TN STATEBOARD 11th COMMERCE CHAPTER 4

TEST SOLUTION

SOLE PROPREITORSHIP CHAPTER TEST

 

TEST –4

PADVIKSHA BLOG

 

 

TOTAL MARKS: 25

 

 

         

I Multiple Choice Questions (MCQ) (Mark- 5 x 1 = 5)

Write all questions

Question 1.

 

…………….. is that form of business organisation which is owned and controlled by a single individual.

 

(a) Sole trading concern

 

(b) Partnership firm

 

(c) Joint Hindu family business

 

(d) Joint stock companies

 

Answer:

 

(a) Sole trading concern

 

 

 

Question 2.

 

…………….. is known as individual entrepreneurship.

 

(a) Partnership

 

(b) Sole trader

 

(c) Joint stock company

 

(d) Co – operative

 

Answer:

 

(b) Sole trader

 

 

 

Question 3.

 

When his business assets are not sufficient to pay off the business debts, he has to pay from his personal property.

 

(a) Unlimited Liability

 

 

 

(b) Flexibility

 

(c) Small capital

 

(d) Limited Liability

 

Answer:

 

(a) Unlimited Liability

 

 

 

 

 

Question 4.

 

“He receives all the profits and risks all of his property in the success or failure of the enterprise”- was said by

 

(a) Wheeler

 

(b) J.L. Hansen

 

(c) H.Haney

 

(d) O.R. Krishnasamy

 

Answer:

 

(a) Wheeler

 

 

 

Question 5.

 

Which of the following is under non – corporate enterprise?

 

(a) Government

 

(b) Co – operative

 

(c) Company

 

(d) Sole trading concern

 

Answer:

 

(d) Sole trading concern

II VERY SHORT ANSWER QUESTIONS. (3x2=6)

 

Write Any 3 Questions:

1. What should be the Government role in sole proprietorship?

Answer:

A sole proprietor concern is free from Government regulations. No legal formalities are to be observed in its formation, management or in its closure.

 

2. Who is called Sole Trader?

Answer: Proprietorship is a form of business organization in which an individual introduces his own capital, uses his own skill and intelligence in the management of its affairs and is solely responsible for the results of its operations.

 

3. For which of the following types of business do you think a sole proprietorship form of organization would be more suitable, and why?

1. Grocery store

2. Medical store

3. Craft center

4. Legal consultancy

5. Internet café

Answer: Sole proprietorship will be most suitable in case of a Grocery store as in this case, initial business setting-up costs are not very high, the legal requirements are minimum and the scale of operations is small. Besides, direct personal contact is needed with the customers in the case of a grocery store and hence, sole proprietorship where there is a single person who owns and manages the business may be more suitable as he would be able to know his customers well and thus serve them better.

 

4. Mahesh is a young graduate who has inherited a sum of Rs 1, 00,000 by way of family savings. He also has a family house to which he has sole title as the only son of his father. He is thinking of starting a small factory for the manufacture of plastic toys. What form of ownership organisation will you advise him to choose?

Answer:

 

Sole Trader.

 

5. How was the decisions taken in sole proprietorship?

 

III Short answer questions. (3 X 3 = 9)

 

WRITE ANY 3 QUESTIONS

1. How is it possible to maintain secrecy in sole proprietorship?

Answer: In sole proprietorship as the trader is the sole owner of the business, the secrecy can be maintained easily.

 

2. What is limited managerial skill?

Answer:

Single person’s intelligence and experience may not help him beyond a certain stage. Since he has to focus on each and every activity, his managerial ability is bound to be limited.

 

3. Write any three characteristics of sole proprietorship.

Answer:

 

1. Ownership by one man: This is owned by single person. The sole trader contributes the required capital. He is not only the owner of the business but also manages the entire affairs.

 

2. Freedom of work and Quick Decisions: Since.an individual is himself as an owner, he need not consult anybody else. Hence he can take quick decisions.

 

3. Unlimited Liability: When his business assets are not sufficient to pay off the business debts he has to pay from his personal property.

 

4. What is limited capital?

Answer:

 

Since the capital is contributed by one individual only, business operations have necessarily to be on a limited scale.

5. Give some examples of sole trading business.

Answer: Beauty parlor, barbershop, general store and sweet shop run by a single owner.

 

IV. Long Answer question (1 x 5 = 5)

 

WRITE ANY ONE QUESTION

1. Explain the characteristics of sole trading business.

Answer:

1. Ownership by one man: This is owned by single person. The sole trader contributes the required capital. He is not only the owner of the business but also manages the entire affairs.

2. Freedom of work and Quick Decisions: Since an individual is himself as a owner, he need not consult anybody else. Hence he can take quick decisions.

3. Unlimited Liability: When his business assets are not sufficient to pay off the business debts he has to pay from his personal property.

4. Enjoying Entire Profit: He strives tirelessly for the improvement and expansion of his business and enjoys all the benefits of his hard work.

5. Absence of Government Regulation: A sole proprietor concern is free from Government regulations. No legal formalities are to be observed in its formation, management or in its closure.

6. No Separate Entity: The sole trading concern comes to an end with death, disability, insanity and insolvency of the individual.

7. Maintenance of Secrecy: Since he/she manages all the affairs of the business, the secrecy can be maintained easily.

2. What are the Advantages and Disadvantages of Sole trading Business? Write 3 points for each.

Answer:

Advantages of Sole Trading Business

1. Easy Formation: No legal formalities are required to initiate a sole trading concern. Any person capable of entering into a contract can start it, provided he has the necessary resources for it. 

2. Incentive to Work hard: There is a direct relationship between effort and reward. The fact that the entire profit can be taken by himself without sharing with anybody else induces him to work ceaselessly.

 

3. Small Capital: Small capital is an important as well as specific advantage of sole proprietorship. Sole proprietor can start business with small capital.

4. Credit Standing: Since his private properties are held liable for satisfying business debts, he can get more financial assistance from others.

 

5. Personal Contact with the Customers:

Since sole proprietor knows each and every customer individually he can supply goods according to their taste and preferences. Thus he can cultivate personal relationship with the customers.

 

6. Flexibility: The sole trader can easily adjust himself to the changing requirements of his business.

Disadvantages of Sole Trading Business

1. Limited Capital: Since the capital is contributed by one individual only, business operations have necessarily to be on a limited scale.

 

2. Limited Managerial Skill: Single person's intelligence and experience may not help him beyond a certain stage. Since he has to focus on each and every activity, his managerial ability is bound to be limited.

 

3. Unlimited Liability: The creditors have the right to recover their dues even from the personal property of the proprietor in case the business assets are not sufficient to pay their debts.

 

4. Lack of Specialization: Since the business unit is small and the financial resources are limited, experts in different fields cannot be employed to secure maximum advantages.

 

5. Hasty Decisions: Sole proprietor is more likely to take hasty decision as he need not consult anybody else.

 

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