TS Inter 2nd Year – Commerce Previous Paper  2023

COMMERCE

Paper II

Time: 3 hours 

Max. Marks : 100

SECTION – A

Note:

• Answer any two of the following questions in not exceeding 40 lines each.
• Each question carries 10 marks.

Question 1:

What are the differences between Money market and Capital market?

Answer:

Money Market

• Deals with short-term financial instruments (maturity less than one year).
• Instruments include Treasury bills, commercial paper, certificates of deposit, etc.
• Primary function is to facilitate short-term borrowing and lending.
• Less risky compared to the capital market.

Capital Market

• Deals with long-term financial instruments (maturity more than one year).
• Instruments include stocks, bonds, debentures, etc.
• Primary function is to facilitate long-term investment and financing.
• Involves higher risk compared to the money market.

Question 2:

Explain the principles of Management.

Answer:

The principles of management are fundamental guidelines that help managers effectively organize and lead their teams. While there are various interpretations, some of the key principles include:

• Planning: Defining goals, objectives, and strategies for achieving them.
• Organizing: Structuring the organization, allocating resources, and assigning responsibilities.
• Staffing: Recruiting, selecting, training, and developing employees.
• Directing: Leading, motivating, and guiding employees towards achieving organizational goals.
• Controlling: Monitoring performance, comparing it with standards, and taking corrective action.
• Coordination: Ensuring all departments and individuals work together towards common goals.
• Communication: Effective exchange of information between all levels of the organization.
• Decision-making: Making informed choices to address challenges and opportunities.
• Innovation: Encouraging creativity and adapting to change.
• Leadership: Inspiring and motivating employees to achieve organizational goals.

Question 3:

Explain the functions of an entrepreneur.

Answer:

Entrepreneurs play a vital role in the economy by creating businesses and driving economic growth. Key functions of an entrepreneur include:

• Idea Generation: Identifying new business opportunities and developing innovative ideas.
• Risk-Taking: Assuming the financial and other risks associated with starting and running a business.
• Resource Mobilization: Gathering and managing financial, human, and other resources required for the business.
• Decision-Making: Making critical decisions related to product development, marketing, finance, and operations.
• Innovation and Creativity: Developing new products, services, and processes to gain a competitive advantage.
• Leadership and Management: Leading and motivating a team, delegating tasks, and overseeing day-to-day operations.
• Market Analysis: Conducting market research, identifying target customers, and understanding market trends.
• Customer Focus: Building and maintaining strong customer relationships.
• Financial Management: Managing finances, generating revenue, and ensuring profitability.
• Adaptability: Adapting to changing market conditions and overcoming challenges.

SECTION-B

Note:

• Answer any four of the following questions in not exceeding 20 lines each.
• 4 x 5 = 20

Question 4:

What are the differences between Primary Market and Secondary Market?

Answer:

The primary market and secondary market are distinct segments of the financial markets, each serving a different function in the trading of securities. Here are the key differences:

Question 5:

What is E-Banking? Explain any four advantages of E-Banking.

Answer:

E-Banking, also known as electronic banking or internet banking, refers to the use of electronic channels such as the internet and mobile devices to conduct banking transactions. It allows customers to perform banking activities online without physically visiting a bank branch.  

 

Four advantages of E-Banking:

1. 24/7 Accessibility: Customers can access their accounts and perform transactions anytime, anywhere, through the internet or mobile app.
2. Convenience: It eliminates the need to visit a bank branch, saving time and effort for customers.
3. Cost-effectiveness: E-banking can reduce operational costs for banks and offer lower fees to customers.
4. Security: Banks employ advanced security measures like encryption and authentication to ensure the safety of online transactions.
5. Faster Transactions: Online transactions are typically processed faster than traditional branch transactions.

Question 6:

Define insurance. Explain any four principles of insurance.

Answer:

Insurance is a contract between an individual or entity (the insured) and an insurance company (the insurer). The insurer agrees to provide financial compensation to the insured in the event of a covered loss or damage in exchange for regular payments called premiums.  

