Class 11

Balbharti Maharashtra State Board Bookkeeping and Accountancy 11th Solutions Chapter 3 Journal Textbook Exercise Questions and Answers.

Maharashtra State Board Bookkeeping and Accountancy 11th Solutions Chapter 3 Journal

1A. Answer in One Sentence:

Question 1.
What is Journal?
Answer:
Journal is a book of account in which all types of day-to-day business transactions are recorded in chronological
order.

Question 2.
What is Narration?
Answer:
Explanation of transaction which is written just below the accounting entry in the particular column is called narration.

Question 3.
What is GST?
Answer:
GST is an abbreviated form of Goods and Service Tax that is levied by the Government on specific goods and services in the place of different taxes levied earlier.

Question 4.
In which year GST was imposed by the Central Government of India?
Answer:
In the year 2017 GST was imposed by the Central Government of India.

Question 5.
What is meant by simple entry?
Answer:
An entry in which only two accounts are affected viz. one account is debited and the other account is credited is called simple entry.

Question 6.
What is the meaning of combined entry?
Answer:
A journal entry that combines more than one debit or more than one credit or both is called a combined/compound entry.

Question 7.
Which account is debited, when rent is paid by Debit card?
Answer:
The rent account is debited when rent is paid by debit card.

Question 8.
Which discount is not recorded in the books of account?
Answer:
Trade discount is not recorded in the books of the account.

Question 9.
In which order monthly transactions are recorded in a Journal?
Answer:
In chronological (date wise) order monthly transactions are recorded in the journal.

Question 10.
Which account is credited, when goods are sold on credit?
Answer:
Sales account is credited, when goods are sold on credit.

2. Give one word/term or phrase for each of the following statements:

Question 1.
A book of prime entry.
Answer:
Journal

Question 2.
The tax imposed by Central Government on Goods and Services.
Answer:
GST

Question 3.
A brief explanation of an entry.
Answer:
Narration

Question 4.
The process of recording transactions in the Journal.
Answer:
Journalising

Question 5.
The French word from which the word Journal is derived.
Answer:
Jour

Question 6.
Concession is given for immediate payment.
Answer:
Cash discount

Question 7.
Entry in which more than one accounts are be debited or credited.
Answer:
Combined Entry

Question 8.
Anything took by the proprietor from the business for his private use.
Answer:
Drawings

Question 9.
Tax payable to the Government on purchase of goods.
Answer:
Input Tax

Question 10.
Page number of the ledger.
Answer:
Ledger Folio

3. Select the most appropriate alternative from the alternatives given below and rewrite the statements.

Question 1.
___________ means explanation of the transactions recorded in the Journal.
(a) Narration
(b) Journalising
(c) Posting
(d) Casting
Answer:
(a) Narration

Question 2.
___________ discount is not recorded in the books of accounts.
(a) Trade
(b) Cash
(c) GST
(d) VAT
Answer:
(a) Trade

Question 3.
Recording of transaction in Journal is called ___________
(a) posting
(b) journalising
(c) narration
(d) prime entry
Answer:
(b) journalising

Question 4.
Every Journal entry require ___________
(a) casting
(b) posting
(c) narration
(d) journalising
Answer:
(c) narration

Question 5.
The ___________ column of the Journal is not recorded at the time of journalising.
(a) date
(b) particulars
(c) ledger folio
(d) amount
Answer:
(c) ledger folio

Question 6.
Goods sold on credit should be debited to ___________
(a) Purchase A/c
(b) Customer A/c
(c) Sales A/c
(d) Cash A/c
Answer:
(b) Customer A/c

Question 7.
Wages paid for installation of Machinery should be debited to ___________
(a) Wages A/c
(b) Machinery A/c
(c) Cash A/c
(d) Installation A/c
Answer:
(b) Machinery A/c

Question 8.
The commission paid to the agent should be debited to ___________
(a) Drawing A/c
(b) Cash A/c
(c) Commission A/c
(d) Agent A/c
Answer:
(c) Commission A/c

Question 9.
Loan taken from Dena Bank should be credited to ___________
(a) Capital A/c
(b) Dena Bank A/c
(c) Cash A/c
(d) Dena Bank Loan A/c
Answer:
(d) Dena Bank Loan A/c

Question 10.
Purchase of animals for cash should be debited to ___________
(a) Livestock A/c
(b) Goods A/c
(c) Cash A/c
(d) Bank A/c
Answer:
(a) Livestock A/c

4. State whether the following statements are True or False with reasons.

Question 1.
Narration is not required for each and every entry.
Answer:
This statement is False.
Correct statement: Narration is required for each and every entry.
Reasons: Narration is a brief explanation of the Journal Entry. It is written in the bracket just below the accounting entry. By reading the narration, the reader understands the meaning and significance of accounting entry and the nature and type of business transactions. Narration should be as short as possible and it should be simple and easy to understand.

Question 2.
A journal voucher is a must for all transactions recorded in the Journal.
Answer:
This statement is True.
Reasons: A voucher is a document that supports a payment made by the businessmen. It is legal evidence that a certain sum of money has been paid to a specific person or party. A Journal voucher is an original or basic voucher on the basis of which business transactions are journalized in the journal. Journal voucher provides legal proof for the business transactions. Therefore a journal voucher is necessary for all transactions recorded in the journal.

Question 3.
Cash discount allowed should be debited to discount A/c.
Answer:
This statement is True.
Reasons: Any allowance or reduction in payment allowed by the seller to the buyer or creditor to the debtor on payment of cash is called cash discount. It is the concession given to encourage prompt payment. The gash discount allowed is an expense or a loss to the receiver. Expenses or Losses are always to be debited. Cash discount allowed is an expense or loss and therefore it is debited to Discount A/c.

Question 4.
Journal is a book of prime entry.
Answer:
This statement is True.
Reasons: Journal is the most important book of accounts. It is a book of daily records. It is the main book of accounts in which transactions are recorded for the first time from source documents. Therefore this book is known as the book of original entry or first entry or prime entry. Business transactions are first entered in the journal and then they are recorded in other accounts book. For these reasons, the journal is called a book of prime entry.

Question 5.
Trade discount is recorded in the books of accounts.
Answer:
This statement is False.
Correct statement: Trade discount is never recorded in the books of accounts.
Reasons: The discount which is allowed or given by the manufacturer to wholesalers and by wholesalers to retailers and retailers to customers on the bulk purchases is called trade discount. By custom or by law trade discount is calculated on the catalog or printed price of the goods. Trade discount is directly deducted from the printed price and net prices of the goods or services are recorded in the books of accounts. A trade discount is given to encourage the buyers to increase their purchases. It is given to traders to enable them to earn a sizeable profit on the printed prices.

Question 6.
Goods lost by theft are debited to the goods account.
Answer:
This statement is False.
Correct statement: Goods lost by theft is credited to the goods account.
Reasons: Goods account is a real account because unsold goods are the property of the business. If goods are purchased or acquired, the Goods account is debited and if goods are sold or lost from the business, they are credited. As per the traditional approach, goods lost means go away from the business, and whatever goes out an account of it is credited. As per the modern approach if loss of business increases account of such loss is credited in the hooks of account.

Question 7.
If rent is paid to the landlord, the landlord’s A/c should be debited.
Answer:
This statement is False.
Correct Statement: If rent is paid to the landlord, the Rent account should be debited.
Reasons: Rent paid is an expense and hence it is a nominal account. When rent is paid to the landlord, the rent account is affected and not the landlord’s account. Rent is an expense to a tenant who pays it and it is an income for the landlord. Such payment is not personally due to the landlord as there is no lending and borrowing of money between landlord and rent payer. As per the rule of nominal account, the rent account is debited because it is an expense. As cash goes out cash account is credited.

Question 8.
Book Keeping records monetary and non-monetary transactions.
Answer:
This statement is False.
Correct Statement: Book Keeping records only monetary transactions.
Reasons: According to the money measurement concept, in the books of accounts accountant records only those business transactions which are monetary or financial in nature and capable to be expressed in monetary terms. It means the qualitative and quantitative aspects which cannot be measured in terms of money are not recorded in the books of account personal or non-monetary transactions are not recorded, in the books of accounts e.g. giving lift from car to neighbour, drinking tea along with friends in the restaurant, etc. are not recorded in the books of account as these transactions are not monetary in nature.

Question 9.
Drawings made by the proprietor increase his capital.
Answer:
This statement is False.
Correct statement: Drawings made by the proprietor decreases his capital.
Reasons: Total amount of goods and services withdrawn by the proprietor from the business from time to time for personal use or family use is called drawings. Withdrawals made by a businessman for business purpose is not treated as drawings. Drawings are always adjusted or deducted from capital. Heavy withdrawals made by a businessman for self-use reduces capital in the business. If the businessman controls the drawings more funds are made available for the development of the business. Drawing made by the proprietor reduces his capital investment.

Question 10.
GST paid on the purchase of goods Input tax A/c should be debited.
Answer:
This statement is True.
Reasons: GST is abbreviated from Goods and Service Tax. GST is levied by the government on the purchases of Goods and Services at a specified rate. Since it is imposed on purchases of goods and services, it increases its cost. GST is added to the purchase price. Purchases are always debited and hence GST i.e. Input tax account is also debited along with purchases. In the case of sales of goods and services, the output tax account is credited.

5. Fill in the blanks.

Question 1.
The first book of original entry is the ___________
Answer:
Journal

Question 2.
The process of recording transaction into journal is called ___________
Answer:
Journalising

Question 3.
An explanation of the transaction recorded in the journal ___________
Answer:
Narration

Question 4.
___________ discount is not recorded in the books of accounts.
Answer:
Trade

Question 5.
___________ is concession allowed for bulk purchase of goods or for immediate payment.
Answer:
Discount

Question 6.
Every Journal Entry requires ___________
Answer:
Narration

Question 7.
___________ discount is always recorded in the books of accounts.
Answer:
Cash

Question 8.
___________ is the document on the basis of which the entry is recorded in the journal.
Answer:
Voucher

Question 9.
There are ___________ parties to a cheque.
Answer:
Three

Question 10.
The ___________ cheque is safer than other cheques as it cannot be encashed on the counter of the bank.
Answer:
Crossed.

6. Specimen and Proforma.

Question 1.
Prepare specimen of Tax Invoice.
Answer:

Question 2.
Prepare specimen of Receipt.
Answer:

Question 3.
Prepare specimen of the Crossed cheque.
Answer:

Question 4.
Prepare specimen of Cash voucher.
Answer:

7. Correct the following statements and rewrite the statements.

Question 1.
All business transactions are recorded in the Journal.
Answer:
Only monetary transactions are recorded in the Journal.

Question 2.
A cash discount is not recorded in the books of accounts.
Answer:
A cash discount is recorded in the books of accounts.

Question 3.
Journal is a book of Secondary entry.
Answer:
Journal is a book of Prime entry.

Question 4.
GST is imposed by the Government of India from 1st July 2018.
Answer:
GST is imposed by the Government of India from 1st July 2017.

Question 5.
The machinery purchased by the Proprietor decreases his capital.
Answer:
Machinery purchased by the proprietor increases his Capital.

8. Do you agree or disagree with the following statements.

Question 1.
Narration is required for every entry.
Answer:
Agree

Question 2.
GST stands for Goods and Sales Tax.
Answer:
Disagree

Question 3.
Trade discount is not recorded in the books of accounts.
Answer:
Agree

Question 4.
Wages paid for the installation of Machinery is debited to Wages Account.
Answer:
Disagree

Question 5.
The process of entering or recording the transactions in a Journal is called Journalising.
Answer:
Agree

9. Calculate the following:

Question 1.
Purchased Motor Car from Tata & Company worth ₹ 2,00,000 at 18% GST. Find out GST amount.
Solution:
Cost of the Motor Car = ₹ 2,00,000
GST @ 18% = 2,00,000 × \(\frac{18}{100}\) = ₹ 36,000
Net value of the Motor Car = ₹ 2,00,000 + ₹ 36,000 = ₹ 2,36,000

Question 2.
Paid Transport charges ₹ 10,000 @ 5% GST. Calculate CGST & SGST.
Solution:
Transport charges = ₹ 10,000 @ 5% GST.
CGST = Transport charges × 2.5%.
= 10,000 × \(\frac{2.5}{100}\)
= 10,000 × \(\frac{25}{1000}\)
= ₹ 250
SGST = Transport charges × 2.5%.
= 10,000 × \(\frac{2.5}{100}\)
= 10,000 × \(\frac{25}{1000}\)
= ₹ 250
Net value = 10,000 + 250 + 250 = ₹ 10,500.

Question 3.
Bought goods from Ranjan ₹ 10,000 @ 5% GST and 10% cash discount. Calculate cash discount.
Solution:
Cost of the goods bought = ₹ 10,000 @ 5% GST and 10% cash discount.
GST on Goods Purchased = Cost of goods × 5%.
= 10,000 × \(\frac{5}{100}\)
= ₹ 500.
Net value of Goods Purchased = 10,000 + 500 = ₹ 10,500
Cash discount = Net value × 10%.
= 10,500 × \(\frac{10}{100}\)
= ₹ 1,050.

Question 4.
Received cheque of ₹ 90,000 from Kiran in full settlement of his account ₹ 1,00,000/-. Calculate discount rate.
Solution:
Discount allowed to Kiran = Amount due – Amount received
= 1,00,000 – 90,000
= ₹ 10,000.
Rate of discount allowed to Kiran = \(\frac{100 \times \text { Total Discount allowed }}{\text { Amount on which discount allowed }}\)
= \(\frac{100 \times 10,000}{1,00,000}\)
= 10%

Question 5.
Sold goods of ₹ 1,00,000 at 10% Trade Discount and 10% cash discount to Ram and received 50% amount by cheque. Calculate the amount of cheque received.
Solution:
Trade Discount = Catalogue price × Rate of trade discount
= 1,00,000 × \(\frac{10}{100}\)
= ₹ 10,000
Net amount receivable = Catalogue price – Trade Discount
= 1,00,000 – 10,000
= ₹ 90,000
50% of net amount received.
∴ Amount receivable = 50% of 90,000
= \(\frac{50}{100}\) × 90,000
= ₹ 45,000
Cash discount allowed = 10% on ₹ 45,000
= \(\frac{10}{100}\) × 45,000
= ₹ 4,500
Amount of cheque received = 50% of total amount – Cash discount
= 45,000 – 4,500
= ₹ 40, 500
Amount received by cheque = ₹ 40,500.

10. Complete the following table.

Question 1.

Answer:
1. Drawings A/c
2. Sonali’s A/c
3. Bad debts A/c
4. Livestock A/c
5. Capital A/c

Practical Problems

Question 1.
Journalise the following transactions in the books of Anand General Merchants.
2019 April
1 Mr. Anand started the business with cash of ₹ 60,000.
5 Purchased goods for cash ₹ 30,000.
7 Sold goods of ₹ 10,000 to Suresh.
10 Purchased Furniture from Mr. Govind on credit ₹ 30,000.
15 Paid for Rent ₹ 3000 and paid by debit card.
21 Purchased goods from Urmila on credit ₹ 70,000.
27 Paid for Transport ₹ 1,000 to United Transport.
30 Paid to Urmila ₹ 20,000 on behalf of Sharmila.
Solution:
In the Journal of Anand General Merchants

Question 2.
Journalise the following transactions in the books of Gajanan.
2019 May
3 Purchased goods for ₹ 90,000 and amounts paid by Bank directly.
7 Sold goods to Satish on credit ₹ 30,000.
9 Paid for Postage ₹ 10,000.
12 Paid for Wages ₹ 15,000.
15 Received cheque of ₹ 30,000 from Satish.
21 Received Dividend ₹ 5000.
25 Purchased Laptop of ₹ 40,000 and paid by cheque.
28 Deposited cash ₹ 10,000 into State Bank of India.
31 Purchased goods for ₹ 40,000 and paid by RTGS.
Solution:
Journal of Gajanan

Question 3.
Journalise the following transactions in the books of Ashok General Stores.
2019 May
1 Received ₹ 5,000 from Ram on behalf of Bharat.
4 Purchased Goods for cash ₹ 55,000.
8 Paid for Salary ₹ 8,000.
12 Purchased goods from Ganesh ₹ 30,000 on credit.
17 Sold goods to Mrs. Neha ₹ 60,000 on credit.
20 Purchased Machinery of ₹ 80,000 @ 12% GST and amount paid by cheque.
25 Paid to SG & Sons by cheque ₹ 30,000.
28 Received Commission ₹ 10,000 from Ganesh.
30 Paid Rent ₹ 5000.
31 Purchased Shares of Atul Company Ltd. for ₹ 10,000 through Demat account.
Solution:
Journal of Ashok General Stores


Working Note:
Dated 20th May 2019:
Calculation of CGST and SGST on Machinery
Catalogue price of ₹ 80,000 @ 12%.
CGST i.e. Central Goods and Services Tax = 12% × \(\frac{1}{2}\) = 6%.
CGST = Price of Machinery × 6%.
= 80,000 × \(\frac{6}{100}\)
= ₹ 4,800.
SGST i.e. State Goods and Service Tax = 12% × \(\frac{1}{2}\) = 6%.
SGST = 80,000 × \(\frac{6}{100}\) = ₹ 4,800.

Question 4.
Journalise the following transactions in the books of Sanjay General Stores.
2019 June
1 Started business with cash ₹ 50,000, Bank ₹ 1,00,000, Goods worth ₹ 50,000.
5 Purchased goods from Mohan on credit ₹ 80,000 at 10% Trade Discount.
9 Sold goods to Urmila ₹ 30,000 at 5% Trade Discount.
12 Paid into Dena Bank ₹ 40,000.
15 Goods worth ₹ 5000 were distributed as a free samples.
22 Paid for Commission ₹ 5,000 to Anand.
24 Received ₹ 28,000 from Urmila in full settlement of her account by Debit Card.
29 Paid for Advertisement ₹ 9,000.
30 Purchased Laptop for ₹ 20,000 @ 28% GST and amount paid by NEFT.
Solution:
Journal of Sanjay General Stores

Working Note:
5th June 2019:
Calculation of Trade discount
Purchased goods for ₹ 80,000 @ 10% Trade discount
Trade discount = 80,000 × \(\frac{10}{100}\) = ₹ 8,000
Net Purchase Price = 80,000 – 8,000 = ₹ 72,000

24th June 2019:
Discount allowed to Urmila = Amount due – Amount received
= 28,500 – 28,000
= ₹ 500

30th June 2019:
Calculation of CGST and SGST
Price of Laptop = ₹ 20,000 @ 28% GST.
CGST = (Price of Laptop) × Rate of CGST
= 20,000 × \(\frac{14}{100}\)
= ₹ 2,800
SGST = (Price of Laptop) × Rate of SGST
= 20,000 × \(\frac{14}{100}\)
= ₹ 2,800

Question 5.
Journalise the following transactions in the books of Kunal Stores.
2018 August
1 Purchased goods of ₹ 90,000 at 10% Trade Discount and 10% Cash Discount from Rakesh and 1/3rd amount paid by cheque.
5 Opened current account in State Bank of India by depositing ₹ 60,000.
8 Cash purchases ₹ 85,000.
10 Goods sold on credit to Tushar ₹ 20,000 @ 10% Trade Discount.
12 Paid Salary ₹ 4,000.
16 Tushar returned goods of ₹ 250.
17 Goods taken by Kunal for his private use ₹ 2,000.
20 Purchased Laptop of ₹ 40,000 from Joshi Electronics @ 18% GST and paid by cheque.
22 Rent paid by cheque ₹ 15,000.
25 Purchased Motor car worth ₹ 2,00,000 for cash @ 18% GST and paid by Bank.
26 Goods distributed as free sample ₹ 4,000.
28 Purchased goods from Amit of ₹ 60,000 on credit.
30 Paid by ECS cash to Amit ₹ 58,500, who allowed us a discount of ₹ 1,500.
30 Sold goods ₹ 5,000 at a loss of ₹ 1,000
31 Sold goods for ₹ 20,000.
Solution:
Journal of Kunal Stores


Working Notes:
1. 2018 Aug. 1st:
Trade discount = 10% on Purchase catalogue price
= \(\frac{10}{100}\) × 90,000
= ₹ 9,000
Net Purchase price = 90,000 – 90,00 = ₹ 81,000
Amount paid = \(\frac{1}{3}\) × 81,000 = ₹ 27,000
Cash discount = 10% on 27,000
= \(\frac{10}{100}\) × 27,000
= ₹ 2700
Amount paid by cheque = 27,000 – 2700 = ₹ 24,300

2. Aug. 10th:
Net price of Goods sold to Tushar = 20,000 – 10% Trade discount
= 20,000 – \(\frac{10}{100}\) × 20,000
= 20,000 – 2,000
= ₹ 18,000

3. 20th Aug. 2018:
Calculation of GST
CGST = 9% on ₹ 40,000
= \(\frac{9}{100}\) × 40,000
= ₹ 3,600
SGST = 9% on ₹ 40,000
= \(\frac{9}{100}\) × 40,000
= ₹ 3,600

4. 25th Aug. 2018:
Calculation of GST
CGST = 9% on ₹ 2,00,000
= \(\frac{9}{100}\) × 2,00,000
= ₹ 18,000
SGST = 9% on ₹ 2,00,000
= \(\frac{9}{100}\) × 2,00,000
= ₹ 18,000

Question 6.
Journalise the following transactions in the books of Nina General Stores.
2018 Sept
1 Sold goods of ₹ 50,000 at 10% Trade Discount and 10% Cash Discount to Raj and received 50% by cheque and 20% by cash.
3 Bought goods worth ₹ 60,000 from Prashant at 7.5% Trade Discount and half amount paid by cash.
5 Returned goods worth ₹ 550 to Prashant.
7 Sold goods worth ₹ 90,000 to Ranvir on credit at 10% Trade Discount.
12 Received Commission ₹ 4,500.
15 Received cheque of ₹ 80,000 from Ranvir in full settlement of his account.
18 Purchased Computer worth ₹ 80,000 from Reliance Company by cheque at 28% GST.
22 Wages paid ₹ 13,000.
23 Paid for Life Insurance premium ₹ 17,000.
27 Sold goods worth ₹ 28,000 to Tushar who paid us ₹ 18,000 immediately
Solution:
Journal of Nina General Stores


Working Notes:
1. 1st Sept. 2018:
Selling (invoice) price = ₹ 50,000
Trade Discount = 10% on ₹ 50,000
= \(\frac{10}{100}\) × 50,000
= ₹ 5,000
Net selling price = 50,000 – 5,000 = ₹ 45,000
50% of the Net selling price received by cheque
Amount of cheque received = 50% of Net selling price – Cash discount
= \(\frac{50}{100}\) × 45,000 – 10% on ₹ 22,500
= 22,500 – 2,250
= ₹ 20,250
20% of Net selling price received by cash.
Net amount of cash received = 20% of Net selling price – Cash discount
= \(\frac{20}{100}\) × 45,000 – Cash discount
= 9,000 – \(\frac{10}{100}\) × 9000
= 9,000 – 900
= ₹ 8,100
30% of Net Selling price is not received
∴ Amount not received = \(\frac{30}{100}\) × 45,000 = ₹ 13,500
Total of cash discount = 2,250 + 900 = ₹ 3,150

2. 3rd Sept. 18:
Trade discount = 7.5% on 60,000
= \(\frac{7.5}{100}\) × 60,000
= ₹ 4,500
Net Purchase price = 60,000 – 4,500 = ₹ 55,500

3. 18th Sept. 18:
Calculation of GST
CGST = (Purchase Price of Computer) × 14%
= 80,000 × \(\frac{14}{100}\)
= ₹ 11,200
SGST = 80,000 × \(\frac{14}{100}\) = ₹ 11,200
Net Purchase price of Computer = 80,000 + 11,200 + 11,200 = ₹ 1,02,400

Question 7.
Journalise the following transactions in the books of Varun
2018 Oct.
1 Purchased Machinery of ₹ 95,000 and paid ₹ 5,000 for freight.
3 Purchased goods for ₹ 1,50,000 and amount paid by Bank.
6 Purchased Laptop from Nagesh & Co. worth ₹ 1,80,000 @ 18% GST.
10 Paid into Bank of Baroda ₹ 70,000.
12 Paid for Rent ₹ 4,000 and Commission ₹ 3,000.
15 Bought goods from Tushar Company Ltd. ₹ 1,20,000 at 12% GST and paid 1/2 amount by RTGS.
16 Cash purchases ₹ 50,000 amount paid by cheque.
20 Invoiced goods to Satish ₹ 80,000 at 12% GST and the amount received by cheque.
25 Paid for Telephone charges ₹ 90,000
27 Mrs. Varsha bought goods from us ₹ 90,000 at a 12% Trade Discount.
28 Purchased goods from Abhijeet & Sons ₹ 1,50,000 at 18% GST.
30 Paid to Abhijeet & Sons and received 10% Cash Discount by cheque.
31 Paid for Advertisement ₹ 8,000 and Brokerage ₹ 12,000.
Solution:
Journal of Varun

Question 8.
Journalise the following transactions in the books of Dhoni Auto Car Centre
2018 Nov
1 Sold 1,000 shares for ₹ 100 each and paid brokerage @ 1% and the amount credited to our account.
4 Purchased goods from Ashish & Co. of ₹ 2,00,000.
6 Sold goods to Virat & Co. ₹ 1,50,000.
8 Paid for Advertisement ₹ 30,000 to Times of India.
10 Paid for Printing and Stationery ₹ 7,000.
12 Purchased goods from Prakash & Co. ₹ 1,50,000 @ 18% GST.
15 Paid for Transport charges ₹ 10,000 @12% GST.
20 Purchased goods from Vikram & Sons ₹ 1,20,000 @ 18% GST and paid half the amount immediately.
25 Paid to Prakash & Co. less 10% discount.
30 Invoiced Goods to Sanjay ₹ 60,000.
31 Sanjay returned goods of ₹ 10,000.
31 Sanjay became insolvent and recovered only 50 paise in a rupee as a final settlement from him.
Solution:
Journal of Dhoni Auto Car Centre


Working Notes:
1. 2018, Nov. 1:
Amount credited to Bank A/c = Sales proceed – Brokerage @ 1%
= 1,000 × 100 – \(\frac{1}{100}\) × 1,000 × 100
= 1,00,00 – 1,000
= ₹ 99,000

2. Nov. 12:
Net Purchase price = Purchase price + 9% CGST + 9% SGST
= 1,50,000 + \(\frac{9}{100}\) × 1,50,000 + \(\frac{9}{100}\) × 1,50,000
= 1,50,000 + 13,500 + 13,500
= ₹ 1,77,000

3. Nov. 20:
Net Purchase price = Purchase price + 9% CGST + 9% SGST
= 1,20,000 + \(\frac{9}{100}\) × 1,20,000 + \(\frac{9}{100}\) × 1,20,000
= 1,20,000 + 10,800 + 10,800
= ₹ 1,41,600
Amount paid = \(\frac{1}{2}\) of 1,41,600 = ₹ 70,800 and credit purchased = ₹ 70,800.

