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class 12 commerce study material – Complete details

class 12 commerce study material – Complete details

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class 12 commerce study material – Complete details

class 12 commerce study material:- Accountancy

class 12 commerce study material:-Accountancy : Company Accounts and Analysis of Financial Statements

class 12 commerce study material:-Chapter 1 – Accounting for Share Capital

  • What is public company?

    • A public company is defined as a company that offers a part of its ownership in the form of shares, debentures, bonds, securities to the general public through stock market. There must be atleast seven members to form a public company. As per the section 3 (1) (iv) of Companies Act 1956, public company means a company which:a) is not a private company,b) has a minimum paid up capital of Rs 5,00,000 or such higher paid up capital, as may be prescribed,c) is a private company, being a subsidiary of a company which is not a private company.A public company should not be mistakenly understood as a publicly-owned company, as the latter is exclusively owned and controlled by the government. A public company issues its share to general public without any restriction on maximum number of persons. A public company can be segmented into two types:1. Listed Company– A Company whose shares are listed and traded in the stock exchange like, Tata Motors, Reliance, etc.2. Unlisted Company– A Company whose shares are not listed in the stock exchange and thereby these shares cannot be traded in the stock exchange.
  • What is meant by the word ‘Company’? Describe its characteristics.

    • The Section 3 (1) (i) of the Company Act of 1956 defines an organisation as a company that is formed and registered under the Act or any existing company that is formed and registered under any earlier company laws. In general, a company is an artificial person, created by law that has a separate legal entity, perpetual succession, common seal and has limited liability. It is a voluntary association of person who together contributes in the capital of the company to do business. Generally, the capital of a company is divided into small parts known as shares, the ownership of which is transferable subject to certain terms and conditions. There are two types of company, public company and private company.Characteristics of Company1. Association of Person: A company is formed voluntarily by a group of persons to perform a common business. Minimum number of person should be two for formation of a private company and seven for a public company.2. Artificial Person: Company is an artificial and juristic person that is created by law.3. Separate Legal Entity: A company has a separate legal entity from its members (shareholders) and Directors. It can open a bank account, sign a contract and can own a property in its own name.4. Limited Liability: The liability of the members of a company is limited up to the nominal value or the face value of the shares. Unlike a partnership firm, on insolvency of a company, the members and the shareholders are not liable to pay the amount due to the creditors of the company. In fact, the members and the shareholders are only liable to pay the unpaid amount of the shares held by them. For example, if the value of share is Rs 10 and Rs 6 is paid up, then the member is liable to pay only Rs 4.5. Perpetual Existence: The existence of company is not affected by the death, retirement, and insolvency of its members. That is, the life of a company remains unaffected by the life and the tenure of its members in the company. The life of a company is infinite until it is properly wound up as per the Company Act.6. Common Seal: The Company is an artificial person and has no physical existence; hence it cannot put its signature. Thus, the Common Seal acts as an official signature of a company that validates the official documents.7. Transferability of Shares: The shares of public limited company is easily and freely transferable without any consent from other members. But the share of ownership of a private limited company is not transferable without the consent of the other members.
  • What is private limited company?

    • Private limited company is a company that is limited by shares or by guarantee by its members. A private limited company is defined as a company that has a minimum paid up share capital of Rs 1,00,000. As defined by the Section 3 (1) (iii) of Companies Act 1956, private limited company is defined by the following characteristics:a) It restricts the right to transfer its shares.b) There must be atleast two and a maximum of 50 members (excluding current and former employees) to form a private company.c) It cannot invite application from the general public to subscribe its shares, or debentures.d) It cannot invite or accept deposits from persons other than its members, Directors and their relatives.Unlike public company, a private company cannot issue its shares or debentures to general public at large as shares of these companies are not traded in the stock exchange, for example, Coca-Cola India Private limited, etc.

class 12 commerce study material:-Chapter 2 – Issue and Redemption of Debentures

  • What is meant by a Debenture?

    • The word Debenture is derived from a Latin word ‘debere‘ which means to borrow. A debenture is issued in the form of a certificate under the seal of a company and containing a contract for the repayment of the principal sum after a fixed period of time and payment of interest at regular intervals, generally half yearly. Debentures are issued by a company for acquiring long-term borrowings.
  • What does a Bearer Debenture mean?

    • When a company does not maintain any record of the debenture holders and the debenture is transferable mere by delivery, then the type of the debenture held by the holders is termed as Bearer Debenture. Interests on such debentures are paid to the persons who produce the interest coupons that are attached with these debentures in a specified bank.
  • State the meaning of ‘Debentures issued as a Collateral Security’.