 

Four principles of insurance:

1. Utmost Good Faith: Both the insured and the insurer must disclose all material facts relevant to the insurance contract honestly and truthfully.
2. Insurable Interest: The insured must have a financial interest in the subject matter of the insurance. For example, a homeowner has an insurable interest in their house.
3. Indemnity: The principle of indemnity states that the insured should be compensated for the actual loss incurred, not exceeding the insured amount.
4. Subrogation: If the insurer pays a claim to the insured for a loss caused by a third party, the insurer acquires the right to sue the third party to recover the amount paid.
5. Contribution: If the insured has multiple insurance policies covering the same risk, each insurer is liable to pay only a proportionate share of the claim.

Question 7:

How the special support is extended by the government of Telangana to the SC/ST entrepreneurs in our State?

Answer:

The government of Telangana extends various support measures to encourage entrepreneurship among Scheduled Castes (SC) and Scheduled Tribes (ST) communities. Some of the key support measures include:

1. Financial Assistance: Providing subsidized loans, grants, and subsidies through schemes like the Stand-Up India scheme and the Prime Minister’s Employment Generation Programme (PMEGP).
2. Skill Development: Offering training programs and skill development initiatives to enhance the entrepreneurial skills of SC/ST individuals.
3. Marketing Assistance: Providing support for marketing and branding of products and services produced by SC/ST entrepreneurs.
4. Infrastructure Development: Providing access to industrial parks, incubation centers, and other infrastructure facilities.
5. Reservation in Government Tenders: Setting aside a certain percentage of government tenders for SC/ST entrepreneurs.
6. Mentorship and Guidance: Providing mentorship and guidance from experienced entrepreneurs and industry experts.
7. Awareness Programs: Conducting awareness programs to educate SC/ST individuals about entrepreneurship opportunities and government support schemes.

Question 8:

Explain any five objectives of SEZs.

Answer:

Special Economic Zones (SEZs) are designated areas with special economic regulations that are different from the rest of the country. The objectives of establishing SEZs typically include:

1. Promoting exports: SEZs are designed to attract foreign investment and promote exports by offering favorable trade and investment policies.

2. Generating employment: SEZs are expected to create employment opportunities, both directly and indirectly, by attracting businesses and industries.

3. Economic development: SEZs aim to stimulate economic growth and development in the region by attracting investments and promoting industrialization.

4. Technology transfer: SEZs are intended to facilitate the transfer of technology and knowledge by encouraging collaborations between domestic and foreign companies.

5. Infrastructure development: SEZs typically have improved infrastructure facilities like roads, power, and communication, which can benefit the surrounding region.

6. Foreign exchange earnings: SEZs contribute to foreign exchange earnings by promoting exports and attracting foreign investment.

Question 9:

Define the staffing process and explain four steps involved in it.

Answer:

The staffing process is the process of recruiting, selecting, training, and developing employees to fill the organization’s workforce needs. It involves a systematic approach to ensure that the right people are hired for the right jobs.

Four steps involved in the staffing process:

1. Recruitment: This involves identifying and attracting potential candidates for vacant positions through various channels like job portals, recruitment agencies, and social media.

2. Selection: This involves screening and evaluating candidates based on their qualifications, skills, and experience to identify the most suitable candidates for the job. This may involve various selection methods like interviews, tests, and background checks.

3. Training and Development: This involves providing training and development programs to enhance the skills and knowledge of employees, improve their performance, and prepare them for career advancement.

4. Performance Appraisal: This involves evaluating the performance of employees against established goals and standards. It helps in identifying areas of strength and weakness, providing feedback, and making decisions about promotions, rewards, and training needs.

SECTION – C

Note:

• Answer any five of the following questions in not exceeding 5 lines each.
• 5 x 2 = 10

Question 10:

What do you mean by Lame duck?

Answer:

A lame duck in politics refers to an official or elected representative who is approaching the end of their term and has little or no political power or influence. This is because they are no longer able to effectively represent their constituents or carry out their duties as they are soon to be replaced. Essentially, they are seen as “serving out their time” without much authority or ability to enact significant change.

Question 11:

What is Cash Credit?

