Commerce Material 2nd year

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-: INTERNATIONAL TRADE:-
QUESTION AND ANSWERS
1. WHAT IS INTERNATIONAL TRADE & ITS IMPORTANCE?
A. Trade is the central activity in commerce. Trade is the buying and selling of goods
.The trade that takes place between nations is called international trade.
DEFINITION:
International trade is the process of transferring goods produced in one country for the
consumers in another country.
IMPORTANCE:
 International trade sells its surplus production to other countries and buys goods
required it.
 International trade is the back bone of the modern commercial world.
 International trade promotes increased international understanding, exchange of
ideas and cultures.
 International trade lowers the prices of goods and services all over the world.
 It allows for the working of international monetary system with free convertibility
currencies.
2. DISTINGUISH BETWEEN HOME TRADE AND FOREIGN TRADE?
A. HOME TRADE: It is concerned with the buying and selling of goods within the
boundaries of one country .the buyer and seller belong to same country.
FOREIGN TRADE: The exchange of goods and services between two or more countries is
called foreign trade or international trade.
Difference between home trade and foreign trade:
HOME TRADE FOREIGN TRADE
It refers to the trade within the country. It refers to the trade other country.
It doesn’t involve in any exchange of cur
currency.
It involve in the exchange of currency.
Not Subjected to any restrictions. Subjected to many restrictions.
Transport cost and risks are less. Transport cost and risks are more.
The movement of goods depends on the
development of railway and roads.
The movement of goods takes place
usually by sea.
3. EXPLAIN THE ADVANTAGES OF INTERNATIONAL TRADE?
A. DEFINITION: The trade between two or more nations is called international trade.

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ADVANTAGES:
 It leads to better use of available natural resources.
 It reduces the wastage of resources.
 It equalizes the prices of the goods throughout the world.
 It helps countries to sell those goods which they have in surplus and buy goods
which are short supply.
 It provides an opportunity to developing countries for importing the needed
technology.
 It brings about international division of labour and specialization.
4. EXPLAIN THE PROBLEMS OF FOREIGN TRADE?
A. Trade is the central activity in commerce. Trade is the buying and selling of goods
.The trade that takes place between nations is called international trade.
DEFINITIONS: International trade is the process of transferring goods produced in one
country for the consumers in another country.
PROBLEMS OF FOREIGN TRADE:
1. CURRENCY PROBLEMS: As every country has its own currency payments between
nations create complications. The rate of exchange has to be determined to avoid
losses in transaction
2. LEGAL PROBLEMS: Every country has its own rules and regulations affecting its
import and export trade.
3. CREDIT PROBLEMS: As there is no direct contact between importer and exporter,
the exporter has to take special steps to ascertain the credit worthiness of the
importer.
4. GREATER RISKS: The goods are exposed to greater risks as they have to be
transported over a long period of time.
5. TIME GAP: There is a wide time gap between the time when the goods are
dispatched and the time goods are received and paid for.
5. WHAT ARE VARIOUS PRICE QUOTATIONS USED IN THE FOREIGN TRADE?
A: There are various price quotations which are used in the foreign trade.
They are:
1. LOCO PRICE: It includes the cost of the goods plus a small margin of profits. The
buyers have to meet all the expenses for utilizing the goods from warehouse of
exporter of his own warehouses.
2. FREE ON BOARD [FOB]: It includes the cost plus all expenses incurred up to the
loading the goods on ship. It does not include freight charge.
3. FREE ON RAIL [FOR]: The price quoted includes the cost of carrying the goods to the
railway station and loading them into wagons.
4. FREE ALONGSIDE SHIP [FAS]: This includes cost plus all expenses of placing the
goods near the ship. Loading charges and freight are to be paid by the buyer.
5. COST, INSURANCE AND FREIGHT: This price includes the charges under c & f
quotation mentioned and also covers insurance premium.

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6. WHAT ARE INDENT HOUSES AND MENTION ITS ADVANTAGES (OR) BENEFITS?
A:
DEFINITION: The importer may place indent or order through the middle men who are
specialized in placing such orders on behalf of the importer. The specialized middlemen is
called as indent house.
ADVANTAGES:
 Many small scale units in spite of their obtaining the import license are not familiar
with the import procedure.
 The indent houses collect the indent or order from a large number of small
importers and place order with exporter.
 The indent houses also help in increase market for Indian goods.
 They secure more favorable terms of trade and liberal credit to the importer.
 The indent houses also help to importers in addressing their problems as breakage,
inferior quality of goods, and defect in package.
7. WHAT ARE THE ADVANTAGES OF EPZ’S?
A:
EPZ’S (EXPORT PROCESSING ZONES):The government of India set up EPZS to promote
exports. These provide free trade environment for export production. The main aim in
setting up EPZS is making Indian export products competitive in the world markets.
ADVANTAGES:
1. They have given a major boost to the economic growth and industrialization of the
country.
2. The EPZS are specialized areas in the country where quotas and tariffs are
eliminated.
3. EPZS can also be defined as production centers where large number of workers is
employed.
4. The EPZS units involve the import of raw materials and the export of finished goods.
5. 100% foreign direct investments are allowed for all manufacturing activities.
6. Income tax holidays are introduced and exemption provided from VAT, import duty,
and also various other taxes.
8. WHAT ARE OBJECTIVES OF THE SEZS?
A:
SEZS (SPECIAL ECONOMIC ZONES):A schemes for setting up SEZS in the country was
announced in the export and import policy in the year 2000. The main aim of the SEZS is
attracting the larger foreign investments. it is intended to make SEZS as a engine for
economic growth.
OBJECTIVES:

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The following are the aim objectives of SEZS:
1. Generation of additional economic activities.
2. Promotion of exports of goods and services.
3. Promotion of investment from domestic foreign sources.
4. Creation of employment opportunities.
5. Development of infra-structure facilities.
9. EXPLAIN MAIN BENEFITS OF SEZS?
A:
BENEFITS OF SEZS:
1. EMPLOYMENT GENERATION; SEZS are viewed as highly effective tools for job
creation.
2. ECONOMIC DEVELOPMENT: SEZS are viewed as the engines for economic
development.
3. GROWTH OF LABOR INTENSIVE MANUFACTURING INDUSTRY: Establishment of
SEZS e would lead to fast growth of labor intensives manufacturing and service
industries in the country.
4. BALANCED REGIONAL DEVELOPMENT: SEZS are beautifully crafted initiative for
achieving the balanced regional development.
5. CAPACITY BUILDING: SEZS are important for strong capacity building.
6. EXPORT PERFORMANCE: SEZS induce dynamism in the export performance of a
country by eliminated distortions resulting from tariffs and trade barriers.
VERY SHORT ANSWERS:
 INTERNATIONAL TRADE: International trade is the process of transferring goods
produced in one country. For the consumers in another country this can also be called
foreign trade.
 ENTREPORT TRADE: Entreport trade means goods are imported into a country not for
consumption in that country but for exporting them to a other country. This type of
trade is known as entreport.
 EXIM POLICY: Export import (exim) policy frames rules and regulations for the country.
This policy is also known as foreign trade policy. It provides policy and strategy of the
government to be followed for promoting exports and regulating imports.
 INDENT HOUSES: The importer may place the indent (or) order either directly (or)
through middlemen. These specialized intermediaries are referred to as indent houses.
They are also called indent firms or import commission houses.
 LETTER OF CREDIT: The importer has to prove his credit worthiness to the exporter.
For this he has to show a letter of credit to the exporter. A letter of credit is issued by
the bank in the importers country in the favour of the exporter.
 CERTIFICATE OF ORIGIN: This certificate is the declaration testifying the origin of
exports. In order to enable the importer to get the benefit of lower tariff, a certificate of

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origin has to be sent to him. This certificate is issued by an authorized chamber of
commerce (or) trade consul.
 LOCO PRICE: It includes the cost of the goods plus a small margin of profits. The buyers
has to meet all the expenses for utilizing the goods from warehouse of exporter of his
own warehouses.
 FREE ON BOARD[FOB]: It includes the cost plus all expenses incurred up to the loading
the goods on board ship. It does not includes freight charge
 BALANCE OF PAYMENTS: It refers to the sum of the balance of both visible and invisible
items. Thus the balance of payments includes the balance of trade also.
 EPZ’S (EXPORT PROCESSINGZONES): The government of India set up EPZS to promote
exports. These provide free trade environment for export production. The main aim in
setting up EPZS is making Indian export products competitive in the world markets
 SEZS (SPECIAL ECONOMIC ZONES): A schemes for setting up SEZS in the country was
announced in the export and import policy in the year 2000. The main aim of the SEZS
is attracting the larger foreign investments. it is intended to make SEZS as a engine for
economic growth.
-: MARKETING:-
1. WHAT IS MARKETING? EXPLAIN THE FUNCTIONS OF MARKETING?
A. Marketing is that function of business activity through which human wants are satisfied
by the exchange of goods and services. It emerges when the people decided to satisfy their
needs and wants through exchange process.
DEFINITION: Marketing is the social and managerial process by which individuals and
groups obtain what they need through creating and exchanging products and value with
others.
CLASSIFICATION OF MARKETING FUNCTIONS: Marketing functions have been classified by
different marketing experts in the different ways:
MARKETING FUNCTIONS
FUNCTIONS OF FUNCTIONS OF PHYSICAL FACILITATING FUNCTIONS
EXCHANGE SUPPLY
Buying Transportation Financing
Selling Storage Risk taking
Pricing Marketing Information
Advertising Marketing Research
Sales promotion Standardization & Grading
Packaging, Branding

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A. FUNCTIONS OF EXCHANGE:
1. BUYING: Buying is one of the functions of the exchange process. Buying involves planning
of purchases search for seller, selection of the goods to be purchased, assembling of goods
to suits requirement of the buyer.
2. SELLING: Selling is the function of the exchange process concerned with transfer of
ownership of the products from seller to the buyer. Selling function involves product
planning and development, location of the buyer such as price, quantity, quality, date of
delivery etc.
3. PRICING: Pricing is the most important element determining market share and
profitability of the company. The firm has to consider many factors in setting the pricing
policy.
4. ADVERTISING: Advertising may be defined as any paid form of non personal
presentation and promotion of ideas, goods (or) services. The aim of advertising is creation
of awareness, interest and finally a desire to purchases the goods and services.
5. SALES PROMOTION: Sales promotion consists of a collection of intensive tools designed
to stimulate greater purchase of a particular product by consumer. Consumer sales
promotion activities include samples, coup ons, free goods etc.
B FUNCTIONS OF PHYSICAL SUPPLY:
1. TRANSPORTATION: Transportation creates place utility. Transportation is the physical
means where the goods are moved from place of production to place of consumption. In
shipping goods to its warehouses dealers.
2. STORAGE: Storage function provides time utility by storing the products and selling it
during scarce period .the period of storage and mode of storage varies according to the
nature of the product.
C FACILITATING FUNCTIONS:
1. FINANCE: Company requires higher working capital while extending credit facilities.
Hence arrangement of finance has become an important function.
2. MARKETINGINFORMATION: Developing and implementing marketing plans involves a
number of decisions and up to date information on macro trends as well as micro effects
related to their business.
3. STANDARDIZATION AND GRADING: Buyers always prefer to have standardized goods
and services. Standard is a list of specifications based on size, colours, appearance, tastes
etc
4. PACKAGING: Packaging may be defined as all the activities of designing and producing
the container of a product. Developing an effective package requires a number of decisions.

