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class 12 commerce notes – complete details

class 12 commerce notes – complete details

class 12 commerce notes:- CBSE class 12 commerce notes including Accountancy , Business Studies and Economics. we provide full notes of class 12 commerce notes in this article.

 class 12 commerce notes

class 12 commerce notes:-Accountancy

class 12 commerce notes:-Partnership Deed.

Partnership Deed is a written agreement among the partners of a partnership firm. It includes agreement on profit sharing ratio, salaries, commission of partners, interest provided on partner’s capital and drawings and interest on loan given or taken by the partners, etc. Generally following details are included in a partnership deed.


1. Objective of business of the firm

2. Name and address of the firm

3. Name and address of all partners

4. Profit and loss sharing ratio

5. Contribution to capital by each partner

6. Rights, types of roles and duties of partners

7. Duration of partnership

8. Rate of interest on capital, drawings and loans

9. Salaries, commission, if payable to partners.

10. Rules regarding admission, retirement, death and dissolution of the firm, etc.

class 12 commerce notes:-Give two circumstances under which the fixed capitals of partners may change.

The following are the two circumstances under which the fixed capitals of partner may change.

(i) If any additional capital is introduced by the partner during the year.

(ii) If any part of capital is permanently withdrawn by the partner from the firm.

class 12 commerce notes:-Identify various matters that need adjustments at the time of admission of a new partner.

The following are the various items that need to be adjusted at the time of admission of a new partner.

1. Profit Sharing Ratio: Calculation of new profit sharing ratio.

2. Goodwill: Valuation and adjustment of goodwill among the sacrificing old partners.

3. Revaluation of Assets and Liabilities: Assets and liabilities are revalued to ascertain the current value of the assets and liabilities of the partnership firm. Moreover, the profit or loss due to the revaluation need to be distributed among the old partners.

4. Accumulated profits, losses and reserves are distributed among the old partners in their old ratio.

5. Adjustment of capital of the partners.

class 12 commerce notes:-GOODWILL

Goodwill is an intangible asset of a firm. It is the value of a firm’s reputation and its good brand name in the market. A firm earns goodwill by its hard work and thereby winning the blind trust and faith of the customers by fulfilling their demands in both qualitative and quantitative aspects. A positive goodwill helps a firm to earn supernormal profits compared to its competitors that earns normal profits (as their goodwill is zero). In other words, goodwill ensures greater future profits as there will be greater number of satisfied customers in the future. As in the words of Lord Eldon, “Goodwill is nothing more than the probability, that the old customers will resort to the old place.”

Characteristics of Goodwill

The following are the characteristics of goodwill.

1) It is an intangible asset.

2) It is not a fictitious asset.

3) It is difficult to ascertain the exact value of goodwill.

4) It enhances the future as well as the present earning capacity of a business.

5) It helps in earning supernormal profits against the normal profits.

6) It assists the business to enjoy its upper hand over its counterparts.

Factors Affecting Goodwill

The following are the important factors that affect the goodwill of a firm.

1) Quality Products: If a company produces product of the best quality and in large scale, then automatically the company earns more goodwill.

2) Location: If a business islocated at easily reachable and convenient place, then more number of consumers will be attracted again and again which will lead to increase in sales and, therefore, the firm will earn higher goodwill.

3) Management: Efficient management leads to cost efficiency and increases productivity. If a firm’s management is efficient, then superior quality products can be produced at lower cost .These can be sold at lesser price. Superior quality at lower price enables a firm to earn higher goodwill.

4) Market Structure: If a firm is operating in a monopoly market with no close substitutes, then there will be more goodwill of the firm.

5) Economies of Scale: If a firm enjoys special advantages like, continuous supply of power, fuel and raw materials at a low price and produces quality product at a large scale, then the firm enjoys higher value of goodwill.

class 12 commerce notes:-What is sacrificing ratio? Why is it calculated?

Sacrificing ratio refers to the ratio in which the old partners of a partnership firm surrender their share of profit in favour of the new partner/s. It is calculated as a difference between the old ratio and the new ratio of the old partners.

Sacrificing Ratio = Old Ratio – New Ratio

It is very important to calculate this ratio, as the new partner need to compensate the old partners for sacrificing their share of profit. The new partner compensates the old partners by making payment to them in the form of goodwill that is transferred among the old partners in their sacrificing ratio.

class 12 commerce notes:-What are the different ways in which a partner can retire from the firm?

The following are the different ways in which a partner can retire from a firm.

i. With the consent of all other partners: A partner must take the consent of all the co-partners of the firm before his/her retirement. Thereafter, the partner can retire from the firm if and only if all the partners agree on the decision of his/her retirement.

ii) With an express agreement by all the partners: In case of written agreement among the partners a partner may retire from the firm by expressing his/her intention of leaving the firm though a notice to the other partners of the firm.

iii) By giving a written notice: If partnership among the partners is at will then a partner may retire by giving notice in writing to all the other partners informing them about his/her intention to retire.

class 12 commerce notes:ECONOMICS 

class 12 commerce notes:-What are official reserve transactions? Explain their importance in the balance of payments.