Answer:

Cash Credit is a short-term loan facility provided by banks to businesses. It allows businesses to withdraw funds up to a pre-determined limit as and when required. The interest is charged only on the amount withdrawn.

Question 12:

What do you mean by Overdraft?

Answer:

Overdraft is a short-term loan facility provided by banks to individuals and businesses that allows them to withdraw more money from their bank account than the available balance. It is typically used for temporary cash flow shortfalls.

Question 13:

What is Fire Insurance?

Answer:

Fire insurance is a type of property insurance that provides financial protection against losses caused by fire and related perils such as smoke, heat, and water damage.

Question 14:

What do you mean by Bridge Loans?

Answer:

Bridge loans are short-term loans used to finance a temporary gap in funding. They are typically used to bridge the gap between the sale of one asset and the purchase of another. For example, a bridge loan might be used to finance the purchase of a new home while waiting for the sale of the existing home to complete.

Question 15:

What do you mean by Cheap Jacks?

Answer:

Cheap Jacks refer to itinerant traders who sell goods at low prices, often in public places or from door to door. They are also known as peddlers or hawkers.

Question 16:

What is Bill of Lading?

Answer:

A Bill of Lading is a legal document issued by a carrier to a shipper acknowledging receipt of cargo for shipment. It serves as a contract of carriage between the shipper and the carrier, and it also acts as a document of title to the goods.

Question 17:

Meaning of Control.

Answer:

Control is a managerial function that involves monitoring and evaluating organizational performance to ensure that it is in line with the planned objectives and taking corrective action as needed. It helps to ensure that the organization is operating efficiently and effectively.

SECTION-D

Note:

• Answer any ONE question.
• Each question carries TWENTY marks.

Question 18:

Ram and Karan are partners sharing profits and losses in the ratio of 3:2 respectively. Their Balance Sheet as on 31st March, 2021 was as follows:

On 1st April, 2021, they have decided to admit Sharath for 1/5th of the share in profits. The terms of admission are –

(a) He has to bring ₹ 20,000 towards capital and ₹ 10,000 towards Goodwill in cash.

(b) Furniture is to be depreciated by ₹ 1,000.

(c) Create a provision of ₹ 1,500 for bad debts on Debtors.

(d) Appreciate the value of buildings by ₹ 5,000.

Prepare necessary ledger accounts and opening balance sheet of the new firm.

Solution:

1. Journal Entries:

• Sharath’s Admission:

  • Sharath’s Capital A/c Dr. 20,000
  • Goodwill A/c Dr. 10,000 To Bank A/c 30,000

• Depreciation on Furniture:

  • Depreciation A/c Dr. 1,000 To Furniture A/c 1,000

• Provision for Bad Debts:

  • Profit & Loss Adjustment A/c Dr. 1,500 To Provision for Bad Debts A/c 1,500

• Appreciation of Buildings:

  • Buildings A/c Dr. 5,000 To Profit & Loss Adjustment A/c 5,000

• Adjustment for Goodwill:

  • Ram’s Capital A/c Dr. 6,000 (10,000 * 3/5)
  • Karan’s Capital A/c Dr. 4,000 (10,000 * 2/5) To Goodwill A/c 10,000

2. Partner’s Capital Accounts:

• Ram’s Capital A/c:

  • Opening Balance: 40,000
  • Goodwill: 6,000
  • Profit & Loss Adjustment: -900 (1,500/5 * 3)
  • Closing Balance: 45,100

• Karan’s Capital A/c:

  • Opening Balance: 30,000
  • Goodwill: 4,000
  • Profit & Loss Adjustment: -600 (1,500/5 * 2)
  • Closing Balance: 33,400

• Sharath’s Capital A/c:

  • Bank A/c: 20,000
  • Closing Balance: 20,000

3. Profit & Loss Adjustment Account:

• Debit: Depreciation A/c (1,000), Provision for Bad Debts A/c (1,500)
• Credit: Buildings A/c (5,000), Goodwill A/c (10,000), Ram’s Capital A/c (900), Karan’s Capital A/c (600)

4. Revaluation Account:

• Debit: Depreciation A/c (1,000), Provision for Bad Debts A/c (1,500)
• Credit: Buildings A/c (5,000)

5. Opening Balance Sheet of the New Firm:

Note:

• The Goodwill is adjusted among the old partners in their profit-sharing ratio (3:2).
• The Profit & Loss Adjustment Account is used to record adjustments at the time of admission of a new partner.
• The Revaluation Account records the adjustments to the values of assets and liabilities.