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2. WHAT IS THE MARKETING MIX?
A. Marketing mix describes the combination of four components which constitute the core
of the company’s marketing mix. These four components include product, price, place, and
promotion.
1. PRODUCT: Product is anything that can be offered to the market to satisfy a want (or)
need. Products that are marketed include physical goods, services, experiences, events,
persons, places, ideas, information etc
2. PRICE: Price is one element of the marketing mix that produces revenue, while other
elements produce costs price variables include list price, levels of prices, discounts, profits
etc.
3. PLACE: Place refers to the delivery of product place variables include channels of
distribution, transportation, warehousing and inventory control.
4. PROMOTION: Promotion is the persuasive communication about the product by the
offered to the prospect. The promotion variables includes advertising, personal selling,
sales promotion etc.
3. WHAT IS THE DIFFERENCE BETWEEN SELLING AND MARKETING?
A. SELLING: Selling is the act of transferring goods and services to the buyers through a
sale transaction.
MARKETING: Marketing is the social and managerial process by which individuals and
others.
DIFFERENCE BETWEEN SELLING AND MARKETING:
SELLING MARKETING
It focus on the sellers needs. It focus on the buyers needs.
It gives importance to product. It gives importance to customers.
It gives particular importance on corporate
Objectives
It gives particular importance to customer
satisfaction.
Selling aims at profit through sales value. Marketing aims at profit through serving
customers demand.
Selling activities are organized & directed
by marketing department.
Marketing policies and strategies are
directed by top management.

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-: CHANNELS OF DISTRIBUTION:-
1. EXPLAIN THE DIFFERENT TYPE’S CHANNELS OF THE DISTRIBUTION?
A. Channels of distribution are the distribution networks through which a producer puts
his products in the hands of the actual user.
DEFINITION: Channels of distribution is a path traced in the direct (or) indirect transfer of
the producer to the ultimate consumer (or) industrial users.
TYPES: 1. Direct channel 2. Indirect channel
1. DIRECT CHANNEL: The manufacturer sells the goods directly to the consumer without
any marketing intermediary.
Manufacturer -Consumer
2. INDIRECT CHANNEL: The manufacturers sell the goods to the consumer through the
middle men.
Manufacturer - Wholesalers, Agents - Consumer
2. EXPLAIN THE USES AND MISUSES OF TELEMARKETING?
A. Telemarketing has become a major direct marketing tool. Tele marketing is increasingly
used in the business as well as consumer marketing. Telemarketing facilitating
personalized contact, through non face to face contact with prospects i.e. buyers
DEFINITION: Telemarketing is the use of telephone and call centers to attract prospects
sell to existing customers and provide service by taking orders and answering to questions.
ADVANTAGES:
1. Telemarketing is less expensive compare to mast other forms of selling.
2. Telemarketing can be used in respect of different types of products.
3. Telemarketing helps to companies increase revenue reduce the selling cost.
4. Telemarketing improves customs satisfaction.
5. Telemarketing is used as a supplement to personal selling.
DISADVANTAGES:
1. Telemarketing companies call at almost any hour of the day (or) night resulting in
incovience to customers.
2. Telemarketing companies call at all the members on phone whose numbers are found in
telemarketing.
3. Computers are used to dial numbers and they automatically deliver the pre-recorded
messages and even accept the orders resulting in violation of consumer’s right to privacy.
3. WHAT IS E-COMMERCE? EXPLAIN ITS MERITS AND DEMERITS?
A. Electronic commerce is a general concept covering any form of business transaction (or)
information exchange using information.

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DEFINITION: Buying and selling of the products and services over the internet is known as
E-commerce.
ADVANTAGES:
1. It is highly economical as there is no rent to the physical store case and infrastructure
investment.
2. It provides better and quicker customer service.
3. It provides offering and services through barter.
4. It helps the people to work together by facilitating in exchange of information and works
solution.
5. E-commerce plays improve information sharing between merchants and customers.
6.E-commerce helps consumers to comparing to shop.
DISADVANTAGES;
1. There is a continuing shortage of E-literate people in work place.
2. E-commerce favors only large business with good funding.
3. Security continuous to be a problem of online business.
4. Computer system will never to be 100% safe.
5. In ability to touch and feel to merchandised to feel a psychological to sent in online.
4. WHAT ARE THE SERVICES RENDEREDBY WHOLESALER TO THE MANUFACTURER AND
RETAILERS?
A. Wholesaler offers various services by acting as middlemen between producers and
retailers in the central market.
SERVICES OF WHOLESALER TO MANUFACTURER:
1. BENEFITS OF ECONOMIES OF LARGE SCALE PRODUCTION:
Wholesalers buy the goods from the manufacturer in large quantities, thus enabling
manufacturer to undertake large scale production. This will help him to reap the benefits of
large scale production.
2. PRICE STABILIZATION: Wholesaler maintains stability in price by maintaining balance
between demand and supply. He stores goods during slack period and sells them during
peak demand period.
3. FINANCIAL ASSISTANCE: Wholesaler provides financial help to manufacturer by
assuming credit risk and by making advance payment to small manufacturer .thus the
manufacturer enjoys financial relief.
4. MARKETINGINFORMATION: The wholesaler knows the pulse of the market. He secure
first hand information of consumers wants through the retailers order.
5. ECONOMY DISTRIBUTION: The wholesaler helps the manufacture r in minimizing the
cost of distribution as the wholesaler undertakes the distribution of goods to retailer.
6. PRODUCT SERVICING: Product servicing is undertaken by the wholesaler thus preventing
the manufacturer from setting up of service centers.

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SERVICES OF WHOLESALER TO RETAILER:
1. PROMPT DELIVERY OF GOODS: Supplies to the retailers will be available more quickly as
the goods are in wholesaler’s warehouse almost ready for delivery.
2. GRANT OF CREDIT: Wholesalers grant credit to their permanent customers enabling
them to carry on business on the sound lines.
4. KNOWLEDGE OF NEWPRODUCTS: The wholesaler informs the retailer about the arrival
of the new product in the market. This helps the retailer in meeting the customers demand.
5. TRANSPORTATION: Many wholesalers provide the transportation facility to the retailers.
The retailers need not move to collect the goods from the wholesaler.
6. SALES PROMOTION: As the wholesaler undertakes various sales promotion activities the
retailer is relieved from the cost on sales promotion.
7. RISK BEARING: The wholesalers save the retailers from bearing risk due to change in the
prices (or) change in demand.
5. WHAT ARE THE SERVICES RENDERED BY RETAILERS TO THE MANUFACTURER TO
CONSUMERS?
A. Retailers play a vital role in offering services to the manufacturers, wholesalers and
customers.
SERVICES TO THE MANUFACTURERS AND WHOLESALERS:
1. INTRODUCTION NEW PRODUCTS: Throughpersonal sales man ship and window displays
a retailer attracts customer’s attention to new products and provides information about the
introduction of new products.
2. CONCENTRATES ON PRODUCTION: Individual sales in the small quantities are the
responsibility of the retailers. In the absence of retailer it would be impossible to distribute
goods to ultimate consumers.
3. MARKET INFORMATION: Retailers have personal contacts with the consumers of the
products. They can easily provide feedback information to wholesaler and manufacturers
.4.REDUCE RISK OF LOSS: Retailers by providing market information help the
manufacturers in reducing the risk of loss.
SERVICES OF RETAILERS TO CONSUMERS:
1 .WIDER CHOICE: A retailer maintains wide variety of products. He may have all popular
brands of one article. Thus the consumers are provided variety Of choice.
2. RELIEF FROM STORAGE: consumers need not store the products more than their
requirement as the retailer supplies the products in any required quantities.
3. SUPPLY INFORMATION: Retailers provide reliable advice and guidance to the customers
with regarded of purchase of right product at right price.
4. CREDIT FACILITY : Retailers offer credit facility to the customers. Retailers also provide
the products on installment basis.
5. LOCAL CONVINCE: The retailers provide maximum local convience to the customers thus
satisfying the daily wants of the customers.

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VERY SHORT ANSWERS:
1. MARKETING: Marketing is the social and managerial process by which individuals and
others.
2. SOCIAL MARKETING: Social marketing is concerned with ethical environment, legal and a
social concept of marketing requires the marketer to consider their role in terms of social
welfare.
3. WEB MARKETING/E-MARKETING: E- marketing is the process of marketing a brand
using the internet. It includes all the activities a business conducts via the worldwide web
with the aim of attracting customers.
4. DE-MARKETING: De-marketing refers to dissuading customer from consuming (or)
buying certain things either because there are harmful or because the demand is more than
the supply. This could be on a temporary or permanent basis.
5. VERTICAL MARKETING: Vertical marketing is a system in which the members of a
distribution channel viz producers, wholesalers and retailers work together as a unified
group to meet the needs of the consumers.
6. LATERAL MARKETING: Lateral marketing is about analyzing fixed concepts of products
and understanding how to alter them so as to create new ideas. Vertical marketing is
appropriate during early stages of a product‘s life cycle. Lateral marketing strategy is
appropriate during maturity stage of a products life cycle.
7. GRADING: Grading refers to sorting of products into different lots on the basis of their
quality. It helps in selling through description rather than personal verification.
8. MARKET: The term market has been derived from the Latin word “MERCUTAS” which
means “to trade”. The term market was used to refers to a physical place where buyers and
sellers meet to effect the process of exchange i.e, buying and selling.
9. DIRECT CHANNEL: The manufacturer sells the goods directly to the consumer without
any marketing intermediary.
10. INDIRECT CHANNEL: The manufacturers sell the goods to the consumer through the
middle men.
Manufacturer - Wholesalers, Agents - Consumer
11. TELEMARKETING: Telemarketing is the use of telephone and call centers to
attract prospects sell to existing customers and provide service by taking orders
and answering to questions.
12.E-COMMERCE: Buying and selling of the products and services over the internet is
known as E-commerce. E-commerce refers to doing business online.
13. M-COMMERCE: Mobile commerce is any transactions, including the transfer of
ownership or rights to use goods and services which is initiated and or completed by using
mobile access to computers mediated networks with the help of an electronic device.
14. RETAIL WHOLESALER: Retailer wholesaler acts as both a wholesaler and a retailer. He
buys goods from the manufacturer in large quantities and sells them in small quantities to
the ultimate customers.