The transactions carried by monetary authority of a country, which cause changes in official reserves, are termed as official reserve transactions (ORT). These transactions are carried through purchase or sale of currency in the exchange market for foreign currencies or other assets. The reserves are drawn by selling foreign currencies in exchange market during deficits and foreign currencies are purchased during surplus. When the official reserves increases or decreases, it is called overall balance of payments surplus or deficit respectively.

Importance of ORT in balance of payments:

1. Purchase of a country’s own currency is a credit item in the balance of payments; whereas, sale of the currency is a debit item.

2. It helps to adjust the deficit and surplus in balance of payments.

class 12 commerce notes:-Differentiate between balance of trade and current account balance.

Points of differenceBalance of tradeCurrent account balance
DefinitionIt is the difference between the values of exports and imports of goods of a country.It is the difference between the values of exports and imports of goods, services and unilateral transfers of a country.
Components1. Export of goods

2. Import of goods

Export and import of goods, export and import of services, unilateral transfers.
Nature of transactionsIt records transactions related to visible items (i.e. goods) only.It records the transactions related to visible items (goods) as well as invisible items (services) and unilateral transfers.

class 12 commerce notes:-Explain why public goods must be provided by the government.

A good that is non-rival and non-excludable is referred to as public good. Non-rival means that consumption by one individual does not affect the consumption of another individual. Whereas, non-excludable implies that no individual can be excluded from using the good. For example, parks, roads, national defence, etc.

These goods must be provided by the government because of the following reasons:

1. The benefits of public goods can be easily enjoyed by anyone without affecting the consumption of other individuals. There arises market failure.

2. No individual can be excluded from using public goods as it is available to all. The link between the producer and the consumer becomes non-functional, necessitating government interference through public provisions.

class 12 commerce notes:-Distinguish between revenue expenditure and capital expenditure.


Revenue expenditure

Capital expenditure

Creation of AssetsIt does not create assets for the government.It results in the creation of assets.
Reduction of LiabilityThese expenditures do not result in the reduction of liability.These expenditures cause a reduction of the liability of the government.
Items(a) Aids given to states and others

(b) Interest payments

(c) Expenditure on defence

(a) Purchase of shares

(b) Expenditure on land, building, etc.

(c) Grants by the central government to the state government


class 12 commerce notes:-What is a barter system? What are its drawbacks?

Barter system is a system that was used in ancient times to exchange goods. In other words, this system was used to exchange one commodity for another before the monetary system came into existence. For example, if a person having rice wants tea, then he can exchange rice with a person who has tea and needs rice. The economy having the barter system was called ‘C-C economy’, i.e. commodity is exchanged for commodity.

The various drawbacks of the barter system are as follows:

1. Problem of double coincidence of wants

Double coincidence of wants implies that needs of two individuals should complement each other for the exchange to take place. For example, in the above case, the second person must need rice in exchange of tea.

2. Lack of common unit of value

Under barter system there was no common unit for measuring the value of one good in terms of the other good for the purpose of exchange. For example, a horse cannot be measured in terms of rice in the case of exchange between rice and horse.

3. Difficulty in wealth storage

It was very difficult to store commodities for future exchange purposes. The perishable goods like grains, milk and meat could not be stored to exchange goods in future. Therefore, wealth storage was a major difficulty of batter system.

4. Lack of standard of deferred payments

The future payments could not be met in a C-C economy (barter system) as wealth could not be stored. It was very difficult to pay back loans.

class 12 commerce notes:-What are the main functions of money? How does money overcome the shortcomings of a barter system?

The main functions of money are as follows:

1. Medium of exchange

Money acts as a medium of exchange as it facilitates exchange through a common medium, i.e. currency. In other words, money helps in the buying and selling of goods. For example, a person can sell his goods to another for money and that person can use money to purchase goods of his choice. Money solves the problem of double coincidence of wants.

2. Unit of value

The values of goods can be measured in terms of money. It is a common medium through which we can calculate the value of each and every good. The value of a good in terms of money is called the price. In barter system the lack of a common denominator for measuring values of goods was a major drawback.

3. Store of value

This function explains the importance of money as value storage. This implies that wealth in the form of money can be stored easily as a medium of exchange for future use. For example, money can be stored in banks for meeting emergency and future needs.

4. Standard of deferred payments

Payments can easily be made through the medium of money. In other words, it is very difficult to pay back a loan in terms of goods and services. However, with the advent of money the payments of loans or interests can easily be made.

Money overcomes the shortcomings of barter system in the following manner:

1. Money solves the problem of double coincidence of wants. For example, if a person needs wheat in exchange of tea, then he/she must search for a person who is ready to trade wheat for tea. Money made the need for such searches redundant.

