreign trade.

Commercial invoice, bill of lading, certificate of origin, letter of credit (L/C), bill of exchange, marine insurance policy, and indent.

What is a bill of lading?

A bill of lading is a document issued by a shipping company acknowledging receipt of goods for carriage; it is a receipt for goods, evidence of the contract of carriage, and a document of title to the goods.

What is a Letter of Credit (L/C)?

A Letter of Credit is a written undertaking by the importer's bank to pay the exporter a stated sum on presentation of specified shipping documents; it guarantees payment and reduces risk in foreign trade.

What is an invoice and how does it differ from a debit/credit note?

An invoice is a statement of goods sold showing quantity, price and total amount due from buyer to seller. A debit note increases (or a credit note decreases) the amount owed to correct an invoice (e.g., for returns or undercharges).

What is a bill of exchange?

A bill of exchange is a written, unconditional order signed by the drawer directing the drawee to pay a certain sum to a named person (payee) on demand or at a fixed future date; it is widely used to settle trade debts.

Define a bank and name the main types of banks.

A bank is a financial institution that accepts deposits, lends money, and provides related financial services. Main types: central bank, commercial banks, industrial/investment banks, agricultural banks, cooperative banks, and exchange/savings banks.

What is a central bank and what is Pakistan's central bank?

A central bank is the apex bank that controls and regulates a country's banking and monetary system; it is the bank of issue, banker to the government, and lender of last resort. Pakistan's central bank is the State Bank of Pakistan (SBP).

List four main functions of a central bank.

Issuing currency notes, acting as banker/agent/adviser to the government, acting as banker's bank and lender of last resort, controlling credit/money supply, and managing foreign exchange reserves.

List four functions of a commercial bank.

Accepting deposits, advancing loans/credit, creating credit (credit creation), facilitating payments (cheques, drafts, transfers), discounting bills of exchange, and providing agency/general utility services (lockers, foreign exchange).

Name and distinguish the main types of bank deposit accounts.

Current account (no/low interest, unlimited withdrawals, for businessmen), Savings account (small interest, limited withdrawals, for small savers), and Fixed/Term deposit account (lump sum for a fixed period at higher interest, not withdrawable before maturity).

What is a cheque and name its three parties?

A cheque is a written order to a bank to pay a stated sum from the drawer's account. Its three parties are the drawer (account holder who writes it), the drawee (the bank), and the payee (the person to be paid).

What is the difference between a bearer cheque and a crossed cheque?

A bearer/open cheque is payable in cash across the counter to whoever presents it. A crossed cheque (two parallel lines on the face) cannot be cashed over the counter and must be paid only into a bank account, making it safer.

Define insurance and its basic principle.

Insurance is a contract (policy) in which the insurer agrees to compensate the insured for a specified loss in return for a premium. Its basic principle is the pooling/sharing of risk—losses of the few are borne by the contributions of the many.

Name the main principles of insurance.

Utmost good faith (uberrimae fidei), insurable interest, indemnity, contribution, subrogation, proximate cause, and (in life insurance) the principle of greater risk/mortality.

Explain the principle of indemnity and which insurance is an exception.

Indemnity means the insured is compensated only for the actual loss suffered, not to make a profit, so payment cannot exceed the loss. Life insurance is an exception because human life cannot be valued in money.

What is insurable interest?

Insurable interest means the insured must stand to suffer a financial loss if the insured event occurs; without insurable interest the insurance contract is void (e.g., you can insure your own property or life).

Distinguish life insurance from general (non-life) insurance and name types of general insurance.

Life insurance covers risk to human life and pays on death or maturity (an investment + protection contract). General insurance covers property/liability risks and is a pure indemnity contract; types include fire, marine, motor, theft and accident insurance.

Define premium and policy in an insurance contract.

The premium is the consideration (amount) the insured pays the insurer, periodically or as a lump sum, to keep the cover in force. The policy is the written document containing the terms and conditions of the insurance contract.