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15. SUPER MARKETS: According to the dictionary of business and finance, super market is a
large retail store selling a wide variety of consumer goods, particularly food and small
articles of household requirements. A super market is a novel form of retail organization.
16. UNIT STORES: Unit stores are retail stores which deal with only one variety of product
such as drugs, clothes , shoes, books, utensils etc. single line stores also called as specialty
shops since they are specialized in only one item.
17. SYNDICATE STORES: A syndicate store is an extension of the mail order business on a
small scale. These retailers buy most of the unbranded varieties and sell them under their
own brand names.
18. HAWKERS: These retailers are very commonly found in all places. Hawkers don’t have
any fixed place of business. They move from one place to another carrying their goods on
cart etc
-: ADVERTISING:-
1. WHAT IS ADVERTISING? EXPLAIN ITS FEATURES?
A. Advertising helps to maximize the demand for goods and service by persuading the
customers to increase rate of consumption. It creates awareness about new products.
DEFINITION: Advertising is any paid form of non- personal presentation and promotion of
ideas to goods and services by an identified sponsor.
FEATURES:
1. IT IS A PAIDFORM OF COMMUNICATION: When the messages about the product and
services are published in any media like newspaper, magazines, cinemas, the advertiser
pays for it and it is different from other non paid forms of communications like publicity.
2. NON- PERSONAL PRESENTATION: The advertisement in any media is not an
individualistic presentation .there is no one- to- one (or) face-to-face communication
between the business man coming out with an advertisement to the person whom it is
addressed.
3. PRESENTATION OF IDEAS, GOODS AND SERVICES: Advertisements are used to
communicate information about the existence of product, the improvements in a product
and the new uses of a product. Such information is passed on through advertising.
4. IT IS BY AN IDENTIFIEDSPONSOR: Advertising is sponsored and inserted in print media
(or) any other media whose identity is certain.
2. EXPLAIN THE BENEFITS OF THE ADVERTISING?
A. The significance of advertising can be identified through its benefits to producers,
customers and society.

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BENEFITS:
1. TO FACE THE COMPETITION: Advertising creates brand loyalty to face the competition in
the market.
2. STEADY DEMAND: Advertising enables constant demand during all the seasons.
3. INCREASE OF SALES: By attracting new customers and entering new markets advertising
increases sales volume of the product.
4. SAVE TIME & EFFORTS: Advertisement saves time & efforts of the customers by
informing source and availability of the products.
5. CONSUMER EDUCATION: Advertising creates awareness among the customers about
the existence and uses of various products.
6. QUALITY PRODUCTS: On the basis of different advertisements customers are able to
differentiate products and select the quality products of their choice.
3. WHAT IS ADVERTISING COPY? EXPLAIN ITS FEATURES?
A. The term copy covers all items appearing in an advertisement, the written words picture,
design, label and logo.
FEATURES:
1. THE GOAL OF THE MESSAGE: Before the advertiser begins writing the message, he has to
define the purpose of the message. Everything you write should directly support the goal.
2. WHAT AUDIENCE WANTS: The target customers have to be discovered by
defining the characteristics of their best customers.
3. SELF-INTEREST OF AUDIENCE: Advertising copy must focus on the benefit the product
provide as the customers care about they get from buying the product (or) service.
4. EMOTIONAL APPEAL: Advertising copy should dramatize the feelings of customers get
while enjoying the benefit of the product (or) service.
5. BEST OFFER: The strong offerresult in greater response. Offer is the only reason people
respond to the advertising offer, an offer may include free information, special, price, free
bonus etc.
6. SIMPLIFY EVERYTHING: The copy must be easy to read and understand, it should be
simple and clear and the copy should induce the customers to take a decision without
hesitation.
4. WHAT ARE POSITIVE EFFECTS OF ADVERTISING?
A. Advertising has become an integral part not only in the case of marketing but also in the
case of our social and economic life.
POSITIVE EFFECTS:
1. INCREASES PURCHASING POWER: Advertising increases the purchasing power of the
customers by increasing their income through employment generation.

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2. ACCEPTANCE BY PUBLIC: Any change that is brought in the life style of society by science
and technology has to be accepted.
3. SELECT RIGHT CHOICE: Advertising enables the people to have awareness about
different competing products. This helps the people in product differentiation and thus is
able to select a right product.
4. REDUCTION OF PRICE: The aim of the advertising is to increase the demand for the
product. Demand increases facilitate mass production and mass distribution.
5. QUALITY PRODUCTS: Advertising increases the competition among business. In
Order to face challenges in the market.
4. WHAT ARE NEGATIVE EFFECTS OF ADVERTISING?
A.
NEGATIVE EFFECTS:
1. HIGHER PRICES: Advertising increases the cost of production which in turn results in
higher prices of the product.
2. WASTEFUL EXPENDITURE: Advertising appeals to the mass. Many people may not view
the advertisements. Advertising promotes artificial living by creating demand for unworthy
products.
3. MISLEADS THE CONSUMERS: Advertising makes the people to buy the goods which they
do not desire at prices at which they cannot afford.
4. UNDERMINES SOCIAL VALUES: modern advertising has as unhealthy influence on the
cultural and social life of the people. Many advertisements encourage social evils like
drinking and smoking which are against the ethics of the society.
5. WHAT ARE THE 9C’S OF COMMUNICATION?
A.
1. COMPETITIVE PRODUCTS AND SERVICES: Price, quality, technical specifications,
commercial and delivery terms etc are some of the components of a buying decision in the
manufacturing sector.
2. CRITICAL MASS: The issue of critical mass becomes particularly significant as a company
engages in trade initiatives.
3. COMMITMENT: commitment refers to the demonstrated. Commitment by management
and employees in planning for and implementing trade activities.
4. CAPITAL: The availability of capital is critical element in building a healthy enterprise
and also for the growth of business internationally.
5. CONNECTED: Globally competitive entire price requires two components:
(a) Business connection/networks
(b)IT readiness/ connectedness
6.COUNTRY ACUMEN: Successful management of business risks and the ability to
effectively penetrate a particular marketing requires in depth knowledge.
7. COMPANY PLAN: The plan is the foundation on which company will grow.
8. CONTINUOUS INNOVATION: Innovation is a key driver in creating productivity resulting
in profitable sales. Continuous innovation helps the company to remain competitive.

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9. CONFIDENCE: The management and employees of the company must have a belief in the
company’s ability to compete a global level.
VERY SHORT ANSWER:
1. ADVERTISING: Advertising is any paid form of non- personal presentation and promotion
of ideas to goods and services by an identified sponsor.
2. ADVERTISING COPY: The term copy covers all items appearing in an advertisement, the
written words picture, design, label and logo. it is prepared by an expert copy writer.
3.DIRECT MAIL: Under this medium the advertisement message is sent directly to the
selected customers addresses through mail in the form of letters, catalogues, booklets etc.
direct mail involve sending on offer, reminder, samples and sending gifts through mail etc.
4. OUTDOOR MEDIA: outdoor media includes posters, bill boards, boarding’s, highway
advertising etc. outdoor media are extensively used for consumer goods and financial
advertisements. Outdoor media advertising attracts the attention of the people.
5. INTERNET: Internet is defined as network of network. Innumerable users are connected
with internet, whoever connected to internet can exchange any form of data with others.
The advertisers need to set up a store on the web to get instant gain in the market.
6. ADVERTISINGMEDIA: The channels through which the advertising message is conveyed
to the public are called advertising media. Advertising media are the channels through
which advertising message is transmitted to the desire public.
-: CONSUMERISM:-
1. EXPLAIN CONSUMER PROTECTION ACT 1986?
A. Many statutory regulations are introduced by the Indian government to protect the
interests of the consumer. Enactment of consumer’s protection act 1986 is a milestone in
the history of consumer movement in India. The parliament enacted this legislation in
December 1986. This act extends to whole of India except the state of Jammu& Kashmir.
2. The act is based on the principle of self-helpers to protect customers against unfair trade
practices of the sellers to provide for better protection of the rights and interests of
consumers.
3. The act made provision for establishment of proper machinery for speedy settlement of
consumer disputes. Under this act there are consumers protection councils of 3 levels:
 Consumer disputes redressal form at the district level.
 Consumer disputes redressal commission at the state level.
 National consumer redressal commission at the national level.
4. ACCORDING TO THIS ACT:
(A) The term complainant refers to
 A consumer
 Any volunteer consumer association registered on the companies act 1956 or any other
law for the time being in force… etc..

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 The central Government or any State government.
(B) The term complaint refers to any allegation in writing made by a complainant that:
 An unfair trade practice or restrictive trade practice adopted by any trader.
 The goods bought or to be bought by the buyer suffers from one or more defects.
 A trader has charged for the goods a price in excess of the price fixed under
any law.
5. THE LEGISLATION SEEKS TO PROMOTE AND PROTECT THE FOLLOWINGRIGHTS OF THE
CONSUMER:
 The right to be protected against marketing of goods which are dangerous to
life and property.
 The right to be informed about the quantity, quality, purity, standard and price of goods
to protect the consumer against unfair trade practices.
 The right to seek redressal against unfair trade practices
 The right to consumer protection.
2. WRITE ABOUT DISTRICT FORUM AND ITS POWERS?
A: The state government in each district establishes district forum by notification. The
district forum consists of a president nominated by state government. He should be
qualified judge of district court. The forum also comprises to other members who shall
have at least have 10 years of experience in dealing problem of economics, laws, industry,
and commerce
POWER OF DISTRICT FORUM:
 The district forum shall have jurisdiction to entertain consumers complaints where the
value of goods and services for which the compensation claimed should not exceed 20
lakhs.
 Forum has been vested with same powers has or vested in a civil court under the code
of civil procedure 1908 in respective of following matters.
 Discovery and production of any document producible as evidence.
 Reception of evidence on affidavits.
 Appointing of any commission for examination of any witness.
 The forum has the power to require any persons to furnish books, accounts, documents
for the purpose of examining them.
 Where the district forum satisfied that the goods complained against has defects
specified in complaint, it has a power issue an order to the seller directing them to do one
or more of the following things:
 To remove the defects from goods.
 To replace the goods with the new goods.
 To return the price and charges paid by the complaints.
 To compensate the consumer for any laws or damage suffered.
 To discontinue the unfair trade practice.