4. Nov. 25:
Cash discount = Amount due to Prakash & Co × 10%
= 1,77,000 × \(\frac{10}{100}\)
= ₹ 17,700

5. Bad debts = Amount due from Sanjay – Amount recovered
= 50,000 – 50% of 50,000
= 50,000 – 25,000
= ₹ 25,000

Question 9.
Journalise the following transactions in the books of Hero Enterprises.
Balance on 1st April 2019
Cash at Bank ₹ 80,000, Sundry Debtors Ram ₹ 20,000, Rahim ₹ 30,000, Stock ₹ 55,000, Building ₹ 1,50,000.
Credit Balances on 1st April 2019
Sundry Creditors Swapna ₹ 20,000, Rohit ₹ 30,000, Bank Loan ₹ 50,000.
2019 April
1 Purchased goods worth ₹ 1,50,000 from Prashant & Co., less 10% Trade Discount.
4 Sold goods to Mr. Amit Sharma ₹ 70,000 at 10% Trade Discount on credit.
9 Purchased goods for cash ₹ 2,00,000 @ 28% GST amount paid by NEFT.
12 Sold Goods to Aditya Ray of ₹ 90,000 @ 28% GST.
15 Paid for Rent ₹ 5000 and Salary ₹ 18,000.
17 Paid for Proprietor’s house Rent ₹ 12,000.
20 Sold half of the goods purchased on 9th April at 20% Profit and 28% GST.
25 Paid for Wages ₹ 1,500.
25 Purchased Furniture ₹ 1,80,000 @ 12% GST and amount paid by RTGS.
28 Sold an old Furniture of ₹ 20,000 for ₹ 12,000.
30 Sold shares of ₹ 10,000 for ₹ 15,000 and the amount received by cheque.
Solution:
Journal of Hero Enterprises


Working Notes:
1. 2019 April, 20:
Cost of Goods sold = \(\frac{1}{2}\) of purchases on 9th April, 2019
= \(\frac{1}{2}\) × 2,00,000
= ₹ 1,00,000
Selling price of Goods sold = \(\frac{120}{100}\) × ₹ 1,00,000 = ₹ 1,20,000

2. April, 28:
Loss on sale of furniture = Cost of furniture – Selling price
= 20,000 -12,000
= ₹ 8,000

3. April, 30:
Profit on sale of shares = Selling price – Cost of shares
= 15,000 – 10,000
= ₹ 5,000

Question 10.
Journalise the following transactions in the books of Harbhajan & Co. for the month of 1st April 2019.
Balance on 1st April 2019
Cash in hand ₹ 35,000, Cash at Bank ₹ 25,000, Furniture ₹ 1,50,000, Laptop ₹ 1,00,000
Debtors: Sangita ₹ 40,000, Viru ₹ 30,000
Creditors: Ganesh ₹ 10,000, Garima ₹ 40,000, Bank loan ₹ 50,000.
2019 April
1 Purchased goods from Ajay Kumar worth ₹ 2,50,000 at 10% Trade discount @ 18% GST and paid 1/4 amount in Cash.
5 Purchased shares of Infosys Company ₹ 50,000 and ₹ 500 paid as a brokerage for Demat A/c.
8 Sold goods to Raj worth ₹ 90,000 at 10% Trade discount and 1/3 amount received by cash and 5% cash discount is allowed.
12 Paid house rent of proprietor ₹ 9,000 and office rent ₹ 5,000.
15 Purchased Laptop of ₹ 60,000 @ 18% GST and paid amount by cheque.
20 Paid transport charges on the above Laptop ₹ 1,000 @ 18% GST.
25 Paid Commission ₹ 20,000 to Ram.
26 Paid Telephone Charges ₹ 1,000.
28 Transferred from private Bank A/c of proprietor to business Bank A/c ₹ 40,000.
30 Bought goods for ₹ 1,50,000 @ 12% as GST by cheque.
30 Exchanged our Furniture of ₹ 30,000 against a Motor car of the same value for business.
Solution:
Journal of Harbhajan & Co.


Working Notes:
1. 8 April 2019:
Net selling price = Selling price – 10% Trade discount
= 90,000 – 10% on 90,000
= 90,000 – 9,000
= ₹ 81,000
Cash received = \(\frac{1}{3}\) of 81,000
= \(\frac{1}{3}\) × 81,000
= ₹ 27,000
Net cash received = 27,000 – Cash discount @ 5%
= 27,000 – \(\frac{5}{100}\) × 27,000
= 27,000 – 1,350
= ₹ 25, 650
Credit sale = \(\frac{2}{3}\) of 81,000
= \(\frac{2}{3}\) × 81,000
= ₹ 54,000

Balbharti Maharashtra State Board Bookkeeping and Accountancy 11th Solutions Chapter 2 Meaning and Fundamentals of Double Entry Book-Keeping Textbook Exercise Questions and Answers.

Maharashtra State Board Bookkeeping and Accountancy 11th Solutions Chapter 2 Meaning and Fundamentals of Double Entry Book-Keeping

1. Answer in one sentence only.

Question 1.
What is a Double Entry System?
Answer:
A system of accounting is which double or two-fold effects of every business transaction are recorded systematically in the books of accounts is called a double-entry book-keeping system.

Question 2.
What is an Account?
Answer:
The summarised record of all transactions related to a person, an institution, an income, and expenditure, an asset, a liability, a profit, gain as per the accounting principles is called an account.

Question 3.
State the meaning of the Single Entry System.
Answer:
A book-keeping system in which only one aspect of every business transaction is considered and systematically recorded in the books of accounts and other aspects are completely ignored is called Single Entry System.

Question 4.
What is Personal Account?
Answer:
Account of person or account relating to a person with whom a business keeps dealings is called Personal Account.
e.g. Kishor’s A/c, Bank of India’s A/c.

Question 5.
State the rules of Nominal Account.
Answer:
The rules of Nominal Account state that Debit all expenses or loses and Credit all incomes and gains.

Question 6.
Give two examples of intangible assets.
Answer:
Goodwill and Patents or Trademark are two examples of intangible assets.

Question 7.
State the meaning of Real Account.
Answer:
Account of tangible as well as intangible property or anything owned and possessed by the business is called real account, e.g. Cash A/c.

Question 8.
Give two examples of income and gains.
Answer:
Interest received, Discount earned, sales, etc. are examples of income and gains.

Question 9.
State the rule for Personal Account.
Answer:
The rule of personal account states that Debit the receiver and Credit the giver.

Question 10.
How many methods of recording accounting information are there?
Answer:
The methods of recording accounting information are broadly classified as (i) Indian System and (ii) English System. It is sub-classified as (a) a Single Entry System and (b) a Double Entry System.

2. Write one word/term or phrase which can substitute each of the following statements.

Question 1.
Method of Accounting which records both aspects of the transaction.
Answer:
Double Entry System

Question 2.
The right-hand side of an account.
Answer:
Credit side

Question 3.
Name of the account which is debited when proprietor uses business money for personal use.
Answer:
Drawings A/c

Question 4.
Accounts of Assets and Properties.
Answer:
Real A/c

Question 5.
Accounts of Expenses and Losses and Incomes and Gains.
Answer:
Nominal A/c

Question 6.
The left-hand side of an account.
Answer:
Debit side

Question 7.
The Assets which cannot be seen, touched or felt.
Answer:
Intangible Asset

Question 8.
A person who invented the Double Entry System.
Answer:
Luca D. Bargo Pacioli

Question 9.
Incomplete system of recording business transactions.
Answer:
Single Entry System

Question 10.
A scientific system of recording business transactions.
Answer:
Double Entry system

3. Select the most appropriate alternatives from those given below and rewrite the statements.

Question 1.
International Accounting day is observed on _______________
(a) 10th November
(b) 12th November
(c) 10th December
(d) 15th December
Answer:
(a) 10th November

Question 2.
Conventional system of accounting is _______________
(a) English entry system
(b) Double entry system
(c) Indian System
(d) None of these
Answer:
(c) Indian System

Question 3.
Every debit has corresponding _______________
(a) Debit
(b) Credit
(c) Right hand side
(d) None of these
Answer:
(b) Credit

Question 4.
Radha’s Account is a type of _______________ account.
(a) Nominal
(b) Personal
(c) Real
(d) Expenses
Answer:
(b) Personal

Question 5.
Machinery Account is _______________ account.
(a) Nominal
(b) Income
(c) Personal
(d) Real
Answer:
(d) Real

Question 6.
Goodwill is _______________ asset.
(a) Tangible
(b) Current
(c) an intangible
(d) None of these
Answer:
(c) an intangible

Question 7.
Prepaid expenses is _______________ account.
(a) Real
(b) Personal
(c) Nominal
(d) Income
Answer:
(b) Personal

Question 8.
Debit the receiver, Credit the _______________
(a) Goes out
(b) Giver
(c) Income and gains
(d) Comes in
Answer:
(b) Giver

Question 9.
Debit what comes in, Credit what _______________
(a) Giver
(b) Expenses and losses
(c) Goes out
(d) Income and gains
Answer:
(c) Goes out

Question 10.
Debit all _______________ and Credit all income and gains.
(a) Giver
(b) Expenses and losses
(c) Goes out
(d) None of these
Answer:
(b) Expenses and Losses

4. State whether the following statements are True or False with reasons.

Question 1.
Outstanding expense is a nominal account.
Answer:
This statement is False.
Outstanding expenses are personal accounts. It is a representative personal account. Expenses are payable to some person.

Question 2.
A capital account is a real account.
Answer:
This statement is False.
Capital is a personal account. Amount invested in the business by the proprietor is capital. A proprietor is a natural person.

Question 3.
Every debit has equal and corresponding credit.
Answer:
This statement is True.
Under the Double Entry System, the two-fold effects of each transaction are recorded. Under this system one account is to be debited and another is to be credited with an equal amount.

Question 4.
The discount received is a nominal account.
Answer:
This statement is True.
Discount received in an income for the business. All expenses and income come under the Nominal account.

Question 5.
The drawings account is a nominal account.
Answer:
This statement is False.
The drawing is a Personal account. Drawing means cash on goods withdrawn by the proprietor for personal use. As the proprietor is a Personal account his drawings are also a Personal account.

Question 6.
Outstanding salary is a nominal account.
Answer:
This statement is False.
Outstanding salary is Personal account. Salary is the amount payable to staff. As he is a person, the amount payable to him is a personal account. It is a Representative Personal account.

Question 7.
A loan account is a personal account.
Answer:
This statement is True.
The loan is taken from a person or bank and they are persons either natural or person or artificial persons.

Question 8.
A goodwill account is a real account.
Answer:
This statement is True.
All properties/assets come under real accounts. Goodwill is an intangible asset so goodwill is a Real account.

Question 9.
A discount account is a nominal account.
Answer:
This statement is False.
Trade discount is a noncash transaction it is not recorded in the books of account so it doesn’t fall under any account.

Question 10.
Personal transactions of proprietors are recorded in the books of account of business.
Answer:
This statement is False.
Personal transactions of proprietors are not recorded in the books of account of business. Only business transactions are recorded in the books of account of business as businesses have a separate entity.

Question 11.
A motor car account is a Real Account.
Answer:
This statement is True.
All properties and assets fall under real accounts. Motor car is property so it is a real account.

Question 12.
The rule of a Nominal Account is to Debit the receiver and Credit the giver.
Answer:
This statement is False.
The rule of the Nominal account is to debit all expenses and losses Credit all incomes and gains.

Question 13.
A bank loan account is a Nominal account.
Answer:
This statement is False.
The bank account is a Personal account. It is a representative person.

Question 14.
Assets = Capital + Liabilities
Answer:
This statement is True.
Total assets are always equal to total liabilities. Total liabilities include capital also.
So Assets = Capital + Liabilities.

Question 15.
A Trademark account is a personal account.
Answer:
This statement is False.
Trademark is a real account. All tangible and intangible assets are properties and they fall under real account.

5. Fill in the blanks.

Question 1.
Increase in asset is debited and decrease in asset is _______________
Answer:
Credited

Question 2.
Assets = Liabilities + _______________
Answer:
Capital

Question 3.
Increase in capital is credited and decrease in capital is _______________
Answer:
Debited

Question 4.
Scientific and complete system of recording is known as _______________
Answer:
Double Entry System

Question 5.
Debit all expenses and losses, Credit all _______________
Answer:
Income and Gains

Question 6.
Land and Building account is _______________ account.
Answer:
Real

Question 7.
Cash Book and Personal Accounts are only maintained under _______________ system.
Answer:
Single Entry

Question 8.
Debit what comes in and credit what goes out is the rule of _______________ account.
Answer:
Real

Question 9.
Travelling expenses account is _______________ type of Account.
Answer:
Nominal

Question 10.
Every transaction has _______________ effect.
Answer:
Two Fold

Question 11.
_______________ accounts are accounts of properties and assets.
Answer:
Real

Question 12.
Laptop account is a _______________ account.
Answer:
Real

6. Classify the following accounts under the types of Personal, Real, and Nominal accounts.

Question 1.
Mr. Rohit’s capital A/c
Answer:
Personal Account

Question 2.
Loose Tools A/c
Answer:
Real Account

Question 3.
Drawing A/c
Answer:
Personal Account

Question 4.
Cartage A/c
Answer:
Nominal Account

Question 5.
Prepaid Rent A/c
Answer:
Personal Account

Question 6.
Copyright A/c
Answer:
Real Account

Question 7.
Patent A/c
Answer:
Real Account

Question 8.
Outstanding Income A/c
Answer:
Personal Account

Question 9.
Prepaid Expenses A/c
Answer:
Personal Account

Question 10.
Commission Received A/c
Answer:
Nominal Account

Question 11.
Freight A/c
Answer:
Nominal Account

Question 12.
Plant and Machinery A/c
Answer:
Real Account

Question 13.
Sundry Income A/c
Answer:
Nominal Account

Question 14.
Live Stock A/c
Answer:
Real Account

Question 15.
Goods distributed as free sample A/c
Answer:
Nominal Account

Question 16.
Radhika’s A/c
Answer:
Personal Account

Question 17.
Outstanding Wages A/c
Answer:
Personal Account

Question 18.
Loss on Sale of Furniture A/c
Answer:
Nominal Account

Question 19.
Bank of Maharashtra A/c
Answer:
Personal Account

Question 20.
Loan A/c
Answer:
Personal Account

Question 21.
Computer A/c
Answer:
Real Account

Question 22.
Legal Expenses A/c
Answer:
Nominal Account

Question 23.
Fixed Deposit A/c
Answer:
Real Account

Question 24.
Income Receivable A/c
Answer:
Personal Account

Question 25.
Audit Fees A/c
Answer:
Nominal Account

Question 26.
Trademark A/c
Answer:
Real Account

Question 27.
Loss by fire A/c
Answer:
Nominal Account

Question 28.
Motor Car A/c
Answer:
Real Account

Question 29.
Income tax A/c
Answer:
Personal Account

Question 30.
GST A/c (Goods and Service Tax)
Answer:
Nominal Account

Question 31.
Siddhivinayak Trust A/c
Answer:
Personal Account

Question 32.
Office Equipment A/c
Answer:
Real Account

Question 33.
The stock of Stationery A/c
Answer:
Real Account

Question 34.
Indian Railways A/c
Answer:
Personal Account

Question 35.
Income Received in Advance A/c
Answer:
Personal Account

Question 36.
Dividend on Investment Advance A/c
Answer:
Nominal Account

Question 37.
Discount A/c
Answer:
Nominal Account

Question 38.
Raj & company A/c
Answer:
Personal Account

Question 39.
Repairs A/c
Answer:
Nominal Account

Question 40.
Royalty A/c
Answer:
Nominal Account

7. Complete the following Accounting equation table.

Question 1.

Answer:

Transactions	Assets (₹)	=	Liabilities (₹)	+	Capital (₹)
1. Started business with Cash ₹ 50,000	50,000	=	00	+	50,000
2. Purchased goods of ₹ 10,000	50,000 (+) 10,000 (-) 10,000	=	00	+	50,000
3. Goods stolen ₹ 1,000	50,000 (-) 1,000	=	00	+	50,000 (-) 1,000
4. Sold goods for Cash ₹ 5,000	49,000 (+) 5,000 (-) 5,000	=	00	+	49,000
5. Loan taken from Bank ₹ 7,000	49,000 (+) 7,000	=	00 7,000	+	49,000
Total	56,000	=	7,000	+	49,000

8. Give necessary transactions for the following effect of increase and decrease in Assets, Capital, and Liabilities.

Question 1.

Answer:

1.	Sold goods for Cash ₹ 10,000	Increase in Assets Decrease in Assets
2.	Goods costing ₹ 12,000 Sold for ₹ 15,000	Increase in Capital Decrease in Assets
3.	Paid cash ₹ 8,500 to our creditor Mr. Kishor	Decrease in Liabilities Decrease in Assets
4.	Goods worth ₹ 7,000 stolen from Godown	Decrease in Assets Decrease in Capital

Practical Problems

Question 1.
Prepare a chart showing Analysis of the following transactions in a Tabular form according to the Traditional Approach:
1. Rajasaheb started the business with cash of ₹ 85,000.
2. Goods Purchased for cash ₹ 5,000.
3. Sold goods on credit worth ₹ 6,000 to Ramesh.
4. Cash deposited into Bank of Maharashtra ₹ 12,000.
5. Interest received ₹ 700 from Radhika.
6. Paid Rent ₹ 2,000 to the landlord.
7. Bought goods on credit from Birajmohan ₹ 7,000.
8. Withdrew cash from bank ₹ 1,000 for office use.
9. Purchased computer ₹ 9,000 for cash.
10. Paid Mobile bill (office) ₹ 500.
11. Sold old Mobile ₹ 2,000.
12. Received Rent ₹ 1,000 from the tenant.
Solution:
Table showing analysis of the transactions is given below (Traditional Approach)

Question 2.
Prepare Chart showing Analysis of the following transaction in a Tabular form according to Modern Approach.
1. Mr. Meghraj started the business with cash of ₹ 30,000.
2. Deposited cash into Bank of India ₹ 2,000.
3. Withdrew cash ₹ 1,000 for personal use.
4. Purchased goods on credit from Nilesh ₹ 2,000.
5. Cash purchases ₹ 3,000.
6. Paid Wages ₹ 400.
7. Purchased a chair for office use ₹ 3,200.
8. Sold goods to Mohan worth ₹ 1,200.
9. Withdrew Cash for Office use ₹ 3,000.
10. Sold old furniture ₹ 9,000.
11. Received Dividend of ₹ 1,000.
12. Paid for Printing bill book ₹ 200.
Solution:
Analysis of transactions by applying rules of Debit and Credit (Modern Approach)

Question 3.
Give the accounting equation for the following transactions:
1. Mr. Vaibhav started the business with Cash of ₹ 1,00,000.
2. Purchased goods on credit from Rita Stores ₹ 9,000.
3. Purchased Laptop for office use ₹ 10,000.
4. Sold goods to Rina on credit ₹ 12,000.
5. Received Interest ₹ 2,500.
6. Paid Telephone bill ₹ 1,300.
Solution:
Table showing Accounting equations for the transactions.

Question 4.
Give the accounting equation for the following transactions.
1. Mr. Swaraj commenced business with a Bank balance of ₹ 1,10,000.
2. Purchased Furniture on credit from S.M Furniture Mart ₹ 25,000.
3. Bought goods on credit from Yuvraj ₹ 15,000.
4. Purchased Machinery ₹ 10,000.
5. Paid Electricity bill ₹ 3,500.
6. Goods destroyed by fire ₹ 1,500.
Solution:
Table showing equation for the transactions.

Question 5.
Show accounting equation for the following transactions:
1. Rohit started the business with cash of ₹ 50,000.
2. Bought goods on credit from Manoj ₹ 6,000.
3. Cash purchases ₹ 5,000.
4. Paid wages ₹ 3,000 to Casual labour.
5. Sold goods to Santosh ₹ 7,000 on credit.
6. Received Commission ₹ 1,000 from Vaishali.
Solution:

Balbharti Maharashtra State Board Bookkeeping and Accountancy 11th Solutions Chapter 1 Introduction to Book Keeping and Accountancy Textbook Exercise Questions and Answers.

Maharashtra State Board Bookkeeping and Accountancy 11th Solutions Chapter 1 Introduction to Book Keeping and Accountancy

1. Answer in One Sentence:

Question 1.
What is Book-keeping?
Answer:
Recording the business transactions in the books of accounts systematically by considering some definite principles is called book-keeping.

Question 2.
What is meant by Goods?
Answer:
Any commodity, article, or merchandise in which trader regularly deals or carries on trade is called goods e.g. cloth is the goods for cloth merchant.

Question 3.
What is Capital?
Answer:
Amount invested by the proprietor into the business from time to time is called Capital.

Question 4.
What are Drawings?
Answer:
The total amount of goods and services are withdrawn by the proprietor from time to time for self-use is called drawings.

Question 5.
What is Goodwill?
Answer:
The money value of business reputation earned by the business over the number of years is called Goodwill.

