IGNOU| BUSINESS ORGANISATION (ECO - 01)| SOLVED PAPER – (JUNE - 2022)| (BDP)| ENGLISH MEDIUM
BACHELOR'S DEGREE
PROGRAMME
(BDP)
Term-End
Examination
June - 2022
(Elective Course:
Commerce)
ECO-01
BUSINESS
ORGANISATION
Time: 2 Hours
Maximum Marks: 50
Weightage: 70%
Note: (i) Attempt any five questions.
(ii) All
questions carry equal marks.
हिंदी माध्यम: यहां क्लिक करें
1. Describe the requisites of an ideal form of business organisation. 10
Ans:- The requirements of the ideal form of organization
are as follows:-
(i) Ease of
Formation: An important factor in preferring a particular form of
organization over another is the ease with which a business can be brought into
existence. The comparative ease of difficulty in forming a particular type
of organization depends mainly on three factors:-
(a) Formation expenses by way of
registration fees, stamp duty, fees of legal experts, fees involved in drafting
of documents, obtaining licenses etc.
(b) legal formalities, and
(c) Procedural delay, etc.
Unless it's absolutely necessary, it's better to choose an outfit that is easy
to make.
(ii) Scope of
raising capital: The choice of organization depends mainly on the amount of
capital required which is determined by the nature of the business and scale of
operations. For example, if you want to open a grocery retail store, it will
not require much capital. But if you want to set up a sugar factory you may
require a large amount of capital. The ideal form of organization is one which
provides scope for increasing the amount of capital as and when required.
(iii)
Limitation of Liability: You know that the element of risk and uncertainty
is prevalent in every business. In view of this, businessmen generally give
preference to limited liability. Obviously, limited liability is considered an
important feature of good organization. However, a certain amount of risk is
also found important to provide the necessary motivation for initiative, drive
and participation in business. Sometimes, absence of such motivation leads to
weakness, incompetence and even dishonesty on the part of management personnel.
(iv)
Flexibility of operations: The form of organization should be very flexible
and should adapt to changing business conditions without any difficulty or
complexity. For example, if you want to expand your business, diversify or
modernize plant and equipment, the organization must be able to meet all the
requirements.
(v) Stability
and continuity: Stability and long life of business is desirable from the
point of view of owners, employees and customers. Employees always prefer
stable and continuous employment. If the business is stable, the owner should
be able to make plans for the future and invest for a considerable period of
time. From the customers' point of view also, regular supply of goods and
services is expected to satisfy their needs. An ideal form of organization is
one that provides a reasonable amount of stability to the business.
(vi)
Effectiveness of Management: As you know the success of any business
enterprise depends on the efficiency of management. Managerial efficiency
depends on skills, motivation, flexibility, adaptability etc. It is difficult
to have all these qualities in a person.
(vii) Extent
of government control and regulations: If government control and regulations
are too much, the enterprise may have to use a lot of time, money and energy
for compliance with legal formalities and instructions. In some cases there may
be too much interference by government officials in the daily business of the
firm. There is no doubt that investors, creditors and customers trust business
enterprises whose activities are properly regulated by the government. But too
much government interference is not liked by entrepreneurs as it hampers their
initiative and hinders the functioning of their business.
(viii)
Commercial secrecy: In business, it is important to maintain commercial
secrets without disclosing them to competitors. Therefore, preference is given
to that form of organization which enables commercial secrets to be preserved,
as compared to those in which commercial secrets are difficult to preserve.
(ix) Tax
burden: Commercial taxes like sales tax, excise duty and customs duty are
imposed on certain products and services. Therefore, such taxes affect all
forms equally and they will not influence choice. But income tax liability
varies from organization to organization. Naturally, the form of organization
which attracts minimum tax liability is considered to be the ideal form. From
this point of view company organization is considered best as it offers many
tax reliefs which are available to II No. 1 in case of other forms of
organization.
(x) Ownership
Privileges: Some individuals have a very strong desire to control the
entire business activities themselves and give great importance to their right
to personal leadership. Some individuals are willing to share the
responsibilities and risks of the business. Some people may want to own shares
without any capital; Strong desire to control business affairs. You may also
find some individuals who are unwilling to take business risks. An ideal form
of organization takes care of such privileges of the owners.
2. Discuss main features of sole trader organisation.
State briefly its merits and limitations. 5+5
Ans:- A sole trader organization has the following features:-
(i) Sole
Proprietorship: A sole trader is the sole owner of the business
(ii)
Unlimited Liability: Sole trader has unlimited liability for the business
(iii) Minimal
Government Control: Business is less affected by government control.
(iv) Business
confidentiality: A sole trader can maintain complete business
confidentiality
(v) Complete
Control: A sole trader has complete control over the business.
(vi) Taxed as
an individual: Sole trader is taxed as an individual
(vii) Minimum
admin and filing requirements: The business has minimum admin and filing
requirements
(viii) No directors
or shareholders: There are no directors or shareholders to run the business
(ix) No legal
separation: There is no legal separation between sole trader and business.
A sole trader
organization is also known as a sole proprietorship, sole proprietorship or
sole entrepreneurship.
Sole traders are
the most popular form of business. They have complete control over their
business, including decision-making and profit-sharing. However, they also face
all the risks themselves.
Merits:-
(i) Control: Sole
traders have complete control over their business.
(ii) Profit:
Sole traders keep all the profits with themselves.
(iii) Taxes:
Sole traders have simplified tax obligations.
(iv) Legal
Requirements: There are minimum legal requirements for sole traders.
(v)
Flexibility: Sole traders are flexible.
(vi) Ease of
starting: It is easy to start a sole trader business.
Limitations:-
(i)
Liability: Sole traders have unlimited liability.
(ii)
Reliability: Sole traders may face reliability problems.
(iii)
Funding: Raising funds may be difficult.
(iv) Selling:
Selling the business of a sole trader is not as easy as that of a limited
company.
(v) Tax
Planning: Tax planning has some limitations.
3. Differentiate between advertisement and publicity with
suitable example. 10
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