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 To ceases production and offering of harmful products.
VERY SHORT ANSWERS
 CONSUMERISM: is defined as social force designed to protect the consumers in the
market place through consumer’s pressures on business. Consumerism protest of
consumers against unfair business practices and injustice. It represents vital aspects
of socially responsible marketing.
 ISI MARK: means Indian standards of institute mark are given by BIS (Bureau of
Indian Standards) is a 3rd party guarantee of quality. BIS does certain checks on the
Products and provides the ISI mark.
 DISTRICT FORUM: The state government in each district establishes district forum
by notification. The district forum consists of a president nominated by state
government. He should be qualified judge of district court. Every member of the
forum shall have 5years or the age of 65 years whichever is earlier. The district
collector acts as the chairmen of district forum
 STATE COMMISSION: The state commission settles the consumer disputes at state
level. He was headed by the judge of high court and comprised of other members of
not less then two and more than as prescribed.
 NATIONAL COMMISSION: It operates at national level. Its settles the consumer
disputes in the country. The national commission has the president. He should be a
serving or retired as judge of Supreme Court. The commission also compromises
other members not less than 4.
 AGMARK: BIS also provides other quality checks certificates like AGMARK. This Mark
is given for agriculture based products.
-: BANKING:-
1. DEFINE BANKING? EXPLAIN THE FUNCTIONS OF BANKING?
A. Banks plays a very role in the economic life of the nation. Bank performs a variety of
functions. It is an institution, which borrows money by accepting the deposits from public
those who are in need.
DEFINITION: A bank is a manufacturer of credit and machine for facilitating exchange.
BANKING FUNCTIONS:
1. PRIMARY FUNCTIONS:
A) ACCEPTING DEPOSITS FROM PUBLIC: The most important function of a modern
commercial bank is borrowing of money (or) receiving the deposits from the public.
 CURRENT DEPOSITS: This deposit is also called as demand deposits. The traders
generally maintain these accounts. Under current deposits a person can deposit any
amount of money and withdraw any number of times.

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 SAVING DEPOSITS: The account holders derive interest income on the amount lying
with the bank. There are some restrictions on number of withdrawals and the
maximum amount.
 FIXEDDEPOSITS: Fixed deposits are also called time deposits. Under this type of deposit
the amount cannot be normally withdrawn until maturity. These deposits carry higher
rate of interest, depending on maturity period.
 RECURRING DEPOSITS: Recurring deposits are gaining wide popularity these days.
Under this type of deposit the depositor is required to deposit a fixed amount of money
every month for specific period of time.
B) LENDING MONEY: The money collected by banks is lent to producers and traders. Loans
may be given with or without security.
 CASH CREDIT: A cash credit is granted to its customers on the security of goods, assets
etc. the amount of cash credit is credited to separate account of the borrower. the
borrower can withdraw from his account as and when he needs.
 LOANS: A specified amount is granted as debt for a specified period to the borrower is
called as loan. He can withdraw this amount in the single or multiple installments. The
loan may be (a) Demand loan (b) Term loan
 DISCOUNTING OF BILLS: The holder of bill may be in urgent need of cash before the
maturity period. He sells the bill to the bank at lesser amount then the actual. The
reduced amount is returned to the banker.
 OVERDRAFT: Sometimes the bank provides overdraft facilities to its customers through
which they allowed to withdrawer more deposits. Interest is charged from the
customers on the overdrawn amount.
2. SECONDARY FUNCTIONS:
 AGENCY FUNCTIONS:
 It collects interest and dividends on half of its customers.
 (b)It purchases securities and sells them at an advantageous price.
 Payment of rent, interest, insurance premium etc on behalf of their
customers.
 It agrees to collect cheques and bills.
 Acting as agent on behalf of customers.
 GENERAL UTILITY SERVICES:
 Issuing of circular notes, drafts and traveler’s cheques.
 Supplying trade information.
 Receiving valuable, securities etc for safe custody.
 Carrying on foreign exchange transaction.
 Accepting bills of exchange on behalf of its customers.

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2. WHAT ARE TYPES OF E- BANKING?
A. TYPES:
1. AUTOMATIC TELLER MACHINE (ATM): ATMs have overcome the time limitations of the
customer’s services. ATM is one type of electronic fund transfer. It is an unattended or
unmanned device. Those who want to transact with bank need not rush to the bank during
specified bank working hour.
2. ANYWHERE BANKING: The concept of customer of the branch is upgraded to
Customer of the bank. We can transact our account from any branch of the bank in India.
This is also called as core banking.
3. TELE- BANKING: Tele- banking means banking on telephone the customer can enquire
his bank, previous balance (or) funds transfer between the accounts. It helps the customer
to call to the bank at any time.
4. INTERNET BANKING: Internet banking is the predominated mode of E- banking. It
enables for providing general purpose information to customers through bank websites,
electronic information transfer through passwords etc.
5. MOBILE BANKING: This type of service is free of cost to all the customers of bank. It
helps the customers to access his bank account on his mobile screen for the services such
as checking balance, Ordering, demand draft etc.
6. PAYMENTS ANDSETTLEMENT SYSTEME- CHEQUE: E- cheque is one of the facilities of E-
banking. This facility would avoid tedious preparation of traditional paper cheques. E-
cheque is nothing but electronic version of the paper cheque.
3. WHAT ARE MERITS AND DEMERITS OF E- BANKING?
A. E- banking is one of the e- commerce facilitating segments. The banks brought the state
of the art technology into the banking system.
DEFINITION: Electronic banking is the banking with the use of electronic tools and facilities
through the electronic delivery channels.
MERITS:
1. A higher degree of personalization.
2. Fast and flexible execution.
3. Round the clock services to the customer.
4. Reduction in operating costs of banks.
5 .Increased speed and accuracy of information exchange.
6. Bank account can be accessed from anywhere.
7. Greater customer satisfaction.
8. Internet banking helps banks reduce the workload of their branches, such as generation
of statements, balance enquire etc.
DEMERITS:
1. Non availability of internet connection with greater band with in rural areas.

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2. Difficulty in imparting training to banking staff. This may cause storage of skilled
technical employees.
3. Problems may crop up regarding security and reliability.
4. Resistance to paperless transaction by the customer.
5. Low literacy rate in India is a hindrance to E-banking.
6. Although the technology is advancing our legal environment is not able to keep
pace with the technology.
VERY SHORT ANSWERS:
1. AUTOMATIC TELLER MACHINE (ATM): ATMs have overcome the time limitations of the
customer’s services. ATM is one type of electronic fund transfer. It is an unattended or
unmanned device. Those who want to transact with bank need not rush to the bank during
specified bank working hour.
2. ANYWHERE BANKING: The concept of customer of the branch is upgraded to
Customer of the bank. We can transact our account from any branch of the bank in India.
This is also called as core banking.
3. TELE- BANKING: Tele- banking means banking on telephone the customer can enquire
his bank, previous balance (or) funds transfer between the accounts. It helps the customer
to call to the bank at any time.
4. E-CHEQUE: E-cheque is nothing but electronic version of paper cheque. E-cheque is one
of the facilities of E-banking .this facility would avoid tedious preparation of traditional
paper cheques.
5 .E- BANKING: Electronic banking is the banking with the use of electronic tools and
facilities through the electronic delivery channels.
6. CASH CREDIT: A cash credit is granted to its customers on the security of goods, assets
etc. the amount of cash credit is credited to separate account of the borrower. the borrower
can withdraw from his account as and when he needs.
7. DISCOUNTING OF BILLS: The holder of bill may be in urgent need of cash before the
maturity period. He sells the bill to the bank at lesser amount then the actual. The reduced
amount is returned to the banker.
-: TRANSPORTATION:-
1. WHAT ARE FUNCTIONS (OR) BENEFITS OF TRANSPORTATION?
A. Transportation is the physical means of moving of goods and persons from one place to
another place. It creates the place utility of goods by moving them from different centers of
production to the places of consumption.
DEFINITION: Transportation in simple language can be defined as a means through which
goods are transferred from one place to another.
FUNCTIONS;