2. Give the word term or phrase which can substitute each of the following statements:

Question 1.
Recording of business transactions.
Answer:
Book-keeping

Question 2.
Amount invested in the business by the proprietor.
Answer:
Capital

Question 3.
A person to whom the amount is payable.
Answer:
Creditor

Question 4.
The exchange between two persons.
Answer:
Transaction

Question 5.
Excess of expenses over income.
Answer:
Loss

Question 6.
A person whose assets are sufficient enough to meet business obligations.
Answer:
Solvent

Question 7.
Book-keeping is providing all required financial information to the businessman.
Answer:
Decision Making

Question 8.
Property of any description owned by Proprietor.
Answer:
Assets

Question 9.
Assets that remain in the business for only for short time and can be converted into cash very easily.
Answer:
Current Assets

Question 10.
Allowance is given on catalogue price of goods.
Answer:
Trade Discount

3. Select the most appropriate alternatives from those given below and rewrite the statements.

Question 1.
Surplus of income over expenses is _____________
(a) Profit
(b) Deficit
(c) Loss
(d) Financial Statements
Answer:
(a) Profit

Question 2.
In _____________ basis of accounting, actual cash receipts and actual cash payments are recorded.
(a) Accrual
(b) Hybrid
(c) Cash
(d) Mercantile
Answer:
(c) Cash

Question 3.
Amount which is not recoverable from customer is known as _____________
(a) Bad Debts
(b) Debts
(c) Debtors
(d) Doubtful debts
Answer:
(a) Bad Debts

Question 4.
Accounts must be honestly prepared and they must disclose all material information is known as _____________
(a) Entity Concepts
(b) Dual Aspect Concept
(c) Disclosure Concept
(d) Cost Concept
Answer:
(c) Disclosure Concept

Question 5.
A commodity in which a trader deals is known as _____________
(a) Goods
(b) Income
(c) Property
(d) Expenditure
Answer:
(a) Goods

Question 6.
_____________ means a reputation of a business valued in terms of money.
(a) Trademark
(b) Assets
(c) Patents
(d) Goodwill
Answer:
(d) Goodwill

Question 7.
According to _____________ Cash flow statement is prepared and presented for the period for which the profit and loss account is prepared.
(a) AS-3
(b) AS-10
(c) AS-6
(d) AS-2
Answer:
(a) AS-3

Question 8.
The immediate recognition of loss is supported by principle of _____________
(a) Conservatism
(b) Objective
(c) Matching
(d) Consistency
Answer:
(a) Conservatism

Question 9.
Brief explanation of an entry is called as _____________
(a) Folio
(b) Narration
(c) Posting
(d) Journalising
Answer:
(b) Narration

Question 10.
An act of exchange of things or services between the two parties is termed as _____________
(a) Ledger
(b) Transfer
(c) Transaction
(d) Business
Answer:
(c) Transaction

4. State whether the following statements are true or false with reasons:

Question 1.
Book-keeping and accounting are one and the same thing.
Answer:
This statement is False.
Book-Keeping means recording business transactions in a separate set of books and accountancy is the process of summarising and analyzing the business transactions which are recorded in the books of accounts, so book-keeping and accounting are not one and the same thing.

Question 2.
Conservatism means to follow the safe side.
Answer:
This statement is True.
This accounting concept suggests that while preparing accounting statements, planning, policies, strategies, and budgets, all possible or anticipated losses must be taken into consideration. While unrealized prospective or anticipated profits should be ignored. This is known as “The policy of playing a safe game” or “Principal of Prudence”.

Question 3.
The double entry system is based on the “Dual Aspect” concept.
Answer:
This statement is True.
This accounting concept explains that every business transaction has two aspects viz. (i) acquisition or increase in the asset of the business and (ii) creation or increase in claims against the business. Assets refer to the valuable things owned by the business. Capital refers to the proprietor’s contribution to the business to provide funds to undertake activities. Capital refers to the proprietor’s contribution to the business to provide funds to undertake activities. Capital is the owner’s claim against the business, e.g. a capital of ₹ 5,00,000 received in cash by the business from the proprietor has dual aspects viz. business has cash i.e. asset of ₹ 5,00,000 and the proprietor has a claim of ₹ 5,00,000 against the business entity called capital.

Question 4.
Bank overdraft is an asset of the business.
Answer:
This statement is False.
Bank overdraft is a liability of the business. Businesses owe to the bank for the excess amount withdrawn from the bank account. It is a temporary loan from a bank.

Question 5.
A solvent person is a person whose assets are more than his liabilities.
Answer:
This statement is True.
A person who is unable to pay his debts is called insolvent. An insolvent person does not have sufficient assets to pay his debts. His business debts are much larger than his business and personal assets. He cannot settle the dues of his creditors fully. Insolvency leads to the compulsory dissolution of the business.

Question 6.
Cash discount does not appear in the books of accounts.
Answer:
This statement is False.
It is the amount deducted from the final amount due at the time of receipt. It is the concession given for encouraging prompt payment. It is given either for the spot payment or for payment within a specific period. A cash discount is calculated after deducting a trade discount, since it is a loss to the seller and gain to the buyer, a cash discount appears in the books of accounts.

Question 7.
A transaction is concerned with money or money’s worth.
Answer:
This statement is True.
In common parlance, a transaction is a dealing between two or more persons, in which one person gives something to the other and in exchange for that receives something from the other. It is an exchange of goods and services either for cash or for any other goods or services. In other words, it is a business activity that interprets in money terms what business gives and what business receives in that exchange. To complete the transaction at least two persons are required. Purchase of goods, sale of goods, receipt, and payment of cash, borrowing, and lending, depositing cash into the bank, withdrawal of cash from the bank, etc. are examples of business transactions.

Question 8.
Accounting is the language of business.
Answer:
This statement is True.
Book-keeping is a part of Accounting. It is the primary stage in accounting. It is the process of recording transactions in accounts. Accounting is part of Accountancy. Accountancy is the practice of recording, classifying and reporting business transactions for a business. Accounting principles are the basic norms and assumptions developed and established as the basis for an accounting system. These principles are adopted by accountants universally. So accounting is the language of business.

Question 9.
In the early times of civilization, accounting was done by owners.
Answer:
This statement is False.
Booking is a part of Accounting that follows certain rules for recording transactions. It has classification, concepts, conventions, and principles which requires certain knowledge and qualifications. So it is done by an accountant.

Question 10.
Book-keeping is useful to find out all tax liabilities.
Answer:
This statement is True.
As all business transactions are recorded in the books of accounts so there is no question of hiding any income or expenses, with the help of book-keeping businessmen know their liabilities towards the government for tax payments like GST., Income tax, etc.

5. Do you agree or disagree with the following statements:

Question 1.
Accounting is useful only to the owner.
Answer:
Disagree

Question 2.
Book-keeping is an art, science, and profession.
Answer:
Agree

Question 3.
Bills Payable is an asset of the business.
Answer:
Disagree

Question 4.
In Book-keeping and Accountancy, only non-monetary transactions are recorded.
Answer:
Disagree

Question 5.
Totalling of Journal or Ledger is called casting.
Answer:
Agree

6. Complete the following sentences:

Question 1.
Revenue arising as a result of business transactions is known as _____________
Answer:
Income

Question 2.
Excess of gross profit over operating expenses is _____________
Answer:
Operating profit

Question 3.
An expenditure which is basically revenue in nature but the benefit of which is not exhausted within one year is called as _____________
Answer:
Deferred revenue expenditure

Question 4.
The amount deducted by the seller from the list price of goods at the time of sale is _____________
Answer:
Trade Discount

Question 5.
A person to whom the business owes money for the goods or services is known as _____________
Answer:
Creditor

Student Activity: (Textbook Page No. 9)

Collect some Advertisements relating to discounts and stick them in the notebook.
Answer:
Go through daily new paper read advertisements regarding sales like flip cart, Amazon, Big Bazar, etc.

Balbharti Maharashtra State Board Class 11 Sociology Solutions Chapter 8 Social Change Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Sociology Solutions Chapter 8 Social Change

1. (A) Choose the correct alternative and complete the statements.

Question 1.
Social change as a term is ………………
(value loaded / ethically neutral / prejudiced)
Answer:
Ethically neutral

Question 2.
The effects of an earthquake on people is a ………………. factor of change.
(geographical / biological / cultural)
Answer:
geographical

Question 3.
The study of sex ratio is a ………………. factor of change.
(biological / technological / natural)
Answer:
biological

Question 4.
The slum rehabilitation programme within a city is an example of ………………… social change.
(planned / unplanned / revolutionary)
Ans.
planned

1. (B) Correct the incorrect pair.

Question 1.
(a) Earthquake – Biological
(b) Fundamentalism – Economic
(c) Growing Urbanization – Technological
(d) E-governance – Physical
Answer:
(b) Fundamentalism – Socio – cultural factor

1. (C) Identify the appropriate term from the given options.

(Physical Factor, Educational Factor, Economic Factor)
Question 1.
Impact of rising sea water level on coastal regions.
Answer:
Physical factor

Question 2.
Creating awareness about the problem of sexual abuse.
Answer:
Educational factor

1. (D) Correct the underlined words and complete the sentence.

Question 1.
Social change is a linear process.
Answer:
Social change is a continuous process.

Question 2.
All teachers are expected to think about how they will teach a unit in the classroom. This is an example of unplanned change.
Answer:
All teachers are expected to think about how they will teach a unit in the classroom. This is an example of planned change.

2. Differentiate between.

Question 1.
Planned change and unplanned change.
Answer:

Planned change	Unplanned change
(i) Planned change occurs when purposeful changes are promoted by the government or other agencies.	(i) Unplanned change is a type of changes that is not planned. It happens suddenly.
(ii) In the case of planned cities in India, they have definite spaces marked for residence, parks, grounds, places of worship so on; the five years plans, educational plans, tribal welfare programmes, etc.	(ii) In the case of natural disaster, there is a loss of human and animal lives as well as property. Rehabilitation programmes have to be immediately designed and implemented for the affected persons.
(iii) Planned change occurs when deliberate decisions are taken to bring change.	(iii) Unplanned change is a result of unforeseen occurrences.
(iv) Planned social change is based on directions and goals.	(iv) Unplanned social change occurs without any directions or goals.

Question 2.
Short-term change and Long-term change.
Answer:

Short-term change	Long-term change
(i) Some social changes which may bring about immediate results are known as short-term change	(i) Some social change which may take years or decades to produce results are known as long-term change.
(ii) The purchase of new gadgets like home theatre for the purpose of entertainment within the home is rapid.	(ii) Giving up social evils like dowry, early marriage or domestic violence take decades to get rid of.
(iii) Short term change is change in material culture.	(iii) Long term change is change in non¬material culture.
(iv) Technological changes such as inventions and discovery play important role in bringing short term changes.	(iv) Social movements and revolutions play important role in bringing long term changes.

3. Explain the following concept with an example.

Question 1.
Social change is interactional chain reaction
Answer:
1. A single factor may trigger a particular change, but it is almost associated with other factors like physical, biological, technological, cultural, social, economic, which may together bring about a social change.

2. This is due to mutual interdependence of social phenomenon.
Example : A huge increase in school fees will have an impact on student enrolment. It may further result in higher dropouts especially for the girl child from the system of school. Increase in school fees is an economic factor which may give rise to social factor like problems of girls dropout.

Technological factor of social change:

1. Today, as we live in a digitalized world, we have been increasingly loaded with technology from our homes to our workplace.
2. Technological changes have affected our social, economic, religious, political, and cultural life.
3. Technological development creates new conditions of life and new conditions for adaptation. It continues to be an index of the overall progress of society.

Example : During the British period in India, systems of transportation and communication were laid. These may have served the needs of colonizers then, but we still continue to benefit from the systems.

Dysfunctional of social system:

1. The social system may become dysfunctional at times.
2. Hence, human beings have to make conscious efforts to help bring stability, balance and equilibrium in society.

Example : Emile Durkheim makes reference to anomic suicide where there is a state of normlessness or chaos, which can trigger off suicidal feelings that makes the social system dysfunctional.

Change in performance of social roles of individuals is also social change:

1. The social system comprises of social institutions like education, government, economy, etc., they regulate human contact, allocate roles and provide resources.
2. Social change also refers to change in performance of social roles of individuals according to changing times.

Example : In today’s Information Age, the role of a teacher in school is radically different than it was during the early Vedic period. There was marked differences in terms of the size of the school, learners, content of education, educational philosophy, methods of teaching and evaluation, etc.

Question 2.
Long term change

4. (A) Complete the concept maps.

Identify the significant factor of change for each.
Question 1.

inventions	——–
Effects of earthquake	——–
Declining sex ratio	——–
Student exchange programme	——-
Cultural diffusion	——–
Materialism	——–

Answer:

inventions	Technological factor
Effects of earthquake	Physical factor
Declining sex ratio	Biological factor
Student exchange programme	Educational factor
Cultural diffusion	Socio – cultural factor
Materialism	Economic factor

4. (B) State whether the following statements are true or false with reasons.

Question 1.
Prejudice and fear of the unknown is an obstacle to change.
Answer:
This statement is True.

1. Sometimes people are not open to change as they are too comfortable within their life.
2. Sometimes people don’t perceive the need to change prejudice or attitude towards a change also becomes obstacles.
3. Fear of unknown leads people to avoid difference.
   Hence, prejudice and fear of unknown is an obstacle to social change.

Question 2.
Social changes can be predicted accurately.
Answer:
This statement is False.

1. The concept of social change involves a transition in society from one state to another through time. The change depends upon complex factors. Hence social change cannot be predicted accurately.
2. Social change is not instant; it takes place over time. There is no inherent law of social change.
3. The forces of social change may not remain the same and the process of social change does not remain uniform.

5. Give your personal response.

Question 1.
Do you think people do not accept change easily? Why?
Answer:
Yes, I think people do not accept change easily. Customs and traditions which are embedded in society do not allow people to accept new ideas and acts as an obstacle to social change. Sometimes lack of motivation or interest also causes hindrance to social change. Even though social change is universal, there are more often some quarters of resistance to change.

Question 2.
Do you think the Swachh Bharat Abhiyan has had a positive impact on society? Justify your response.
Answer:
The physical environment has also been adversely affected by human behaviour in the name of development. In this era of global warming and climate change, everyone is striving towards a clean and safe India. The campaign of clean India, i.e., the Swachh Bharat Abhiyan is the biggest step taken over as a cleanliness drive and has a huge possible impact on society.

11th Sociology Digest Chapter 8 Social Change Intext Questions and Answers

ACTIVITY (Textbook Page No. 83)

Question 1.
Do a Google search for ‘Punk Hairstyle’.
Answer:
Relate ‘Punk Hairstyle’ to cultural change in society. The inspiration for the hairstyle came from the punk rock music in the 70’s. People have long been in the practice of using hair dyes to change the colour of their hair as a means of making themselves more attractive. Punks use hair dyes to make themselves appear different from mainstream society. One of the most common punk hairstyles is the Mohawk and use of bright colours on the hair.

Question 2.
You have learnt about the physical factor of social change. Now, write one page about how the natural calamities affect the life of people and society by giving some suitable examples. (Textbook Page No. 86)
Answer:
Natural disaster in India, cause massive losses of life and property. Droughts, cyclones, landslides pose greatest threat. Landslides are common in the lower Himalayas. Parts of Western Ghats also suffer from low intensity landslides. Floods are the most common natural disaster in India. The heavy southwest monsoon rain causes the Brahmaputra and other rivers to over-cross their banks, often flooding the surrounding areas. The floods kill and displace many. Temperatures in three Indian cities of Chennai, Mumbai and Delhi in the last five decades have seen a steady rise. This rise in temperature has led to a higher incidence of natural disaster storms, floods and drought, which have increased. The cost of damages has gone up. The latest cyclone Vayu in Gujrat have led to widespread devastation along parts of the eastern coast of India.

Question 3.
Try to understand the meaning of globalisation and observe changes brought about by globalisation in the world around you. (Textbook Page No. 88)
Answer:
Globalization is a process of integrating a country’s economy with the world economy with a view to exploit global opportunities for local growth. Globalization has resulted in both advantage and disadvantage for the Indian society. On one hand it has promoted the process of industrialization but on the other small-scale industries are the worst affected by the entry of large-scale multinational companies. Though globalization has increased the export of Indian industrial and agricultural products, there are lot of hindrance in path of export.

Globalization has led to new and better employment opportunities but there has been also a negative impact of globalization on the employment situation in India, since it has to shift many of its workers from the organized sector to the unorganized sector of Indian economy. It has promoted international travel and tourism leading to cultural exchange.

Question 4.
You have understood the importance of technological factor of social change. Now, try to collect the data from ten families in your neighbourhood, about the use of modern technology in their day-to-day life. (Textbook Page No. 89)
Answer:
Students should attempt this question on their own.

Question 5.
Study the educational transformation in the last 10 years e.g., Teach for India campaign (Textbook Page No. 90)
Answer:
Teach for India campaign have transformed the lives of children in low-income communities.
They have re-imagined education by being holistic and differentiated such that every single child learns and grows to his or her fullest potential. 37,920 children have learned across Teach for India classrooms; They are committed to a singular goal – an excellent education for all children. Teach for India is striving to end the problem of educational inequality in India.

Question 6.
Trace changes in fashions and eating habits followed by teenagers in the past decade. Make a pictorial album or photo essay to show the changes. (Textbook Page No. 91)
Answer:
Students should attempt this question of their own.

Balbharti Maharashtra State Board Class 11 Sociology Solutions Chapter 7 Social Stratification Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Sociology Solutions Chapter 7 Social Stratification

1. (A) Choose the correct alternative and complete the statements.

Question 1.
Social stratification is ……………….
(local / national / universal)
Answer:
universal

Question 2.
Class is a ………………. form of stratification.
(open / closed / rigid)
Answer:
open

Question 3.
Gender based stratification has led to ………………. in society.
(justice / exploitation / equality)
Answer:
exploitation

Question 4.
Social stratification of ………………. is based on the principle of purity and pollution.
(class / gender / caste)
Answer:
caste

1. (B) Correct the incorrect pair.

Question 1.
(a) Ownership of wealth – Economic Capital
(b) Membership and involvement in social network – Social Capital
(c) Gained through education – Cultural Capital
(d) Prestige, status and social honour – Economic Capital
Answer:
(d) Prestige, status, social honour – Symbolic Capital

1. (C) Correct underlined words and complete the sentence.

Question 1.
Caste is based on wealth.
Answer:
Class is based on wealth.

Question 2.
A hierarchical system where women are given a lower social status is stratification based on class.
Answer:
A hierarchical system where women are given a lower social status is stratification based on gender.

2. Write short notes.

Question 1.
Principles of social stratification.
Answer:

1. Stratification is social: Social stratification is not determined by biological differences but it is governed by social norms and sanctions.
2. Social stratification persists over generations : In all society’s parents confer their social status on their children. Thus, the pattern of inequality stays same from generation to generation.
3. Social stratification is universal but variable : Social stratification is found everywhere. At the same time the nature of inequality varies. ‘What’ is unequal and ‘how’ unequal, changes within the context of a society.
4. Social stratification involves inequality : Any stratified system not only gives people more resources but also justifies this arrangement and defines them as fair.
5. Social stratification is consequential : Stratification affects every aspect of life of all individuals. Social life is affected because of the position of an individual in the social hierarchy. Some experience positive consequences, while others face negative consequence of the hierarchy in a particular society.

Question 2.
Characteristics of caste according to Dr. G.S. Ghurye.
Answer:
Dr. G.S. Ghurye a well known Sociologist and Indologist defines caste in terms of its essential characteristics. They are as follows:
1.Segmental division by society : Society is divided into various castes. The membership of castes are determined by birth. Therefore, mobility from one caste to another is impossible.

2. Hierarchy: Castes or segments are arranged in terms of hierarchy. According to Dr. Ghurye, castes are graded and arranged into a hierarchy on the basis of the concept of ‘purity and pollution’.

3. Restriction on feeding and social intercourse : This fact of separation is reinforced by the notion of ‘purity and pollution’. Each caste imposes restrictions on its members with regard to food and social intercourse.

4. Differential civil and religious privileges and disabilities : In a caste society there is an unequal distribution of privileges and disabilities among its members. The higher castes enjoy all privileges and lower caste suffer from all kinds of disabilities.

5. Lack of unrestricted choice of occupation : Choice of occupation is not free under caste system. Occupations are hereditary and the members of the caste are expected to follow their traditional occupation.

6. Endogamy : Endogamy is the essence of caste system. Every caste of sub-caste insists that its member should marry within the group.

Question 3.
Types of mobility.
Answer:
1. Horizontal Mobility : It refers to change of residence or job without status change. Under this type of social mobility, a person changes one’s occupation but the overall social standing remains the same. Certain occupation like doctor, engineer and teacher may enjoy the same status but when an engineer changes one’s occupation from engineer to teaching engineering there is a horizontal shift from one occupational category to another but no change has taken place in the system of social stratification.

2. Vertical Mobility : Vertical mobility refers to any change in the occupational, economic, political status of an individual or a group which leads to change of their position. Vertical Mobility stands for change of social position, either upward or downward.

3. Intergenerational Mobility : This type of mobility means that one generation changes its social status in contrast to the previous generation. However, this mobility may be upward or downward. For e.g., people of lower caste or class may provide facilities to their children to get higher education, training and skills, with the help of which the younger generation may get employment in higher position.

4. Intragenerational Mobility : This type of mobility takes place in the lifespan of one generation. A person may start one’s career as a clerk and after acquiring more education, becomes an IFS Officer. Here the individual moves up and occupies a higher social position than previously.

3. Differentiate between.

Question 1.
Caste and Class.
Answer:

Caste	Class
(i) Different castes form a hierarchy of social preference and each position in the caste structure is defined in terms of its ‘purity and pollution’.	(i) A social class is made up of similar social status who regard one another as social equals.
(ii) In a caste stratification system, an individual’s position depends on the status attributes ascribed by birth.	(ii) In a class stratification system and individual’s position depends on the possession of substantial amounts of wealth, occupation, education and prestige which is achieved.
(iii) Caste is an example of closed stratification.	(iii) Class system is an example of open stratification.
(iv) In this type of social stratification there is no scope for social mobility.	(iv) In this type of social stratification there is scope for social mobility.

Question 2.
Intragenerational Mobility and Intergenerational Mobility.
Answer:

Intragenerational Mobility	Intergenerational Mobility
(i) This type of mobility takes place in the lifespan of one generation.	(i) This type of mobility means that one generation changes its social status in contrast to the previous generation.
(ii) This mobility is upward.	(ii) The mobility may be upward or downward.
(iii) A person may start one’s own career as a clerk. He / she acquires more education and over a period of time becomes an IFS Officer. Here the individual moves up and occupies a higher social position than previously.	(iii) People of lower caste or class may provide facilities to their children to get higher education, training and skills. With the help of these skills the younger generation may get employment in higher position.
(iv) It refers to advancement in one’s social level during the course of one’s lifetime.	(iv) It refers to a change in the status of family members, one generation to the next.

4. Explain the following concept with suitable examples.

Question 1.
Vertical Mobility
Answer:

1. Vertical mobility refers to any change in the occupational economic or political status of an individual or a group which leads to change of their position.
2. Vertical mobility stands for change of social position either upward or downward, which can be labelled as ascending or descending type of mobility.

Example : A person who works as a customer assistant, works hard and starts his own business successfully. In such a position there is a clear change in the position of the individual.

Question 2.
Intergenerational Mobility
Answer:

1. This type of mobility means that one generation changes its social status in contrast to the previous generation.
2. However, this mobility may be upward or downward.

Example : People of lower caste or class may provide facilities to their children to get higher education, training and skills, with the help of which the younger generation may get employment in higher position.

5. (A) Complete the concept maps.

Question 1.

Answer:

5. (B) State whether the following statements are true or false with reasons.

Question 1.
There is no mobility in the class system.
Answer:
This statement is False.

1. Class system is an example of open stratification in which individuals or groups enjoy the freedom of changing their social strata, i.e., in class system there is scope for social mobility. Individuals or groups move from one strata to another.
2. The class system in modern industrial society (Upper class, middle class and lower class) is an example of open stratification.
3. The criteria of open stratification i.e., class system are power, property, intelligence, skills, etc.

Question 2.
Education had led to women’s empowerment.
Answer:
This statement is True.

1. Education is a milestone of women empowerment because it enables them to respond to challenges, to confront their traditional role and change their life.
2. Education creates occupational achievement, self-awareness, satisfaction etc.
3. Education is one of the main levers of social class which has helped women empower and change their status in society.

6. Answer the following in detail (About 150-200 words).

Question 1.
Discuss class and gender as forms of social stratification with suitable examples of your own.
Answer:
Class as a form of social stratification:
A social class is made up of people of similar social status who regard one another as social equals.
Each class has a set of values, attitudes, beliefs and behaviour norms which differ from those of the other classes. A social class is essentially a status group which is achieved. Class is almost a universal phenomenon. Each social class has its own status in the society. Status is associated with prestige. A social class is relatively a stable group. Social class represent an open social system. An open class system in one in which vertical social mobility is possible.

Example : Within this system, individuals can move from one class to another through hard work, education and skills. Ownership of wealth and occupation are the chief criteria of class differences but education, hereditary, prestige, group participation, self identification and recognition by others, also play an important role in class distinction.

