Class 11 Business Studies NotesBusiness ServicesAHSEC Class 11 Notes
Unit – IV: Business Services
Very
Short answer types Questions
1. To which insurance Principle if
Indemnity is not applicable?
Ans. Life Insurance
2. What is the full name of A.T.M.?
Ans. Automated Teller Machine
3. Who are the central Bank of our
country and which is the largest commercial bank of our country?
Ans. Reserve Bank of India is central bank of our
country and State bank of India is largest commercial Bank
4. “The Cause for loss must be related
to the purpose of insurance” Which principle of insurance is related to this
statement?
Ans. Principle of proximate cause
5. “The insured must have an interest
in the subject matter of insurance” Which principle of insurance is related to
this statement?
Ans. Principle of insurable interest
6. What are the two functions of E-
Banking?
Ans. 1. ATM (Automated Teller Machine) 2. EFT (Electronic Fund Transfer)
Short/
Long answer type questions:
Q.1. What are Business services?
Explain their characteristics. Distinguish between goods and services.
Ans: Business Services: Auxiliaries to trade are also known as
business services. Service sector includes commercial firms engaged in banking,
communication, transport, insurance and warehousing. Business cannot be even
imagined in the absence of these services. All these services collectively
constitute the Service Sector.
Types of
Business Services 2018
a) Banking
b) Insurance
c) Warehouse
d) Transportation
Characteristics
or nature of Business Services: 2015,
2016, 2018
a)
Intangibility
b)
Inconsistency
c)
Inseparability
d)
Storability
e)
Involvement
Difference between Goods and Services
|
Basis
of Difference |
Services |
Goods |
|
Intangible |
Services are Intangible. |
Goods are tangible. |
|
Inventory |
No requirement of inventory. |
Inventory must be maintained. |
|
Transfer of ownership |
Ownership cannot be transferred. |
Ownership can be transferred. |
|
Type |
Heterogeneous. |
Homogeneous. |
|
Intangibility |
Services are intangible such as doctor’s services. |
Goods are tangible such as Medicine. |
Q.2. Why are
business services needed?
Ans:
Business services are needed because:
a)
For financing business activities
b)
For distributing the goods
c)
For providing safety against risk
d)
For creating awareness among consumers
Q.3. What is Bank? What are its
Features? What are various types of Bank? Mention some important functions of
commercial bank. 2017,
2019
Ans:
Bank: A bank is an institution, which deals in money and credit. It
accepts deposits of money from public for the purpose of lending and investment.
Features
of Banks:
a)
Mobilizes Capital
b)
Role of Creditor and
Debtor
c)
Role of an
intermediary
d)
Creator of money
Types of Banks:
a)
Commercial Banks
b)
Industrial Banks
c)
Exchange Banks
d)
Agricultural Bank
e)
Regional Rural Banks
f)
Indigenous bankers
g)
Central Bank
Most common
functions of commercial banks are:
(1) Accepting the
Deposits: A bank accepts deposits from the public through different types of
accounts e.g. (i) Fixed Deposit account (ii) Savings deposit account, (iii)
Current deposit or current account, (iv) Recurring deposit or recurring account
(2) Lending Money:
Bank lends money to Businessmen and other persons through (i) Loans and
advances, (ii) Overdraft, (iii) Cash Credit, (iv) Discounting of bills
(3) Agency Functions
:( i) Collection of cheques, drafts, bills, hundies, dividend, interest, school
fee, rent etc. (ii) Payment of cheques, drafts, hundies, rent, subscription,
insurance premium, taxes, fees, electricity and water bills etc (iii) Acts as
trustee, executor etc.(iv)Buying and selling securities.(v) Dealing in foreign
exchange(vii) Advisory Functions.
(4) General
Utility functions: These are certain utility functions performed by the modern
commercial bank to its customer for the community. These are: 2017
a.
Safe custody of valuables.
b.
Issuing letters of credit.
c.
Gift Cheques.
d.
Dealing in foreign exchange.
e.
Credit cards.
Q.4.
What is Insurance? What are its various types? Mentions fundamental
principles of Insurance. 2007
Ans: Insurance is a
contract in writing under which one party (insurer) promises to compensate the
other party (insured) in case of loss as per the premium. It is a protection
against risks.
Types of Insurance contract
1) Contract of
Indemnity: it includes (a) Fire Insurance (b) Marine Insurance (c) Fidelity
insurance (d) Health insurance
2) Contract of
Guarantee (Life Insurance Contract): It Includes (a) Whole life assured policy
and (b) Endowment Life assurance policy.