    • The term collateral security means additional or secondary security in addition to the primary security. Sometimes, when a company takes loan from a financial institution, then besides the primary security, the company may issue debenture for additional security (as collateral security). The lender who receives debenture as collateral security is not entitled for interest on these debentures. If any default is made by the company in paying back the principal amount (i.e. the loan amount) or interest on the loan, then the lender has the full right to recover his/her dues from the sale of primary security. But, if the primary security is not sufficient to recover the amount of the debt, then the debentures issued as collateral may be used for recovery of the remaining amount.
  • What is meant by an ‘Irredeemable Debenture’?

    • Irredeemable Debentures are those debentures that are not repayable or redeemable by a company during its life time. These are repayable only at the time of winding up of the company. These are also known as Perpetual Debentures that means debentures having indefinite life. In India, now days, no company can issue irredeemable debentures.

class 12 commerce study material:-Chapter 3 – Financial Statements of a Company

  • What is public company?

    • A public company is defined as a company that offers a part of its ownership in the form of shares, debentures, bonds, securities to the general public through stock market. There must be atleast seven members to form a public company. As per the section 3 (1) (iv) of Companies Act 1956, public company means a company which:a) is not a private company,b) has a minimum paid up capital of Rs 5,00,000 or such higher paid up capital, as may be prescribed,c) is a private company, being a subsidiary of a company which is not a private company.A public company should not be mistakenly understood as a publicly-owned company, as the latter is exclusively owned and controlled by the government. A public company issues its share to general public without any restriction on maximum number of persons. A public company can be segmented into two types:1. Listed Company– A Company whose shares are listed and traded in the stock exchange like, Tata Motors, Reliance, etc.2. Unlisted Company– A Company whose shares are not listed in the stock exchange and thereby these shares cannot be traded in the stock exchange.
  • Explain the nature of the financial statements.

    • The financial statements are the end-products of the accounting process. The financial statements not only reveal the true financial position of the company but also help various accounting users in decision making and policy designing process. The nature of the financial statements depends upon the following aspects like recorded facts, conventions, concepts, and personal judgment1. Recorded facts– The items recorded in the financial statements reflect their original cost i.e. the cost at which they were acquired. Consequently, financial statements do not reveal the current market price of the items. Further, financial statements fail to capture the inflation effects.2. Conventions– The preparation of financial statements is based on some accounting conventions like, Prudence Convention, Materiality Convention, Matching Concept, etc. The adherence to such accounting conventions makes financial statements easy to understand, comparable and reflects the true and fair financial position of the company.3. Accounting Assumptions – These basic accounting assumptions like Going Concern Concept, Money Measurement Concept, Realisation Concept, etc are called as postulates. While preparing financial statements, certain postulates are adhered to. The nature of these postulates is reflected in the nature of the financial statements.4. Personal Judgments- Personal value judgments play an important role in deciding the nature of the financial statements. Different judgments are attached to different practices of recording transactions in the financial statements. For example, recording stock either at market value or at the cost requires value judgment. Similarly, provision on various assets, method of charging depreciation, period related to writing off intangible assets depends on personal judgment. Thus, personal judgments determine the nature of the financial statements to a great extent.
  • What is private limited company?

    • Private limited company is a company that is limited by shares or by guarantee by its members. A private company is defined as a company that has a minimum paid up share capital of Rs 1,00,000. As defined by the Section 3 (1) (iii) of Companies Act 1956, private limited company is defined by the following characteristics.a) It restricts the right to transfer its shares.b) There must be atleast two and a maximum of 50 members (excluding current and former employees) to form a private company.c) It cannot invite application from the general public to subscribe its shares, or debentures.d) It cannot invite or accept deposits from persons other than its members, Directors and their relatives.Unlike public company, a private company cannot issue its shares or debentures to general public at large as shares of these companies are not traded in the stock exchange, for example, Coca-Cola India Private limited, etc.
  • Define Government Company?

    • As per the Section 617 of Company Act of 1956, a Government Company means any company in which not less than 51% of the paid up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one on more State Governments and includes a company which is a subsidiary of a Government Company as thus defined.

class 12 commerce study material:- Business Studies

Business Studies : Business Finance and Marketing

class 12 commerce study material:-Chapter 1 – Financial Management

  • What is working capital? How is it calculated? Discuss five important determinants of working capital requirement.