Gender as a form of social stratification:
Gender stratification refers to social ranking, where men typically inhabit higher statuses than women. A common general definition of gender stratification refers to the unequal distribution of wealth, power and privilege between the two sexes. Throughout the world, most societies allocate fewer resources to women than men. Almost all societies are characterized by sexism. Sexism is the belief that one sex is superior than the other. Although, societies have been believing in the superiority of men over women and therefore have been dominating women. This male dominance is supported further by patriarchy. The process of socialization is gendered and creates gender hierarchy. Example : Boys are given toy cars or lego sets or bat and ball to play whereas girls are given household sets, medical sets, dolls, etc.

11th Sociology Digest Chapter 7 Social Stratification Intext Questions and Answers

ACTIVITY (Textbook Page No. 75)

Question 1.
Watch the Marathi movie, ‘Fandry’ and write a film review describing the social, cultural and economic obstacles created by caste barriers.
Answer:
Review of the Marathi Movie ‘Fandry’. The film powerfully busts the myth of individual merit in a caste-decided society. In a small village in Maharashtra Jabya portrays friend Pirya are the only two boys from a so-called untouchable caste. Jabya doesn’t want to consider his caste an obstacle to his aspirations. These hopes of wanting to move out of the confines of his caste are shown through Jabya’s love for his classmate Shalu, an upper caste by birth. Jabya and Pirya, meanwhile want to hunt down the exclusive black sparrow which Jabya believes would help him to win Shalu’s love. His father Kachru wants him to continue their tradition. From being called blacky to being made to feel ashamed of his mother’s occupation. When she comes to school Jabya’s trials indicate the prejudices that make the promise of equality sound like unreal.

In theory, Jabya’s school is supposed to uplift him to a modern and caste-less society where he should be able to choose the work he wants to do. Yet we see how modern education itself is not free from caste. In caste system social set up everything is pre-decided by one’s caste, whom one can love and be friends with, the occupation he has to choose etc. Fandry makes visible the way in which caste is so central to all our relatives.

Question 2.
In today’s world the characteristics of caste are changing. Find out which of the characteristics are changing and which are remaining constant. Conduct a group discussion on the same. (Textbook Page No. 75)
Answer:
In the modern age, many changes happen in the features and functions of caste system. A group discussion can be conducted on the following changes within the caste system.

1. Decline in the superiority of upper caste.
2. Changes in the restrictions regarding social habits.
3. Changes in the restrictions regarding marriage.
4. Changes in the restrictions regarding occupation.
5. Changes in the disabilities of lower castes.
6. Loss of faith in the ascribed status.
7. Changes in lifestyle.
8. Changes in inter-caste relations.
9. Changes in the lower of caste Panchayats.
10. Restrictions on education removed
11. Changes in the philosophical basis.

Question 3.
Divide the class into groups. Each group can select one of the issue mentioned and collect information on it. The group should present their findings to the class. (Textbook Page No. 78)
Answer:
Present findings on any one of the issues to the class.
1. The Economy : Explains how women are being paid low for some amount of work done by men in various unorganized sectors. Also, dual role played by women and unpaid work.

2. The Polity : Explains about women exercising the power of right to vote, in spite of reservation for women, the number of women in official positions of power are less as world leaders, less number of women at war and peace movements.

3. Crime : Explains the crime committed by women, increase in number of women coming in conflict with the law; women prisons in India are relatively less crowded, women commit fewer and different crimes compared to men.

4. Religion : Most religions elevate the status of men over women and have striker sanctions against women and require them to be submissive.

5. Family : In spite of women sharing the economic role, the role of men in raising children is still minimum or negligible. Traditional sexual division of labour where women looked after the house and men played the role of economic provider is still prevalent in the society. Women are expected to balance between home and work.

6. Health : Women neglect their health and nutrition. The frequency of women to visit a doctor is very less as most of the time they manage with home remedies.

Question 4.
Find out examples of intergenerational and intragenerational mobility from your surroundings and present it in your classroom.
Answer:
1. Intergenerational mobility means one generation changes its social status in contrast to the previous generation.
Example : Eminent personality like Dr. B. R. Ambedkar.

2. Intragenerational mobility this type of mobility takes place in the life span of one generation. Example : A person may start one’s career as a clerk and after acquiring more education over a period of time he becomes an IAS officer. Students should find out similar examples of intergenerational and intragenerational mobility from their surroundings.

Question 5.
Arrange the group reading of any two of the following books and conduct a group discussion on the caste and gender discrimination/inequality Baburao Bagul-Jevha Mi Jaat chorli Hoti, Daya Pawar- Baluta, Urmila Pawar- Aaydaan, Omprakash Valmiki- Jhootan, Kishor Shantabai Kale- Against all Odds. (Textbook Page No. 81)
Answer:
Baburao Bagul – ‘Jevha Mi Jaat Chorli Hoti’: This most poignant story recites about an educated Dalit trying to escape his caste profession of scavenging, is an ethnography of caste oppression, description of gender roles shaped by caste, the way Dalit women are oppressed, critique of the political economy of a caste society.

Daya Pawar – ‘Baluta’ : It generalizes the status of rural untouchables. Baluta is a collection of memories of life trapped within the framework of India’s caste system. The frustration and helplessness of being born as a Dalit and the inner conflict in the writer’s mind. He thinks of education as a means to escape from his downtrodden life but ends up being the agent of his lifelong distress.

Urmila Pawar – ‘Aaydaan’: The lives of different members of the family are woven together in a narrative that gradually reveals different aspects of the everyday life of Dalits the manifold ways in which caste assets itself and grinds them down.

Omprakash Valmiki – ‘Jhootan’ : An autobiography by Omprakash Valmiki in which he has explored the issues of Dalits. Being socially segregated for centuries the Dalits are obliged to live a helpless life.

Kishor Shantabai Kale – ‘Against all Odds: The book raises many questions about the exploitation life of women in Kolhati community.

Balbharti Maharashtra State Board Class 11 Sociology Solutions Chapter 6 Socialization Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Sociology Solutions Chapter 6 Socialization

1. (A) Choose the correct alternative and complete the statements.

Question 1.
The process whereby an individual learns to conform to the norms of society is called …………………..
(assimilation / socialization / co-operation)
Answer:
socialization

Question 2.
Family is a ………………….. agency of socialization.
(primary / secondary / tertiary)
Answer:
primary

Question 3.
School is an ………………….. agency of socialization.
(primary / secondary / tertiary)
Answer:
secondary

Question 4.
Television is a / an ………………….. medium of communication.
(audio / visual / audio visual)
Answer:
audio-visual

1. (B) Correct the incorrect pair.

Question 1.
(a) Language, behaviour – Family
(b) Social values like friendship – Peer Group
(c) Teamwork, discipline – Neighbourhood
(d) To build opinion – Mass media
Answer:
(c) Team work, discipline – Workplace

1. (C) Identify the appropriate term from the given options.

(Internet, Peer Group, Childhood, Socialization)
Question 1.
Takes place in the early years of life.
Answer:
Socialization

Question 2.
Global impact in today’s world.
Answer:
Internet

1. (D) Correct the underlined words and complete the sentence.

Question 1.
Radio is an audiovisual medium.
Answer:
Radio is an audio medium.

Question 2.
Peer group is an example of an authoritarian agency.
Answer:
Family is an example of an authoritarian agency.

2. Write short notes.

Question 1.
Formation of ‘self ’ according to Mead.
Answer:
George Mead has elaborated on the process of building social self which does not exist at birth. According to Mead, formation of self occurs in three distinct stages.
Stage 1 – Imitation : In this stage, children imitate behaviour of adults without understanding it. Example : A little boy might drive his mother to her office by driving his toy car or help his parents clean the floor by pushing a broom.

Stage 2 – Play stage : A child plays, sometimes as being a mother or a teacher, at times a postal worker, a police officer etc. In this stage, responses are not organized. A child internalises the attitudes of others who are significant to her/his through enacting the roles of others. A significant other is someone whose opinions matter to us and who is in a position to influence our thinking.

Stage 3 – Game stage : As a child matures, and as the self gradually develops, one internalises the expectations of a large number of people. Children learn to behave according to the impressions of others. They understand that role play in each situation involves following a consistent set of rules and expectations. For example, a child at this stage is likely to be aware of the different responsibilities of people in a restaurant who together, make for a smooth dining experience. Thus, the self is mainly formed through our interactions with others and our understanding of others responses. Socialization, in this sense is a process of self-awareness.

Question 2.
Agencies of socialization.
Answer:
There are different social groups which can be seen as agencies of socialization.
1. Family : Family is the main agent of socialization. The child learns language and other basic behavioural patterns in family. Socialization through family is varied because there is no single, uniform pattern to do so. A child brought up in nuclear family will undergo different pattern of socialization. Patterns of child rearing vary across families with different caste, class, and ethnic backgrounds.

2. Peer groups : Peer groups are friendship groups made up of people of similar age. In peer groups, the interactions are reasonably egalitarian as there is a greater amount of give and take, when compared to family or school. Peer groups use informal sanctions including positive sanctions like approving gestures or laughing at your jokes, and negative sanctions like disapproving jokes, labelling or rejecting your company.

3. Schools : Schooling and education are considered as secondary agencies. School involves learning values and norms at a step higher than those learnt in a family. Skills and values like team work, discipline, conformity to authority are learnt in schools and this helps prepare students for the adult world.

4. Mass Media : One of the significant forces of socialization in modern culture is mass media. Mass media are the means for delivering impersonal communication directed to a vast audience. Mass media includes traditional print media like newspapers and magazines, electronic media like radio and television and current IT enabled media and social media. Television has an influence on children from a very young age and affects their cognitive and social development. Modern technological advancements have strengthened and changed the role of mass media. Technology has certainly increased the spread of mass media.

5. Neighbourhood : A neighbourhood community is an important agency of socialization. A neighbourhood is a geographically localized community within a larger city, town or suburb. Neighbourhoods are formed through considerable face to face interaction among members often living near one another. A neighbourhood community provides the base for an individual to extend social relations and interactions beyond the narrow limits of the home.

6. Workplace : Socialization is a life long process. Adult socialization indicates this continuous process of learning. One of the significant agents of adult socialization is the workplace.

Adult individuals spend significant amount of time at the workplace. Socialization through work place involves acquiring new skills, knowledge and behaviour patterns suitable to the requirements of the job.

Question 3.
Resocialization.
Answer:
The process of unlearning old norms, roles, values and behavioural patterns and learning new patterns is called re-socialization. Sometimes an individual is caught in a situation where one has to break away from past experience and internalise different norms and values. Re-socialization can also be defined as a process which subjects an individual to new values, attitudes and skills according to the norms of a particular institution and the person has to completely re-engineer one’s sense of social values and norms.

The person may be in a jail, hospital, in religious organization, police, army etc. In such institutions there is total break up from the normal social life outside. A prison sentence is a good example. The individual not only has to change and rehabilitate one’s behaviour in order to return to society but must also accommodate the new norms required for living, while in prison.

3. Explain the following concept with an example.

Question 1.
Primary socialization
Answer:

1. The most critical process of socialization happens in the early years.
2. This learning in the early years is termed as primary socialization.
3. Primary socialization takes place in infancy and childhood and involves intense cultural learning.
4. A child gets acquainted with values, customs, behavioural norms and manners. It is an informal process.

Example : Family is the main agent of primary socialization. Peer group and neighbourhood is also seen as a primary socializing agency.

Question 2.
Secondary socialization
Answer:

1. Socialization as a process is lifelong.
2. The learning which extends over the entire life of a person is known as secondary socialization. It is a formal process of socialization.

Example : Schooling and education are considered as secondary agencies of socialization. What we learn through a formal curriculum with specific subjects and skills. Schooling involves learning values and norms at a step higher than those learnt in family.

4. (A) Complete the concept maps.

Question 1.

Answer:

4. (B) State whether the following statements are true or false with reasons.

Question 1.
Socialization is a life-long process.
Answer:
This statement is True.
(i) The process of learning attitudes, norms and behaviour patterns and becoming members of different social groups like family, kin network, peer group and later, formal groups like school, professional networks etc., is a life long process.

(ii) Socialization is an ongoing process of continuous learning The birth of a child is a new experience of parenting for a couple. Similarly, older people become grandparents thus creating another set of relationships connecting different generations with each other.

(iii) Thus, socialization as a learning process is life long even though the most critical process happens in the early years but secondary socialization extends over the entire life of a person.

Question 2.
Advertisements influence consumer behaviour.
Answer:
This statement is True.

1. Mass media has become an integral part of our day to day life. Advertisements through mass media are the means for delivering impersonal communication directed to a vast audience.
2. Advertisements transmit information and messages which influence the behaviour of the consumer to a great extent.
3. The use of colours, words, music, images, videos influence our behaviour and persuades us to take action. Advertisements through mass media has wider approach.

5. Give your personal response.

Question 1.
‘Breaking News’ tends to create panic or emotional responses. Why do you think this happens? Give relevant examples to illustrate.
Answer:
Many newspapers as well as some private news channels very frequently transmit news of murders, accidents, stealing, dacoity, beating, rape, economic cheating, fraud, scams, etc., as breaking news. Constant hearing of such news affects the minds of the people and it weakens the faith in ideals and values of life. This happens because breaking news get much more viewers than normal news.

Question 2.
The use of ‘unacceptable language’ is often picked up by children even if this kind of language is not used within the home. Explain how this might happen.
Answer:
Even though the new born is initiated with this learning process in family it is not the only agency of socialization. School, peer groups, neighbourhood, mass media are different social groups and social contexts which can be seen as agencies of socialization. Children pick up unacceptable language from variety of other sources like television which has strong influence on viewers. The child might hear one of his friends or someone in neighbourhood using slang words or abusing language.

6. Answer the following question in detail (About 150-200 words).

Question 1.
You belong to a generation that has been exposed to internet. Discuss how internet has brought about positive and negative results.
Answer:
Modern technological advancements have strengthened and changed the role of mass media as an agent of socialization. Technology like internet has certainly increased the spread of mass media. People spend most of their time in touch with the world. Internet has enhanced communication and social connection. It has also increased political and civic participations. Social media allow students to learn outside of their class rooms. ‘School in the cloud’ is yet another example of how the internet and social media can help to improve global education.

Internet has helped to transmit information and create awareness about a wide range of issues and events among members of the society. It influences attitudes, values and moulds public opinion and acts as an effective way to change the society. Through the internet we can access online educational courses or training. In fact, any type of information from any part of the world can be accessed through the internet.

There is also negative impact of internet on society as – Youth access the internet and indulge in chatting, emailing, watching restricted site that leads to cyber crimes instead of creating interest in reading and creative activities. Sometimes internet may not give accurate information hence the validity and accuracy of the messages must be considered. Internet reaches the masses in developing countries, but there are many tribal, rural and poor urban people having no access to any kind of information. Communication technologies are expensive and need maintenance. Thus, internet may help to develop knowledge and spread information but it also has adverse effects on the society and have promoted values like individualism and materialism.

11th Sociology Digest Chapter 6 Socialization Intext Questions and Answers

ACTIVITY (Textbook Page No. 68)

Question 1.
Conduct a group discussion on the threatening challenge of online games like ‘Blue Whale’. Try to find answers to issues like why do children even consider participating in such games? Are parents to be blamed? What is the role of Law?
Answer:
Games like ‘Blue Whale’ has the challenges of self-harm. It exploits vulnerable people. It blocks the boundary between virtual and real world. There’s a constant competition, level up, which drive the children to perform their best amongst others.

Most games are addictive become of the challenges involved. Once the children are engrossed in it, there is no coming back and they strive hard to achieve the next level, the next goal. This sense of achievement targets the brain’s reward system and compels the gamer to perform the act again and again.

Are parents to be blamed?
Children are becoming addictive to online games because they are designed to be addictive and not because parents allow them to play too much.

What is the role of Law?
With dangerous online games like ‘Blue Whale’ claiming several innocent lives in the recent past, the supreme court has directed the centre to constitute a panel of experts to block such life-threatening games.

Question 2.
Watch advertisements or messages on T.V. and see how effective mass media is in creating awareness against corruption, drug addiction, smoking or any other relevant social issue. (Textbook Page No. 68)
Answer:
The mass media has potential to create awareness against various issues like corruption, drug addiction, smoking etc., by propagandise simple and focused messages to large audiences repeatedly, overtime, at a low cost. They are able to reach a large heterogeneous population. Media campaigns can help in the reduction of smoking and drug addiction and have shown positive results in number of other relevant social areas. Techniques of mass media can be effectively used to counter corruption as well.

Question 3.
Do you think resocialization requires total institutions? Why? Why not? (Textbook Page No. 70)
Answer:
In the process of resocialization old behaviours are removed because they are of no use. Resocialization is necessary when a person moves to a senior care centre, goes to a boarding school or serves time in jail. I think, resocialization requires ‘total institutions’ in a new environment as they can learn new norms and unlearn existing behaviours. The most common way of resocialization occurs in a total institution where people are isolated from society and made to follow new rules and behaviours. A ship at sea military camps, religious convents, prisons or some cult organizations. They are cut off from a larger society. Members entering an institution have to leave behind their old identify to be socialized.

Question 4.
Collect data from five students regarding their experience with social networking sites (example Facebook, Snapchat, Twitter). Find out about how much time they spend online, what kinds of people they interact with, what topics are usually discussed, the uses and problems of social networking sites. Write a 100-word Report on your findings. (Textbook Page No. 71)
Answer:
With respect to overall media consumption, most students spend hours on social networking sites using mobile phones, tablets, laptops, desktops, etc. This age group restricts watching television and is considered as the largest part of change in the media landscape. Example: More three to eleven years of age group are online than in 2016, with much of this growth coming from increased use of tablets. Unsurprisingly, tablets and other portable, connected devices are also playing an important role.

Uses:
Social networking sites allow users living at distant places within their network to connect to another thus increasing social connection, share ideas, photographs, videos, information and other happenings around the world.

Problem:

1. Untrustworthy Member Data.
2. Users submit inaccurate information on their profile.
3. Leaving social networking is difficult; there are saved accounts, and ways to continue to reconnect to the site, even after an individual uninstall the account.
4. Less time for face to face connections with family members.
5. Being too much online diminishes our skills and can have serious side effects. These side effects are becoming more and more frequent amongst the waves of generations.

Balbharti Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 6 Directors and Key Managerial Personnel of a Company Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 6 Directors and Key Managerial Personnel of a Company

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
_____________ comprises of a team of Directors.
(a) Board of Directors
(b) Board of Trustees
(c) Board of Managers
Answer:
(a) Board of Directors

Question 2.
_____________ can be a director.
(a) An Individual
(b) A Firm
(c) A Body corporate
Answer:
(a) An individual

Question 3.
Upto _____________ as maximum directors are allowed to a company.
(a) five
(b) fifteen
(c) fifty
Answer:
(b) fifteen

Question 4.
A maximum of _____________ Directorships is allowed to a person.
(a) two
(b) ten
(c) twenty
Answer:
(c) twenty

Question 5.
A maximum of _____________ Directorships of a public company is allowed to a person.
(a) one
(b) ten
(c) twenty
Answer:
(b) ten

Question 6.
_____________ is a unique identification number required to be a Director.
(a) PIN
(b) DIN
(c) TIN
Answer:
(b) DIN

Question 7.
_____________ powers are the powers given to Board under the Act.
(a) Statutory
(b) Managerial
(c) Administrative
Answer:
(a) Statutory

Question 8.
Director represents company in his role as _____________
(a) Agent
(b) Managing Partner
(c) employee
Answer:
(a) Agent

Question 9.
Managing Director is appointed for a period of _____________ years
(a) 5
(b) 10
(c) 15
Answer:
(a) 5

Question 10.
_____________ is required to work under superintendence, control, guidance of the Board.
(a) Government
(b) ROC
(c) Managing Director
Answer:
(c) Managing Director

Question 11.
_____________ is an employee of the company.
(a) Alternate director
(b) Non-executive Director
(c) Whole-time director
Answer:
(c) Whole time Director

Question 12.
_____________ need not be a director of the company.
(a) Manager
(b) Managing Director
(c) Whole-time director
Answer:
(a) Manager

Question 13.
_____________ needs a whole time director.
(a) Listed company
(b) Partnership
(c) OPC
Answer:
(a) Listed company

Question 14.
To provide guidance to Board is _____________ duty of Company Secretary.
(a) Personal
(b) General
(c) Statutory
Answer:
(c) Statutory

Question 15.
Only a member of _____________ can be a practicing Company Secretary.
(a) ICAI
(b) ACCA
(c) ICSI
Answer:
(c) ICSI

Question 16.
_____________ is to be prepared in prescribed form MR-3.
(a) Annual Report
(b) Auditors Report
(c) Secretarial Audit Report
Answer:
(c) Secretarial Audit Report

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(a) Board of Directors	(1) Nominated by the Board
(b) Managing Director	(2) Assists and advises the Board
(c) Company Secretary	(3) Automatic Appointment
(d) First Directors	(4) Appointed by ROC
(e) Alternate Director	(5) Extensive Powers of management
	(6) Substantial Powers of management
	(7) Appointed by Promoter
	(8) Assist and Advises the Government
	(9) Negligible Powers of management
	(10) Nominated by Council

Answer:

Group ‘A’	Group ‘B’
(a) Board of Directors	(5) Extensive Powers of management
(b) Managing Director	(6) Substantial Powers of management
(c) Company Secretary	(2) Assists and advises the Board
(d) First Directors	(7) Appointed by Promoter
(e) Alternate Director	(1) Nominated by the Board

Question 2.

Group ‘A’	Group ‘B’
(a) Public company	(1) Arises due to death of Director
(b) Private company	(2) Collective Powers
(c) Secretarial Auditor	(3) Individual Powers to Directors
(d) Casual Vacancy of a Director	(4) Arises due to additional work
(e) Powers of the Board	(5) Appointed by Managing Director
	(6) At least 2 (two) Directors
	(7) At least 3 (three) Directors
	(8) At least 15 (fifteen) Directors
	(9) At least 1 (one) Director
	(10) Appointed by the Board

Answer:

Group ‘A’	Group ‘B’
(a) Public company	(7) At least 3 (three) Directors
(b) Private company	(6) At least 2 (two) Directors
(c) Secretarial Auditor	(10) Appointed by the Board
(d) Casual Vacancy of a Director	(1) Arises due to death of Director
(e) Powers of the Board	(2) Collective Powers

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
The organization with distinct features of separate ownership and management.
Answer:
Joint-stock company

Question 2.
The officer is responsible for the company’s finances.
Answer:
Chief Financial Officer

Question 3.
The body of elected representatives of the company.
Answer:
The Board of Directors

Question 4.
The officer is a statutory and administrative officer and also acts as co-ordinator of the company.
Answer:
Company Secretary

Question 5.
Qualification required to be a Company Secretary.
Answer:
Member of ICSI

Question 6.
Agents, Trustees, and Managing Partners of the company.
Answer:
The Board of Directors

Question 7.
The audit which checks compliances of different legislations.
Answer:
Secretarial audit

Question 8.
This KMP signs documents of the company requiring authentication by the company.
Answer:
Company Secretary

Question 9.
The nature of the relationship of Directors with the company.
Answer:
Fiduciary

Question 10.
Name the Secretarial Standard – 1.
Answer:
Secretarial Standards on meetings of the BOD

Question 11.
Name the Secretarial Standard – 2.
Answer:
Secretarial Standards on General Meeting

Question 12.
Name the Secretarial Standard – 3.
Answer:
Secretarial Standards on Dividend

1D. State whether the following statements are True or False.

Question 1.
A large number of shareholders necessitates the company to have a separate managerial body.
Answer:
True

Question 2.
The maximum number of Directors allowed to a company is 15 (fifteen).
Answer:
True

Question 3.
A public company should have a minimum of 10 (ten) directors.
Answer:
False

Question 4.
DIN is required for Secretaryship.
Answer:
False

Question 5.
Executive Director is called an outside Director.
Answer:
False

Question 6.
The promoter of a company cannot be the Independent Director.
Answer:
True

Question 7.
Only individuals can be directors.
Answer:
True

Question 8.
The casual vacancy of the Board is filled by the members.
Answer:
False

Question 9.
To function as per Articles of Association of the company is the statutory duty of the Board.
Answer:
True

Question 10.
A Director is an employee of the company.
Answer:
False

Question 11.
The Managing Director is appointed by a resolution.
Answer:
True

Question 12.
The minimum and maximum age to be a Managing Director is 21 and 70 respectively.
Answer:
True

Question 13.
A company may appoint more than one M.D.
Answer:
True

Question 14.
Indian companies prefer a Managing Director over a Manager.
Answer:
True

1E. Find the odd one.