Fundamental
Principles of Insurance 2016,
2018
a)
Principle of utmost
faith: refers that no material or important facts should be concealed by
both the parties of insurance contract.
b)
Principle of
Insurable Interest: There must be some pecuniary interest in the
subject matter of the insurance contract.
c)
Principle of
Indemnity: Refers that the insured can get only the compensation against
actual loss and he cannot make profit out of the insurance.
d)
Principle of
proximate cause: It refers to the direct cause and not the remote cause.
e)
Principle of
mitigation of loss: states that it is the duty of the insured to
take reasonable steps to minimize the loss/damage to the insured property.
Q.5. Distinguish between life, fire
and marine insurance. 1999,
2010
Ans: Difference between life, fire and
marine insurance are given below
|
Basis of
difference |
Life
Insurance |
Fire Insurance |
Marine
Insurance |
|
Subject Matter |
The subject matter of insurance is human life. |
The subject matter is any physical property or assets. |
The subject matter is a ship, cargo or freight. |
|
Element |
Life Insurance has the elements of protection and investment or
both. |
Fire insurance has only the element of protection and not the
element of investment. |
Marine insurance has only the element of protection. |
|
Insurable Interest |
Insurable Interest must be present at the time of effecting the
policy. |
Insurable interest on the subject matter must be present both at
the time of effecting policy as well as when the claim falls due. |
Insurable interest must be present at the time when claim falls
due or at the time of loss only. |
|
Duration |
Life Insurance policy usually exceeds a year and is taken for
longer period ranging from 5 to 30 years or whole life. |
Fire insurance policy usually does not exceed a year. |
Marine insurance policy is for one or period of voyage or mixed.
|
|
Indemnity |
Life insurance is not based on the principle of indemnity. |
Fire insurance is a contract of indemnity. The insured can claim
only the actual amount of loss from the insurer. |
Marine insurance is a contract of indemnity. |
|
Loss measurement |
Loss is not measurable. |
Loss is measurable. |
Loss is measurable. |
|
Surrender value or paid up value |
Life insurance policy has a surrender value or paid value. |
Fire insurance does not have any surrender value or paid up
value. |
Marine insurance does not have any surrender value or paid up value.
|
|
Contingency of risk |
There is an element of certainty. |
There is an element of uncertainty and there may be no claim. |
The event i.e., loss at sea may not occur and there may be not
claim. |
Q.6. What is general insurance?
Mention some important general insurance contract.
Ans: General Insurance: It is also known as an all in one policy which covers losses
arising from any kind of risks, such as, fire, theft, burglary, third party
risks, lightning, explosion of gas in domestic appliances, earthquake, storm
etc. Such policies are generally taken by people in connection with their
houses and household items.
Types of Insurance
a)
Fire Insurance: A contract
of fire insurance is a contract where in the insurer, in consideration of the
premium paid, undertakes to compensate the insured for any loss or damage
caused by fire. It is a contract of indemnity.
b)
Marine Insurance: Marine insurance covers the loss or damage of ships, cargo, terminals,
and any transport or cargo by which property is transferred, acquired, or held
between the points of origin and final destination.
c)
Fidelity insurance: Under
fidelity insurance, the insurance company undertakes to compensate the insured
business firm against loss caused by misappropriation of funds or goods by its
employees.
d)
Health insurance: A type of insurance coverage that pays for medical and surgical expenses
that are incurred by the insured.
Q.7. What is warehouse and
warehousing? Explain the importance (uses/need/function) of warehousing. What
are various types of warehouses? 2000
Ans: Warehouse: It is a place for the storage and
preservation of goods in proper condition. It is an establishment for the
accumulation of goods.
Warehousing: Warehousing means retaining the
goods for future use. It implies holding or preservation of goods from time of
their production or purchase until their consumption or sale. The warehousing
service plays an important role in supply and distribution of goods after their
manufacture.
Need and importance of warehouses:
a)
To store excess production in anticipation of
demand
b)
To store goods those are produced
seasonally
c)
To store goods those have seasonal demand
d)
Stability in prices
e)
Storage of raw materials
f)
Basis of Trade
g)
Processing, curing and packaging of goods.
Types of
warehouses: (1) Government warehouses (2) Private warehouses (3) Public warehouses (4) Cooperative warehouse (5) Bonded warehouse (6) Excise Bonded warehouse (7) Custom Bonded warehouse
Q.8.
Write a short note on various functions performed by warehouses. 2007, 2009, 2017
Ans: The functions of warehousing are discussed as follows:-
a)
Consolidation: The warehouse receives and
consolidates, materials/goods from different production plants and dispatches
the same to a particular customer.
b)
Break the bulk into smaller quantities: The
warehouse performs the function of dividing the bulk quantity of goods received
from the production plants into smaller quantities.
c)
Stock piling: The next function of warehousing
is the seasonal storage of goods to select businesses. They are made available
to business depending on customers demand.
d)
Value added services: Certain value added
services are also provided by the warehouses, such as in transit mixing,
packaging and labeling.
e)
Price stabilization: By adjusting the supply
of goods with the demand situation, warehousing performs the function of
stabilizing prices.
f)
Financing: Warehouse owners advance money to
the owners on security of goods and further supply goods on credit terms to
customers.