SECTION-E

Note:

• Answer any ONE question.
• Each question carries TEN marks.

Question 19:

On 1st January, 2021 Ravi of Hyderabad consigned goods valued ₹ 60,000 to Karan of Karimnagar. Ravi paid cartage and other expenditures ₹ 4,000. On 31st March, 2021 Karan sent an account sales with the following information:

(a) 50% of the goods sold for ₹ 50,000. (b) Karan incurred expenses ₹ 3,000. (c) Karan is entitled to receive commission @ 6% on sales.

Bank draft was enclosed for the balance due. Prepare the necessary Ledger Accounts in the books of Ravi.

Solution:

In the books of Ravi

Consignment A/c

Consignor’s Expenses A/c

Goods Transferred on Consignment A/c

Karan’s A/c

Profit on Consignment A/c

Karan’s Commission A/c

Calculations:

• Sales Value of Goods Sold: 50,000
• Cost of Goods Sold (50% of 60,000): 30,000
• Gross Profit: 50,000 – 30,000 = 20,000
• Karan’s Expenses: 3,000
• Net Profit: 20,000 – 3,000 = 17,000
• Karan’s Commission: 50,000 * 6% = 3,000
• Profit to Consignor: 17,000 – 3,000 = 14,000
• Total Profit: 14,000 + 4,000 (Consignor’s Expenses) = 18,000

Balance Due to Ravi:

• Sales Value: 50,000
• Less: Karan’s Expenses: 3,000
• Less: Karan’s Commission: 3,000
• Add: Consignor’s Expenses: 4,000
• Add: Profit to Consignor: 14,000
• Balance Due: 58,000

SECTION-F

Note:

• Answer any TWO questions.
• Each question carries FIVE marks.

Question 21:

Distinguish any five differences between the Consignment and Sales.

Answer:

Here are five key differences between Consignment and Sales:

1. Ownership: In Consignment, the ownership of goods remains with the consignor (owner) even after they are transferred to the consignee (agent). In Sales, the ownership of goods transfers to the buyer upon the sale.
2. Risk of Loss: In Consignment, the risk of loss or damage to the goods remains with the consignor until they are sold by the consignee. In Sales, the risk of loss generally passes to the buyer upon delivery.
3. Profit/Loss: In Consignment, the consignor bears the risk of profit or loss. In Sales, the buyer bears the risk of profit or loss.
4. Accounting Treatment: Consignment transactions are recorded in a separate set of accounts called Consignment Accounts, whereas Sales transactions are recorded in the usual Sales and Purchases accounts.
5. Objective: The primary objective of Consignment is to sell goods on behalf of the owner, while the primary objective of Sales is to generate revenue for the seller.

Question 22:

Rama bought a plant and machine on 1st April, 2017 for ₹ 23,000 and paid ₹ 2,000 for its installation. Depreciation is to be allowed at 10% under straight line method. On 31st March, 2020 the plant was sold for ₹ 12,000. Assuming that the accounts are closed at the end of the financial year, prepare Plant & Machine Account.

 

Answer:

Plant & Machinery Account

Note:

• The cost of the plant and machinery is ₹25,000 (₹23,000 + ₹2,000).
• Depreciation is calculated at 10% per annum on the original cost of the asset.
• The profit on sale of the machinery is calculated as the selling price (₹12,000) minus the book value of the machinery at the time of sale (₹25,000 – ₹7,500 = ₹17,500).

Question 23:

From the following details, prepare Receipts and Payments Account of the NGO’s club for the year ending 31st March, 2021:

• Opening Balance of Cash: ₹3,000
• Opening Bank Balance: ₹9,000
• Subscriptions collected: ₹16,000
• Entertainment show receipts: ₹8,000
• Entrance fee received: ₹4,000
• Computer purchased: ₹6,000
• Tournament expenses: ₹6,000
• Entertainment show expenses: ₹3,600
• Paid for Magazines: ₹2,400
• Salaries paid: ₹2,400
• Rent paid: ₹8,000
• Cash in hand at close: ₹3,600

Answer:

NGO’s Club Receipts and Payments Account For the Year Ended 31st March, 2021

Note:

• The Receipts and Payments Account only records cash transactions (receipts and payments).
• Accruals and deferrals are not considered in this account.

Question 24:

Write any five limitations of Computerized Accounting.

Answer:

1. Initial Cost: Implementing a computerized accounting system can involve significant initial costs, including software licenses, hardware upgrades, and training for staff.

2. Dependence on Technology: Businesses become heavily reliant on technology. System failures, power outages, or cyberattacks can disrupt operations and lead to data loss.

3. Maintenance and Upgrades: Ongoing maintenance, software updates, and system security measures are required, which can incur ongoing costs and require specialized expertise.

4. Data Security Risks: Computerized systems are vulnerable to cyber threats like hacking and data breaches, which can compromise sensitive financial information.

5. Implementation Challenges: Implementing a new system can be complex and time-consuming, requiring careful planning, data migration, and staff training.

SECTION-G

Note:

• Answer any five of the following questions.
• 5 x 2 = 10

Question 25:

Define the term Depreciation.

Answer:

Depreciation is the systematic allocation of the cost of a tangible asset (like machinery, equipment, buildings) over its useful life. It reflects the gradual wear and tear, obsolescence, and decline in value of the asset.

Question 26:

What is depletion?

Answer:

Depletion is a method of allocating the cost of natural resources (like mines, oil wells, and timberlands) over the period during which the resource is extracted. It accounts for the gradual depletion of the natural resource.

Question 27:

What is account sales?

Answer:

An account sales is a document sent by a consignee (agent) to the consignor (owner) detailing the sales made on behalf of the consignor. It includes information such as the quantity of goods sold, the selling price, expenses incurred by the consignee, and the commission earned by the consignee.

Question 28:

What do you mean by Entrance fee?

Answer:

An entrance fee is a charge paid by individuals to gain entry to a particular event or place. Examples include entrance fees to concerts, museums, amusement parks, and sporting events.

Question 29:

What is Ratio of Gaining?

Answer:

In partnership accounting, when a new partner is admitted, the existing partners may have to sacrifice a portion of their profit-sharing ratio. The ratio of the sacrifice made by each existing partner is known as the ratio of gaining. It is used to calculate the amount of goodwill to be credited to the existing partners.

Question 30:

What is Password?

Answer:

A password is a secret word or phrase used to restrict access to a computer or a computer system. It is used to authenticate users and prevent unauthorized access to sensitive information.

Question 31:

What is Spreadsheet?

Answer:

A spreadsheet is an electronic document organized into rows and columns. It is used to store, organize, and manipulate data. Spreadsheets are commonly used for tasks such as budgeting, financial modeling, and data analysis. Examples of popular spreadsheet software include Microsoft Excel, Google Sheets, and LibreOffice Calc.

Question 32:

X and Y are partners sharing profit and loss in the ratio of 3:2. They decided to admit Z for 1/5th share in profit. Calculate new profit sharing ratio of X, Y and Z.

Answer:

• Original Profit Sharing Ratio: X:Y = 3:2
• Z’s Share: 1/5th
• Remaining Share for X and Y: 1 – 1/5 = 4/5

New Profit Sharing Ratio of X and Y:

• X’s Share: (3/5) * (4/5) = 12/25
• Y’s Share: (2/5) * (4/5) = 8/25

New Profit Sharing Ratio of X, Y, and Z:

• X:Y:Z = 12/25 : 8/25 : 1/5

To simplify, multiply each ratio by 25:

• X:Y:Z = 12 : 8 : 5

Therefore, the new profit sharing ratio of X, Y, and Z is 12:8:5.