Question 1.
Woman Director, Promoter, Executive Director.
Answer:
Promoter

Question 2.
Absent at Board Meeting, failure to disclose an interest, DIN.
Answer:
DIN

1F. Complete the sentences.

Question 1.
Separate ownership and management is a unique feature of _____________
Answer:
Company

Question 2.
Minimum number of Directors for a private company should be _____________
Answer:
Two

Question 3.
Minimum number of Directors for a public company should be _____________
Answer:
Three

Question 4.
Minimum number of Directors for an OPC should be _____________
Answer:
One

Question 5.
First Directors of a company are appointed by _____________
Answer:
Promoter

Question 6.
At least one Woman Director is required by _____________ company.
Answer:
Listed Company

Question 7.
Casual vacancy on Board is filled by _____________
Answer:
Board

Question 8.
Director is the guardian of interest of company as _____________
Answer:
Trustees

Question 9.
First Secretary is appointed by _____________
Answer:
Promoters

Question 10.
The audit which checks the compliance of Companies Act is called as _____________
Answer:
Secretarial Audit

1G. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(1) Rotational Director	…………………..
(2) ……………………….	Alternate Director
(3) Woman Director	…………………..
(4) ……………………….	First Director

(Every Listed Company, Appointee by Promoters, Appointed in Place of a director who is absent, Retire by Rotation)
rotation)
Answer:

Group ‘A’	Group ‘B’
(1) Rotational Director	Retire by Rotation
(2) Appointed in Place of a director who is absent	Alternate Director
(3) Woman Director	Every Listed Company
(4) Appointee by Promoters	First Director

1H. Answer in one sentence.

Question 1.
Who is the officer responsible for the company’s financial plan?
Answer:
Chief Financial Officer is responsible for the company’s financial plan.

Question 2.
What is the importance of Secretarial Standards?
Answer:
The main aim of Secretarial Standards is to standardize all diverse secretarial practices prevailing in the corporate world.

Question 3.
Who provides guidance to the Board of Directors?
Answer:
Company Secretary provides guidance to the Board of Directors.

Question 4.
What is the tenure of ‘Managing Director?
Answer:
The tenure of the Managing director is Five Years.

1I. Correct the underlined word and rewrite the following sentences.

Question 1.
A public company must have a minimum of 15 directors.
Answer:
A public company must have a minimum of 03 directors.

Question 2.
First Directors are appointed by ROC.
Answer:
First Directors are appointed by Promoters.

Question 3.
Secretarial Standards are given by the Companies Act, 2013.
Answer:
Secretarial Standards are given by the Institute of Company Secretaries of India.

2. Explain the following terms/concepts.

Question 1.
Director
Answer:
Director is a person appointed to manage, direct and supervise the company. According to Sec-2(34) of the act, “Director means a director appointed to the Board of the company”.

Question 2.
Managing Director
Answer:
Managing Director is a director appointed by virtue of an agreement with the company; or by passing a resolution in the general meeting or by its Board of Directors or by virtue of Memorandum of Associations or Articles of Association. He is entrusted with substantial powers of management of the affairs of the company. He is appointed for a period of 5 years.

Question 3.
Independent Director
Answer:
As per section 149 of the Companies Act, 2013, any director other than a managing director, whole-time director, or a nominee director is termed as an independent director.

Question 4.
Executive Director
Answer:
Executive Director is also called as ‘Whole Time Director’, He is in full-time employment with the company. He plays an important role in the day-to-day management of the company.

Question 5.
Non-Executive Director
Answer:
Non-Executive Director is known as ‘Outside Director’. Non-Executive Director is not involved in the day-to-day management of the company. He is appointed to get second opinions from the board.

Question 6.
Alternate Director
Answer:
Alternate Director is a director who is nominated by the board in the place of absence director. He is appointed for a minimum of 3 months.

Question 7.
Casual vacancy of Director
Answer:
The casual vacancy is created due to the death of a director, which is filled by the board at the board meeting. It is valid till the vacating director’s incomplete term.

Question 8.
Chief Financial officer
Answer:
An officer responsible for the company’s finances is called Chief Financial Officer. He need not be a director of the company. He has to compulsory sign the audited financial statements of the company.

Question 9.
Company Secretary
Answer:
The company secretary is appointed to perform functions of the company and he is appointed by a resolution of the Board. He has to follow the terms and conditions decided by the board. He should be a member of ICSI.

Question 10.
Secretarial Standard
Answer:
It is formulated by ICSI and approved by Central Government through the Ministry of Corporate Affairs (MCA). The main purpose of setting Secretarial Standards is to standardized fine corporate government practices prevailing in companies.

Question 11.
Secretarial Audit
Answer:
It is an audit that monitors the compliance requirements of the company. The main aim of such an audit is to detect errors and mistakes in compliance with the rules and regulations of the Companies Act. It builds confidence among regulators, management, and shareholders of the company.

Question 12.
The Board of Directors
Answer:
Representatives elected by the Equity Shareholder in their Annual General Meeting are called as Board of Directors. They are allotted certain powers to control and manage the business of the firms.

3. Study the following case/situation and express your opinion.

1. Mr. A is a commerce graduate. He has vast experience in the field of finance and the financial market. He wishes to become a director of PQR Co. Ltd.

Question (a).
Is he required to obtain DIN?
Answer:
He was required to obtain DIN. It is compulsory to acquire DIN for every Director.

Question (b).
Can PQR Co. Ltd. object to his directorship on lack of specialized qualification?
Answer:
The company act has not prescribed any academic or professional qualification for directors, so he can obtain directorship.

Question (c).
If he is appointed as director of PQR Co. Ltd, is he entitled to remuneration?
Answer:
The managerial position entitles him to get managerial remuneration so if Mr. A is appointed as director of PQR Co. Ltd then he is entitled to remuneration.

2. Mr. Z is a member of the Institute of Company Secretaries of India.

Question (a).
Can Mr. Z be appointed as pro-tem Secretary of LMN Ltd. which is under formation?
Answer:
Yes, Mr. Z can be appointed as pro-tem secretary of LMN Ltd. which is under formation. The First Secretary is appointed by the promoters of the company.

Question (b).
Can Mr. Z work as Secretarial Auditor?
Answer:
Yes, Mr. Z can work as Secretarial Auditor because he is a member of ICSI.

Question (c).
Mr. Z wishes to be employed as whole time Secretary in companies ABC Ltd. and OPC Ltd. Is he allowed?
Answer:
Mr. Z, as a whole-time secretary, cannot hold office in more than one company. So, Mr. Z can be employed either in ABC Ltd or One Person Company and not in both.

3. Mr. M wishes to be the Managing director of QRS Ltd.

Question (a).
The age of Mr. M is 30 years. Can he be appointed as MD of a company?
Answer:
Yes, Mr. M is 30 years old and the age required to be completed for MD’s post is 21 years. So he can be appointed as MD of a Company.

Question (b).
Is it necessary that Mr. M should be one of the directors on the Board of QRS Ltd?
Answer:
Yes, It is necessary that Mr. M should be one of the directors on the board of QRS Ltd. He should be appointed by the board.

Question (c).
For how long a period QRS Ltd. can appoint Mr. M. as a Managing Director?
Answer:
QRS Ltd can appoint Mr. M. as a managing director for a period of 5 years.

4. Distinguish between the following.

Question 1.
Director and Managing Director
Answer:

Basis	Director	Managing Director
1. Meaning	Director is the elected representative of the shareholders of the company.	The managing director represents the board in the day-to-day activities of the business.
2. Appointment	He is elected at the Annual General Meeting by the members of the company.	He is appointed by the board of directors.
3. Tenure	Directors of public companies retire by rotation. Maximum tenure is of 3 years, 1/3 of Independent Director is not liable to retire by rotation.	The tenure of managing director is for a term of five years.
4. Remuneration	Remuneration for services is given as per specific provisions. The director is given sitting fees to attend the board meeting which may extend up to ₹ 1 lakh plus remuneration.	M.D is entitled to either a monthly salary or 5 % of the net profit. If more than one M.D. is appointed then maximum remuneration cannot be more than 10% of the net profit.
5. Status	Directors are elected representatives of the shareholders managing company in absence of shareholders. They can be agents of the company but not employees of the company.	Managing Director has dual status i.e. a director and a manager (employee).
6. Positions held	Director is the only member or person on the board.	The managing director is the director on the Board. M.D. is the whole time manager in the company.
7. Number of companies	Director can work in 20 companies at a time wherein a maximum of 10 public companies at a time.	A person can be an M.D. of a maximum of 2 companies at a time.

Question 2.
Managing Director and Manager
Answer:

Basis	Managing Director	Manager
1. Meaning	The Managing Director is appointed by the Board to look after the day-to-day administration of the company.	The manager is in charge of the whole management affairs of the company.
2. Appointment	The managing director is appointed by an agreement with the company or by resolution passed by the company in a Board meeting or by virtue of its Articles of Associations of the company.	The manager is appointed under a contract of service.
3. Remuneration	MD is entitled to either a monthly salary or 5% of net profit. If there is more than one managing director, the maximum remuneration payable is 10% of the net profit.	Maximum remuneration to a manager cannot be more than 5% of the net profit.
4. Number of posts	A company may have more than one Managing Director. He can be M.D. in maximum of 2 companies.	The company can have only one post of manager.
5. Power	He is given substantial powers of management.	He is entrusted with whole powers of management.
6. Position held	The managing director must be the director of the company.	The manager need not be a director of the company.

Question 3.
Managing Director and Whole Time Director
Answer:

Basis	Managing Director	Whole Time Director
1. Meaning	The managing director represents the board in the day-to-day management of the company.	The whole time director devotes whole time to the working of the company.
2. Powers	The Managing Director is given substantial powers of management.	A whole-time director does not have the power to take decisions on policy matters.
3. Number of posts	A person can be an M.D. of a maximum of 2 companies at a time.	More than one whole-time directorship is not possible at a time.
4. Performance	He manages the affairs and business of the company.	He performs important administrative functions of the company.

5. Answer in brief.

Question 1.
What is DIN?
Answer:

• It means Director Identification Number.
• DIN is a Unique Identification Number for an existing director or person intending to be the director of a company.
• It is compulsory to acquire DIN by Director.
• It helps in the detection and handling of offenses committed by a director.
• It is obtained through an online process by filing an application.

Question 2.
State any four powers of the Board of Directors.
Answer:

• Director is a person appointed to manage, direct and supervise the affairs of the company.
• The power of the Board of Directors are as follows:
• To appoint or remove key managerial personnel: The Board of Directors has the power to appoint and remove key managerial personnel.
• To recommend dividend: The board of directors recommends the dividend to the shareholders.
• To fill a casual vacancy in the Board: Casual vacancy in the board arises due to different reasons such as the death of a director who is filled by the Board at the Board meeting.
• To issue securities whether in India or abroad: Board of Director’s issue securities means shares, debentures, bonds) in India and abroad also.

Question 3.
Mention any four ways in which the office of a director becomes vacant.
Answer:
The office of a Director shall automatically become vacant in the following ways:

• Any disqualification: A person cannot be appointed as a director if he is of unsound mind or insolvent or convicted by the court.
• Absentee at Board meeting: Director who has been absent in the meeting of the board of directors held during the period of 12 months with or without taking leave of absence of the Board.
• Disqualification by Court or Tribunal: Director has to vacate office if he has been disqualified by an order of a court or the Tribunal.
• Provision of the Act: Director has to vacate office if he is removed under the provisions of the Companies Act.

Question 4.
State the powers of a Managing Director.
Answer:
As it is stated in the definition itself the Managing Director is entrusted with the substantial powers of management, which clearly indicates that he has been given certain important powers of routine business matters of a company.
The powers exercised by him are fellows:

• To act as a link between the Board of Directors and the managerial staff.
• To look after the management and administration of a company.
• To appoint the company employees.
• To participate in policymaking as well as policy execution.
• To sign contracts on behalf of a company.
• To decide about the investment of funds of a company.
• To receive remuneration from a company.

Question 5.
State the statutory duties of a company secretary.
Answer:
Secretary is an employee of the company. He enjoys the power and advises the management.
Statutory duties of a company secretary are as follows:

• To organize meetings and be present at all the meetings of the company.
• To maintain the minutes of all meetings.
• To issue notices and circulars to the members of the company.
• To maintain and update the Register of members and debenture holders and other books of the company.
• To file all necessary returns with the Registrar of Companies.
• To communicate with the shareholders on various matters.

6. Justify the following statements.

Question 1.
Directors are managing partners.
Answer:

• Directors have to work as a team as Board of Directors, not as an individual.
• The powers by Board are subject to provisions of the Companies Act and Memorandum and Articles of Associations.
• Director is required to perform his functions.
• He represents shareholders to conduct and manage the business of the company on their behalf.
• They are entrusted with vast powers of management and perform several functions which are proprietary in nature like allotment of shares, raising of loans, investing funds of the company.
• This is because they themselves are significant shareholders of the company.
• In fact, they are the most active shareholders of the company.
• Thus, Directors are the managing partners of the company.

Question 2.
A Director is an agent of the company.
Answer:

• Since the company is an artificial person, it needs to be represented by the Director.
• They deal on behalf of the company.
• Directors should deal skillfully, carefully, and diligently.
• Directors are held liable as an, while company is held liable as the principal.
• A Director is an agent as he acts between the company and shareholders.
• Thus, a director is an agent of the company.

Question 3.
The company has a distinct feature of separate ownership and management.
Answer:

• The company has a unique feature of separate ownership and management.
• Shareholders are its owner and Directors are its managers.
• Being an artificial person, it needs a human agent to manage and control the working of the company.
• Shareholders are scattered all over therefore management of the company by them is not possible.
• Also, the shareholders are not interested in the management of such a big organization.
• The company as an artificial person having no physical existence needs humans to control its affair.
• Thus, the company has a distinct feature of separate ownership and management.

Question 4.
DIN helps investors of the company.
Answer:

• DIN is a unique identification number for an existing director or person intending to be the director of the company.
• It is compulsory to acquire DIN by every Director.
• Din is Pre-require for e-filling of company’s documents.
• It helps the investors of the company to make a more accurate and informed decisions because they get to known the composition of the top management of the company.
• It also helps to handle the problems created due to a company after collecting or raising money from the public.
• Thus, I agree with the given statement.

Question 5.
Directors have to work as a team.
Answer:

• Directors have to work as a team of “Board of Directors” and not individually.
• He exercises the power as a Board which is subject to provision of the Act.
• Director is a representative of shareholders so he has to work collectively in the best interest of the company and its shareholders.
• He cannot take decisions alone on behalf of the company.
• Thus, directors have to work as a team.

Question 6.
Directors play a triple role.
Answer:

• Directors play a triple role i.e. in the form of an agent, as a managing partner, and as a trustee.
• As an agent, the director deals skillfully, carefully, and elegantly while representing the company with outsiders.
• As a managing partner, the director acts as a representative of the shareholder and manages the company on their behalf.
• As a trustee, the director acts as a guardian of the interest of shareholders and a company.
• They use the company’s funds in the most appropriate manner and cautiously.
• They are also the trustee of all the assets of the company.
• Thus, directors play a triple role.

Question 7.
Company Secretary plays a triple role.
Answer:

• Company Secretary plays a three-fold role in the form of – as a statutory officer, as a coordinator, and as an administration officer.
• As a statutory officer, the secretary signs the document for authentication, files annual returns to ROC, maintains various statutory registers and ensures compliance with the law.
• As a coordinator, the secretary acts as a network between the Board of Directors and other executive officers at different levels. He acts as an internal as well as external coordinator for the company.
• As an administrative officer, the secretary ensures the implementation of various policies of the company and also supervises and controls the functioning of various departments of the company.
• Thus, Company Secretary plays a triple role.

Question 8.
A director cannot be called an employee of the company.
Answer:

• Directors are elected representatives of the company’s shareholders.
• The status of an employee is within the limits of his contract and service.
• His employer holds the ultimate control to guide his activities and functions.
• These limits of an employee cannot be applied to a director.
• So a director cannot be called an employee of the company.
• Thus, a director cannot be called an employee of the company.

Question 9.
The managing Director has substantial powers of management.
Answer:
As it is stated in the definition itself the Managing Director is entrusted with the substantial powers of management, which clearly indicates that he has been given certain important powers of routine business matters of a company.
The powers exercised by him are as follows:

• To act as a link between the Board of Directors and the managerial staff.
• To look after the management and administration of a company.
• To appoint the company employees.
• To participate in policymaking as well as policy execution.
• To sign contracts on behalf of a company.
• To decide about the investment of funds of a company.
• To receive remuneration from a company.

Question 10.
Indian companies prefer to appoint a Managing Director than a Manager.
Answer:

• Indian company prefers to appoint managing director rather than manager because Managing Directors holds dual authorities and he is able to influence the board of director in a better way.
• Manager need not be a director of a company while the managing director has to be director of a company,
• The company cannot have more than one manager, while it can have more than one managing director.
• Thus, Indian companies prefer to appoint a managing director than a manager.

Question 11.
Pro-tem secretary is helpful to the company.
Answer:

• The first secretary of the company is appointed by the promoters of the company.
• The first secretary is called as ‘pro-tem’ secretary.
• Pro-tem secretary appointed by promoters may or may not be appointed as full-time or regular Secretary.
• Pro-tem secretary helps in fulfilling different formalities during the formation of the company.
• Thus, the Pro-tem secretary is helpful to the company.

Question 12.
Secretarial Standards should be in conformity with the Act.
Answer:

• The Secretarial Standards are formulated by the Institute of Company Secretaries of India and approved by the Central Government through the Ministry of Corporate Affairs.
• The Companies Act, 2013, makes compliance with the Secretarial Standard mandatory.
• It leads to provide better monitoring of compliances of law, strengthening the process of the Board, and create confidence in investors.
• The Secretarial Standards aim at achieving integrating, harmonizing, and standardizing fine corporate governance practices across all companies.
• Thus, Secretarial Standards should be in conformity with the Act.

Question 13.
Secretarial Standards lead to better legal compliance.
Answer:

• Companies follow diverse practices based on differing business cultures and varied usages over a period of time.
• The Secretarial Standards aim at achieving integrating, harmonizing, and standardizing fine, corporate governance across all companies
• It leads to provide better monitoring of compliance of the law, strengthening the process of the Board, and create confidence in investors.
• Secretarial Standards are reviewed by Secretarial Standard Board (SSB) once a year or whenever changes are made in the law.
• Thus, Secretarial Standards lead to better legal compliance

Question 14.
A secretarial Audit is required under the laws.
Answer:

• It is an audit that checks the compliance of various legislation including the Companies Act, other Corporate Acts, and economic laws.
• It aims at detecting errors and mistakes in the compliance mechanisms.
• It gives confidence to regulators, management authorities, and shareholders that the company is following a disciplined approach of evaluation and improve effectiveness and risk management.
• Thus, Secretarial Audit is required under the laws.

7. Answer the following questions.

Question 1.
Explain the Role of Directors.
Answer:
Director is a person appointed to manage, direct and supervise the affairs of the company.
The elected representatives of the shareholders are called Directors.

Role of the Directors:

• He helps the investors to take accurate decision.
• He has to fill casual vacancies on the board.
• He has to recommend dividends.
• He has to issue securities in India or abroad.
• He manages a company on behalf of the shareholder.
• He appoints the first auditor of the company.
• He can appoint or remove Key Managerial Personnel.
• He can borrow the money on behalf of the company.
• His role is full of trust, loyalty, care, and good faith.
• Directors act as a trustee, agent and managing partner for the company.

Question 2.
Explain the duties of a Director.
Answer:
A director’s relationship with a company is regarded as fiduciary in nature. It means his duty is full of trust, care, and good faith.
The duties of directors can be categorized into two heads:

1. Statutory Duties:
   • To file a return of Allotment.
   • To act in accordance with the Articles of the company.
   • To disclose an interest in a transaction.
   • To attend Board meetings.
   • To appoint first Auditors of the company.
2. General Duties:
   • Duty of good faith i.e. he must act in the best interest of the company.
   • Duty of care i.e. he must take utmost care in the performance of work assigned.
   • Duty not to delegate i.e. he is required to perform his function personally. He may delegate in case of emergency.

Question 3.
Explain the Managing Director.
Answer:
Definition: The Companies Act, has defined a Managing Director as “A Director who by virtue of an agreement with the company or of a resolution passed by a company in the general meeting or by its Board of Directors or by virtue of its Memorandum or Articles of Association, is entrusted with substantial powers of management of the company”.

Disqualification:

• Any person less than 21 years of age and more than 70 years of age.
• A person who is an undischarged insolvent person or has at any time been adjudged as an insolvent.
• A person who has suspended payment to his creditors or made a composition with them.
• A person who is, or has been convicted by a court of an offense with a sentence of more than 6 months period.

Appointment:
A Managing Director may be appointed by any one of the following ways:

• by an agreement with a company.
• by the resolution passed at the general meeting.
• by the Board of Directors.

Term of office:
The term of office of the Managing Director cannot exceed 5 years at a time, but he can be reappointed as such for a further period of five years.

The number of Managing Directorship:
A Managing Director can not act as such for more than two companies at the same time.

Remuneration:
The remuneration paid to the Managing Director is subject to the maximum limit of 5% of the net profit of a company or a monthly salary. If a company has more than one Managing Director then total remuneration paid to them (all) shall not exceed 10% of the net profit.

Powers of a Managing Director:

• To act as a link between the Board of Directors and the managerial staff.
• To look after the management and administration of a company.
• To appoint the company employees.
• To participate in policymaking as well as policy execution.
• To sign contracts on behalf of a company.
• To decide about the investment of funds of a company.
• To receive remuneration from a company.

Duties of a Managing Director:

• To act on behalf (agent) of the Board of Directors.
• To implement the decision of the Board.
• To supervise, direct, control, and guide the day-to-day affairs of the business.
• To guide the senior executives in their administrative work.
• To report to the Board about programmes made or any problem faced by a company.
• To chair the Board meetings and general meetings, if necessary.
• To manage routine work of a company.
• To sign all the contracts and documents on behalf of the company.

Question 4.
Explain the Company Secretary.
Answer:
Meaning:

• Secretary is an employee of the company and he is appointed to perform functions of a company secretary,
• He should be a member of the Institute of Company Secretaries of India (ICSI).
• The first secretary is appointed by the promoter of the company and he is called a ‘pro-tem’ secretary.
• He holds liable for non-compliance with the provisions of the Act.

Duties of a Company Secretary:
It is categorized as (A) Statutory Duties and (B) General Duties.

(A) Statutory Duties:

• To organize and attend meetings of the company.
• To prepare minutes of meetings.
• To communicate with shareholders on various matters.
• To issue notices and circulars to the members of the company.
• To maintain various Registers and books of the company
• To file returns with the ROC.

(B) General Duties:

• To provide guidance to the Board of Directors as needed.
• To discharge duties towards regulators and authorities of the company.
• To assist the Board of Directors in conducting the business of the company.
• To perform duties allotted by the Board.

Rights of a Secretary:

• To control and supervise the working of departments of the company.
• To get indemnified by the company, if any loss is suffered by the secretary.
• To sign documents requiring authentication.
• To get remuneration from the company.

Question 5.
Explain the role of the Company Secretary.
Answer:
The company secretary plays a crucial and important role in the administration of the company.
The emphasis on good governance has increased the role of the secretary in protecting the interest of investors.

Role of Company Secretary:

• Secretary as a Statutory officer:
• To sign documents for authentication.
• To sign and deliver Annual Returns and other documents and to the Registrar of Companies.
• To maintain different statutory registers like
  • Minutes of General and Board meetings of the company.
  • Registers of Members and Debenture holders Register of Directors and KMP and their shareholdings.
• To ensure compliance with the law

(ii) Secretary as a Co- ordinator:

• To implement policies framed by the Board.
• To act as a link between the Board and other executives at different levels.
• To act as a mouthpiece or spokesperson of the Board.
• To act as an internal and external coordinator.

(iii) Secretary as an Administration officer:

• To ensure implementation of the policies of the company.
• To supervise and control the functioning of different departments of the company.
• To take an overall view of different aspects of the company’s administration and develop a strong and efficient organizational setup.
• To contribute to the administration of the company.

