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class 12 commerce revision materials – complete details

class 12 commerce revision materials – complete details

class 12 commerce revision materials – complete details:- We provide complete details of class 12 commerce revision materials in this articles.

class 12 commerce revision materials

class 12 commerce revision materials

 class 12 commerce revision materials – complete details

class 12 commerce revision materials:-Accountancy : Partnership Accounts

class 12 commerce revision materials:-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 revision materials:-Partnership and its Characteristics

According to the Section 4 of the Partnership Act, 1932, partnership is an agreement between two or more persons who have agreed to share profits or losses of a business that will be carried by all or any one of them acting for all.

Person who joined their hands to set up the business are called ‘partners’ individually and ‘firm’ collectively and the name under which they carry out their business is termed as ‘firm name’.

Important Characteristics of Partnership

The following are the important characteristics of partnership.

1.Two or more persons: Partnership is an agreement between two or more person coming together for a common goal. Although as per the Partnership Act of 1932, there is no maximum limit on the number of partners in a firm, but as per the Section 11 of Company Act of 1956, the maximum number of partners should not exceed 10 for banking business and 20 for any business. In case if the number of partners exceeds the aforesaid limit, then the partnership becomes illegal.

2.Partnership Deed: The partnership among the partners should be backed up by a partnership deed. A partnership deed is an agreement among the partners governing them in carrying out the proposed business. The deed may be oral or written.

3.Business: A partnership is formed to carry out a legal business. Partnerships in smuggling, black marketing etc. are illegal business activities and hence, the partnership is also illegal.

4. Sharing of profit: The profit or loss earned by a partnership firm must be distributed as per the partnership deed or equally among the partners (in absence of partnership deed). It is a very important feature of partnership. If a group is formed for charitable purpose, not to earn profit then this group will not be regarded as a partnership.

5.Liability: Liability of a partnership firm is unlimited and each partner is liable for firm’s liabilities whether individually and jointly with other partners to the third party. Moreover, each partner along with his/her co-partners is responsible for all the acts of the partnership firm.

6. Mutual agency: Partnership may be carried on by all or any one of them acting on behalf of all. It means all the partners of a firm are equally entitled to participate in the activities of the business or any one of them who is acting on behalf of all. Every partner acts as an agent for others and binds others by his/her act and in turn is bound by others by their act.

 class 12 commerce revision materials:-Discuss the main provisions of the Indian Partnership Act, 1932 that are relevant to partnership accounts if there is no partnership deed.

The following are the main provisions of the Indian partnership Act, 1932 that are relevant to the partnership accounts in absence of partnership deed.

1.Profit Sharing Ratio: If the partnership deed is silent on sharing of profit or losses among the partners of a firm, then according to the Partnership Act of 1932, profits and losses are to be shared equally by all the partners of the firm.

2.Interest on Capital: If the partnership deed is silent on interest on partner’s capital, then according to the Partnership Act of 1932, no interest on capital should be given to the partners of the firm. However, interest on capital is given only out of the profits, if mutually agreed by all the partners.

3.Interest on Drawings: If the partnership deed is silent on interest on partner’s drawings, then according to the Partnership Act of 1932, no interest on drawing should be charged from the partners of the firm for the amount of capital withdrawn in the form of drawings.

4.Interest on Partner’s Loan: If the partnership deed is silent on interest on partner’s loan, then according to the Partnership Act of 1932, the partners are entitled for 6% p.a. interest on the loan forwarded by them to the firm.

5.Salary to Partner: If the partnership deed is silent on salary to a partner, then according to the Partnership Act of 1932, no salary should be given to any partner.

class 12 commerce revision materials:-Guarantee of profit to a partner.

Guarantee to a partner refers to the guarantee of certain minimum amount of profit by all the other partners or any one partner of a firm. The difference amount is paid to the guaranteed partner, if and only if his/her share in the profit is lesser than the assured amount (or the minimum amount guaranteed). There are usually two cases:

Case 1: If a partner is guaranteed by all the other partners for minimum profit

Step I: Calculate the profit earned by the firm.

Step II: Calculate the share of profit of the guaranteed partner.

Step III: Deficiency, if any, will be borne by all the other partners either in their profit ratio or in any other agreed ratio.

Case 2: If a partner is guaranteed by any other partner for minimum profit

Step I: Calculate the profit earned by the firm.

Step II: Calculate the share of profit of all the partners.

Step III: Calculate the deficiency of the guaranteed partner.

Step IV: Deduct the amount of deficiency from the profit of the guarantor partner and add the deficiency amount to the guaranteed partner’s profit.

class 12 commerce revision materials:-What is goodwill? What are the factors that effect 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 revision materials:-Business Studies : Principles and Functions of Management

class 12 commerce revision materials:-Management is considered to be both an art and a science. Explain.