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1. MOVEMENT OF GOODS: The first important function of transportation is the movement
of goods. The raw materials have to move from their sources to the factory. The
manufacture goods have to move from the factory to the consuming areas.
2 . TRANSPORT ENHANCES THE MOBILITY OF LABOUR ANDCAPITAL: An efficient network
of transport services encourages the movement of people from one place to another.
Labour can migrate to the place where they can get better job opportunities.
3. CREATION OF PLACE UTILITY: It moves goods from those places where they are
abundant to those where they are scarce.
4. SPECIALIZATION AND DIVISION OF LABOUR: Transportation facilitates optimum
utilization of natural resources of a country. This is possible by concentrating only on the
products and services in country have abundant resources.
5. CREATION OF TIME UTILITY: With the advancement of technology, transportation time
being is shortened. This helps in lesser inventory costs.
6. STABILITY IN PRICES: Goods can be transported from the place where the goods are
abundant
To the places where are scarcity exists. Prices are equilvalized through the country. This is
possible only because of transportation.
7. CONTRIBUTION OF NATIONAL INCOME: The economic development of a country
depends on the state of transportation of the country. Millions of people depend on the
transportation for their livelihood.
8. ECONOMIES OF LARGE SCALE PRODUCTION: Transport has helped the development of
large scale industries. It would not have been possible for these industries to procure raw
materials gather number of workers and sell the finished goods.
9. IMPROVES STANDARD OF LIVING: Availability of wide variety of goods at reasonable
prices improves standard of living.
10. BROADNESS THE OUTLOOK OF THE PEOPLE: Transportation promotes mutual
understanding. It has broadened the outlook of people of world.
2. WHAT ARE MERITS AND DEMERITS OF ROAD TRANSPORT?
A. Road transport is the oldest form of transport. It is particularly good for short distance.
Door-to-door collection and delivery are possible in the case of road transport. It is most
suitable for perishable goods.
MERITS:
1. LOW CAPITAL: It requires lesser capital for constructing the roads comparing to railways
and air transport. Roads are usually operated, constructed and maintained by the
government and authorities.
2. LOW MAINTENANCE: The maintenance charges of the road carriers are much less than
that of railways.
3. FLEXIBLE: Road vehicles are very flexible. He routes and timings can be adjusted to the
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4. SUITABLE FOR SHORT DISTANCE: It is more economical and quicker for carrying goods
and people over short distances. Goods can be loaded direct into a road vehicle and
transported straight to their place of destination.
5. DOOR-TO-DOOR DELIVERY: Road transport provides door delivery facilities for
industrial concerns. It can drops the good and passengers at any point of the roads to their
advantage.
6. SERVICE TO RURAL AREAS: Road transport is most suitable for carrying goods and
people to and from rural areas which are not served by rail, water, air transport. Exchange
of goods between villages and towns are made possible by transport.
7. LESSER PACKING COST: As compared to other modes of transport is less complicated
goods transported by motor transport require less packing.
DEMERITS:
1. LESSRELIABLE: Road transport cannot be relied up on for long distance travel. During
rainy (or) floods season roads become unfit and unsafe for use.
2. ACCIDENTS AND BREAKDOWN: There are more chances of accidents and break downs
in case of motor transport is not as safe as rail transport.
3. LESSER SPEED: The speed of motor transport is comparatively slow.
4. LIMITED CARRYING CAPACITY: Load carrying capacity of road transport is limited.
Bulky goods are to be transported road transport is not effective.
5. MORE EXPENSIVE: The road is more expensive then railway transport for long distance
travel.
6. IMPROPER TRAFFIC MANAGEMENT: In the matter of speed and traffic regulation,
vehicles are subject to external authorities usually the traffic police.
3. WHAT ARE MERITS AND DEMERITS OF RAIL TRANSPORT?
A. Railways were operated by private companies owned by English men. Government that
works under the ministry of railway of railway. Indian railways stands largest railways
network in Asia. Railway operations incur fixed cost this may be in the form of railway
station. It has lower variable costs.
MERITS:
1. LARGE CARRYING CAPACITY: Comparedto other means of transport railways are known
for bulk carriage of goods over long distances.
2. ECONOMICAL: As the freight rates are telescopic and referential it works cheaper
particularly in case of heavy goods over long distances.
3. SAFETY: Railway transport is the safest there would be lesser accidents.
4. INDUSTRIALIZATION: Railways have contributed more for the development of Indian
industries.
5. NATIONAL DEFENCE: Railway facilities quick movement of troops from one part of the
country to another in times of emergency.

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6 . SOURCES TO NATIONAL INCOME: It is most important source of revenue to the national
income.
DEMERITS:
1. HUGE CAPITAL OUTLAY: Comparing to other modes of transport, railway requires huge
capital for construction, operation, stations etc. in case the traffic is not sufficient.
2. LACK OF FLEXIBILITY: It routes and timings cannot be adjusted to individual
requirements.
3 .COSTLIER FOR SHORT DISTANCE: This mode of transport works costlier over short
distance.
4. DELAY: The time in loading, unloading, shunting etc is quite considerable.
5. NO DOOR-TO-DOOR DELIVERY: It cannot be stopped at any point on the road except at
scheduled stations. Hence it cannot provide door-to-door delivery service to the business.
4. WHAT ARE KINDS OF ROADS IN INDIA?
A. KINDS:
1. NATIONAL HIGHWAY: These roads are meant for interstate transport and movement of
defensemen .these also connect the state capitals, major cities etc. the national highway
authority of India has the responsibility of development maintenance and operation of
national highways.
2. STATE HIGHWAY: These are constructed and maintained by state government. They join
the state capital with district head quarters and other important towns.
3. DISTRICT ROADS: These roads are the connecting link between district head quarters
and the other important roads of the district. They account for 14% of the total road length
of the country.
4. RURAL ROADS: These roads provide links to the rural areas. These are about 80% of
total length in India are divided as rural roads.
5. BORDER ROADS: These roads are in the northern and north-eastern boundary of the
country. The border road organization constructs and maintains border roads construct
roads in high altitude areas.
6. INTERNATIONAL HIGHWAYS: These are meant to promotes the harmonious relationship
with the neighboring countries by providing effective links with India.
VERY SHORT ANSWER:
1. NATIONAL HIGHWAY: These roads are meant for interstate transport and movement of
defensemen .these also connect the state capitals, major cities etc. the national highway
authority of India has the responsibility of development maintenance and operation of
national highways.
2. PIPE LINES: The pipe lines will help to transport the liquid commodities like crude oil,
natural gas and other petroleum products etc. Pipelines have highest fixed cost and lowest
variable cost among transport modes.

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-: WAREHOUSES:-
1. WHAT ARE FUNCTIONS OF WAREHOUSES?
A .Warehousing creates time utility to goods. This function involve in the holding of goods
from the time they are produced until they are needed for consumption.
DEFINITION: Warehousing may be defined as the assumption of responsibility for the
storage of goods.
FUNCTIONS:
1. STORAGE: Warehouses take the responsibility of storing goods in order and in safe
custody. This enables the supply of goods at points of time when they are needed.
2. RISK – BEARING: Ware house keeper takes over all risks incidental to storage of goods.
He becomes responsible for any loss, damage, theft etc.
3. FINANCING: Warehouses also facilitate financing. The receipt issued by ware houses can
be used as a collateral security for obtaining bank loans.
4 .PRICE STABILIZATION: Warehouses helps in stabilization of prices by ensuring steady
supply of goods as per demand.
5. SERVICES: Warehouses render a number of services. They undertake functions of
sorting, packing, labeling, loading and delivery goods to customers.
2. WHAT ARE THE ADVANTAGES OF WAREHOUSES?
A. Warehousing creates time utility to goods. This function involve in the holding of goods
from the time they are produced until they are needed for consumption
ADVANTAGES:
1. It serves the business men who have very limited space.
2. Some warehouses indirectly offer even financial assistance.
3. The warehousing facilities help in determining the channel of distribution.
4. Warehousing facilities stability of prices of goods.
5. Warehouse helps in maintaining continuous sales.
6. Once the goods are handed over to the ware house keeper for storage the storage
responsibility passes on to store keeper.
7. If the traders have a warehousing close proximity to the market it would reduce price of
the products.
3. WHAT ARE KINDS OF WAREHOUSING?
A. KINDS:
1. FIELD WAREHOUSING: Field warehousing are those which are managed by a public
warehousing agency in the premises of a factory (or) company which needs the facility for
borrowing from a bank against the certification of goods in storage.

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2. BONDED WAREHOUSING: Bonded warehouse are owned and operated by port trusts
where importers store goods till customs dues are paid (or) goods are reshipped to other
destinations without being brought into the country.
3. COLDSTORAGE: Cold storage facilitates are provided for perishables against payment of
storage for the space utilized by different parties. These warehouses provide facility of
refrigeration. Perishable products like vegetables, fruits and other farm products are
preserved for longer time.
4. GENERAL MERCHANDISE WAREHOUSES: These are probably the most common type of
ware houses. Any type of commodity may be stored in these warehouses.
5 .PUBLICWAREHOUSES: With regard to ownership, public warehouses are those owned
and operated by public institutions (or) other persons and open for use by anybody at a
charge who can conform to certain rules and regulations.
6. PRIVATE WAREHOUSES: This is also with regard to ownership which are owned and
operated by the company itself and are exclusively by it.
7. DUTY PAID PUBLIC WAREHOUSE: Which are maintained either by dock authorities (or)
by port trust authorities at port. After payment of customs duty goods can be withdrawn
from bonded house. The importer may store the goods in this warehouse depending on his
requirement.
VERY SHORT ANSWER:
1. COLDSTORAGE: Cold storage facilitates are provided for perishables against payment of
storage for the space utilized by different parties. These warehouses provide facility of
refrigeration. Perishable products like vegetables, fruits and other farm products are
preserved for longer time.
2. BONDED WAREHOUSING: Bonded warehouse are owned and operated by port trusts
where importers store goods till customs dues are paid (or) goods are reshipped to other
destinations without being brought into the country.
3. FIELD WAREHOUSING: Field warehousing are those which are managed by a public
warehousing agency in the premises of a factory (or) company which needs the facility for
borrowing from a bank against the certification of goods in storage.
-: INSURANCE:-
1. WHAT ARE THE ELEMENTS OF INSURABLE RISKS?
A. Man is the social animal with full risk at every stage. He always tries to reduce his risk as
he is risk adverse. The main aim of insurance is to protect the owner from a variety of risks.
DEFINITION: The term insurance can be defined in both financial and legal terms. As per
financial term the insurance focuses on an arrangement that redistributes the costs of
unexpected losses.
ELEMENTS:
1. There must be a large number of exposure units.
2. The loss must be accidental and not intentional.

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3. The loss must be determinable and measurable.
4. The loss should not be disastrous to all units at a time.
5 .The chance of loss must be calculable.
6. The premium must be economically feasible.
2. WHAT ARE PRINCIPLES OF INSURANCE?
unexpected losses.
PRINCIPLES:
1. INSURABLE INTEREST: The person getting an insurance policy must have an insurable
interest in his property (or) life insured. A person is said to have an insurable interest in the
property if he is benefitted by it and is at loss by its destruction.
2. UTMOST GOOD FAITH: The rule of caveat emptor is not applicable in case of insurance.
The insurance contract is based on the principle of utmost good faith. It means that both
parties to the contract must give out all the material facts.
3. INDEMNITY: Under this principle the insurer agrees to make good the loss suffered by the
insured. The insurer will indemnify the actual loss suffered. No profit can be made against
insurance contrast.
4. CONTRIBUTION: Sometimes a person may get his goods insured with more than one
insurer. This is referred to as double insurance. But in this event of loss, the insured will have
no right to recover more than full amount of actual loss.
5. CAUSA PROXIMA: According to principle the risk coverage is available to the insured party
provided the loss has occurred directly from such events as specified in the insurance policy.
6. MITIGATION OF LOSS: When the mishap insured against occurs it is the duty of the insured
to take steps to minimize the loss. All reasonable efforts must be made to reduce the loss. He
should not be careless as the property is insured.
3. EXPLAIN THE TERM INSURANCE? EXPLAIN THE FEATURES OF INSURANCE?
unexpected losses.
FEATURES:
1. POOLING OR SHARINGOF LOSSES IN THE HEART OF INSURANCE: Pooling is the spreading
of losses incurred by the few over the entire group, so that in the process actual loss is
substituted for average loss.