Balbharti Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 5 Members of a Company Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 5 Members of a Company

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
____________ is a person whose name is entered in the Register of Members.
(a) Member
(b) Creditors
(c) Registrar
Answer:
(a) Member

Question 2.
A person can be called as a Member when the name is entered in ____________
(a) Register of charges
(b) Register of Members
(c) List of Members
Answer:
(b) Register of Members

Question 3.
A ____________ cannot be a member of a company.
(a) foreigner
(b) woman
(c) minor
Answer:
(c) minor

Question 4.
When a person buys shares of a company by filling up an application form, a person becomes a member by ____________
(a) Application and Allotment of shares
(b) Subscribing to Memorandum
(c) Transmission of Shares
Answer:
(a) Application and Allotment of shares

Question 5.
____________ means a person ceases being a member of the company of membership.
(a) Termination of membership
(b) Acquisition of membership
(c) Subscription to membership
Answer:
(a) Termination of membership

Question 6.
A member has right to participate in General Meetings means, he has a right to ____________
(a) receive dividends
(b) receive notice and agenda of a meeting
(c) to transfer his shares
Answer:
(b) receive notice and agenda of a meeting

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(a) Insane person	(1) Transfer of shares by operation of law
(b) Foreigner	(2) Cannot be a member
(c) Transmission of shares	(3) Cessation of membership
(d) Surrender of shares	(4) To get copies of Auditor’s, Directors’ Report, etc.
(e) Right of Members	(5) Can be a Member
	(6) To attend a board meeting
	(7) Duties of member
	(8) Surrendering all assets to the company
	(9) Demand or claim money from the company
	(10) Transfer of shares by order of Secretary

Answer:

Group ‘A’	Group ‘B’
(a) Insane person	(2) Cannot be a member
(b) Foreigner	(5) Can be a Member
(c) Transmission of shares	(1) Transfer of shares by operation of law
(d) Surrender of shares	(3) Cessation of membership
(e) Right of Members	(4) To get copies of Auditor’s, Directors’ Report, etc.

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
End of membership of a person.
Answer:
Termination of membership

Question 2.
A person whose name is entered in the Register of Members.
Answer:
Member

Question 3.
Book in which names of all members are entered.
Answer:
Register of Members

Question 4.
Becoming a member of a company.
Answer:
Acquisition of membership

Question 5.
The subscribers of this document are considered Members of the company.
Answer:
Memorandum of Association

1D. State whether the following statements are True or False.

Question 1.
Buying shares is the most common way to become a Member of the company.
Answer:
True

Question 2.
Both individuals and body corporates can be members of the company.
Answer:
True

Question 3.
Legal competency to enter into contracts is one of the criteria to become a member of the company.
Answer:
True

Question 4.
Limited Liability Partnership cannot be a member of the company.
Answer:
False

Question 5.
Karta of HUF can be a member of the company.
Answer:
True

Question 6.
Member of the company is conferred with several rights.
Answer:
True

Question 7.
Member is entitled to profits of the company when a dividend is declared.
Answer:
True

Question 8.
Members of the company can attend general and Board meetings of the company.
Answer:
False

Question 9.
The right to appoint Director is given to Members.
Answer:
True

Question 10.
Minor can be a member of the company.
Answer:
False

1E. Find the odd one.

Question 1.
Subscribing to Memorandum, Forfeiture of Shares, Application, and allotment of shares.
Answer:
Forfeiture of shares

Question 2.
Death or insolvency of member, Application, and allotment of shares. Surrender of shares.
Answer:
Application and Allotment of shares

1F. Complete the sentences.

Question 1.
A person whose name is entered in the Register of Member of a company is called ____________
Answer:
Member

Question 2.
In case of death or insolvency of a member, he will cease to be a ____________
Answer:
Member of a Company

Question 3.
Members have a right to appoint and remove the ____________
Answer:
Director

1G. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(1) Minor	……………………..
(2) Co-operative society	………………………
(3) ……………………	Can hold shares in the name of partners

(Partnership firm, Cannot become a member of a company, Can become a member of a company)
Answer:

Group ‘A’	Group ‘B’
(1) Minor	Cannot become a member of a company
(2) Co-operative society	Can become a member of a company
(3) Partnership Firm	Can hold shares in the name of partners

1H. Answer in one sentence.

Question 1.
Which individuals cannot become a member of a company?
Answer:
Minor, insolvent, insane, or lunatic cannot become a member of a company.

Question 2.
What is the common way of becoming a member of a company?
Answer:
Buying shares is the common way of becoming a member of a company.

1I. Correct the underlined word and rewrite the following sentences.

Question 1.
A Minor can be a member of a company.
Answer:
A Guardian/Mai or person can be a member of a company.

Question 2.
Partnership Firm can be a member of the company.
Answer:
The Partnership firm cannot be a member of a company.

2. Explain the following terms/concepts.

Question 1.
Member
Answer:
A person who is a subscriber to the Memorandum of Association of a Company is called a member.
OR
A person whose name is entered in the Register of Members of the company is called a member of a company.

Question 2.
Transmission of shares
Answer:
Transmission of shares refers to the transfer or passing of property or titles in shares by the operation of law from a member to his legal representative. When transmission of shares takes place the membership of the original shareholder is terminated.

Question 3.
Cessation of Membership
Answer:
Cessation of Membership of a company means the discontinuation of membership. The name of the old member is removed from the Register of the member.

Question 4.
Acquisition of Membership
Answer:
Any person who is competent to contract can become a member after fulfilling certain requirements for the membership of the company.

Question 5.
Eligibility of Membership
Answer:
Buying shares amount to making a contract, so any entity i.e. person/organization competent to make contact can be a member of the company.

3. Study the following case/situation and express your opinion.

1. Mrs. & Mr. A work in a Bank. They have a daughter named Ms. Z who is 11 years old.

Question (a).
Can Mrs. & Mr. A invest in shares of the company?
Answer:
Yes, Mrs & Mr. A can invest in shares of the Company.

Question (b).
Can they buy shares in the name of their daughter Ms. Z?
Answer:
Yes, Mrs. A and Mr. A can buy shares in the name of their daughter Ms. Z.

Question (c).
Justify your answer in (a) & (b) in one sentence only.
Answer:
Justification:
Mrs. A and Mr. A can invest in shares of the Company as they are major citizens.
Similarly, they can buy shares on behalf of their daughter as they are guardians of Ms. Z.

2. M/s. ABC is a Partnership firm owned by Dr. A, Dr. B, Dr. C. The doctors want to invest the profits of ABC in the shares of a company.

Question (a).
Can M/s ABC buy the shares of the company?
Answer:
Yes M/s ABC can buy the shares of the company.

Question (b).
Can profits of M/s. ABC be invested in shares held in the names of Dr. A or Dr. B or Dr. C?
Answer:
They can invest profit of M/s ABC in the names of Dr. A or Dr. B or Dr.C.

Question (c).
Are the doctors eligible to invest in shares of the company?
Answer:
Yes, doctors are eligible to invest in shares of the company.

3. ZEN Limited has some investible profits. Please guide Zen limited with respect to the following?

Question (a).
Can ZEN Limited invest in the shares of itself?
Answer:
No, ZEN Limited cannot invest in the shares of itself.

Question (b).
Can ZEN Limited invest in the shares of TEN Limited?
Answer:
Yes, ZEN Limited can invest in the shares of TEN Limited.

Question (c).
Justify your answers in (a) & (b) in one sentence only.
Answer:
Justification:
ZEN limited being a legal person can be a member of another company TEN Limited. It cannot be a member of its own company as per the Companies act.

4. Answer in brief.

Question 1.
State any four ways of acquiring membership of a company.
Answer:
Any person who is competent to contract can become a member after fulfilling certain requirements for membership in a company.
The different ways to acquire membership of a company are explained below:
(i) By Subscription:

• The subscriber to the Memorandum of Association of a company, who are signatories to the Memorandum of the company is deemed to have agreed to become the members of the company.
• When the company is registered, their names are entered as the members in the Register of Members. In this case, neither an application nor the allotment of shares is important to become a member.

(ii) By Application and Allotment of shares:

• This is one of the methods of acquiring membership. An application for shares is made by an applicant in response to the invitation given by the company through its prospectus.
• The company then allots the shares as an acceptance to his application and offers the shares. The applicant then becomes the shareholder and his name is entered in the ‘ Register of Members’.

(iii) By Transfer of shares:

• After acquiring the shares by way of sale or gift, the buyer (transferee) is required to get the shares registered in his name in the Register of Members of the company.
• For this an instrument of transfer signed by the buyer and the seller accompanied by the share certificate is to be lodged (sent to) with the company.
• When the company approves the transfer, the name of the transferee is entered in the Register of Members and thus, be becomes a member of a company. The name of the earlier member is struck off from the Register.

(iv) By Transmission of shares:

• In the event of the death or lunacy of a member, his legal heir or representative automatically becomes the shareholder.
• He is entitled to have his name entered in the Register of Members. He can do so by making an application to the company, supported by legal evidence of his title.
• When the company approves the title the name of the legal representative is entered in the Register of Members and thus, he becomes a member of a company.
• This transfer of shares by the operation of law is called the transmission of shares.

Question 2.
State any four ways of cessation of membership of a company.
Answer:

• Cessation/Termination of a member means the discontinuation of membership. His relationship with the company comes to an end.
• The name of the members is removed from the Register of Members as cessation.
• The original member is thus prevented from exercising his rights of membership.

The membership of a person may be terminated in any one of the following ways:

• Winding up of a company: When a company is ‘winding up’ or exists no more due to the process of law, the membership of all the members stands terminated or cessation automatically.
• Surrender of shares: When the company accepts surrender of partly paid-up shares, if permitted by its Articles, the membership of the shareholder is terminated.
• Transmission of shares: Transmission of shares refers to the transfer or passing of property or titles in shares by the operation of law from a member to his legal representatives. Such an automatic transfer of shares takes place in the event of the death or lunacy of a shareholder. When the transmission of shares takes place, the membership of the original shareholder is terminated.
• Transfer of shares: The transfer of shares is effected by registering an instrument called ‘Instrument of Transfer’ with the company. When the company approves the transfer, the Secretary cancels the name of the seller from the Register of Members and thus the membership of the shareholder is terminated.
• Forfeiture of shares: When the company forfeits the shares on account of non-payment of call money, the membership of the shareholder whose shares are forfeited comes to an end.

Question 3.
State the rights of members with regard to participation in general meeting.
Answer:
As an integral part of a company, a member enjoys certain rights and has to fulfill certain duties and liabilities.
Following are the rights of members:

• Right to receive the notice and agenda of all general meetings, attend them in person or appoint a proxy, speak and vote at the meeting, demand to call Extra-Ordinary General meeting and pass resolutions.
• Right to receive the copy of annual reports, auditors’ reports, statutory reports, and the annual account are on his registered address.
• Right to transfer shares, if any, imposed by the Article of Association.
• Right to receive bonus shares whenever issued by the company.
• Right to get the name entered in the Register of members and be registered as a member of the company,
• Right to receive a share in the surplus property and assets of the company on winding up of the company after all other claims have been paid.

5. Justify the following statements.

Question 1.
Member and Shareholder are interchangeable terms.
Answer:

• A person whose name is entered in the register of members of a company is called a member and a person who owns shares of a company and holds actual possession of shares is called a shareholder of a company.
• A shareholder becomes a member of a company only when his name is recorded in the Register of Members. A person who buys a share in an open market is a shareholder. But he cannot be called a member until the procedure of transfer of shares in his name is completed.
• In the case of death, or lunacy of a member of a company, his legal representative becomes the shareholder but he cannot be called a member until the procedure for transmission of shares in his name is completed.
• A shareholder who transfers his share to another person is not a member until the transfer is registered and the name of the transferee is recorded in the Register of Members.
• A person who subscribes to the Memorandum of Association may not be called a member until the shares are actually allotted to them. Thus, I agree with the above statement.

Question 2.
A foreigner can invest in shares of an Indian company.
Answer:

• A foreigner can enter into contract.
• Foreigners can buy shares and become a member of an Indian company, subject to provisions of FEMA Act 1999.
• ‘FEMA’ aims at facilitating external trade and promote the foreign exchange market in India.
• Foreigner falls under the category of individual eligibility to be a member of a company.
• Thus, I agree with the above statement.

Question 3.
The insolvent person ceases to be a member of the company.
Answer:
Yes, I agree with the statement.

• On, becoming insolvent, a person’s beneficial rights of shareholders passes to Official Receiver or Assignee.
• Thus, the insolvent person stops being a member of the company on his insolvency.
• Official Receiver is an officer appointed by the court, to deal with the property and assets of the insolvent person.
• On being insolvent a member ceases to be a member of the company and thus he can neither attend Annual General
• Meeting nor can he vote on matters of the company.
• Thus, I agree with the above statement.

Question 4.
The Co-operative Society is eligible to be a member of the company.
Answer:

• The Co-operative Society falls under the category of Organizations eligible for membership of a company.
• Co-operative Societies are registered under the State Co-operative Societies Act of respective states.
• A Co-operative Society is a registered entity, it can become a member of the company.
• Thus, it can invest in shares of the company and also enjoys all the rights of membership.
• It also has a right to receive notice of meeting, attend the meeting, vote in meeting, etc.
• Thus, I agree with the above statement.

Question 5.
Subscribers to the Memorandum of Association are the first members of the Company.
Answer:

• There are different ways for the acquisition of membership in a company.
• Subscribing to Memorandum of Association is one is of the way of acquiring membership in a company,
• Subscribers to the Memorandum of Association of companies are different in different cases i.e. Seven (7) members in the case of a Public Company, Two (2) members in the case of a Private company, and One (1) in case of One Person Company.
• Thus, I agree with the above statement.

Question 6.
The nominee of the member of OPC becomes its member on the death of the member.
Answer:

• In an acquisition of membership, there are different ways to become a member of the company.
• In the case of One Person Company, the name of the nominee is given beforehand in the Memorandum of One Person Company.
• So, in case of the death of a member, his nominee automatically becomes the sole owner of the company.
• But he cannot be called as a member of the company until all procedure of transmission of shares is completed.
• Thus, I agree with the above statement.

Question 7.
Members of the company are entitled to several rights.
Answer:

• Being an integral part of a company, members enjoy certain rights and have to fulfill the duties and liabilities.
• Member has the right of accessing books and documents of a company. He can make copies of the Memorandum and Article of Association. He has the right to appoint Auditors and Directors and decide their salary and remuneration.
• He can inspect the Register of Members and Debentureholders register.
• He has right to make a Fundamental Corporate Decision like – Change of Registered office of the company, increase authorized capital, change in the object of the company, make amendment in Articles of Association, right of winding up the company, etc.
• He has the right to receive the notice and agenda of a meeting. He can attend the Annual General Meeting in personal or he can send his proxy to attend the meeting.
• Thus, I agree with the above statement.

Question 8.
Members of the company have some fundamental corporate decision-making rights.
Answer:

• Members hold powers to decide at meetings on important matters.
• He has certain fundamental rights like a change of registered office of the company.
• He can increase the authorized capital of the company.
• He can change the objects of the company because he is a member of the company as well as the owner of the company.
• He also has a right to amend the Articles of Association.
• He also has a right to acquisitions, mergers, and takeovers by the company. He can appoint sole selling agents for the company.
• He also has a fundamental right to close or wind up the company.
• Thus, I agree with the above statement.

Question 9.
Transfer of shares results in termination of membership.
Answer:

• On termination of membership, the name of the member is removed from the Register of Members.
• Companies Act empowers every shareholder to transfer his share in the manner laid down in the Articles and in accordance with the provisions of the law.
• A transfer of share takes place when a registered shareholder transfers his shares by sale or gift to another person voluntarily.
• Transfer of shares by operation of law in event of death or insolvency of members is called the transmission of shares. The legal representative/heir in case of death, official receiver in case of insolvency, and administrator in case of insanity replaces the concerned member.
• When the company approves the transfer, the Secretary cancels the name of the seller i.e. (transferor) from the Register of Members, and the membership of the shareholder stands terminated after transferring the shares.
• Thus, I agree with the above statement.

6. Answer the following questions.

Question 1.
Explain the circumstances when Member is not a shareholder and vice-versa.
Answer:
An organization is formed for purpose of education, sports, health, business with well-defined objectives and relationships. The organization is by ‘members’ and ‘only for members.’
“Member means a person whose name is entered in the Register of Members of the company and are the holder of equity shares and are a beneficial owner in the records of Depository.
Buying shares is the most common and easy way where a person becomes a member of the company.

Following are different circumstances when Member is not a shareholder:

• Member without being a shareholder:
  • Signatories to the Memorandum of Association: They are members of the company but not shareholders till the shares are not allotted to them.
  • Company Limited by Guarantee Amount: This company does not have any share capital. Therefore, it has only members, not the shareholders.
  • Transfer of shares: Transferor (seller) of shares continue to be a member of the company, till his name is removed from the Register of Members and is replaced by transferee’s (buyer)name.
  • On the death of a member: On the death of a member, his legal heir becomes the holder of deceased member shares. But he is not a member of a company until the procedure of transmission of shares is completed.
  • On insolvency of member: Shares of insolvent member are held by court-appointed Official Receiver.
    So the insolvent person continues to be a member but not the shareholder.
• Shareholder without being a member: The buyers of the shares, Official Receiver in case of insolvency; legal heir in case of death as explained above are shareholders but not the members of the company.

Question 2.
Explain the eligibility of memberships of a company.
Answer:

• The organization is formed and managed by persons termed as ‘Member’.
• So it is rightly said organization is by ‘member’ and ‘only for members’.
• Any entity i.e. person or organization who is competent to make a contract can become a member of the company.
• Subject to provisions of the Companies Act, 2013, Memorandum of Association, and Articles of Association, any person who is legally competent to manage their own affairs (‘Sui-Juris) can become a member of the company.

Eligibility Criteria:
(A) Individuals:

• Major person: Any person domiciled (staying) in India, having completed 18 years of age, having a sound mind, and not be disqualified by law can become a member of the company.
• Minor: A minor cannot be a member of a company but a guardian can be a member of a company on behalf of a minor.
• Insolvent: Insolvent person cannot be a member of a company as his beneficial rights of shareholding are held by the Official Receiver, an officer appointed by the court.
• Insane/Lunatic: Insane/Lunatic person is unable to enter into a contract which makes him ineligible to be a member of a company.
• Foreigner: A foreigner or Non-resident Indian can become a member of a company, subject to provisions of FEMAAct, 1999.

(B) Organizations:

• Company: A company being a legal person can be a member of another company if authorized by its Memorandum of Association. It cannot be a member of its own company.
• Co-operative Society: Since co-operative societies are registered entity, they can be a member of the company.
• Limited Liability Partnership (LLP): Such, firms are treated as a juristic person, hence it can be a member of the company.
• Hindu Undivided Family: HUF firm is prohibited to be a member of a Company, but ‘Karta’ can buy a share in his name on behalf of Hindu Undivided Family firm.
• Partnership Firm: Since the partnership firm is not a registered entity. It cannot be a member of the company. But partners themselves can buy shares in their individual names.
• Trust: Registered trust can become a member of a company in its own name.

Question 3.
Explain different ways to acquire membership of the company briefly.
Answer:
Any person who is competent to contract can become a member after fulfilling certain requirements for membership in a company.
The different ways to acquire membership of a company are explained below:
(i) By Subscription:

• The subscriber to the Memorandum of Association of a company, who are signatories to the Memorandum of the company is deemed to have agreed to become the members of the company.
• When the company is registered, their names are entered as the members in the Register of Members. In this case, neither an application nor the allotment of shares is important to become a member.

(ii) By Application and Allotment of shares:

• This is one of the methods of acquiring membership. An application for shares is made by an applicant in response to the invitation given by the company through its prospectus.
• The company then allots the shares as an acceptance to his application and offers the shares. The applicant then becomes the shareholder and his name is entered in the ‘ Register of Members’.

(iii) By Transfer of shares:

• After acquiring the shares by way of sale or gift, the buyer (transferee) is required to get the shares registered in his name in the Register of Members of the company.
• For this an instrument of transfer signed by the buyer and the seller accompanied by the share certificate is to be lodged (sent to) with the company.
• When the company approves the transfer, the name of the transferee is entered in the Register of Members and thus, be becomes a member of a company. The name of the earlier member is struck off from the Register.

(iv) By Transmission of shares:

• In the event of the death or lunacy of a member, his legal heir or representative automatically becomes the shareholder.
• He is entitled to have his name entered in the Register of Members. He can do so by making an application to the company, supported by legal evidence of his title.
• When the company approves the title the name of the legal representative is entered in the Register of Members and thus, he becomes a member of a company.
• This transfer of shares by the operation of law is called the transmission of shares.

(v) By holding shares in the Dematerialized form:
The person holding shares in dematerialized form and has his name as a beneficial owner in the records of Depository is treated as a member of the company.

(vi) Nominee of One Person Company (OPC):
In the case of One Person Company, the name of the nominee is given beforehand in the Memorandum of One Person Company. He becomes the sole owner of the shareholdings of the deceased member.

(vii) By Acquiescence:
If a person is wrongly entered in the Register of Members or holds or allows his name as the Register of Members without informing the company about its mistake, he is treated and made liable as a member in the event of liquidation of a company.

Question 4.
Explain how membership of the company terminates.
Answer:
Cancellation of membership of a shareholder is called Termination or Cessation of membership. On termination of membership, all rights of a member are canceled.

Following are the ways of Termination of membership:
(i) Transfer of shares: Transfer of shares is effected by registering an instrument called Instrument of Transfer with the company. The secretary cancels the name of the seller from the Register of Members and thus the membership of the shareholder is terminated.

(ii) Transmission of shares: Transmission of shares refers to the transfer of shares by operation of law. This is an automatic transfer of a share in the event of death or lunacy of a shareholder. When the transmission of shares takes place, the membership of an original shareholder is terminated.

(iii) Winding up: When a company is winding up, the membership of all the members stands terminated automatically.

(iv) Forfeiture of shares: When a company forfeits the shares on account of non-payment, of calls on shares, shareholder’s shares are forfeited and he ceases to be a member of the company.

(v) Surrender of shares: When a company accepts surrender of partly paid-up shares if permitted by its Articles, the membership of the shareholder is terminated.

(vi) Redemption of Preference shares: When the redeemable preference shares are redeemed (repaid) to the shareholder by the company as per the terms of issue, the membership comes to an end.

(vii) Right of lien as shares: When a shareholder has some obligation towards the company, it is said to be lien on shares by the company. It means shareholders cannot sell their shares until they clear their dues or obligations if any. In case of his failure to pay his dues company cancels his shares and his membership comes to an end.

Question 5.
Explain the Rights of a Member of a company.
Answer:
Being a part of a company, a member enjoys certain rights and has to fulfill certain duties.
Right of members are as follows:

1. Right of accessing books and documents: A member can get copies of Memorandum and Articles of Association, Auditors and Directors Reports, Balance Sheet and Profit and Loss A/c. Members can also check the Register of members.
2. Right to participate in General meetings: Members have the right to receive notice and agenda of all general meetings, attend the meeting personally or appoint a proxy, vote at the meeting, etc.
3. Right to appoint and remove a Director: Member of a company has the right to appoint and remove the directors.
4. Shareholding rights: Shareholders have the right to receive a share certificate, transfer his shares, to get right issue and bonus issue shares.
5. Right to Class Action Suit: The Act confers the right of Class Action Suit to members against the company or their directors in the time of any unlawful or wrongful act. They can file a petition to wind up the company.
6. Right to receive surplus assets: In the event of the winding-up of the company, the member has the right to get a share in surplus assets of the company.
7. Right with respect to the company’s accounts and its audit: Members have the right to approve the annual accounts at the Annual General Meeting. He can appoint auditors, fix their salary, and has a right to remove the auditors.
8. Right to participate in the profit of the company: Members invest money in the company and expect a certain return in form of dividends. They have the right to receive dividends within 30 days of its declaration in the Annual General Meeting.
9. Right to make Fundamental Corporate Decision: Members hold powers to decide at a meeting on important matters like a change of Registered office of the company, increase authorized capital of the company, change the objects of the company, to amend an Articles of Association, right of acquisitions, mergers and takeovers by the company, appoint a sole selling agents for the company, rights to close or wind up the company.

Activity (Textbook Page No. 72)

Find the composition of shareholding of a listed public company.
Answer:
“Listed Public Companies” means a public company that has any of its securities listed in any recognized stock exchange. One of the advantages to the shareholder(s) of a Public Company is free transferability of shares and in the case of Listed Companies such free transferability also ensures quick liquidity of the investment. However, such liquidity is only possible when there is an existence of buyers and sellers in the market. In many Listed Companies, a large chunk of the paid-up capital is held by the promoter group which reduces the public shareholding to a great extent.