2. In barter system, it was very difficult to measure the value of one good in terms of another. For example, it is difficult to calculate the value of a cow in terms of wheat.

3. It was very difficult to store goods, especially perishable goods (fruits, meat, etc.) for the purpose of value storage. Money serves this purpose.

4. The contractual or future payments are much difficult to be made in barter system. For example, a worker working on contract basis could not be paid in terms of rice or chairs.

class 12 commerce notes:-Business Studies

class 12 commerce notes:-Primary and secondary markets

Primary and secondary markets complement each other. Primary market deals with the issue of new securities. That is, through the primary market a company raises capital directly from the borrowers. On the other hand, secondary market deals in the purchase and sale of the existing securities. That is, once the securities are issued in primary market, they are then traded in the secondary market. It is in this sense that both the markets complement each other.

class 12 commerce notes:-What is marketing? What functions does it play with process of exchange of goods and services? Explain.

Marketing refers to the process wherein the buyers and sellers interact with each other for purchase and sale of goods and services. Earlier, marketing had different approaches with respect to its definition. It was sometimes described as a post-production process that involves purchasing of the final products and sometimes, as a pre-production process that involves merchandising (designing) of the product. In reality, marketing is a much wider concept than this. It consists of all those activities that are involved in the process of exchange of the goods and services between producers and consumers. These activities are basically the functions performed under marketing. It involves planning, designing the product, packaging and labelling of the product, standardising, branding, warehousing, transportation, advertising, pricing and distribution. It also includes activities that are performed even after the sale of product such as, maintaining customer relations and collecting feedback. Thus, marketing plays an important role in the process of exchange of goods and services.

class 12 commerce notes:-Explain the advantages of branding to marketers of goods and services.

Branding implies giving a unique name, sign, symbol or term for the identification of a product. The following are the advantages of branding to the marketers.

i) Branding enables a firm to distinguish its product from the product of other firms.

ii) It facilitates advertising of the product. Only when a product is given a brand, it can be advertised and thereby, attract customers. A product with a generic name cannot be advertised.

iii) Through good branding manufacturers can create loyalty and habituality for their product. Thereby, the firm can benefit from this and charge a different price for its product.

iv) It helps in establishing the base if a new product is to be launched. This is because if a new product is launched under a good and established brand, it is expected to get a good boost and benefit from reputation of the brand.

class 12 commerce notes:-Explain the importance of consumer protection from the point of view of a business.

Consumer protection refers to the consumer education regarding their rights and responsibilities and the redressal of their grievances and complaints. Consumer protection is important not just for consumers but also for business. The following points highlight the significance of consumer protection from the point of view of business.

(i) Long-Term Interest: With increasing competition and the drive to survive in the market, consumer satisfaction and interest is of prime importance for any business. While taking due care of the interest of the consumers, a business builds goodwill and reputation. A satisfied customer not only comes back and results in repeated sales for the firm, but also pulls new customers by spreading the good word. Thus, it is in long-term benefit of the business to protect consumers’ interest.

(ii) Use of Resources: A business uses the resources of society for the production of various goods and services. Through the sale of these goods and services to the society, a business earns profits. Thus, it is their duty to supply such goods and services that adhere to the overall interest of the society.

(iii) Ethical Reasoning: Today moral values and ethics play an important role in business. It is the moral duty of every business to protect the interests of its customers. They must follow ethical and moral values and avoid any form of exploitation of the consumers such as unfair trade practices, adulteration, etc.

(iv) Responsibility towards Society: As the business earns profits by selling various goods and services to consumers, it becomes their responsibility to take care of the interests and satisfaction of the consumers.

(v) Government Interference: A business organisation that indulges in any form of exploitation of consumers such as unfair trade practices, adulteration, etc. draws intervention from the government. Such government interference spoils the goodwill and image of the business. Thus, it is in the interest of the business to voluntarily follow such practices that take care of the interest of the consumers.

class 12 commerce notes:-Clarify the meaning of the terms ‘entrepreneur’, ‘entrepreneurship’ and ‘enterprise’.

The three terms ‘entrepreneur’, ‘entrepreneurship’ and ‘enterprise’ are different yet interrelated to each other. An entrepreneur refers to a person/individual who starts up a business. He is the one who takes up the basic idea of setting up the business. In the process of setting up the business, he undertakes risk, coordinates production resources and undertakes innovation. This whole process of setting up a new business is called entrepreneurship. The final result, that is, the business which is established after undertaking the process of entrepreneurship is called an enterprise. Thus, ‘entrepreneur is the person’ who undertakes the ‘process of entrepreneurship’ to set up an ‘enterprise’.

class 12 commerce notes

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class 12 commerce notes

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  1. navjeet says:

    hello sir/ma’am,
    i am teaching commerce for 6 years.i have notes to post on your website.if you are interested kindly mail me.

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