    • Every business needs to take the decision regarding the investment in current assets i.e. the working capital. Current assets refer to the assets that are converted into cash or cash equivalents in a short period of time (less than or equal to one year). There are two broad concepts of working capital namely, Gross working capital and Net working capital.Gross working capital (or, simply working capital) refers to the investment done in the current assets. Net working capital, on the other hand, refers to the amount of current assets that is in excess of current liabilities. Herein, current liabilities are those obligatory payments which are due for payment such as bills payable, outstanding expenses, creditors, etc. Net Working Capital is calculated as the difference of current assets over current liabilities. i.e.NWC = Current Assets – Current LiabilitiesThe following are five determinants of working capital requirement.i) Type of Business: Working capital requirement of a firm depends on its nature of business. An organisation that deals in services or trading will not require much of working capital. This is because such organisations involve small operating cycle and there is no processing done. Herein, the raw materials are the same as the outputs and the sales transaction takes place immediately. In contrast to this, a manufacturing firm involves large operating cycle and the raw materials need to be converted into finished goods before the final sale transaction takes place. Thereby, such firms require large working capital.ii) Scale of Operations: Another factor determining the working capital requirement is the scale of operations in which the firm deals. If a firm operates on a big scale, the requirement of the working capital increases. This is because such firms would need to maintain high stock of inventory and debtors. In contrast to this, if the scale of operation is small, the requirement of the working capital will be less.iii) Fluctuations in Business Cycle: Different phases of business cycle alter the working capital requirements by a firm. During boom period, the market flourishes and thereby, there is higher sale, higher production, higher stock and debtors. Thus, during this period the need for working capital increases. As against this, in a period of depression there is low demand, lesser production and sale, etc. Thus, the working capital requirement reduces.iv) Production Cycle: The time period between the conversion of raw materials into finished goods is referred as production cycle. The span of production cycle is different for different firms depending on which the requirement of working capital is determined. If a firm has a longer span of production cycle, i.e. if there is a long time gap between the receipt of raw materials and their conversion into final finished goods, then there will be a high requirement of working capital due to inventories and related expenses. On the other hand, if the production cycle is short then requirement of working capital will be low.v) Growth Prospects: Higher growth and expansion is related to higher production, more sales, more inputs, etc. Thus, companies with higher growth prospects require higher amount of working capital and vice versa.
  • What is financial risk? Why does it arise?

    • Financial risk refers to a situation when a company is not able to meet its fixed financial charges such as interest payment, preference dividend and repayment obligations. In other words, it refers to the probability that the company would not be able to meet its fixed financial obligations. It arises when the proportion of debt in the capital structure increases. This is because it is obligatory for the company to pay the interest charges on debt along with the principle amount. Thus, higher the debt, higher will be its payment obligations and thereby higher would be the chances of default on payment. Hence, higher use of debt leads to higher financial risk for the company.

class 12 commerce study material:-Chapter 2 – Financial Markets

  • What are the functions of a financial market?

    • A financial market refers to the market where the creation and exchange of financial assets such as shares and debentures takes place. The following are the functions of a financial market.i) Transfer of Savings and Alternatives for InvestmentA financial market acts a link between the savers and the investors. It provides a platform for the transfer of savings from the households to the investors. It also provides savers with various alternatives for investment and thereby, directs the funds to the most productive investment.ii) Establishes the PriceSimilar to a commodity, the price of a financial asset is established through the forces of demand and supply for funds. Financial market provides a platform for the interaction of the demand of the funds (represented by the business firms) and the supply of funds (represented by the households). Thereby, it helps in determining the price of the asset being traded.iii) Facilitates LiquidityAn asset or a security can be easily purchased and sold in a financial market. This renders liquidity to the assets. That is, through trading in the financial market assets can be easily converted into cash or cash equivalents.iv) Reduced Cost of TransactionBy rendering information regarding the securities being traded, their price, availability, etc., a financial market helps in reducing the cost of transaction in terms of effort, money and time.
  • ”Money Market is essentially a Market for short term funds”. Discuss.

    • Money market refers to the market for trading of short term securities and funds. Securities traded in the money market have a very short maturity period ranging from one day to one year. Such assets act as a close substitute for cash or money. Due to their short maturity period they are also known as ‘Near Money instruments’. Money market instruments act as an important source of finance for working capital requirements. They enjoy a high degree of liquidity. DFHI discounts money market securities and offers a ready market for them. In addition, securities traded in the money market are safe and secure as the transactions are made in those instruments that are issued by financial institutions and those companies that are financially strong. Common instruments traded in the money market are treasury bills, commercial paper, call money, certificate of deposit, etc.

class 12 commerce study material:-Chapter 3 – Marketing

  • 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.
  • 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 study material:-Economics

class 12 commerce study material:-Economics : Introductory Macroeconomics

class 12 commerce study material:-Introductory Macroeconomics Chapter 1 – Introduction

  • What is the difference between microeconomics and macroeconomics?

    • Points of Difference

      Microeconomics

      Macroeconomics

      1.DefinitionIt is a branch of economics that studies the economic variables at an individual level like the households, the firms, the consumers etc.It is a branch of economics that studies the economic variables of an economy as a whole.
      3.Deals withIt deals with how consumers or the producers make decisions depending on their given budget and other variables.It deals with how different economic sectors like households, industries and other government and foreign sectors make their decisions.
      4MethodThe method of partial equilibrium (i.e. equilibrium in one market) is used.The method of general equilibrium (i.e. equilibrium in all the markets, simultaneously) is used.
      4.VariablesThe major variables involved are price, consumer’s demand, wages, rent, profit, firm’s revenue, cost, etc.The major variables involved are aggregate demand, aggregate supply, inflation, unemployment, poverty, etc.
      5TheoriesVarious theories studied are:

      1.Theory of Consumer’s Behaviour and Demand

      2. Theory of Producer’s Behaviour and Supply

      3. Theory of price Determination under different market conditions

      Various theories studied are

      1. Theory of National Income

      2. Theory of Money

      3. Theory of General Price level

      4. Theory of Employment

      5. Theory of International trade

      6Popularised byAlfred MarshalKeynes
  •  What are the important features of a capitalist economy?

    • Capitalist economy is an economic system where the means of production are privately owned. These means of production are driven by the motive of profit making. This economic structure is also known as free market economy or laissez faire.Following are the features of a capitalist economy:1. Role of the governmentThe government provides the basic framework for the smooth functioning of an economy. It provides the basic framework and is responsible for maintenance of law and order, justice, growth and stability, defence, etc.2. Profit motiveThe economic agents are driven by the prime motive of profit maximization.3. Central problemsThe central problems of an economy are solved by the market forces of demand and supply, i.e., the law of demand and supply operates here. The producers will supply only those goods and services that are demanded by the economy.4. Role of private sector

      The role of private individuals is more dominant. The main role of undertaking production and organising factors of production are played by the private individuals and capitalists.

      5.Laissez-faire

      This economy is also called `laissez faire‘. It has minimum interference or restriction from the government.

class 12 commerce study material:-Introductory Macroeconomics Chapter 2 – National Income Accounting

  • What are the four factors of production and what are the remunerations to each of these called?

    • The four factors of production are:1. Land – It denotes the natural resources like air, water, soil, etc. The payment that is paid by the firms to acquire these services is called rent.2.Labour – It refers to the physical and mental effort required to do a work. For example, engineer, manager, worker, etc. The payment made to the labour in exchange of his/her services is called as wage.3. Capital – It refers to the monetary investments and physical and tangible investments like machinery, buildings, technology, tools, etc, which assists in production process. The payment received in exchange of these services is called interest.4. Entrepreneur – It refers to the individual who undertakes the risk to organise the production process. Entrepreneurs are the risk takers and often are the innovators of new techniques. They receive profit in exchange of their entrepreneurship.The remunerations paid to the factors of productions are called factor payments or factor incomes. These are the aggregation of rent, wage, interest and profit.
  • Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Explain.

    • In a two sector economy, consisting of households and firms, the only way in which the households can dispose their income is on the goods and services produced by the firms. The factors of production use their remuneration to purchase goods and services. Thus, the income will come back to the producers in the form of sales’ revenue. So, there is no difference between the amount that firms distribute in the form of factor payments and consumption expenditure incurred by the households. The same process continues year after year. However, if there has been any leakage in the form of savings, imports or taxes, then there arises a difference between the aggregate consumption expenditure and aggregate factor payments. In the case of some leakage, the households will spend less than their factor incomes. Consequently, the firms will receive lesser amount in the form of revenue, which will reduce the production level and employment level. This process will continue in every successive round and production and employment levels will continue to drop. Thus, the equality between the aggregate consumption expenditure and the aggregate factor payments is very necessary for the smooth functioning of the economy.

Recommended Read:- class 12 commerce study material

class 12 commerce study material

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