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2. PAYMENT OF UNEXPECTED LOSSES: The loss should be incidental i.e unexpected .if the loss
is expected the event cannot be compensated and it cannot be covered under insurance.
3. RISK TRANSFER: Risk transfer means that a pure risk is transferred from the insured to the
insured to the insurer. Here pure risk refers to possibilities that can result on only loss
(or) no change.
4. INDEMNIFICATION: Indemnification means that the insured is restored to his or her
approximate financial position prior to the occurrence of the loss.
4. WHAT ARE THE ADVANTAGES OF LIFE INSURANCE POLICY?
A. Life assurance is the proper word for life insurance. Under life insurance contract the
amount of the policy is definitely paid. The policy may mature during the life time of the
assured (or) it may be paid on death.
ADVANTAGES:
1. ENCOURAGES SAVING: Many persons do not save money unless forced to do so. If the
premium is not paid the policy will be cancelled. Therefore the insured is compelled to pay.
Insurance is helpful in creating the habit of saving money.
2. EXEMPTION FROM INCOME TAX: The amount paid as premium on a life insurance policy is
allowed as deduction from income for calculating income tax. The insured is able to save some
income tax.
3. PROTECTION: When an insured dies premature the life insurance policy would come to the
rescue of his family members. The family members of the insured who committed suicide
would also get the insured amount only when the incident takes place after one year of policy.
4. CREDIT FACILITATES: The insured can raise loans by keeping the insurance policy as
security. Even the insured company, would extend such loans at cheaper interest rates.
5. MEETS THE FUTURE NEEDS: An insurance policy can be helpful in providing funds for
marriage and educational needs of insured’s children.
5. WHAT ARE KINDS OF LIFE INSURANCE POLICIES?
A. Life assurance is the proper word for life insurance. Under life insurance contract the
amount of the policy is definitely paid. The policy may mature during the life time of the
assured (or) it may be paid on death.
KINDS:
1. WHOLE LIFE POLICY: This is also called an ordinary policy which runs throughout the life of
assured. The sum assured under this policy is payable only after the death of the assured. The
premium payable is low and is meant to protest the family.
2. ENDOWMENT POLICY: The policy is taken up for a specific period. The policy will mature at
the expiry of a specified period (or) at the attainment of particular age (or) on the death of the
insured whichever is earlier. The premium of this policy is more than the whole life policy.
3. WITH (OR) WITH PROFIT POLICY: Under the with profit policies the policy holder gets a
share in the profits of insurance company. The profits is called bonus. It is added to the total

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sum assured and paid at the time of maturity of the policy. In case of without profits policies no
such profits is allowed.
4. JOINT LIFE POLICY: A policy may be taken up jointly on the lives of two (or) more persons.
On the death of any one person the policy is paid to other surviving policy holder as case may
be.
5. GROUP INSURANCE POLICY: An insurance policy is taken out on the lives of the members of
a family (or) the employees of a business concern.
6. POLICES UPON LIVES OF CHILDREN: Parents of minor children insure the lives of their
children to provide funds for future (i.e.) marriage, education etc. the insurance company
would pay the assured sum on maturity date (or) on the death of the child.
6. EXPLAIN KINDS OF MARINE INSURANCE POLICIES?
A.
DEFINITION: Under this insurance contract which covers the risks of loss arising from and
incidental to marine adventure is known as marine insurance. It has developed with the
expansion of trade.
KINDS: 1. VOYAGE POLICY: It is the policy taken for a particular trip. This starts as soon as the
ship leaves part of departure and it ends on its arrival at the part of destination.
2. TIME POLICY: This is a policy where buy the subject matter is insured for a specific period.
The maximum period for policy is issued is 12 months.
3. MIXED POLICY: A marine policy that covers both specified period and voyage. This policy is
also known as time and voyage policy.
4. VALUED POLICY: A policy where the value of the subject matter in agreed between the under
writer and the insured this is decided at the time of contract.
5. UNVALUED POLICY: It is the policy in which the value of the subject matter will not be
started at the time of issuing the policy. It will be ascertained in the event of loss.
6. FLOATING POLICY: A merchant who is regular shipper of goods has to take out a marine
insurance policy every time he ships the goods. It involves a lot of trouble, duplication of work
and waste of time.
7. STATE VARIOUS KINDS OF FIRE INSURANCE?
A.
DEFINITION: It relives the insured from the horror of the fire losses to which he is exposed.
KINDS:
1. SPECIFIC POLICY: A specific policy is that which insures a risk for a specific sum. In case of
any loss to the property insured will pay the whole loss to insured. Provided does not exceed
specific sum.
2. VALUED POLICY: In this policy the value of subject matter is agreed up on at time of taking
up the policy. The insurer agrees to pay a pre determined amount if the subject matter is
destroyed (or) damaged by fire.

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3. AVERAGE POLICY: If a policy has average clause then the policy would be known as average
policy. This clause is inserted to discourage under insurance of the subject matter.
4. FLOATING POLICY: A floating policy is taken up to cover the risk of goods lying at different
places. The goods should belong to the same person and one policy will cover the risk of all
these goods.
5. COMPREHENSIVE POLICY: A policy may be taken up to cover up all types of risks including
fire etc.
VERY SHORT ANSWERS:
1. RE- INSURANCE: Re-insurance denotes insuring an already insured risk. An insurance
company generally undertakes the risks according to its capacity. Sometimes a company
undertakes more risks than its capacity. It tries to share the risk with some company in case of
its occurrence.
2. DOUBLE INSURANCE: Double insurance means purchasing more than one policy for the
same property. A person may get two or more policies on his life. He can claim the amount on
all these policies.
3. ENDOWMENT POLICY: The policy is taken up for a specific period. The policy will mature at
the expiry of a specified period (or) at the attainment of particular age (or) on the death of the
insured whichever is earlier. The premium of this policy is more than the whole life policy.
4. JANATA POLICY: Life insurance Corporation of India introduced janata policy in May 1957.
This policy is issued for a duration that it should mature. At the age of 60 years of the assured.
This policy is issued for a term of 5, 10, 15, 20(or) 25 and it will be mature at 60 years.
-: STOCK EXCHANGE:-
1. DEFINE STOCK EXCHANGE?EXPLAIN ITS FUNCTION?
A. Stock exchange is a barometer of the country. It is a part of capital market which deals in
long term finances of industry and government. It provides a connecting link between people
who want to dispose of their investment.
DEFINITION: Stock exchange defined as an association, organization (or) body of individuals
established for the purpose of assisting, regulation and controlling business in buying and
selling and dealing in securities. It is treated as secondary market.
FUNCTIONS:
1. READY AND CONTINUOUS MARKET: The stock exchange provides a ready and continuous
market for securities. The listed securities continue to be traded at exchanges irrespective of
the fact that their owners go on changing. It provides exchanges regular market for trading
securities.
2. PROTECTION TO INVESTORS: The stock exchange protects the interests of investors
through the enforcement of their rules. The rules of securities contract the dealings on stock
exchange.

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3. PROVIDES INFORMATION TO ACCESSTHE REAL WORTH OF SECURITIES: Trading activity
takes place in stock exchange continuously and prices of securities are determined by their
supply and demand. The investors can verify the real value of their holdings at any time.
4. PROVIDES LIQUIDITY OF INVESTMENT: It is a place where buyers and sellers come together
to exchange their surplus. The seller comes to sell his securities for cash. Buyer comes to the
market to purchase securities this process enables to avoid blocking of investments.
5. HELP IN RAISING NEW CAPITAL: There is always demand for additional capital from
existing concerns. This demand is met through the issue of rights share. It provides a proper
type of ready market for such shares.
6. RAISINGPUBLIC DEBT: The increasing role of government in economic development has
necessitated the raising of huge amounts from market. The stock exchange provide platform
for raising the public debts.
7. LISTINGOF SECURITIES: Listed companies alone are eligible to trade on stock exchange.
Stock exchange authorities take up critical examination of application in which company
has mentioned all details regarding capital etc.
8. ENCOURAGES CAPITAL FORMATION: The positive features of stock exchange market
encourage people to save and invest in securities. Good returns and liquidity are two
benefits.
9. IMPROVES THE COMPANY PERFORMANCE: The listed company has to comply with the
rules laid by the stock exchange regularly. This keeps the management of company on its
toes every time.
10. ECONOMIC BAROMETER: The pulse market can be known by its stock indices. The
prevailing economic conditions affect the share prices.
2. DESCRIBE THE SIGNIFICANCE (OR) MERITS OF STOCK EXCHANGE?
A. The utility of stock exchange can be explained with the help of three heads. i.e to the
investors, to the company an d to the community.
A) FROM THE POINT OF VIEW OF INVESTORS:
1. Provides liquidity to the securities held by investors.
2. Stock exchange protects the interests of the investors through enforcement of rules.
3. Determination of prices of securities can be done by the stock exchange.
4. Stock exchange promotes saving habit.
5. It provides protection against counter party risk.
B) FROM THE POINT OF VIEW OF COMPANY:
1. The mobilization of large amount of resources is possible due to access to a wider market.
2. A listed company generally enjoys better reputation and credit worthiness.
3. The listed securities command higher prices as compared to unlisted securities.
4. A stock exchange minimizes prices fluctuation of the stock exchange.
5. Stock exchange would give a boost to the primary market.
C) FROM THE POINT OF VIEW OF THE SOCIETY:
1. It promotes industrial growth and economic development.

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2. It ensures optimum utilization of scare financial resources.
3. It encourages good companies to gather more capital.
4. It helps the government to raise huge amount from the market to undertake big projects.
5. It determines real worth of different securities.
3. DESCRIBE THE SEBI FUNCTIONS AND POWERS?
A. As per narasimham committee recommendation, SEBI was constituted in April 1st 1988
by the Rajiv Gandhi government with the establishment of SEBI, controller of capital issues
regime came to end. The statutory status was conferred on only in January 1992. Its head
quarter located in Mumbai. The powers under securities contracts act 1956, have been
delegated to SEBI by the central government.
FUNCTIONS OF SEBI:
1. Regulating the business in stock exchanges and any other securities market.
2. Registering and regulating the working of stock brokers, merchant brokers underwriters.
3. Registering and regulating the working of venture capital funds and collective
investment.
4. Prohibiting insider trading in securities.
5. Regulating substantial acquisition of shares and takeover of companies.
POWERS OF SEBI:
1. Suspending the trading of any security in a recognized stock exchange.
2. Suspend any office bearer of stock exchange.
3. Confiscate securities in respect of any transaction, which is under investigation.
4. Attach for a period not exceeding one month, with prior approval of a magistrate.
5. Any person associated with securities market to buy and sell securities was prohibited.
4. EXPLAIN THE LISTING OF SECURITIES? AND ITS ADVANTAGES?
A. Public limited companies which want their securities to be traded on a stock exchange
must enlist themselves. The companies seeking the enlistment of their securities for the
first time have to apply in the prescribed from along the listing agreement and listing fee.
DEFINITION: The legal provisions relating to the listing of a security with the stock
exchange was stipulated in securities contract regulation act under sec 21 and 22A. Listing
of shares means allowing a scrip to trade on the floor of a stock exchange will admit a share
for the listing purpose.
OBJECTIVES:
The objectives of listing are mainly to
1. Provide liquidity to securities.
2. Mobilize saving for economic development.
3. Protect interest of investors by ensuring full disclosures.