Management fulfills the criteria of both an art as well as a science. The following points explain the features of management as an art and as a science. 

Management as an Art

Management satisfies the following criteria for it to be called an art.

  1. Existing Literature: All art forms such as music, dance presuppose a defined body of knowledge and literature. Similarly, management also has a lot of literature for theoretical knowledge and learning. Various theories and principles have been developed in management. Such as Henry Fayol’s Principles of Management, Taylor’s Scientific Management Theory. 
  2. Dynamic Application: Art is the personalised applicability of the existing knowledge. That is, each individual uses the basic knowledge in his own creative way. For example, every dance form has some basic steps. These steps are used by each dancer using his own creative manner. In a similar manner, managers use the available theories and principles as per the situation in their own unique manner. That is, the managers use their own creativity and imagination for the application of the knowledge of management.
  3. Practice and Creativity: Art involves practice and innovation. The artists use the existing literature as per his own creativity and innovation. For example, two writers can describe a given situation based on their unique interpretations. Similarly, in management, a manager applies the theories and principles of management to different situations as per his own creativity and imagination and some times even formulates new ways to address a situation.

Management as a Science

As a science, management fulfills the following criteria. 

  1. Systematic Body of Knowledge: Science has a specified body of knowledge which is based on cause and effect relationship. Similarly management has its own body of theories and principles that are developed over years. In addition, similar to other disciplines of science, management also has its own vocabulary.
  2. Theories Based on Experimentation: In science the principles and theories are based on continuous observation and experimentation. In a same manner, the principles of management have also developed over several years based on repeated observations and experiments. However, as against science, in management no exact cause and effect relationship can be established. This is because management primarily deals with humans and human behavior. As human behavior is subject change, so, the outcome of these theories would also vary from one situation to another. Despite this, management fulfils this criterion of science to some extent as the scholars have been able to identify certain theories and principle that act as guidelines in management.
  3. Universal Validity: In science, the principles have universal validity. In management also the theories and principles are valid to some extent if not universal. Although the application of the theories and their outcomes vary from situation to situation, however they act as standards for actions in different situations. That is, these principles can be used for the basic training of the managers.


Management can be defined as a process of getting the work or the task done that is required for achieving the goals of an organisation in an efficient and effective manner. 

Process implies the functions of the management. That is, planning, organising, staffing, directing and controlling. On the other hand, effective implies completing the given task and work while, efficient means successfully completing the task with minimum possible cost. 

Thus, management can be defined as the process of planning, organising, staffing, directing and controlling such that the goals of the organisation are achieved successfully with minimum cost and resources.

Characteristics of management.

The following are the two characteristics of management. 

i. Pervasive– Management is pervasive to all organisations across size, characteristics and region.

That is, all organisations whether large or small, working whether for economic, social or political interest and in any region need management. For example, a corporate firm requires management as does a non-profit organisation. Similarly, a hotel needs as much management as a hospital. In addition, management is practiced by organisations in all the countries and regions. The only difference lies in how it is practiced by different organisations in different regions based on their culture and traditions. 

ii. Continuous Process– Management is a continuous process. That is, the various functions of management (planning, organising, directing, staffing and controlling) are performed simultaneously by the managers. However, the focus or the priority of the manager may differ from day to day. While on one day, the manger mat devote more time towards planning, while on other day more time may be spent on controlling.

class 12 commerce revision materials:-Management is a series of continuous interrelated functions. Comment.

In the words of ‘Robert L. Trewelly and M. Gene Newport’, management is defined as the process of planning, organising, actuating, and controlling an organisation’s operations in order to achieve coordination of the human and material resources essential in the effective and efficient attainment of objectives. Planning, organising, directing, staffing and controlling are the five basic functions of management that the manager has to perform simultaneously. In addition to this, these functions are interrelated and each one is a function of the other. That is, no function can be complete without the other ones. For example, until planning is not done, organising cannot take place. Similarly, until right kind of staffing is not there, then direction would not be successful. 

A detailed explanation of the functions of management is as follows.

(a) Planning– Planning implies deciding what work is to be done, who is to do it and how it is to be done. That is, it implies the setting up of goals to be achieved and devising the means for achieving them effectively and efficiently. It is the stepping stone for management of any organisation. It is well said idiom that ‘well planned is half done’. In addition, planning helps in predicting the situations and choosing the best out of various alternatives to deal with the situation.

(b) Organising– Once the plan is designed, the next step is organising. Organising implies indentifying what tasks and resources are required for the execution of the plan. Under organising the duties and tasks are grouped and allotted to different departments, authority is defined and a hierarchical structure is established in the organisation. Proper organisation leads to both effectiveness and efficiency in the organisation. 