The promoter group usually refrains from trading in their shares which in turn reduces the number of buyers and sellers in the market and the liquidity factor also gets affected. In order to ensure a minimum level of Public Shareholding in Listed Public Companies and to provide liquidity to the investors, the Ministry of Finance amended the Securities Contracts (Regulation) Rules, 1957 [SCCR, 1957] twice in the year 2010. The press note released by the Ministry of Finance upon the first amendment of SCCR, 1957 stated “A dispersed shareholding structure is essential for the sustenance of a continuous market for listed securities to provide liquidity to the investors and to discover fair prices”.

Balbharti Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 4 Documents Related to Formation of a Company Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 4 Documents Related to Formation of a Company

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
___________ is a primary document of the company which contains the aims and objectives of the company.
(a) Memorandum of Association
(b) Articles of Association
(c) Prospectus
Answer:
(a) Memorandum of Association

Question 2.
___________ describes the relationship between company and outsiders.
(a) Memorandum of Association
(b) Articles of Association
(c) Prospectus
Answer:
(a) Memorandum of Association

Question 3.
The ___________ clause describes the range of activities a company can undertake.
(a) Name
(b) Capital
(c) Object
Answer:
(c) Object

Question 4.
Any act done by the company beyond the Powers of Memorandum is called as ___________
(a) Doctrine of indoor management
(b) Ultra-Vires
(c) Mis-statement
Answer:
(b) Ultra-Vires

Question 5.
___________ acts are void or legally ineffective.
(a) Object clause
(b) Main object
(c) Ultra Vires
Answer:
(c) Ultra Vires

Question 6.
___________ clause contains the details of liability of the members.
(a) Name
(b) Liability
(c) Object
Answer:
(b) Liability

Question 7.
___________ clause states the amount of Authorised capital with which the company is registered.
(a) Liability
(b) Object
(c) Capital
Answer:
(c) Capital

Question 8.
___________ contains rules and regulations for internal management of the company.
(a) Articles of Association
(b) Prospectus
(c) Memorandum of Association
Answer:
(a) Articles of Association

Question 9.
Articles establishes relationship between company and ___________
(a) members
(b) outsiders
(c) ROC
Answer:
(a) members

Question 10.
___________ is an invitation to the public to subscribe for shares of the company.
(a) Memorandum
(b) Prospectus
(c) Articles of Association
Answer:
(b) Prospectus

Question 11.
For making multiple issue of shares within a year, a company can prepare a ___________ Prospectus.
(a) Abridged
(b) Shelf
(c) Red Herring
Answer:
(b) Shelf

Question 12.
___________ is an incomplete prospectus.
(a) Red Herring Prospectus
(b) Shelf Prospectus
(c) Abridged Prospectus
Answer:
(a) Red Herring Prospectus

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(a) Capital clause	(1) Details of capital structure of a company
(b) Liability clause	(2) Used for multiple issues of shares
(c) Acts beyond the Powers of Memorandum	(3) Abridged Prospectus
(d) Red Herring Prospectus	(4) Describes main objectives
(e) Shelf Prospectus	(5) Used for Right Issue
	(6) Incomplete Prospectus
	(7) Ultra-Vires
	(8) Doctrine of Indoor management
	(9) Extent of liability of members
	(10) Articles of Association

Answer:

Group ‘A’	Group ‘B’
(a) Capital clause	(1) Details of capital structure of a company
(b) Liability clause	(9) Extent of liability of members
(c) Acts beyond the Powers of Memorandum	(7) Ultra-Vires
(d) Red Herring Prospectus	(6) Incomplete Prospectus
(e) Shelf Prospectus	(2) Used for multiple issues of shares

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
The primary document of a company states the aims and objectives of a company.
Answer:
Memorandum of Association

Question 2.
The document establishes the company’s relationship with outsiders.
Answer:
Memorandum of Association

Question 3.
The document states the limits within which a company has to operate.
Answer:
Memorandum of Association

Question 4.
The document contains Name Clause, Registered Office Clause, Capital Clause, etc.
Answer:
Memorandum of Association

Question 5.
The document is subordinate to the Memorandum of Association.
Answer:
Articles of Association

Question 6.
The document contains rules and regulations for internal management.
Answer:
Articles of Association

Question 7.
A term used for acts beyond the scope of the Memorandum of Association.
Answer:
Ultra-Vires

Question 8.
The clause describes the main activities a company can undertake.
Answer:
Object Clause

Question 9.
The clause gives details of Authorized Capital or Registered Capital.
Answer:
Capital Clause

Question 10.
The clause describes the extent of liability of members.
Answer:
Liability Clause

Question 11.
The last clause of the Memorandum contains the name, signature, and other details of all the subscribers of the Memorandum.
Answer:
Association or Subscription Clause

Question 12.
The document establishes a relationship between a company and its members.
Answer:
Articles of Association

Question 13.
Document issued by public company inviting the public to subscribe to its shares.
Answer:
Prospectus

Question 14.
Prospectus attached with every share application form.
Answer:
Abridged Prospectus

Question 15.
Prospectus used for multiple issues of shares within a year.
Answer:
Shelf Prospectus

Question 16.
It is an incomplete prospectus.
Answer:
Red Herring Prospectus

Question 17.
This prospectus does not contain information about the quantum of shares to be issued or the price at which shares will be issued.
Answer:
Red Herring Prospectus

1D. State whether the following statements are True or False.

Question 1.
A Memorandum of Association and Articles of Association are prepared at the time of incorporation of a company.
Answer:
True

Question 2.
Memorandum of Association describes the nature and character of the company.
Answer:
True

Question 3.
Memorandum establishes the relationship between Company and Members.
Answer:
False

Question 4.
Any act done by the company beyond the Powers of Memorandum is Ultra-Vires.
Answer:
True

Question 5.
Articles of Association can have provisions that contradict the Memorandum.
Answer:
False

Question 6.
Memorandum need not have a Liability Clause.
Answer:
False

Question 7.
Articles of Association are subordinate to Memorandum.
Answer:
True

Question 8.
A memorandum contains rules and regulations for the internal management of a company.
Answer:
False

Question 9.
Every subscriber who signs the Memorandum must also sign the Articles.
Answer:
True

Question 10.
Entrenched Articles cannot be easily altered.
Answer:
True

Question 11.
Prospectus can be issued by a private company.
Answer:
False

Question 12.
Only public companies can issue Prospectus.
Answer:
True

Question 13.
The prospectus must be issued within 1 year from the date of filing it with the ROC.
Answer:
False

Question 14.
Actions can be taken against a company or its officers for misstatements in the prospectus.
Answer:
True

Question 15.
Every company has to issue a shelf prospectus every time it offers shares to the public.
Answer:
False

Question 16.
Red Herring prospectus does not contain details of the price at which shares will be sold by the company.
Answer:
True

Question 17.
Letter of the offer is issued at the time of Rights Issue.
Answer:
True

1E. Find the odd one.

Question 1.
Name Clause, Rights of Board of Directors, Object Clause.
Answer:
Rights of Board of Directors

Question 2.
Rights of shareholders, Appointment and remuneration of Directors, Liability clause.
Answer:
Liability Clause

Question 3.
Shelf prospectus, Abridged Prospectus, Articles of Association.
Answer:
Articles of Association

1F. Complete the sentences.

Question 1.
The documents which state the aims and objectives of a company is called as ___________
Answer:
Memorandum of Association

Question 2.
Any act done by the company which goes beyond the powers of Memorandum of Association will be called as ___________
Answer:
Ultra-Vires

Question 3.
The document which is subordinate to the Memorandum of Association is called ___________
Answer:
Articles of Association

Question 4.
The document which contains the rules and regulations governing the internal management of a company is called ___________
Answer:
Articles of Association

Question 5.
The document issued by a company to invite investors to buy its securities is called as ___________
Answer:
Prospectus

1G. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(1) …………………….	Memorandum of Association
(2) Liability clause	………………………….
(3) Incomplete Prospectus	………………………….
(4) ………………………	Establishes relationship between the company and its members

(Articles of Association, Red Herring Prospectus, Primary document, Details of liability of members)
Answer:

Group ‘A’	Group ‘B’
(1) Primary Document	Memorandum of Association
(2) Liability clause	Details of liability of members
(3) Incomplete Prospectus	Red Herring Prospectus
(4) Articles of Association	Establishes relationship between the company and its members

1H. Answer in one sentence.

Question 1.
Which document contains the aims and objectives of the company?
Answer:
Memorandum of Association contains the aims and objectives of the company.

Question 2.
What does the capital clause describe?
Answer:
The capital clause states the amount of capital with which the company is registered and the division of it into shares of a fixed amount.

Question 3.
When is Abridged Prospectus issued?
Answer:
Abridged Prospectus is issued only in case of a public offer made by a company.

1I. Correct the underlined word and rewrite the following sentences.

Question 1.
Articles of Association states the aims and objectives of the company.
Answer:
Memorandum of Association states the aims and objectives of the company.

Question 2.
The prospectus is subordinate to the Memorandum of Association.
Answer:
Articles of Association are subordinate to Memorandum of Association.

Question 3.
The prospectus contains a liability clause.
Answer:
Memorandum of Association contains a liability clause.

1J. Arrange in proper order.

Question 1.
(a) Subscription clause
(b) Name clause
(c) Object clause
Answer:
(a) Name clause
(b) Object clause
(c) Subscription clause

2. Explain the following terms/concepts.

Question 1.
Memorandum of Association
Answer:

• It is a secondary document.
• A Memorandum of Association is a primary document of a company.
• It states the objects for which the company is formed.
• A Memorandum of Association of a company is a charter or constitution of a company.
• It describes the range of activities a company can undertake.
• No company can be registered without a Memorandum of Association.
• Memorandum establishes a relationship between the company and an outsider.

Question 2.
Articles of Association
Answer:

• Articles of Association is a secondary document.
• It contains rules and regulations that govern the internal management of the company.
• Articles of Association is also known as Bye-laws of a company.
• It defines the powers, duties, and rights of managers officers, and board of directors.
• It establishes a relationship between the company and its members.
• This document is subordinate to Memorandum.

Question 3.
Name Clause
Answer:

• This clause contains the name of the company.
• The name of the company should not be identical to any existing company.
• If it is a private company, then it should have the word Private Limited at the end.
• And in the case of a public company, then it should add the word limit at the end of its name.
• For eg ABC Private Limited in the case of the private and ABC Ltd for a public company.

Question 4.
Object Clause
Answer:

• This clause states the objective with which the company is formed.
• It is the most important clause of the Memorandum of Association.
• The clause defines the scope and limitations of the activities of the company.
• The objects must be clearly defined keeping in mind the following conditions.
  • The objects of the company must be legal.
  • The objects should not be against the provisions of any law.
  • The objects must not be immoral.

Question 5.
Liability Clause
Answer:

• This clause defines the liability of the members of the company.
• In the case of companies limited by shares, the liability of the members is limited to the extent of unpaid shares.
• In the case of a company limited by guarantee, the liability is limited to the amount of guarantee given by each member.
• In the case of an unlimited liability company with or without share capital, this clause states that the liability of its members is unlimited.

Question 6.
Capital Clause
Answer:

• This clause states the amount of capital with which the company is registered.
• The capital with which the company is registered is called registered capital or authorized capital.
• A company can issue only that number of shares that are authorized by its memorandum.
• The company has to alter the capital clause if the company wants to issue more shares than authorized capital.

Question 7.
Registered Office Clause
Answer:

• This clause contains the name of the state in which the registered office of the company is to be situated.
• Every company must have a registered office within 30 days of its incorporation.
• A registered office is a place where all the important documents of the company are kept.
• The registered office clause determines the jurisdiction of the Registrar of Companies and of the court.

Question 8.
Ultra Vires act
Answer:

• The word Ultra means beyond and the word Vires means the powers.
• Thus Ultra-Vires means beyond the powers of Memorandum.
• The doctrine of ultra-vires states that any activity done by a company that is beyond the powers of the company will be null and void.
• The purpose of the Doctrine of Ultra-Vires is to protect all the stakeholders.
• The stakeholders have the right to see that the company uses their money for the objects mentioned in Memorandum.

Question 9.
The doctrine of Indoor Management
Answer:

• The doctrine of Indoor Management states that persons entering into a contract with the company need not inquire whether the company or its officers have properly followed the internal proceedings.
• It is assumed that the company acts as per its Memorandum and Articles of Association.
• The doctrine of Indoor Management protects the interest of outsiders when they act based on the Memorandum of Association and Articles of Association.

Question 10.
Prospectus
Answer:

• A prospectus is any document that invites deposits or offers from the public for the purchase of any shares or debentures of a company.
• When a public company is collecting capital by issuing shares to the public has to issue a prospectus.
• The prospectus must be true and factual as investors decide to invest based on the information given in the prospectus.
• The types of the prospectus issued by a company are:
  • Abridged Prospectus
  • Shelf Prospectus
  • Red Herring Prospectus
  • Letter of offer
  • Offer Letter

Question 11.
Mis-statements in Prospectus
Answer:

• Mis-statements means:
  • The statement is misleading in form or content.
  • Where any inclusion of statement or omission is likely to mislead the reader.
• If the investor has purchased shares based on the misleading information in the prospectus he can take action against the company.
• The company and persons will be responsible for issuing mis-statement prospectus and have to face liability.

Question 12.
Abridged Prospectus
Answer:

• Abridged Prospectus contains the main contents of a prospectus in brief.
• It is attached with the application form issued by the company while offering securities.
• The abridged prospectus is issued only in case of a public offer made by a company.
• It contains all the salient features of a prospectus.

Question 13.
Shelf Prospectus
Answer:

• The company instead of preparing a fresh prospectus for every issue prepares a shelf prospectus.
• Shelf Prospectus can be used for all issues made by the company for up to one year.
• An Information Memorandum has to be filed with ROC every time during the validity period of one year of the shelf prospectus.
• Information Memorandum contains latest material facts such as new charges, changes in financial position, etc.

Question 14.
Red Herring Prospectus
Answer:

• A red herring prospectus is a kind of incomplete prospectus as it does not include complete particulars of the quantity/price of the securities.
• It is usually issued at the time of IPO (Initial Public Offer).
• A red herring prospectus shall have the same obligations that are applicable to the prospectus.
• A company must file a Red Herring Prospectus with ROC at least 3 days prior to the opening of the subscription list and the offer.

3. Study the following case/situation and express your opinion.

1. The Articles of a company stated that while borrowing any money from outsiders, the document must have the signatures of the Managing Director (MD) and any one of the Director. The Articles of Association clearly stated the procedure to be followed while borrowing money. The Managing Director did not follow all the procedures but still borrowed money from Mr. X. Mr. X assumed that the MD has followed the required procedures.

Question (a).
Can the MD be held punishable for his act?
Answer:
He can be held liable for his actions and can be insisted to pay back the loan amount.

Question (b).
Under which Doctrine can Mr. X take action against the company?
Answer:
Under Doctrine of Indoor Management.

Question (c).
Explain the Doctrine.
Answer:

• According to this doctrine, persons dealing with the company need not inquire whether internal proceedings relating to the contract are correctly followed.
• They are satisfied that the transactions are in accordance with the memorandum and articles of association.
• If there are any internal irregularities then the company will be liable as the person has acted in good faith and he did not know about the internal arrangement of the company.
• Similarly with X as he has acted in good faith and lent money to the managing director, but the managing director did not follow the procedure. So there is an irregularity that can make the director liable for his actions.

2. Mr. A entered into a contract with Star Limited Company and as advance payment gave a cheque of ₹ 1 lac to a Director Mr. Sam. Mr. Sam is not the Managing Director. Articles state that only the MD is authorized to sign any contracts or receive any payments on behalf of the company.

Question (a).
Did Mr. Sam have the authority to accept the cheque? Why?
Answer:
Sam did not have the authority to accept the cheque because usually, individual directors do not have the authority to act on the company’s behaviour unless expressly authorized.

Question (b).
Can Mr. Sam’s action be called as Ultra-Vires? Why?
Answer:
Mr. Sam’s action cannot be called ultra-vires because any act done by him beyond the powers of the memorandum is called Ultra-Vires.

3. The Object clause of Memorandum of a Company stated the main object as manufacturing of plastic chairs and tables and any other activity in furtherance of achievement of its main activity. The Board of Directors wants also to produce T.V. Serials and feels that the shareholders may give their permission.

Question (a).
Can the company with immediate effect start producing T.V. serials? Why?
Answer:
No, a company cannot start producing T.V. serials with immediate effect. A company cannot indulge in activities other than those provided in the object clause. The activities carried outside the scope drawn by the Memorandum of Association are called Ultra-Vires activities.

Question (b).
How can the object clause of the company be altered?
Answer:
A special resolution must be passed in the General Meeting for altering the object clause.

4. A public limited company has issued all the shares mentioned in its Memorandum as Authorised Capital. Now the company wants to make a public issue of 10,000 shares at a face value of ₹ 100 per share, to raise more funds for its expansion activities.

Question (a).
Which clause of Memorandum needs to be altered?
Answer:
The capital clause of the memorandum needs to be altered.

Question (b).
In which meeting the alteration can be approved?
Answer:
A capital clause is altered by passing an ordinary resolution in a general meeting of the company.

Question (c).
Which document should the company issue to invite the public to buy its shares?
Answer:
The prospectus is the document issued to invite the public to buy its shares.

5. A Company stated in its prospectus that it has been making profits for the last 5 years. However, Mr. X., an investor found out that two years back the company had not made any profit. The prospectus was filed with ROC on 1st January 2017 and was issued to the public on 10th February 2018.

Question (a).
Can Mr. X state that there was mis-statement in the prospectus?
Answer:
Yes, Mr. X can state mis-statement in the prospectus.

Question (b).
If found guilty which two types of liability will the company and its officers face?
Answer:

• Civil liability (Pay compensation for loss suffered by the investor)
• Criminal liability companies or their officers will be fined or imprisoned or both.

Question (c).
Can the prospectus be valid for the issue to the public on 10th February 2018?
Answer:
No, the prospectus will not be valid for the issue to the public on 10th February 2018.

6. A Company plans to offer Rights Issues.

Question (a).
Which document must it send to its shareholders for offering the rights issue?
Answer:
Letter of the offer must be sent to its shareholders for offering the rights issue.

Question (b).
Instead of the rights issue, if the company wants to issue shares to the public which document must it issue for inviting the public to subscribe to it.
Answer:
The prospectus is the document to be issued by the company if it wants to issue shares to the public instead of rights issues.

Question (c).
Name the document which is called an incomplete prospectus.
Answer:
Red Herring prospectus is called an incomplete prospectus.

4. Distinguish between the following.

Question 1.
Memorandum of Association and Articles of Association.
Answer:

Basis	Memorandum of Association	Articles of Association
1. Meaning	Memorandum of Association is a document that contains all the fundamental information which are required for the incorporator of the company.	Articles of Association is a document containing all the rules and regulations that govern the company.
2. Defined in	Section 2(56)	Section 2(5)
3. Types of information contained	Powers and objects of the company.	Rules for internal management of a company.
4. Status	It is subordinate to companies Act.	It is subordinate to Memorandum.
5. Retrospective effect	The memorandum of the company cannot be amended retrospectively.	The Articles of Association can be amended retrospectively.
6. Major contents	A memorandum must contain 6 clauses.	The Articles can be drafted as per the choice of the company.
7. Filing with registrar	Memorandum of Association must be filed with Registrar of Company by all types of companies.	Filing of Articles of Association is optional for a public company as it may adopt Table (A).
8. Alteration	Alteration can be done after passing special resolution in Annual General Meeting and previous approval of central government or company law board is required.	Alteration can be done in the Articles by passing special Resolution at Annual General Meeting.
9. Relation	Define the relationship between company and outsider.	Regulates the relationship between company and members.
10. Acts done beyond the scope	Absolutely void.	Can be satisfied by shareholders.

5. Answer in brief.

Question 1.
State any four clauses of Memorandum of Association.
Answer:
Memorandum of Association is a basic document, which gives information about the aims and objects of the company. It is also a charter of a company.

The following are four clauses of Memorandum of Association:
(i) Name Clause:

• This clause state the company’s proposed name.
• It must end with the word limited if its a public company or private limited if its a private company.
• It can’t be identical to any existing company’s name.
• It can’t resemble any registered Trade Mark.
• It should not be misleading in any way.

(ii) Registered office clause:

• The registered office clause lists the name of the state where the company’s registered office is physically located.
• The registered office’s physical location determines which jurisdiction the Registrar of companies and which court the company would fall under.
• It also confirms the company’s nationality .
• The registered office’s full address must be provided to the Registrar of companies to simplify further communications.

(iii) The object clause:

• This clause defines the objects for which a company is formed. It indicates the range of activities a company can undertake. This clause states in detail the main object for which the company is to be incorporated.
• The objects of the company must not be illegal, immoral or against the public policy.
• A company cannot do anything beyond or outside the scope of its objects.

(iv) Liability clause:

• The liability clause explains what liability each of the company’s member faces. If the company is limited by shares the liability that each member faces can be no more than the face value of share.
• If the company is limited by guarantee, this clause must define how much liability each individual company member holds.

Question 2.
State any four contents of Articles of Association.
Answer:
Articles of Association is a document which contains rules and regulations that governs the internal management.
The following are the four contents of Articles of Association:

• Share capital – Shares and their value and their division into different types of shares.
• Rights of each class of shareholders and procedure for variation of their rights.
• Procedure relating to allotment of shares, making of calls and forfeiture of shares.
• Rules relating to transfer and transmission of shares and the procedure to be followed.

Question 3.
State the statutory requirements in relation to Prospectus.
Answer:
Prospectus is an invitation to public to purchase its share and debentures. It is issued after the formation of company.
The following are the statutory requirements in relation to Prospectus:

• Draft Prospectus to be made Public: A draft prospectus filed with SEBI by the company should be made available to the public and to the stock exchange where the company wants to lists its shares.
• Signed by Director’s: Prospectus must be signed by all directors or by duly authorised attorney.
• Registration of Prospectus: A copy of the prospectus must be registered with ROC before issuing it to the public.
• Dating of Prospectus: A prospectus has to be dated. The date on the prospectus is considered as the date of publication of prospectus.
• Issuing Prospectus to Public: Prospectus must be issued to the public within 90 days from the date of registering a copy with the ROC.

6. Justify the following statements.

Question 1.
Memorandum of Association defines the limitations of the powers of the company.
Answer:

• The Memorandum of Association is a basic or fundamental or primary document of a company.
• It contains the following clauses: Name clause, Address clause, Object clause, Liability clause,Capital clause, Association of subscription clause.
• The entire business centres around its object clause.
• Object clause of the Memorandum of Association defines the area beyond which the company cannot do anything.
• It determines the powers of the company.
• It helps the stakeholders to know what is its permitted range of operation.
• A company is governed by Memorandum of Association and any act beyond it shall be considered as ultra-vires.
• Hence, Memorandum of Association defines the limitations of the power of the company.

Question 2.
Ultra-vires acts are null and void.
Answer:

• A Memorandum of Association of a company is a basic charter of the company.
• If a company departs from its Memorandum of Association such an act is ultra-vires.
• The doctrine of ultra vires is a fundamental rule of company law.
• An act legally in itself but not authorized by the object clause of Memorandum of Association of a company is ultra-vires.
• Hence if the company does an act or enters into a contract beyond the powers of the company then the act is said to be null and void.
• The company cannot sue on an ultra-vires transaction or it cannot be sued.
• Thus, I agree with the above statement.

Question 3.
Contents of Articles can be altered.
Answer:

• As per section 2(2) of the companies Act, 1956 ‘Articles’ means Articles of Association of a company as originally framed or as altered from time to time in pursuance of any previous companies’ law or of this Act.
• The Articles regulate the internal management of a company.
• It states the relationship between the company and its members.
• The articles, being the internal regulations of a company can be altered easily.
• The articles are required to be altered from time to time as per changes made by the government in the company law or as per changing situations in the corporate sector.
• Thus, the Articles of Association can be altered by passing a ‘Special Resolution’ at a general meeting.

Question 4.
The doctrine of Indoor Management protects outsiders who are unaware of the correctness of the internal proceedings of a company.
Answer:

• The doctrine of Indoor Management states that a person entering into a contract with the company need not inquire whether the company has followed the internal processing.
• It is assumed that the company acts as per the Memorandum of Association and Articles of Association.
• Because certain information which is internal to a company cannot be known to outsiders.
• So the doctrine of Indoor Management protects the interest of the outsider when the act is based on the Memorandum of Association and Articles of Association.