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ADVANTAGES OF LISTING:
A) TO THE COMPANY:
1. The listed companies enjoy tax concessions.
2. The company gains good reputation.
3. It provides greater publicity for the company.
4. Financial institutions and banks extend term loan facilities.
5. It helps the company to mobilize resources from the share holder through rights issue
B) TO THE INVESTORS:
1. It ensures liquidity of securities.
2. Banks prefer to extend loan on listed securities to the individuals.
3. The rules of stock exchange protect the interest of the investors.
4. Listing ensures the transparency in trading.
5. The takeover offers concerning the listed companies are to be announced to the public.
This will enable the investing public to exercise their discretion on such matters.
C) TO THE GENERAL PUBLIC: It stills confidence in the mind of general public. It also safe
guards the interest of the general public as it enforces timely disclosure of proper
information, bonus shares etc.
4. WHAT IS SPECULATION AND WHAT ARE THE TYPES OF SPECULATION?
A. Speculation on the stock exchange refers to the buying and selling of securities
anticipating profits from anticipated changes in the price of securities. The persons engaged
in such activity are known as speculators.
TYPES:
1. BULL: A bull is also known as Tejiwala. He is an operator who expects a rise in the prices
of the securities in the future. He always thinks that the future will be bright. He makes the
purchases of shares with the intention to sell at higher prices in future.
2. BEAR: Bear is also known as Mandiwala. He expects the prices to fall in future and sells
the securities at present. He sells the securities which he does not possess in the current
market.
3. STAG: Stag is a cautious speculator. He concentrates on primary market. He applies for
the shares in the public issue and expects to sell them at a premium. It he gets an allotment
he selects only those companies whose shares are in more demand and are likely to carry a
higher price.
4. LAME DUCK: If a bear speculator fails to fulfill his commitment he said to be struggling
like a lime duck. A bear may agree to sell a certain security on a certain day. However on
that day he may not able to deliver the security as it may not available in the market.
5. WHAT ARE SPECULATION DEALS?
A. The speculative dealing in the stock market are presented below:

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TYPES:
1. MANIPULATION: It involves the creation of false opinion and spreads rumors.
Manipulation means the purchase and sale of the securities by a group of speculators.
2. RIGGING: Rigging is another speculative dealing method. The speculator places orders to
different brokers at different prices. He places orders for some buying and selling of the
securities.
3. ARBITRAGE: It is highly specialized activity. It requires a lot of skill and talent. These
transactions are carried out by the speculators to earn profit at the different prices in
different stock markets.
4. KERB: The speculators may promote the un official deal. That is purchase and sale of
securities before or after the official hours of business in the stock exchange..
5. CORNERING: Under this the speculators sometimes create a scarcity of particular scrip by
purchasing large amount of shares.
6. WASH SALES: It refers to fictitious transactions in which some speculators sell particular
securities and then buy the same at a higher price through other brokers which creates false
and misleading opinions in the market about the prices.
6. DIFFERENCE BETWEEN SPECULATION AND INVESTMENT?
A.
SPECULATION: Speculation on the stock exchange refers to the buying and selling of
securities anticipating profits from anticipated changes in the price of securities. The
Persons engaged in such activity are known as speculators.
DIFFERENCE BETWEEN SPECULATION AND INVESTMENT:
BASIS OF DIFFERENCE SPECULATION INVESTMENT
1. Types of contract Ownership Creditor
2. Basis of acquisition Generally on margin Usually by outright
purchase
3. Attitude of participants Venture some Cautious and conservative
4. Length of commitment Short term Long term
5. Source of income Changes in market price of
securities
Capital appreciation and
dividends
6. Risk High Low
7. Basis of purchase Hoping price changes Valuation of intrinsic worth
of the security
8. Stability of income Uncertain and erratic Very stable
7. DIFFERENCE BETWEEN SPECULATION AND GAMBLING?
A. Speculation and gambling operations appear to be same. In both cases the profits or
losses depend upon future events which are uncertain. The object of speculation as well as
gambling is to make quick profits.

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SPECULATION GAMBLING
1. It is based on knowledge and fore sight
ness.
1.It is based on chance of events
happenings
2. It is a lawful activity. 2. It is n illegal activity.
3. It performs economic functions and
develops economy.
3. It has no benefits to offer to the economy
and does not develop economy.
4. Speculators bear the risk of loss on the
basis of logically.
4. Gamblers assume risks of loss on the
basis of blind and reckless expectations.
8. WHAT ARE TYPES OF OPERATORS OF STOCK EXCHANGE?
A. The following operators are involved in the stock exchange operations. They are:
TYPES:
1. JOBBERS: They are security merchant dealings in shares, debentures as independent
Operators. They buy and sell securities on their own behalf and try to earn through price
changes. They cannot buy shares on behalf of public.
2. BROKERS: They are commission agents who act as intermediaries between buyers and
sellers of securities. The brokers charge commission from both the parties for their services.
3. ARBITRAGEUR: They are also known as budiwalas. He is a dealer who enters the dealings
with same security in different exchanges at the same time encashing profit through price
difference.
4. ODDLOT DEALERS: Specializes in handling the odd lots. All of the companies have fixed
market 50 (or) 100. Anything less than the market lot is odd lot. The broker who specializes
in odd lots is called as odd lot dealer.
5. TARANVANIWALAS: Who can be comparable to jobbers however the classification is not
rigid as they may perform a double role of broker cum jobber.
VERY SHORT ANSWERS:
1. NSE (NATIONAL STOCK EXCHANGE): The NSE of India ltd was promoted by IDBI, ICICI,
LIC, SBI etc as a joint stock company under the companies’ act 1956, on 27 November 1992.
The main objective of NSE is to ensure comprehensive nationwide securities trading
facilities to investors through automated screen based trading and automatic post trade
clearing and settlement facilities.
2. BSE (BOMBAY STOCK EXCHANGE): The BSE was located in Dalal street of Mumbai,
according to Asian development bank’s 2010 report. BSE is second most profitable stock
exchange of the world and world’s 5th in transaction numbers, the BSE is the first stock
exchange in Asia and second stock exchange.
3. SENSEX: Sensitive index of Bombay stock exchange is also known as sensex which was
introduced on 1st January 1986. In this way BSE pioneered the concept of stock market
index in India. Sensex is stock index which represents change in the values of 30 stock
constituting the index with a base year 1978-79.

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4. NIFTY: S and P nifty in the index of NSE. It is made up to 50 stocks. The base year for the
index is 1995-96, with the base value as 1000 ups and downs of nifty reflects the changing
expectations of stock market about the future dividends of the companies.
5. WASH SALES: It refers to fictitious transactions in which some speculators sell particular
securities and then buy the same at a higher price through other brokers which creates false
and misleading opinions in the market about the prices.
6. KERB TRADING: The speculators may promote the un official deal. That is purchase and
sale of securities before or after the official hours of business in the stock exchange. It is
called kerb trading.
7. OPENOUTERY SYSTEM: under open outery system traders shout and resort to signals on
the trading floor of the exchange. An investor desirous of buying a security gets in touch
with a broker and places a buy order along with the money to buy the security.
8. ROLLING SETTLEMENT: High speculation and periodic market criris of accounting period
settlement. It has led to emergence of rolling settlement. 1st January 1998. SEBI on
voluntarily had introduced the rolling settlement on demand shares.
9. ONLINE BROKING: Online broking is a facility which enables the user to trade securities at
his convenient place such as home or office, during trading hours. This is possible with an
interest connected computer.
-: COMPUTER AWARENESS:-
1. WHAT ARE FEATURES OF THE COMPUTERS?
A. The term computer is derived from the word compute and refers to application device of
calculations. It is electronic device that performs arithmetic calculations and other
operations with high speed.
FEATURES:
1. SPEED: Computers are characterized for their speed. They accept and process the data
and information at a very fast rate. Speed enables the computer to perform millions of
calculations per second.
2. STORAGE: A computer has an unlimited storage capacity. Computer can store large
amount of data, instructions and information and can be easily accessed.
3. ACCURACY: There is no scope for inaccuracy in the results giving by the computer.
Incorrect calculations, errors, mistakes do not take place in computer.
4. FLEXIBILITY: It is one of the essential chief characteristic feature of a computer is its
general purpose use for variety of purpose depending upon programs fed into system.
5. DILIGENCE: Computers perform activities on a continuous basis even though they are
repetitive work.
2. WHAT ARE THE ADVANTAGES OF COMPUTER?
A. The term computer is derived from the word compute and refers to application device of
calculations. It is electronic device that performs arithmetic calculations and other
operations with high speed.

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ADVANTAGES:
1. SPEED: Computers work very fast in processing the data thereby enabling many
alternatives for a given data.
2. DECISION MAKING: Since for a given input various alternatives are provided one’s time is
best utilized in decision making.
3. MULTIPLE TASKS: Computers allows creating documents, edit, print and store and
retrieve the information and when required by a user.
4. CONNECTINGTO THE WORLD: Computers are enabling to remain connected to the world
through internet. Internet is the worldwide network.
5. NET WORKING: Net working is one of the important contributions to communication by
email.
6. BEST TOOL: Computer with its inbuilt capability to perform many functions is providing
as best tools.
3. WHAT ARE THE DISADVANTAGES OF THE COMPUTERS?
A.
DISADVANTAGES:
1. HACKING: It has become recognized worldwide now computers are susceptible to
unauthorized access.
2. VIRUS THREAT: A virus damages entire system resources and spreads to other systems
(or) files.
3. SOFTWARE PIRACY: Software piracy is on the rise and has become major obstacle for
doing good business.
4. COMPUTER FRAUDS: Computer frauds are on increasing where in illegal acts are being
perpetuated and many frauds are detected.
5. COMPUTER CRIME: Computer crimes are on increase and finding evidence is difficult.
6. INTERNET SITE: Since internet site has global reach so also fraudsters are always looking
for new victims.
4. WHAT ARE THE APPLICATIONS OF COMPUTER IN VARIOUS FIELDS?
A. 1. EDUCATION: Education is the most important pillar of any country and computers are
very helpful to the education field by providing computer/ web based training, video
conferencing, online examinations etc.
2. HOSPITALS: Computers are playing a prominent role in health care sector by providing
services like keeping hospital records like inpatient register, stock register for medicine etc.
3. BUSINESS: Information technology and networking are helping business concerns in
keeping records pertaining to customers and suppliers.
4. SCIENCE AND TECHNOLOGY: Computers are very useful in various chemical and
engineering industries laboratories, scientific applications and storing the data.