(c) Staffing– Any organisation requires specialised personnel for the accomplishment of the tasks. Staffing implies hiring the right kind of people with the required qualification for the work. Staffing is also known human resource function and includes  hiring, training and development of the people. 

(d) Directing– Directing is a very important function of a manager. It deals with guiding and steering the people working in the office. It includes motivating them in the right direction so that they can put in their best to achieve the goals. Directing has two important aspects- motivation and leadership. Motivation includes setting up of right environment for the work. Leadership on the other hand, implies getting the work done as per the directions of the leader. This is achieved by praising and criticising the work as and when required. 

(e) Controlling– Once the above functions are done, it is necessary to control and check that the work is moving in the right direction. It involves measuring the actual work against the set standards and the policies. It also ensures that the work is up-to the mark and there is no diversion or errors from the set targets. Controlling also takes care that if there arises any error or discrepancy then, appropriate measures are taken to rectify it. This helps in finally achieving the goals in time, effectively and efficiently.

Thus, we can say that the functions of management are interdependent on each other and the manager performs these functions simultaneously.

class 12 commerce revision materials:-Economics : Introductory Macroeconomics

class 12 commerce revision materials:-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 revision materials:-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 revision materials:-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 revision materials:-Give the relationship between the revenue deficit and the fiscal deficit.

The relationship between the revenue deficit and the fiscal deficit can be explained through the following points:

1. Revenue deficit is the difference between government’s revenue expenditures and government’s receipts.

Revenue deficit = Revenue expenditures – Revenue receipts

On the other hand, fiscal deficit is the difference between the total expenditure and the total receipt of the government.

Fiscal deficit = Total Expenditure – Total Receipts (excluding borrowings)

2. The term ‘fiscal deficit’ is used in a broader sense than the term ‘revenue deficit’.

3. As revenue deficit increases, the proportion of fiscal deficit also increases.

class 12 commerce revision materials:-What is the difference between ex ante investment and ex post investment?

S. No.

Ex-ante Investment

Ex-post Investment


It refers to the planned or intended investment during a particular period of time.It refers to the actual level of investment during a particular period of time.


It is imaginary (intended), in which a firm assumes the level of investment on its own.It is factual or original that signifies the existing investment of a particular time.


It is planned on the basis of future expectations.It is the actual result of variables.

class 12 commerce revision materials:- 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 revision materials:-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 revision materials:-Explain the functions of a commercial bank.

Commercial banks perform various functions that are as follows:

1. Accepting deposits

The basic function of commercial banks is to accept deposits of the customers. These deposits are of the following types:

(i)Saving Accounts

Saving accounts cater to the needs of those individuals who wish to save a part of their income and earn interest on the amount saved. Account holders of saving accounts can deposit cheques, drafts, etc. However, there is a limit on withdrawal.

(ii)Fixed deposit accounts

As the name suggests, fixed deposit accounts imply deposits are kept for fixed periods of time; for example, Rs.500 per month for 5 years. The period has to be decided in advance, while opening the account. Holders of these accounts do not enjoy the cheque facility. Higher the time period, higher will be the interest rate, which is decided by RBI.

(iii)Current deposits accounts

Current deposit accounts are also called ‘demand deposits’ as the depositor can withdraw money at any time through cheques. Businessmen use this account to make many transactions in a single day; however, they do not earn interest on the deposits. Banks provide account statements to the current account holders at regular intervals.

2. Granting loans and advances

The second most important function of the commercial banks is to give loans and advances. The rate of interest charged by the banks on loans is higher than the rate of interest paid by the banks on demand deposits and saving deposits. Loans granted by commercial banks are generally for long term and are given against securities. Advances are given by a bank only for a short span of time.

3. Agency functions

The commercial banks perform various agency functions with the prime purpose of acceptance of deposits and granting of loans. Their functions include:

(i) Transfer of funds – The banks provide easy flow of funds from place to place via mail transfers, demand drafts, etc.

(ii) Collection of funds – The banks also collect funds on behalf of its customers through bills, cheques, etc.

(iii) Banks collect insurance premiums, dividends, interest on debentures, etc.

(v) Banks assist in the process of tax payment by the accountholders.

(vi) Banks also play the role of trustees or executors.

4. Discounting bills of exchange

Commercial Banks provide financial assistance to the business community by discounting bills of exchange. The banks purchase these bills, produced by customers, by deducting interest from the face value of the bill, thus providing easy finances to the business community when required.

5. Credit creation

Commercial banks create credit in the economy through demand deposits. Credit creation paves the path for the growth of the economy.

6. Other functions

(i) Providing locker facility

(ii) Purchase and sale of foreign exchange

(iii) Issue of gift cheques

(iv) Underwriting of shares and debentures

(v) Providing information and statistical data useful to customers

class 12 commerce revision materials

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class 12 commerce revision materials

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