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Class 11 - Business Studies
Sample paper - 04 (2024-25)
Maximum Marks: 80
Time Allowed: : 3 hours
General Instructions:
1. This question paper contains 34 questions.
2. Marks are indicated against each question.
3. Answers should be brief and to the point.
4. Answers to the questions carrying 3 marks may be from 50 to 75 words.
5. Answers to the questions carrying 4 marks may be about 150 words.
6. Answers to the questions carrying 6 marks may be about 200 words.
7. Attempt all parts of the questions together.
1. In which of the following modes of entry, does the domestic manufacturer give the right to use intellectual property such
as patent and trademark to a manufacturer in a foreign country for a fee?
a) Lease
b) Joint venture
c) Licensing
d) Contract manufacturing
2. Expand KVIC
a) King of Village Investment Culture
b) Khadi and Village Industries Commission
c) Khadi and Village Industries Core
d) King of Village Industries Commission
3. PSE's are organisations owned by:
a) Joint Hindu family
b) Foreign Companies
c) Private entrepreneurs
d) Government
4. Full form of GST isa) Goods and Services Tax
b) Government and State Tax
c) Goods and State Tax
d) Government and Services Tax
5. Limit of investment in small scale industry is ________.
a) ten lakh
b) five crore
c) two crore
d) ten crore
6. E-commerce offers many benefits to consumers. Which of the following is not a benefit resulting from e-commerce?
a) Quick and Timely delivery
b) Narrow outreach
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c) More options and choices
d) Flexibility
7. Who heads a Departmental Undertaking?
a) Shareholders
b) IAS and Civil Servants
c) Ministry concerned
d) Politicians
8. An entrepreneur is called potential entrepreneur when he has ________.
a) Maximum ability and Minimum willingness
b) Maximum ability and Maximum willingness
c) minimum ability and minimum willingness
d) Minimum ability and Maximum willingness
9. Which of the following statements is true regarding preference shares?
A. Preference shares provide an unsteady income in the form of a flexible rate of return.
B. Preference shares are preferably for investors with a high-risk appetite.
C. Preference shareholders have voting rights.
D. Preference shareholders enjoy a preferential position over equity shareholders.
a) Only A is true
b) Only C is true
c) Only D is true
d) Only B is true
10. Assertion (A): If a person, through his/her own initiative, conduct or behaviour, gives an impression to others that
he/she is a partner of the firm, he/she is a partner by Estoppel.
Reason (R): Partner by Estoppel is liable for the debts of the firm.
a) Both A and R are true and R is the correct explanation of A.
b) Both A and R are true but R is not the correct explanation of A.
c) A is true but R is false.
d) A is false but R is true.
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11. Which type of products are sold through mail-order houses?
a) All of these
b) Product can be described through pictures
c) Perishable in nature
d) Bulky and cannot be easily handled
12. Which itinerant retailers are mostly found at places where huge floating population gathers?
a) Cheap jacks
b) Market traders
c) Hawkers and paddlers
d) Street traders
13. The capital of a company is divided into a number of parts each one of which is called ________.
a) Share
b) Dividend
c) Interest
d) Profit
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14. Entrepreneurship is needed for ________.
a) To begin the development process
b) All of these
c) To maintain development
d) To provide employment opportunities
15. Which of the following is an example of responsibility towards consumers?
A. Supply of good quality and quantity of goods and services
B. Responsibility to provide a fair return
C. Fair wages to workers
D. Responsibility for providing jobs
a) Only A
b) Only C
c) Only D
d) Only B
16. Assertion (A): E-banking allows bank customers to operate their accounts from their personal computer or phone.
Reason (R): One can manage accounts, pay bills, receive funds over the internet through E-banking.
a) Both A and R are true and R is the correct explanation of A.
b) Both A and R are true but R is not the correct explanation of A.
c) A is true but R is false.
d) A is false but R is true.