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5. ENTERTAINMENT: In recent years computers were used mainly for entertainment and
amusement like computer games and other programs.
6. MULTIMEDIA: Computer animation gives life and movement to inanimate objects.
Multimedia too helped in popularized the use of computers.
5. WHAT ARE THE PARTS/ ELEMENTS OF THE COMPUTERS?
A.
PARTS OF THE COMPUTER:
1. KEY BOARD: The key board is an input device which has alphabets, numbers and special
symbols for entering information inside the computer.
2. MOUSE: The mouse is an input device of the computer. It helps in moving the cursor from
one point to the other point on the screen of computer on the upper surface of the mouse
there are two buttons used for clicking.
3. CPU: The CPU of the computer is used to process the data inside the computer. It has
three units as control unit, logical unit, and memory unit. The ALU performs the functions of
calculations etc.
4. MONITOR: Monitor is the output device and gives the answer required by the user . it is
also called as visual display unit. There are two kinds of monitor namely monochrome
monitor which displays the output in black and color monitor which displays the output in
different colors.
VERY SHORT ANSWER:
1. KEY BOARD: The key board is an input device which has alphabets, numbers and special
symbols for entering information inside the computer.
2. MOUSE: The mouse is an input device of the computer. It helps in moving the cursor from
one point to the other point on the screen of computer on the upper surface of the mouse
there are two buttons used for clicking.
3. CPU: The CPU of the computer is used to process the data inside the computer. It has
three units as control unit, logical unit, and memory unit. The ALU performs the functions of
calculations etc.
4. MONITOR: Monitor is the output device and gives the answer required by the user. It is
also called as visual display unit. There are two kinds of monitor namely monochrome
monitor which displays the output in black and colour monitor which displays the output in
different colours.
5. HARDWARE: It is term used to define the parts of the computer. The person who repairs
the computer is known as hardware engineer. It is collection of various physical
components which are inbuilt within a computer.
6. SOFTWARE: The term software defines the working on the computer, it is also known as
the set of the program instructions which are required for processing activities that can be
used for problem solving.

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7. SYSTEM SOFTWARE: The term system software is used for computer operations. This
software controls all processing activities and the computer ability are used to the optimum
extent.
8 .MS- WORDS: It means Microsoft word. It is a word processor and it is used for typing and
editing the letters. It is the part of micro soft office.
9. E-MAIL: E-mail means electronic mail. It is the transmission of textual material from one
computer of another electronically is known as E-mail.
-: ACCOUNTS:-
VERY SHORT ANSWER:
1. DEPRECIATION: Depreciation is a permanent, continuous and gradual decrease in the
book value of a fixed asset from any cause.
2. CAUSES OF DEPRECIATION:
a) Physical wear and tear.
b) With the passage of time.
c) Changes in economic development.
d) Expiration of legal rights.
3. STRAIGHT LINE METHOD: Under this method a fixed amount of depreciation according
to a fixed percentage on the original cost is written off during each accounting period over
the expected useful life of the asset.
Annual depreciation = value of asset –scrap value/ life time
4. DIMINISHING BALANCE METHOD/ WRITTEN DOWN VALUE: Under this method
depreciation is calculated at a fixed percentage on every year opening balance of asset
during each accounting period over a expected useful life of the asset.
5. DEPLETION METHOD: The term depletion refers to the physical deterioration by the
exhaustion of natural resources (ore deposits in mines, oil wells, quarries, timber stands
etc)
6. AMORTIZATION: It refers to the economic deterioration by the expiration of intangible
assets (patents, copyrights, goodwill etc)
7. OBSOLESCENCE: The term obsolescence refers to the economic deterioration by
a) Invention of improved technique
b) Market decline due to changes in taste and fashions etc
c) Inadequacy of existing plant to meet the increased business.
8. SINKING FUND: A fund created for the repayment of a long term liability (or) for the
replacement of an asset.
9. SINGLE ENTRY SYSTEM: Every business transaction has two aspects. Only one aspect is
entered (or) recorded in the books of accounts is called single entry system. It is treated as
incomplete unscientific system.
10. FEATURES OF SINGLE ENTRY SYSTEM:
a) It is very common to keep only personal accounts.
b) It avoids real and nominal accounts.
c) It is mostly suitable to sole trade and partnership concerns.
11) ADVANTAGES OF SINGLE ENTRY SYSTEM:

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a) It is simple method to understand and easy to follow.
b) It is less expensive method.
c) Suitable to small scale concerns.
d) Very easy to calculate profit (or) loss.
12. DISADVANTAGES OF SINGLE ENTRY SYSTEM:
a) It is an unscientific method.
b) The trial balance cannot be prepared.
c) Final accounts cannot be prepared.
13. STATEMENT OF AFFAIRS: It is statement showing various assets and liabilities of a
business on a particular date which is similar to a balance sheet. The excess of assets over
the liabilities treated as capital.
14. PROFORM INVOICE: [consignor- consignee]
The statement prepared by the consignor containing the description of goods sent, quantity,
quality, rate and discount offers and sents it to consignee.
15. ACCOUNT SALES: [consignee- consignor]
The statement prepared by the consignee giving the details of goods sold by him and the
amount due and to be limited by him to the consignor.
16. DELCREDERE COMMISSION: This commission is given to the consignee to cover the risk
of the loss relating to the bad debts. Once the consignee is entained to such commission he
will become responsible for all loss on account of bad debts and consignor will not bear any
loss that may arise on account of credit sales.
17. OVER RIDING COMMISSION: It is allowed to the consignee when he is required to put in
hard work for introducing the new product in the market (or) for selling the goods at higher
than the prices fixed by the consignor.
18. ACCOMMODATION BILL: The bills are drawn and accepted to meet the financial needs of
drawer (or) drawee (or) both and without any consideration is called accommodation bill.
19. ACCEPTANCE OF BILL: The process of consenting to the order by the drawee of a bill of
exchange is known as acceptance of bill. After acceptance of the bill will be returned to the
drawer.
20. MATURITY OF BILL/ DUE DATE: A bill of exchange (or) promissory note matures on the
date on which it falls due.
21. ENDORSEMENT: The drawer may endorse (or) transfer the bill in favour of another
person is called endorsement.
22. DISHONOR: Non- payment of the amount of a bill of exchange on the due date of
maturity is called dishonor of the bill.
23 .NOTING CHARGES: The charges paid to the notary public by the holder of the bill to
prove that the bill is dishonored are called noting charges.
24. RENEWAL OF BILL: When the drawee of a bill is unable to pay the bill amount on the
due date. He may request the drawer and to cancel the old bill and draw a new bill on him
for another period. The process of cancellation of old bill and drawing a fresh bill for
extended period is known as renewal of bill.
25. RETIRINGOF BILL: If the drawee of a bill gets sufficient funds to make the payment of
the bill before the date of maturity is called retiring of bill.

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26. GRACE DAYS: The bill is payable after the expiry of a particular period of time. The date
of maturity will be calculated after adding 3 days of grace.
27. PROMISSORY NOTE: Promissory note is an instrument in writing containing an
unconditional undertaking signed by the maker to pay certain some of money is called
promissory note.
28. REVENUE EXPENDITURE: Any expenditure benefit from which expires on (or) before
the end of accounting period is called revenue expenditure.
29. CAPITAL EXPENDITURE: The expenditure which is generally paid for the purchase of
assets and to increase the earning capacity of the firm is called capital expenditure.
30. DEFERREDREVENUE EXPENDITURE: The expenditure whose benefit spread over a
number of years is called deferred revenue expenditure. it is not written off in one year.
31. RECEIPTS ANDPAYMENTS ACCOUNT: It is the summary of cash transactions. All cash
receipts and cash payments are recorded in this account.
32.INCOME AND EXPENDITURE ACCOUNT: It is similar to profit and loss account. Only
revenue expenditure and revenue income are to be recorded in this account. Difference
between two sides will be return either surplus (or) deficit.
33. LEGACY: An amount received by the organization has per the will of the person is called
legacy. It is treated as capital income and it should be recorded in balance sheet on liability
side.
34. SPECIFIC DONATIONS: A donation received the by organization for a specific purpose
whether huge (or) small is called specific donations. Eg: building funds.
35. ENTRANCE FEES: The amount (or) fees paid by the member at the time of joining is
known as entrance fee. It is treated as capital income.
36. PARTNERSHIP A relation between persons who have agreed to share the profits (or)
losses of a business carried on by all (or) any of them acting for all.
37. PARTNERSHIP DEED: Before starting the business the entire partnership firm enters
into an agreement to carry on business is called partnership deed. The agreement may be
oral (or) written form.
38. NEWPROFIT SHARINGRATIO: After admission of new partner change will take place in
profit sharing ratio which is depend on the agreement. This is called new profit sharing
ratio.
39. SACRIFICING RATIO: When the new partner is admitted the old partner forgoes a
fraction of his share in favor of the new partner and reducing the share of profit (or) loss of
the old partner. Sacrifice made by the old partners can be found out by deducting their new
share from the old share.
Sacrificing share= new share- old share
40. REVALUATION OF ASSETS ANDLIABILITIES: To record transactions of revaluation of
assets and liabilities an account is called revaluation account. It is opened which is a
nominal account in its nature.
41. GOODWILL: Goodwill is an intangible asset. It is force of attracting the customers. It
helps to earn the more profits than the normal profits in future. It depends on the name of
business and its connections.

INTERMEDIATE
SECOND YEAR
41 | P a g e
42. GAINING RATIO: Retirement of any partner from the firm causes computation of profit
sharing ratio of the continuing partners. Ratio in which the share of retiring partner is taken
over by the old partners is called gaining ratio.
By
R.Sarala

Commerce Material 2nd year

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