Q.9. What is E-mail? Write down its advantages. 2006, 2010
Ans:
E-mail is a short process
of communicating written messages on computer through electronic
media i.e. Internet. The immediate
presence of recipient of message is not necessary in it. 2010
Advantages of E-mail:
a)
Fastest Mode of
communication
b)
Cheapest Mode
c)
Secrecy
d)
Immediate
Feedback
e)
Permanent Record
for Future Reference
Q.10. Explain the Functions of
Insurance. (Importance of
insurance) 2015, 2018
Ans: The functions of insurance can be studied into two parts (i)
Primary Functions, and (ii) Secondary Functions.
Primary Functions:
(i) Insurance provides certainty: Insurance
provides certainty of payment at the uncertainty of loss. The uncertainty of
loss can be reduced by better planning and administration.
(ii) Insurance provides protection: The main
function of the insurance is to provide protection against the probable chances
of loss. The insurance guarantees the payment of loss and thus protects the
assured from sufferings.
(iii) Risk-Sharing: The risk is uncertain, and therefore,
the loss arising from the risk is also uncertain. When risk takes place, the
loss is shared by all the persons who are exposed to the risk.
Secondary functions: Besides the above primary functions,
the insurance works for the following functions:
(i) Prevention of Loss: The insurance joins hands with those
institutions which are engaged in preventing the losses of the society because
the reduction in loss causes lesser payment to the assured and so more saving
is possible which will assist in reducing the premium.
(ii) It Provides Capital: The insurance provides capital to the
society. The accumulated funds are invested in productive channel. The
industry, the business and the individual are benefited by the investment and
loans of the insurers.
(iii) It Improves Efficiency: The
insurance eliminates worries and miseries of losses at death and destruction of
property. The carefree person can devote his body and soul together for better
achievement.
(iv) It helps Economic Progress: The
insurance by protecting the society from huge losses of damage, destruction and
death, provides an initiative to work hard for the betterment of the masses.
Q.11. Define bonded
warehouse. 2008,
2010, 2017
Ans: Bonded warehouses are licensed by the government to accept
imported goods prior to payment of tax and customs duty. These are goods which
are imported from other countries. Importers are not permitted to remove goods
from the docks or the airport tile customs duty is paid.
Q.12. Define
Telegraph Services
Ans:
Telegraph Service. Telegram is an important medium of sending messages
speedily to distant places. Government regulates the functioning of telegraph
services through its Post and Telegraph Department. It was one of the most
important mediums till other high tech media took over.
Q.13. Write down the factors responsible for choice of a suitable
mode of transport.
Ans: Choice
of a suitable Mode of Transport:
(1) Availability of Means of Transport
(2) Distance and Cost of Transportation
(3) Safety
(4) Flexibility of Service
(5) Regularity of service
Q.14. What is the
meaning of Financial
Services?
Ans: The
financial services in a broad sense can be defined as “mobilising savings.” It
includes all activities involved in the transformation of savings into
productive investments.
Q.15. What is the
meaning of Fire Insurance?
Ans: A
contract of fire insurance is a contract where in the insurer, in consideration
of the premium paid, undertakes to compensate the insured for any loss or
damage caused by fire. It is a contract of indemnity.
Q.16. What is the
meaning of transport? Define Road transport. Mention its merits and demerits.
Ans:
Transport means movement of goods and persons from one place to another. Road
transport is the oldest means of transport, which involves conveyance of goods
and persons from one place to another by roads and highways.
Advantages of Water Transport: (1)
Cheapest means of transport (2) Large carrying capacity (3) Safety (4) Can move
products all over the world.
Disadvantages of Rail Transport: (1)
Huge Capital Outlay (2) Lack of Flexibility (3) No Door to Door Service
(4) Unsuitable for Short Distance (5) Damage and Delay (6) Evils
of Monopoly
Q.17. Write the full form of
VPP. 2010
Ans: Value payable post.
Q.18. Define double and reinsurance. 2006
Ans: Double Insurance: Double insurance means purchasing more than
one policy for the same subject. A person may get two or more policies on his life.
He can claim the amount of all these policies.
Re-Insurance: When the insurance company insures the risk with
some other insurance company, it is called Re-insurance. The re-insurance may
be for the full amount of the policy or for a part of it. In case of loss the
first company will get compensation from the second company.