17. The government of India used which parameter to explain small industries?
a) Power consumed for business activities
b) Volume of output
c) Number of persons employed in business
d) Investment in plant and machinery
18. Which point is related with the 'role of profit in business'?
a) For rapid growth
b) All of these
c) For increasing efficiency
d) For long survival
19. The District Industries Centers Programme was launched on:
a) September 1, 1978
b) July 1, 1978
c) May 1, 1978
d) 15 August 1978
20. Which of the following industries is not reserved for public sector?
a) Arms
b) Atomic Energy
c) Rail Transport
d) Sugar Industry
21. The forwarding Agent of Paliwal Private Ltd., after getting the goods loaded on the ship gets the Mate's Receipt. What
will the Forwarding Agent have to do immediately after it? Explain briefly.
22. Distinguish between Pure risk and Speculative risk on the following basis:
i. Meaning
ii. Possibility of profits/loss
iii. Risk coverage.
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OR
Differentiate the following activities into Economic and Non-economic:
i. A property dealer is purchasing a house for himself.
ii. A doctor is giving his son a medical treatment.
iii. A person is selling tea on a railway station.
iv. A property dealer is buying a house for someone on commission.
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23. Is Departmental stores make convenient shopping. If yes then explain it.
24. Enumerate the short-term sources of company finance.
OR
Libra Sales Private Limited owns the agency of different food products. This company sells the goods of different brands
to retailers after buying them from several companies. The special characteristic of this company's business is that it
buys almost all its goods on cash and its sale is on credit. The retailers make payment to it about one month after. This is
the very reason that this company keeps often struggling with short term finance. To overcome this problem, the
company's finance department held a meeting. The chairperson of the meeting asked the members to express their views
on the solution of this problem. The first person said, "we should use such a source of finance as should not involve
bureaucracy and legal hassels and to obtain which, help from other companies can be got." The second person's opinion
was: "We are often in need of overdraft. Therefore, keeping this fact in mind, the source of finance should be selected."
The view of the third person was: "When we sell goods on credit, why not to make efforts to buy goods on credit?
Hence, to do so pressure on the companies selling goods should be built up." The chairperson of the meeting listened to
the suggestions of all the people and, to take the final decision, asked them to be present in the meeting again after a
week. This company planted trees at different places in the whole surrounding area and on the trees it fixed its small
boards for advertisement. This type of advertisement attracted the people towards the company and its business had a
fast growth.
Quoting the relevant lines; identify the source of finance indicated by the suggestions given by different people.
25. Write a short note on multiple shops.
OR
Describe any four functions of retailers.
26. Harsh is a well known orthopedic doctor in Agra. He runs his private clinic under the name 'Joint and Bone Clinic'.
In the context of the above case:
i. Identify the type of economic activity that Harsh is engaged in.
ii. State any three features of the type of economic activity as identified in part (i) of the question.
OR
People misinterpret business as having only economic objectives. Make the concepts clear regarding the objectives of the
business.
27. Harsh runs an online store dealing in all kinds of household items which he procures from different dealers. Whereas his
friend Lakshay runs an online store which sells all kinds of organic products like spices, pickles, jams, etc. These
products are produced in his automated manufacturing unit in Kerala. In the context of the above case answer the
following:
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a. Identify the two concepts which define the scope of business activities undertaken by both Harsh and Lakshay,
respectively.
b. Differentiate between the two concepts as identified in part(a) of the question.
28. Explain four features of Government companies.
29. Fast Track Ltd. is a leading manufacturer of automobile spare parts. The Managing Director (MD) of the company is of
the view that business is an economic institution, which exists with the basic objective of profit maximisation and
assuming social responsibility is against this objective. However, one of the newly appointed manager tried to convince
the MD in favour of social responsibility by highlighting the various factors which have forced and persuaded various
companies to consider their social responsibilities. Discuss the factors which might have been highlighted by the
manager to the MD.
30. Explain the role of small scale industries in rural areas.
31. Your firm is planning to import textile machinery from Canada. Describe the procedure involved in importing.
OR
Explain some specific problems faced by international business.
32. Amul is an Indian dairy cooperative, based at Anand in the state of Gujarat. It was formed in 1946 and is a brand
managed by a cooperative body, the Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF), which today is
jointly owned by 3.6 million milk producers in Gujarat. Amul spurred India's White Revolution, which made the country
the world's largest producer of milk and milk products. In the process, Amul became the largest food brand in India and
has ventured into markets overseas.
In the context of the above case answer the follwoing qustions:
a. What is a cooperative society?
b. Why do you think Amul was promoted in the form of the cooperative? Explain by giving any four merits of a
cooperative society form of business organization.
OR
Jagat is running a grocery store under the name 'Morning Needs' in a local market. He takes all decisions about business
himself, without any interference from others and also earns a direct reward for his risk-bearing.
In the context of the above case:
a. Identify and define the form of business organization in which Jagat has promoted his business.
b. State any four features of this form of business organization.
33. Gunjan Cinemas is a popular film entertainment company in Delhi. Keeping in view the growing culture of multiplex its
owners have decided to make some changes in the interiors like creating a lounge area, installing more effective sound
systems, etc. The company wants to raise the required funds for a period of more than one year but less than five years.
In the context of the above case answer the following questions:
a. Identify and explain the type of funds that Gunjan Cinema seeks to raise on the basis of the time period.
b. Explain any one appropriate source of the type of funds as identified in part (a) of the question.
Also, state its any two merits.
34. Dhanwan Bank is a popular private sector bank offering varied services to its customers. It offers many types of bank
accounts options to its customers. Farhan being a businessman has chosen the type of account in which deposits are the
most liquid and there are no limits to the number of transactions or the number of transactions in a day. On the other
hand, his mother has opened a type of account where she can conveniently deposit the money she saves. These accounts
provide a cheque facility and offer a lot of flexibility for deposits and withdrawal of funds from the account. Farhan's
younger brother Sohail has opened a special kind of account wherein he will deposit Rs. 1000 every month for the next
two years.
In the context of the above case, answer the following questions:
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a. By quoting lines from the paragraph identify the various types of bank accounts being used by Farhan and his family
members.
b. Describe briefly any two other types of accounts that are also offered by a bank but have not been mentioned in the
above paragraph.
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Class 11 - Business Studies
Sample paper - 04 (2024-25)
Solution
1. (c) Licensing
Explanation: Licensing refers to permitting another party in a foreign country to produce and sell goods under
trademarks. patents or copyrights in lieu of some fee.
2. (b) Khadi and Village Industries Commission
Explanation: The various policies, programmes and schemes related to agro and rural industries are implemented by the
ministry through the Khadi and Village Industries Commission (KVIC), Handicrafts Board, Coir Board, Silk Board, etc.
3. (d) Government
Explanation: Public Sector Undertaking (PSU) or a Public Sector Enterprise (PSE) these companies are owned by the
union government of India, or one of the many state or territorial governments, or both.
4. (a) Goods and Services Tax
Explanation: The goods and services tax (GST) is a tax that is paid o goods and services with all terms and conditions.
5. (d) ten crore
Explanation: A small enterprise is an enterprise whose investment in plant, machinery and equipment does not
exceed Rs.10 crore, and turnover does not exceed Rs.50 crore.
6. (b) Narrow outreach
Explanation: E-commerce business offers wider outreach which is good for consumers and society as well.
7. (b) IAS and Civil Servants
Explanation: Departmental undertakings are headed by IAS and Civil Servants.
8. (a) Maximum ability and Minimum willingness
Explanation: Maximum ability and Minimum willingness
9. (c) Only D is true
Explanation: Preference shares are the shares that carry preferential rights on the matters of payment of dividend and
repayment of capital.
10. (b) Both A and R are true but R is not the correct explanation of A.
Explanation: Partners by Estoppel are held liable for the debts of the firm because in the eyes of the third party they are
considered partners, even though they do not contribute capital or take part in its management.
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material for CBSE, NCERT, JEE (main), NEET-UG and NDA exams. Teachers can use Examin8 App to create similar
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11. (b) Product can be described through pictures
Explanation: Mail-order business can be suitable for products which can be described through pictures, have the least
competition in the market, available in large quantities, etc.
12. (d) Street traders
Explanation: Street traders are the small retailers who are commonly found at places where huge floating population
gathers for eg., near bus stands or railway stations.
13. (a) Share
Explanation: Shares are the smallest part of share capital which can be transferred freely from one shareholder to
another person (except in a private company).
14. (b) All of these
Explanation: All of these represent entrepreneurship.
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15. (a) Only A
Explanation: Supply of good quality and quantity of goods and services is a responsibility of business towards
consumers.
16. (a) Both A and R are true and R is the correct explanation of A.
Explanation: Since all the transactions that a customer traditionally did after going to bank physically, E-Banking
allows him to do all these transactions through simple clicks on his computer/phone. We can say that one can operate
his/her account from the ease of home through their personal devices.
17. (d) Investment in plant and machinery
Explanation: The parameter used to describe small industries is investment in plant and machinery.
18. (b) All of these
Explanation: All of these
19. (c) May 1, 1978
Explanation: The District Industries Centers Programme was launched on May 1, 1978, with a view to providing an
integrated administrative framework at the district level.
20. (d) Sugar Industry
Explanation: Sugar Industry
21. After getting Mate's receipt, the forwarding agent has to go to the office of the shipping company and fill up a form. This
form is known as the 'Bill of Lading'. Now he will have to deposit the Bill of Lading and the Mate's Receipt in the office.
The Officer of the shipping company will keep the Mate's Receipt with himself and return the Bill of Lading to the
Forwarding Agent after putting his signatures.
22. Difference between Pure risk and Speculative risk on the following basis:
Basis of
Distinction
(i) Meaning
Pure risk
Speculative risk
Pure risk involves no possibility of gain;
Speculative Risk is the risk which involves three
either a loss occurs or no loss occurs
possible outcomes: loss, gain or no change
(ii) Possibility
of profits/loss
The occurrence of this risk may result in loss The occurrence of this risk may result in the
only and no gains.
possibility of both gains as well as loss.
(iii) Risk
coverage
Insurance services provide coverage of such
risks.
Such risks cannot be covered under insurance
provisions.
OR
i. Non-economic
ii. Non-economic
iii. Economic
iv. Economic
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23. Yes, departmental stores make shopping convenient due to the following reasons:
i. These stores are located in central places in heart of the city.
ii. These stores offer a large variety of goods from low price items to very expensive goods under one roof.
iii. These stores provide attractive services of restrooms, etc.
iv. A departmental store purchases its products directly from manufacturers and thus eliminates middlemen and reduces
cost.
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24. Short-term funds are those which are required for a period not exceeding one year. Trade credit, loans from commercial
banks and commercial papers are some of the examples of the sources that provide funds for short duration. Short-term
financing is most common for financing of current assets such as accounts receivable and inventories. Seasonal
businesses that must build inventories in anticipation of selling requirements often need short-term financing for the
interim period between seasons.
OR
i. The first person's opinion: "We should use such a source of finance as should not involve bureaucracy and legal
hassles and obtain which, help from other companies can be got."
Source of Finance - Inter-corporate Deposits - ICDs
ii. The second person's opinion: "We are often in need of overdraft. Therefore, keeping this fact in mind, the source of
finance should be selected."
Source of Finance - Commercial Bank
iii. The third person's opinion: "When we sell goods on credit, why not to make efforts to buy goods on credit?"
Source of Finance - Trade Credit
25. Chain stores or multiple shops are networks of retail shops that are owned and operated by manufacturers or
intermediaries. Under this type of arrangement, a number of shops with similar appearance are established in localities,
spread over different parts of the country. These different shops normally deal in standardised and branded consumer
products, which have rapid sales turnover. These shops are run by the same organisation and have identical
merchandising strategies, with identical products and displays.
OR
The functions of retailers are as follows:
i. Financing: Retailers provide goods to consumers often on a credit basis to their regular customers. This increases the
level of consumption and hence the standard of living of salaried class.
ii. Supplying market information: Since the retailer is in direct contact with the consumers, he provides information
regarding their tastes, preferences, and attitudes, etc. to the wholesaler. This information helps them in making
important marketing decisions.
iii. Convenience in buying: Retailers provide goods to consumers according to their requirements through the door to
door services or by telephone etc. Usually, they are situated near residential areas and remain open for long hours.
iv. Risk bearing: A retailer has to bear the risk if the change in style and fashion occurs when the goods are stored in
large quantities in the warehouses.
v. After sales services: Retailers sometimes provide home delivery and after sales service to costumers.
26. i. Harsh is engaged in a Profession economic activity.
ii. The three features of the Profession are:
a. Profession includes those activities, which require special knowledge and skill to be applied by individuals in
their occupation.
b. A professional is expected to abide by the guidelines or codes of conduct laid down by professional bodies.
c. Professionals earn income in the form of professional fees.
OR
Along with economic objectives, the business also has social objectives which are as follows:
i. Supply good quality products: Businessmen should produce and supply products of proper quality and at
reasonable prices to satisfy the expectations of consumers.
ii. Avoidance of unfair trade practices: Practices such as black marketing, adulteration, etc. should be avoided.
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iii. Employee welfare: Employers should provide good working conditions, fair and just treatment, and impressive
wages along with social security to their employees.
iv. Generation of employment: A businessman must create employment opportunities so that different sections of the
society can earn their livelihood.
v. Conservation of the environment: Business enterprises should take the necessary steps to protect the environment.
A proper arrangement should be made for the disposal of effluents, wastes, etc.
vi. Contribution to social welfare: Business plays a proactive role in the general welfare of society. The Business lends
support to social, cultural, religious, research, and development organizations by building schools, hospitals,etc.
27. a. Harsh is engaged in e-commerce as the scope of his business is restricted to only trading, whereas Lakshay is
engaged in e-business as he is involved in both production and distribution of organic food products.
b. The difference between e-business and e-commerce is outlined below:
S.
No.
Basis
e-Business
e-Commerce
The process of carrying out business activities The process of carrying out buying and selling
1.
Meaning
2.
Scope
3.
Requirement
related to both production and distribution of
goods electronically is known as e-business.
goods and services electronically is known as
e-commerce.
It has a wider scope as it includes ecommerce.
It has a narrow scope as it is a part of ebusiness.
It may involve the use of the internet, intranet
It is conducted through the internet.
or extranet.
e-commerce activities are confined to only
4.
Orientation
e-business includes both internal as well as
the external process of a business.
externally oriented processes that involve
interactions with customers, suppliers,
distributors, etc.
28. Features of Government companies are:
i. It is an organisation created under the Companies Act, 2013 or any other previous Company Law.
ii. The company can file a suit in a court of law against any third party and be sued.
iii. The company can enter into a contract and can acquire property in its own name.
iv. The management of the company is regulated by the provisions of the Companies Act, like any other public limited
company.
v. The employees of the company are appointed according to their own rules and regulations as contained in the
Memorandum and Articles of Association of the company. The Memorandum and Articles of Association are the
main documents of the company, containing the objects of the company and its rules and regulations.
29. the factors which might have been highlighted by the manager to the MD is as follows:
1. Long-term interest of the firm: A firm and its image stands to gain maximum profits in the long run when it has its
highest goal as ‘service to society’.
2. Avoidance of government regulation: From the point of view of a business, government regulations are undesirable
because they limit freedom.
3. Better environment for doing business: If business is to operate in a society which is full of diverse and
complicated problems, it may have little chance of success.
4. Converting problems into opportunities: Related with the preceding argument is the argument that business with
its glorious history of converting risky situations into profitable deals, can not only solve social problems but it can
also make them effectively useful by accepting the challenge.
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30. The role of small business in rural India is as follows:
i. Employment opportunities: Cottage and rural industries create a lot of employment opportunities in the rural areas
especially for the traditional artisans and the weaker sections of society.
ii. Prevents migration: Establishment of these industries in the rural areas prevent migration of rural population to
urban areas in search of employment.
iii. Reduces inequalities: Cottage and rural industries help in reducing inequalities in income, disperse development of
industries and establish link with other sectors of the economy.
31. Following is the procedure involved in importing textile machinery from Canada:
i. Trade Enquiry:- The first stage in an import transaction is to conduct enquiry and collect information about Canada
which can export the required goods and then the exporter sends a reply in the form of a quotation called proforma
invoice.
ii. Procurement of Import License:- We will consult the Export-Import (EXIM) policy in force to know whether the
textile machinery imports are subject to import licensing. In case it can be imported only against the licence, we will
procure an import licence.
iii. Obtaining Foreign Exchange:- As payment for imports will be made in Canadian dollars, our firm will have to
make an application to a bank authorized by RBI to issue a foreign exchange.
iv. Placing Order:- After obtaining the import license, our firm will place an import order or indent with the exporter
for the supply of the specified products. This order is known as indent.
v. Obtaining a Letter of Credit:- If the payment terms agreed between us and the overseas supplier then our firm
should obtain the letter of credit from its bank and forward it to the overseas supplier.
vi. Arranging for Finance:- Our firm would make arrangements in advance to pay to the exporter on arrival of goods at
the port.
vii. Receipt of Shipment Advice:- After loading the ordered textile machinery on the vessel, the overseas supplier will
dispatch the shipment advice to our firm which contains information about the shipment of goods.
viii. Retirement of Import Documents:- After shipping the machinery, the overseas supplier will prepare a set of
necessary documents including bill of exchange, commercial invoice.
ix. Arrival of Goods:- The officer in charge at the dock will provide the document called import general manifest on the
basis of which unloading of cargo will take place.
x. Customs Clearance and Release of Goods:- Textile machinery imported into India will have to pass through
customs clearance.
OR
International business suffers from some specific problems which are explained below:
i. Mobility of factors of production: The degree of mobility of factors of production like labour and capital across the
nation is relatively less.
ii. Import-export restrictions: At times many countries put certain restrictions on their foreign trade to make their
B.O.P. (Balance of Payment) favourable. They impose heavy tariffs or import duties, volume restrictions on both of
their imports as well as their exports. This hampers the smooth conduct of IT.
iii. Lack of proper information about the foreign market: In most of the cases new traders do not have adequate
information about foreign markets and whatever information is provided by different agencies is either inadequate or
does not fulfil their requirements. Thus, they fail to have clarity about the opportunities available to them for exports
and imports.
iv. Heavy documentation: IT requires so many legal formalities and many documents, which makes the trade
procedure very cumbersome as well as complex. That's why most of the small traders trade only through third parties
rather than going directly and have to pay commissions to them which reduces their profit margins, increases the cost
of transactions.
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v. Payment problems: In IT, traders of an importing country wish to make payment in their own currency and the
traders of exporting country want payments in their legal tender. In both situations, there may come the problem of
foreign exchange. The fluctuations in the exchange rates may create problems and risk to the traders of both
countries.
vi. Customer heterogeneity across markets: International business lack homogeneity due to differences in language,
preferences, customer etc across markets.
32. a. The cooperative society is a voluntary association of persons, who join together with the motive of the welfare of the
members.
b. Amul was promoted in the form of cooperative by a group of farmers who decided to bring an end to the exploitation
of marginal milk producers by traders or agents of the only existing dairy, thereby gaining access to markets and
maximizing returns for their efforts. The four merits of a cooperative society form of organization are described
below:
i. Equality in Voting Status: Regardless of the amount of capital invested by a member, the principle of 'one man
one vote' governs the cooperative society.
ii. Limited Liability: The liability of the members of the cooperative society is limited to the extent of capital
invested by them. The personal assets of the members cannot be used to settle the claims of the business against
outsiders.
iii. Stable Existence: The existence of a cooperative society is not affected by the death, insolvency or insanity of its
members. Thus, it is a stable form of business organization
iv. Economy in Operations: The operations of a cooperative society are economical in nature. This is due to
multiple factors like the members may work on an honorary basis, elimination of middlemen, etc.
OR
a. Jagat has promoted his business organization in the form of Sole proprietorship. A sole proprietorship form of
business organisation which is owned, managed and controlled by an individual who is the recipient of all profits and
bearer of all risks.
b. The four features of a sole proprietorship form of business organization are described below:
i. Ease of formation and closure: A sole proprietorship form of business organisation is not covered by a separate
law. As a result, it is easy to form or close down it with minimum formalities.
ii. Unlimited liability: The liability of a sole proprietor is unlimited because in the eyes of the law the owner and his
business are one and the same. Therefore, the personal assets of the sole proprietor may be utilised to settle the
claims of the creditors if the business assets are insufficient to meet the debts.
iii. Sole risk bearer and profit recipient: A sole proprietor is not expected to share the gains of his business with
anyone and remains the sole recipient of it and also the risk of failure of a business is borne all alone by him.
iv. Lack of business continuity: Since a sole proprietorship business doesn't have a separate legal entity the death,
insolvency or insanity of the sole proprietor may adversely affect the business and lead to its closure.
33. a. Gunjan Cinema seeks to raise medium-term finance as it wants to raise the required funds for a period of more than
one year but less than five years.
b. The company may raise funds through public deposits. Public deposits: As these deposits are raised by the company
directly from the public they are known as public deposits. The acceptance of public deposits is regulated by the
Reserve Bank of India. The company offers higher rates of interest on public deposits in comparison to that offered
on bank deposits so as to attract the investors.
The two merits of public deposits are as follows:
i. Funds can be raised easily through a simple procedure and unlike a loan agreement, it does not contain restrictive
clauses.
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ii. As compared to the cost of borrowings from banks and financial institutions the cost of public deposits is usually
lower for the company.
34. a. The various types of bank accounts being used by Farhan and his family members are listed below:
i. Farhan - Current account
'Farhan being a businessman has chosen the type of account in which deposits are the most liquid and there are no
limits for a number of transactions or the number of transactions in a day.'
ii. Farhan's mother - Saving account
'His mother has opened a type of account where she can conveniently deposit the money she saves. These
accounts provide a cheque facility and offer a lot of flexibility for deposits and withdrawal of funds from the
account.'
iii. Sohail - Recurring account
'Farhan's younger brother Sohail has opened a special kind of account wherein he will deposit Rs. 1000 every
month for the next two years.'
b. The two other types of accounts that are also offered by a bank are:
i. Fixed accounts are time deposits, wherein a fixed amount of money is deposited with the bank for a fixed period
of time at a fixed rate of interest. Interest is paid at a higher rate as compared to the savings account. Premature
withdrawal is permissible with a percentage of interest being forfeited.
ii. Multi Option Deposit (MOD) account is a combination of Savings or Current Account with Term/ Special Term
Deposit Accounts, so that one can securely write cheques up to the balance in the MOD account or up to the
drawing power available as an overdraft in the Current account. The interest is paid at higher rates on the deposit.
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