Question 5.
A prospectus is an important document issued by a public company.
Answer:

• A prospectus usually is in the form of a statement giving all material information about the company and showing its future prospectus.
• It aims at inviting investors to subscribe to its shares and debentures.
• It is a must for every public company to prepare its prospectus.
• It is through the prospectus that the prospective investors know the details of the shares offered by the company.
• Otherwise, the investors would have no idea of the shares that a public company is selling.
• All detailed information about a company like its business management, financial structure, etc., are provided in the prospectus.
• The main idea to issue a prospectus is to collect capital for the company from the general public.
• It should contain true, fair, and correct information.
• Hence, the prospectus is very important for a public company.

Question 6.
Company and officers responsible for issuing Prospectus are liable for mis-statements in Prospectus.
Answer:

• The prospectus is a written document giving an invitation to the public to purchase shares or debenture of the company.
• It provides all the necessary information about a company, its business, the management, financial structure, etc., of a company.
• A prospectus must be prepared very carefully and accurately.
• It should contain true and correct information and honest disclosure of facts.
• A company and all those officials can be held responsible for any mis-statement in the prospectus.
• These people have to face severe consequences.
• The shareholder can cancel the contract.
• Persons authorizing the issue of prospectus containing mis-statement are punishable with imprisonment of two years and a fine up to ₹ 5,000.
• Thus, I agree with the above statement.

7. Answer the following questions.

Question 1.
Briefly explain the clauses of the Memorandum of Association.
Answer:

• The Memorandum of Association is the principal document of a company.
• It is considered the charter of the company.
• It contains the powers and objectives of the company.
• It can be altered only according to the provisions made in the companies act regarding its alterations.
• Memorandum of Association provides information to the outsiders.

The Memorandum of Association contains the following clauses:
1. Name clause:

• This clause contains the complete name of the company.
• The company can choose any name subject to the following restrictions.
• The name of the company must end with the word limited in the case of a public limited company and with the word private limited in the case of a private limited company.
• The name should not be similar or identical to the name of any other company.
• The name should not contain the word cooperative.
• The name should not convey any connection or link of the company with the government department.

Alteration of name clause: A company can change its name by passing a special resolution and by obtaining approval from the central government.

2. Address clause:

• This clause contains the name of the state in which the registered office of the company is to be located.
• It is necessary because a company gets the registration from that state only.
• A registered office is a place where all the important documents are kept.
• A company must have a registered office when it starts its business activities or within 30 days whichever is earlier.

Alteration of address clause: A company may change its Registered office from

• One place to another place within the same city or town.
• One town or city to another town or city within the same state.
• One state to another state.
• In both these cases, a special resolution is to be passed in General Meeting.

3. Object clause:

• It is the most important clause of the Memorandum of Association.
• It contains the main object of the company.
• This clause defines the scope and limitations of the activities of the company.
• The objects must be defined keeping in mind the following conditions:
• the objects of the company must be legal.
• the objects should not be contrary to the provisions of any law.
• the objects must not be immoral.

Alteration in object clause: In order to alter its object clause, a company must pass a special resolution.

4. Liability clause:

• This clause defines the liability of the members of the company.
• In the case of a company limited by shares, the liability of the members is limited to the extent of the unpaid amount of share capital.
• In the case of a company limited by guarantee, the liability is limited to the amount of guarantee.

Alteration of liability clause: If a company wants to make any alteration in its liability clause then it must pass a unanimous resolution in a meeting.

5. Capital clause:

• The clause specifies the amount of share capital with which a company is to be registered.
• The capital with which a company is registered is called registered capital.
• A company can issue only that number of shares that are authorized by its memorandum.

Alteration of the capital clause: A company can alter its capital clause by passing a special resolution and by obtaining approval from the company law board.

6. The Association clause or Subscription clause:

• A company is an association of persons, who subscribe to its capital.
• For a public company minimum of 7 persons must subscribe to a memorandum by signing it and giving their undertaking that each one shall buy at least one share of a company.
• For a private company minimum of 2 persons must subscribe to the Memorandum of Association by signing it and they also give an undertaking that each one shall buy at least one share of a company.
• Each subscriber has to put his name address and occupation in the presence of at least one witness who shall also put in his details.

Question 2.
Define Memorandum of Association. Explain briefly its features.
Answer:
Definition:
As per section 2(28) of the companies Act 1956 “Memorandum of Association means the Memorandum of Association of a company as originally framed or altered from time to time in pursuance of any previous company laws or of this Act”.
As such this definition does not state exactly the scope, use, and importance of memorandum in a company.

• Lord Cairns observed that – “The memorandum of association is a charter and defines the limits of the powers of a company. The memorandum contains the fundamental conditions upon which alone the company is allowed to incorporate”.
• Lord Macmillan states that – “The purpose of the memorandum is to enable the shareholders, creditors and those who deal with the company to know what is its permitted range of enterprise”.

Meaning:
In simple words, the Memorandum of Association of a company means

• a basic or fundamental primary document of a company.
• a charter or constitution of a company
• no company can be incorporated without the Memorandum of Association.
• It lays down the range of its activities.
• It is a public document and can be inspected by those who deal with the company.

Features of Memorandum of Association:
The following are the features of the Memorandum of Association:

• Memorandum of Association states the nature of business activities to be conducted by the company.
• It informs about the scope of activities of the company.
• It is prepared by promoters of the company.
• It is signed by at least 7 persons in the case of a public company and 2 persons in the case of a private company.
• It is submitted to the registrar of companies for registration.
• All companies must prepare their own Memorandum of Association.
• It defines the relationship between the company and outsiders.
• It is an unalterable charter of the company.
• It is a public document.

Question 3.
What are Articles of Association? Explain briefly its content.
Answer:
Articles of Association contain rules and regulations regarding the management of the company’s internal affairs.

• It defines the powers, duties, and rights of managers, officers, and the board of directors.
• It establishes a relationship between the company and its members.

Contents of Articles of Association:

• The amount of share capital and different classes of shares
• Rights of each type of shareholders
• Procedure for making allotment of shares
• Procedure for issuing share certificates
• Procedure for transfer of shares
• Procedure for forfeiture of shares
• Procedure for reissue of forfeited shares
• Procedure for conducting meetings
• Procedure for appointment and removal of directors
• Duties powers and remuneration of directors
• Procedure for declaration and payment of dividend
• Procedure regarding the keeping of books of accounts and their audit
• Procedure regarding winding up of the company
• Seal of the company

Alteration of Articles of Association:

• A company may change its Article of Association by passing a special resolution.
• A company can alter its Articles of Association in the following ways:
  • by the adoption of a new set of an Articles
  • by deletion of an article
  • by addition or insertion of a new article
  • by substitution of an article
  • by amendment of an article

Question 4.
Define Prospectus. Explain its contents.
Answer:
Definition: “Sec 2(70) of Companies Act, 2013 defines prospectus as any document described or issued as a prospectus and includes 32a Red Herring Prospectus or shelf prospectus or/and notice, circular advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate”.

Meaning: Prospectus is a document that contains information about various aspects of the company and invests the investors to buy the securities offered by the company.

Contents of Prospectus:
A prospectus must contain the following:
(i) Information and Reports:
As per the Companies Act, the prospectus must contain information such as the name of the issuing company its full registered office address with phone numbers, email address, nature, number and price of securities being offered, details of a lead merchant banker, registrar to the issue, name of the stock exchange where the shares are listed.

• It must also have listed a clause of general risk date of opening and closing of issue etc.
• It must also have reported on financial information.

(ii) Declaration:
There should be a declaration by the company saying that all the provisions of the Companies Act have been complied with and that the prospectus does not contain anything contrary to the provisions of the Companies Act.

(iii) Statement of an Expert:
A prospectus may contain a statement made by an expert like Company Secretary, Chartered Accountant, Cost Accountant, Valuer, Engineer, etc., relating to matters that they have looked into.

• Any other matter as may be prescribed by the Companies Act.
• The expert has to give written consent to issue the prospectus.

(iv) Any other matter as may be prescribed by the Companies Act.

Balbharti Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 3 Formation of a Company Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 3 Formation of a Company

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
A company is ____________
(a) a human being
(b) an artificial person created by law
(c) a natural individual
Answer:
(b) an artificial person created by law

Question 2.
____________ are the persons who undertake the process of formation of a company.
(a) Promoters
(b) Directors
(c) Registrar of companies
Answer:
(a) Promoters

Question 3.
A ____________ company needs minimum two or more members.
(a) Public
(b) Private
(c) One person Company
Answer:
(b) Private

Question 4.
In a public company there must be minimum ____________ or more members.
(a) one
(b) two
(c) seven
Answer:
(c) seven

Question 5.
____________ refers to contracts entered into by the promoters on behalf of a proposed company.
(a) Pre-incorporation/Prehminary contracts
(b) Fiduciary contracts
(c) Memorandum of Association
Answer:
(a) Pre-incorporation/Preliminary contracts

Question 6.
A Director must have a ____________ to be appointed as a Director of a company.
(a) PAN
(b) DIN
(c) CIN
Answer:
(b) DIN

Question 7.
____________ has 21 digit alpha-numeric code which is a unique number assigned to every company at the time of
Incorporation.
(a) DIN
(b) PIN
(c) CIN
Answer:
(c) CIN

Question 8.
____________ is a document that invites the public to buy the shares of a company.
(a) Articles of Association
(b) Prospectus
(c) Certificate of Incorporation
Answer:
(b) Prospectus

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(a) Minimum 7 members	(1) Persons who conceive the idea of setting up a company
(b) DIN	(2) Public company
(c) Preliminary contracts	(3) Promoters
(d) Fiduciary duties towards the company	(4) Eight Digit alpha-numeric number
(e) CIN	(5) Private company
	(6) Unique number assigned to each Director
	(7) ROC
	(8) 21 digit alpha-numeric code number
	(9) One Person Company
	(10) Contracts entered by Promoters with third parties

Answer:

Group ‘A’	Group ‘B’
(a) Minimum 7 members	(2) Public company
(b) DIN	(6) Unique number assigned to each Director
(c) Preliminary contracts	(10) Contracts entered by Promoters with third parties
(d) Fiduciary duties towards the company	(3) Promoters
(e) CIN	(8) 21 digit alpha-numeric code number

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
A term which means registering a company as per provisions of Companies Act, 2013.
Answer:
Incorporation

Question 2.
Persons who undertake the necessary steps to set up a company.
Answer:
Promoters

Question 3.
The term refers to contracts entered into by Promoters with third parties on behalf of the proposed company.
Answer:
Preliminary contracts

Question 4.
The Birth Certificate of a company.
Answer:
Certificate of Incorporation

D. State whether the following statements are True or False.

Question 1.
A company is an artificial person.
Answer:
True

Question 2.
To form a Public company, there must be minimum of 2 persons/promoters.
Answer:
False

Question 3.
Promoters are persons who take the necessary steps to set up a company.
Answer:
True

Question 4.
Promoters can make secret profits while setting up a company.
Answer:
False

Question 5.
In India, companies have to be incorporated as per the provisions of the Companies Act, 2013.
Answer:
True

Question 6.
DSC is needed by Directors when they have to sign documents for e-filing.
Answer:
True

Question 7.
A company can be registered even without submitting a Memorandum of Association and Articles of Association.
Answer:
False

Question 8.
Every Director has to quote his DIN while giving his consent to be a Director of a company.
Answer:
True

Question 9.
ROC issues CIN only to certain companies.
Answer:
False

Question 10.
All companies need a Certificate of Incorporation.
Answer:
True

Question 11.
All companies need a Certificate of Commencement of business.
Answer:
False

1E. Find the odd one.

Question 1.
CIN, DIN, PAN
Answer:
PAN

Question 2.
Promoter, Prospectus, Incorporation of a company
Answer:
Prospectus

1F. Complete the sentences.

Question 1.
Promoters are the persons who undertake the process of ____________
Answer:
Formation of a company

Question 2.
The document issued by the Registrar of Companies when a company is incorporated is called as ____________
Answer:
Certificate of Incorporation

Question 3.
On incorporation of a company the ROC allows a unique identity number called as ____________
Answer:
Corporate Identity Number (CIN)

Question 4.
On behalf of a proposed company, preliminary contracts with third parties are entered by ____________
Answer:
Promoters

1G. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(1) Promoter	……………………
(2) …………………….	Certificate of Incorporation
(3) CIN	……………………
(4) RUN is used for	…………………..

(Corporate Identity Number, Reserving name of a company, Formation of a company, Birth certificate of a company)
Answer:

Group ‘A’	Group ‘B’
(1) Promoter	Formation of a company
(2) Birth Certificate of a company	Certificate of Incorporation
(3) CIN	Corporate Identity Number
(4) RUN is used for	Reserving name of a company

1H. Answer in one sentence.

Question 1.
Who is a Promoter?
Answer:
A person/a group of persons who take initiative efforts for a formation of a company is/are called as ‘Promoter/s’.

Question 2.
What is CIN?
Answer:
It is the Corporate Identity Number, issued by ROC at the time of incorporation of the Company.

Question 3.
Which company needs a Certificate of Commencement of Business?
Answer:
Public and Private companies having share capital and which are incorporated after 2nd November 2018 need a Certificate of Commencement of Business.

Question 4.
What are Preliminary Contracts?
Answer:
Promoter entering into a contract with third parties on behalf of the company before incorporation is called as Preliminary Contracts.

1I. Correct the underlined word and rewrite the following sentences.

Question 1.
ROC prepares draft Memorandum and Articles of Association.
Answer:
Promoter prepares draft Memorandum and Articles of Association.

Question 2.
Certificate of Commencement of Business is like a birth certificate of a company.
Answer:
Certificate of Incorporation is like a birth certificate of a company.

1J. Arrange in proper order.

Question 1.
(a) Appoint First Directors
(b) Prepare Draft Memorandum of Association and Articles of Association.
(c) Come up with the business idea
Answer:
(a) Come up with the business idea
(b) Appoint first Directors
(c) Prepare draft Memorandum of Association and Article of Association.

Question 2.
(a) Incorporation of a company
(b) Commencement of a company
(c) Promotion
Answer:
(a) Promotion
(b) Incorporation of a company
(c) Commencement of Business

2. Explain the following terms/concepts.

Question 1.
Promoters
Answer:
A person who take lead to form the company is called a “Promoter”. As per Companies Act, 2013; Section 2(69) Promoter is defined as,

• A person, who has been named in the prospectus or identified by the company in Annual Return or
• Who has control on company’s affairs directly or indirectly whether as a shareholder, director or otherwise or
• In accordance with whose advice, directions, or instructions, the Board of Directors is accustomed to act.

Question 2.
Promotion
Answer:
It is the first stage of Company formation. It means taking necessary steps to incorporate a company as per the provisions of the Companies Act, 2013.

Question 3.
Certificate of Incorporation
Answer:
It is a certificate issued by the ROC, after verifying all the documents and information provided by the promotors. It is like the Birth Certificate of the company. The company becomes a legal person or a body corporate having perpetual succession on getting incorporation certificate.

Question 4.
Simplified Proforma for Incorporating Company Electronically (SPICe)
Answer:
As per new rule 38 of Companies (Incorporation) (Fourth Amendment) Rules, only one form like FORM INC-32 (SPICe) needs to be submitted at the time of incorporation.
SPICe is to be filed for applying for:

• Reservation of Name of Company
• Incorporation of the new company
• DIN for Directors
• PAN and TAN for a new company.

Question 5.
Corporate Identity Number (CIN)
Answer:
The company needs to incorporate with the Registrar of Companies. Such ROC gives CIN to the company. It is a unique identity number. CIN is a 21 digit alphanumeric code. It is to be quoted in every form and correspondence. CIN includes details of the company like listed or unlisted, industry code, state of the location, year of registration, type of ownership, and registration number.
E.g. CIN of Air India Ltd. – U62100DL1992GOI048581

3. Study the following case/situation and express your opinion.

1. Mr. Ram, Mr. Sam, and Mr. Tom who are partners have come together to convert their business into a company. They have finalized all the details about the business they want to do, the capital needed, etc. However, they do not know how to proceed with the legal formalities. Hence they appoint Mr. Shah who is a Practicing Company Secretary to help them prepare documents needed for incorporating the proposed company.

Question (a).
Can Mr. Ram, Mr. Sam, and Mr. Tom convert their partnership firm into a company?
Answer:
Mr. Ram, Mr. Sam, and Mr. Tom can convert their partnership firm into a company easily.

Question (b).
Name 2 most important documents needed to incorporate a company.
Answer:
Memorandum of Association and Articles of Association are the two most important documents for the Incorporation of the Company.

Question (c).
Will Mr. Shah be considered a Promoter of the Company? Why?
Answer:
Mr. Shah will not be considered a Promoter. Mr. Shah is an advising company secretary and will help to prepare documents needed for incorporation. Promoter means a person or group of persons who take initiative efforts for the formation of the company. Here Mr. Ram, Mr. Sam, and Mr. Tom are in the role of Promoter.

2. Mr. T along with his 5 friends have submitted all the necessary documents for incorporation of TRIM private limited company.

Question (a).
How many minimum promoters are needed to incorporate a private company?
Answer:
Minimum 2 promoters/persons are needed to incorporate a private company.

Question (b).
When can TRIM Private limited company be said to have come into existence?
Answer:
After getting Incorporating Certificate, TRIM Private limited company be said to have come into existence.

Question (c).
Name the two most important documents that must be submitted at the time of Incorporation of a company.
Answer:
There are various documents, which are needed for the Incorporation of a company like Memorandum of Association, Articles of Association, Director’s consent, etc.

3. Sagar company limited got its Certificate of Incorporation on 1st September 2018. The application for Incorporation was submitted on 16th August 2018. There were 10 promoters who took the steps to incorporate the company.

Question (a).
State the date on which Sagar company limited came into existence legally?
Answer:
Sagar Company Limited came into existence legally after receiving an incorporation certificate on 1st September 2018.

Question (b).
On which date will the company get its Corporate Identity Number?
Answer:
At the time of issuing the Incorporation Certificate, ROC allows a CIN to the company, which is 1st September 2018.

Question (c).
How many minimum promoters are needed for incorporating a public company?
Answer:
There are three types of companies like Public Company, Private Company and One Person Company, in which Public Company needs minimum 7 Promoters/Persons for incorporating.

4. Answer in brief.

Question 1.
State the contents of the Certificate of Incorporation.
Answer:
Contents of Certificate of Incorporation:

• The name of the company.
• Date of issue of Certificate of Incorporation.
• Corporate Identity Number (CIN).
• Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) of the company.
• Signature of Registrar with the date and his seal.

Question 2.
State the importance of the Certificate of Incorporation.
Answer:
Importance of Certificate of Incorporation:

• Certificate of Incorporation is like a Birth Certificate of a Company.
• It is proof by which company comes into existence.
• After getting an Incorporation Certificate, the company becomes a legal person distinct from its members.
• It is a document that gives status to the company about its perpetual succession from its date of Incorporation.
• After getting such a certificate, the company can sue and be sued by others.

Question 3.
Write a note on – Role of the Promoter.
Answer:
Role of Promoter:

• To conceive (discover) the idea of forming a business.
• To decide aims and objects of business, amount of capital, scale/size of business, etc.
• Drafting the ‘Memorandum of Association’ and ‘Articles of Association’.
• Drafting Prospectus to invite investors.
• To appoint first directors and first subscribers to Memorandum of Association and Articles of Association.
• To enter into ‘Preliminary Contract’ like hiring office premises, preparing and drafting Memorandum of Association and Articles of Association.

Question 4.
Draw the flow chart of steps in the promotion of a company.
Answer:
Steps in promotion of a company:

5. Justify the following statements.

Question 1.
Certificate of Incorporation is like a Birth Certificate of a company.
Answer:

• Certificate of Incorporation is issued by ‘Registrar of Companies, after successful completion of the Incorporation step of formation.
• It is proof by which company comes into existence.
• An incorporation Certificate brings legal status to the company.
• After getting the Incorporation Certificate company achieves the status of ‘Perpetual Succession’.
• The company can sue and can be sued after getting an Incorporation Certificate.
• The company can enter into various contracts.
• After getting an Incorporation Certificate, the company is considered an artificial person.
• Thus, a Certificate of incorporation is like a Birth Certificate of a company.

Question 2.
Every Company on incorporation gets a CIN.
Answer:

• CIN means Corporate Identity Number.
• ROC allots CIN to every company at the time of issue of Incorporation Certificate after completion of all formalities.
• It is a unique identification number that is given to every company.
• It shows details like whether a company is listed or unlisted, industrial code, state-wise location, year of incorporation, type of ownership, and registration number.
• All correspondence with ROC is conducted on basis of such CIN.
• It is compulsory given to all types of companies.
• Thus, every company gets CIN on incorporation.

Question 3.
Promoters play important role information of a company.
Answer:

• Promoter discovers the idea of business formation.
• Promoter decides aims and objects of business, amount of capital, scale/size of business.
• Drafting the ‘Memorandum of Association’ and ‘Articles of Association’.
• Drafting prospectus to invite investors.
• To appoint first directors and first subscribers of Memorandum of Association and Articles of Association,
• To enter into ‘Preliminary Contracts’ like hiring office premises, etc.
• To protect and promote the interest of the proposed company.
• Thus, promoters play important role in theformation of a company.

6. Answer the following questions.

Question 1.
Explain briefly the steps involved in the incorporation of a company.
Answer:
(i) Obtaining Digital Signature Certificate (DSC): Promoters and the proposed first directors has to obtain a DSC for e-filing.

(ii) Register DSC in the name of the Director with MCA: DSC has to be registered with MCA (Ministry of Corporate Affairs). MCA maintains details of every Director including their DIN, personal details, etc.

(iii) Obtain Director Identification Number (DIN): Proposed first Directors must apply for DIN in electronic form SPICe-32 at the time of incorporation. Every director must have DIN.

(iv) Apply for Reservation of Name: Promoter has to get the name of company approved from Central Registration Centre (CRC) by filling form RUN (Reserve Unique Name) along with prescribed fees on MCA portal. Promoters have to suggest more than one name in order of their preference. CRC will approve the name within 20 days from the date of application.

(v) Finalize Memorandum of Association and Articles of Association: It states the aims and objectives of the business. It contains legal and technical information. The promoter should finalize it. The promoters finalize both the documents with the help of the Company Secretary, legal experts, etc.

(vi) Signing, Stamping, and Dating of Memorandum and Articles of Association: Both documents must be signed by each subscriber and shall add his name, detailed address, occupation, etc. The signature of at least one witness is needed. Due stamp duty as per the Indian Stamp Duty Act, 1899 is required to be paid at the time of incorporation.

(vii) Preparation of other necessary documents for incorporation:

• Consent of Directors: Directors should give written consent in the prescribed format, about their approval to act as a director.
• Details of manager, secretary, etc Articles of Association include the names of the manager, secretary, etc.
• Declaration by subscribers to the Memorandum and First Directors: A declaration by first Directors should be taken who has subscribed to Memorandum of Association stating that he is not convicted of any offense in connection with the promotion, formation of company and has not found guilty of any fraud, etc.

(viii) Address for communication and notice of Registered office address: A company is required to have a Registered office within 30 days of incorporation. The promoter has to provide an address for communication at the time of incorporation.

(ix) Obtain a statutory declaration from Declaration by Company Secretary, Chartered Accountant, advocates, etc. is also necessary to be obtained along with Director, manager, etc. declaration status that all necessary requirements are fulfilled related to incorporation.

(x) Filing of application and document for incorporation of a company: Finally, after preparation of all documents, it has to be submitted to ROC in the prescribed form along with necessary prescribed fees for incorporation.

Question 2.
Promoters play an important role in the formation of a company. Explain.
Answer:
Promoters:
A person who take lead to form the company is called a “Promoter”.
As per Companies Act, 2013; Section 2(69) Promoter is defined as.

• A person who has been named in the prospectus or identified by the company in Annual Return or
• Who has control on company’s affairs directly or indirectly whether as a shareholder, director or otherwise or
• In accordance with whose advice, directions, or instructions, the Board of Directors is accustomed to act.

Role of Promoters:

• To conceive (discover) the idea of forming a business.
• To decide aims and objects of business, amount of capital, scale/size of business, etc.
• Drafting the ‘Memorandum of Association’ and ‘Articles of Association’.
• Drafting Prospectus to invite investors.
• To appoint first directors and first subscribers to Memorandum of Association and Articles of Association.
• To enter into ‘Preliminary Contract’ like hiring office premises, preparing and drafting Memorandum of Association and Articles of Association.

Activity (Text Book Page No. 42)

From the following CIN, identify the type of companies:

Question 1.
U74999TN20140PC098340
Answer:

Question 2.
L28920MH1945PLC004520
Answer:

Question 3.
U72900KA2003PTC033028
Answer: