A TEXTBOOK OF
ICSE COMMERCIAL APPLICATIONS CLASS IX A.GHOSH A.BANERJEE
In accordance with the latest syllabus prescribed by the &RXQFLOIRUWKH,QGLDQ&HUWL¿FDWHRI6HFRQGDU\(GXFDWLRQ([DPLQDWLRQ1HZ'HOKL
A TEXT BOOK OF
ICSE COMMERCIAL APPLICATIONS CLASS IX
AUTHORS A. GHOSH
A. BANERJEE Advisory Member Chetan Tiwari M. Com., M.Sc., B.Ed.,
Principal St. Anthony's School, Kurseong
26:$/38%/,6+(56 1/12 Sahitya Kunj, M. G. Road, Agra-282 002
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Edition : 2021
ISBN : 978-93-90278-77-0
OSWAL PUBLISHERS Head office Phone E-mail Website Printed at
: : : :
1/12, Sahitya Kunj, M. G. Road, Agra-282 002 (0562) 2527771-4, +91 75340 77222
[email protected] www.oswalpublishers.com
Preface The modern business environment is going through rapid changes, necessitating acquisition of knowledge about the nature, objectives, and structures of commerce. Oswal’s ‘A Textbook of ICSE Commercial Applications’ for class IX provides comprehensive coverage of the subject as per the latest syllabus by the ICSE board. Emphasis has been placed on explaining the practical applications of principles of ȱȱȱȱǯȱȱȱ ȱęȱȱȱȱȱȱ reliable companion in terms of guiding and developing insights into the complex world of commerce. ȱ ȱȱĴȱȱȱȱȱĴǰȱȱȱȱȱȱ with relevant questions at the end. This book has been designed taking into account, the need of students for self-study and to explain thoroughly all the fundamental concepts of Commercial Applications. ȱ ȱěȱȱȱȱȱȱȱȱȱ ȱȱȱȱȱ curriculum. Issues regarding environmental concerns are dealt in detail with ample examples. SALIENT FEATURES OF THE BOOK O
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Constructive suggestions are acknowledged and would be incorporated in the future edition. —PUBLISHER
SYLLABUS CLASS IX COMMERCIAL APPLICATIONS environment physically, chemically, biologically and ethically. Technological inputs have yielded high yielding varieties, which reduces the products of agricultural residue such as fodder, etc.; indiscriminate use of fertilizers and pesticides. Mining, industries, energy generation, automobiles, urbanisation leading to defacement of land, deforestation, deterioration of hydrological resources. ǻǼȱ ȱ ȱ ȱ ȱ ȱ DZȱ ȱ ȱ ǰȱ ȱ ȱ ȱǯ
There will be oneȱ Ĵȱ ȱ ȱ two hours duration carrying 100 marks and Internal Assessment of 100 marks. The paper will be divided into two sections A and B. Section A ǻ¢Ǽȱ will consist of compulsory short answer questions covering the entire syllabus. Section B will consist of questions which will require detailed answers there will be a choice of questions in this section. 1.
ȱ
ȱ
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Introduction to Commercial Organisations ǻǼȱ ęȱȱȱȱ ȱ ȱ ȱ ǰȱ ǰȱ ¢ǰȱ ǰȱ ǰȱ ęȱ ȱ ¢ǯȱ ȱ ȱ ȱǯ ȱ A basic understanding of the terms and their distinctions using relevant industry examples. ǻǼȱ ęȱ ȱ ȱ ǰȱȱȱ ȱ ǯ ȱ ěȱ ȱ ȱ ȱ to be explained like : Textile industry, FMCG (fast moving consumer goods), etc. Many examples need to be given to reinforce and clarify these concepts. While the objectives for ęȱȱȬęȱȱȱ ěǰȱ ȱ ȱ ȱ ȱ essential. A brief introduction to each ownership structure, their features and distinctions. ǻǼȱ ȱ ȱDZ ȱ ǻǼȱ ȱȱDZȱǰȱ ǰȱ ǰȱ ǰȱ ǰȱ ȱ ȱǯ Importance of these resources in our daily life. ȱ ǻǼȱ ȱ ȱ ȱ ȱ ȱ DZȱ ȬȦȱ ǰȱȬȱȱ ȱ ǰȱ ȱ ȱ ȱ ȱ ȱȱ ǯ ȱ ȱ Almost all activities of human society have degraded the
ȱ
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Advantages and disadvantages of renewable resoures when compared to non renewable resources. Study of the functioning of biogas, solar, wind and hydro power.
ǻǼȱ ȱ ȱ ȱ ȱȱǯ ȱ ȱ Measures to control pollution and degradation. Need for an Eco friendly form of industrial development. ǻǼȱ ȱȱȱDZ ȱ Vehicular, industrial, burning garbage, brick kilns, industrial waste, ěȱȱȱǰȱȱǰȱ chemical fertilizer, bio-medical waste, pesticides, radiation—x-rays, radioactive fallout from nuclear plants.
ȱ
ȱ
2.
Functioning Organisation
of
a
Commercial
ȱ ȱ ȱ ęȱ ȱ ¢ȱ ¢ȱ ěȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ¢ȱ ȱ Ȭȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ęȱ DZȱ ȱ ȱ ǰȱ ǰȱ ȱ ȱ ǰȱ ǰȱ ȱ ǰȱ ȱ ȱ ȱ ǯ
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These topics should be studied as departments ȱȱ¢ȱęȱ¢ǰȱȱȬȱ or projects. All the departments and their functions need to be explained individually so that the cross-linkages can be brought out clearly.
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Ȭǰȱ ȱ ǰȱ ǰȱ ȱǰȱǯ ȱ
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A comparative analysis of the tools needs to be undertaken.
ȱ ȱ ȱ ȱ ȱ ȱ ȱ ǯ With changing times and increasing size of organisations the everincreasing need and relevance of communication.
ǻǼȱ ¢ȱ ȱ ȱ DZȱ ȱ ǻ Ĵǰȱ Ǽȱ ȱ Ȭȱ ǯȱ ȱ ȱ ȱ ěȱ Ĵȱ ȱ ȱ ǯ
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The advantages and disadvantages of each method. Using industry examples ȱȬȱĴǰȱȱȱȱ of each method.
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ǻǼȱ
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The interpersonal skills required for ěȱǯ
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4.
Mechanics
&
Terminology
of
Accounting Systems ǻǼȱ ȱ
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ǻǼȱ ȱ ȱ ȱ ȱ ȱ ǯ
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ǻǼȱ
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Self-explanatory. No equestions will be set on recording of entries or on calculations– only an understanding of the above is required.
INTERNAL ASSESSMENT ȱ ȱ ȱ fourȱ ȱ ȱ ȱ ȱȱȱ¢ǰȱȱȱ¢ȱȱ ǯ Suggested list of assignments ŗǯ
¢ȱȱ ȱȱȱȱ ¢ȱȱ Ȭȱ¢ȱŚȱęȱȱȱ ¢ȱ ȱ ȱ ȱ ȱ ȱ ȱǯ
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řǯȱ
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Dzȱ Ĵǰȱ ǰȱ
3. Business Communication ǻǼȱ
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ȱǰȱǰȱȱ ȱ ęȱ ȱ ȱ ȱ ȱ ¡ȱ ǯ
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Şǯȱ
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ȱ ě¢ȱ ȱ ȱ ȱȱȱȱ ȱ ȱȱȱ ȱ ěȱ ȱ ȱ ȱ ȱ ȱ ę¢ǯ şǯȱ
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ŗŖǯȱ
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CONTENTS 1. Meaning of Commerce, Business, Trade Organisation, Firm and Company
9 – 19
2. Commercial Organisations Grouped According to Activities
20 – 34
3. Objectives of Commercial Organisation and Ownership Structure
35 – 92
4. Functions of Commercial Organisation : Purchase and Stores
93 – 105
5. Production
106 – 118
6. Marketing and Sales
119 – 128
7. Finance
129 – 139
8. Human Resources
140 – 155
9. General Administration and Legal Department
156 – 162
10. Communication in a Commercial Organisation
163 – 173
11. Ways (Channels) of Communication
174 – 204
12. Accounting : Need and Relevance
205 – 227
13. Books of Accounts
228 – 254
14. Natural Resources
255 – 264
15. Causes of Depletion of Resources
265 – 270
16. Conservation of Resources
271 – 278
17. Industrial Pollution and Degradation of Environment
279 – 285
18. Sources of Pollution
286 – 292
Project Work
293 – 296
Glossary
297 – 308
1IERMRKSJ'SQQIVGI&YWMRIWW8VEHI 3VKERMWEXMSR*MVQERH'SQTER] LEARNING OBJECTIVES y y y y y y y y y y y
Meaning of Human Activities Meaning of Economic Activities Types of Economic Activities Meaning of Business Meaning of Industry, Commerce and Trade. Characteristics of Business Importance of Study of Commerce Classification of Business Meaning of Organisation, Firm, and Company Aids to Trade Meaning of Commercial Organisation.
1)%2-2+3*,91%2%'8-:-8-)7 Activities which human beings undertake, are known as human activities. Some of these activities are undertaken to earn money but others are performed to derive personal satisfaction. All of us participate in various kinds of work from the time we get up from bed in the morning till we go to sleep at night. On examination of the human activities one can find that some of these produce direct economic benefits, e.g., working in office, shop while others like brushing teeth, taking breakfast etc. do not produce any direct economic benefit.
Thus human activities can be classified into two categories: 1. Economic Activities. 2. Non-Economic Activities.
1)%2-2+3*)'3231-'%'8-:-8-)7 Activities which are undertaken by people with the objective of earning money, are known as economic activities. These activities are concerned with production, exchange and distribution of goods and services. Examples of Economic Activities: 1. Production of Goods by a manufacturer in a factory. 2. Distribution of goods by wholesaler. 3. Selling of goods by retailer. 4. Transportation of goods; deposit and lending of money by a banker. 5. Legal profession carried on by a doctor. 6. Working as a School teacher.
8]TIWSJ)GSRSQMG%GXMZMXMIWSV3GGYTEXMSR Economic activities are called occupation of people, when the people are regularly engaged in particular economic activity.
10
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Types of Economic Activities
Profession
Business Employment
1IERMRKSJ4VSJIWWMSR Profession refers to the activity which require special knowledge and skill to be applied by an individual in his work to earn a living. Example of Professions: Medical profession, Law profession, Accounting Profession, Engineering Profession. Meaning of Non-economic activities: Activities other than economic activities, are known as non-economic activities. In other words, the activities which are undertaken for purposes other than purpose of earning money, are called non-economic activities, e.g., Activities undertaken for Personal satisfaction, Physical requirement, Patriotism. (MWXMRGXMSRFIX[IIR)GSRSQMG%GXMZMXMIWERH2SRIGSRSQMG%GXMZMXMIW &EWMWSJHMWXMRGXMSR
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Basis
Based on economic motive
Based on social motive
Expectation of Money
Money expected
Money not expected
Purpose
To create wealth
For psychological satisfaction
)QTPS]QIRX Employment refers to an activity in which an individual works regularly for another person for an agreed remuneration under the rules of services. Example of Employment: Working as nurse; working as legal officer.
'311)6') It is a vast and complex term. It consists of buying goods and materials from the manufacturers and selling them to the ultimate consumers. It consists of all those activities that are required to reach goods to the ultimate consumer. “The sum total of those processes which are engaged in the removal of the hindrances of persons (trade), place (transport and insurance) and time (warehousing) in the exchange (banking) of commodities.” —J. Stephenson This definition is not adequate because many other hindrances have not been discussed in it. “A term that embraces all those functions involved in the making, buying, selling and transportation of goods.” —Dr. Evlyn Thomas
1IERMRKSJ'SQQIVGI&YWMRIWW8VEHIŤŤŤ'SQTER]
11
“Commerce
comprises a group of specialised activities which together form an essential part of the process of production. It links suppliers and consumers by means of trade and activities auxiliary to trade such as transport, banking, insurance and warehousing. The most important links are provided by a series of markets controlled by the price system.” —Dr. Noel Branton
Commerce is concerned with trade which is discussed later in this chapter.
-QTSVXERGISJXLI7XYH]SJ'SQQIVGI The need for study of commerce arises due to the following factors: The diversity of natural resources and their geographical distribution. The
difference in human taste, and
Division
of labour as a result of the first two factors.
Due to the above mentioned factors, different nations of the world have to depend upon one another.
Importance of Study of Commerce
To House Holders
To Businessmen and Industrialists
To Statesmen and Politicians
To Labourers To Society
The subject of Commerce is of great practical importance to different segments of population and also to individuals (householders, businessmen, labourers, politicians and statesmen). To Householders The study of Commerce is of great utility to a householder. By the study of Commerce, a householder comes to know about various forms of buying and selling (their advantages and disadvantages), co–operative stores, merits of depositing money in banks and using cheques, insurance, the role of advertising agencies, etc. He can utilize this knowledge to his advantage in everyday life, particularly in purchasing of goods. By insurance and banking facilities, he can meet his present and future financial needs in a profitable manner. To Businessmen and Industrialists The knowledge of this subject is of great importance particularly to traders and industrialists. By the study of Commerce, a businessman comes to know about the details of home and international trade, works and functions of a wholesaler and a retailer, comparative advantages of different means of transport, functions of banks (loan facilities, current account facilities, etc.), the advantages of different types of insurance, role of advertisement, etc. All these details are directly concerned with his trade. So he can make the best use of this knowledge in a practical way. In fact, a trader or a businessman can get real success only through the study of Commerce. An industrialist or a manufacturer also comes to know all about the arrangement of capital, disposal of products, safety of his assets and earning sufficient profits. The knowledge of the details of Commerce helps him to avoid possible pitfalls and follow
12
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the best course. In fact, it would not be an exaggeration to say that an industrialist can be successful in his entrepreneurial field only after a thorough knowledge of this subject. To Statesmen and Politicians The subject of Commerce is of great importance to statesmen and politicians too. It is because the study of Commerce acquaints the statesmen and politicians with the role of different commercial activities in the country and their impact on the material welfare of the people. By studying the roles of various commercial activities to increase the national income and to bring the welfare to the people, the statesmen and politicians may be able to think in a better way about the development of the different organs of Commerce. By the study of Commerce, politicians and statesmen can offer better solutions to eradicate poverty and unemployment in the country. To Labourers The study of Commerce is also helpful to labourers. The basic knowledge about functions of banks, methods of sale and purchase, insurance, etc., can be of great utility to them. By using the knowledge of insurance, a labourer can take proper insurance policy for the benefit of his family and dependents. By the study of Commerce, the labourers can also know about the benefits of Consumer Co–operative Stores. This may encourage labourers to become members of some Consumer Co– operative Stores. This will keep them away from the clutches of the ordinary retailers who sell to them low quality goods and charge very high rates. To sum up, it can be said that the knowledge of Commerce is very helpful to the labourers in raising their standard of living and in bringing financial security to their family members and dependents. To Society There are certain economic issues which do not concern individuals but which are of great interest and importance to the society as a whole. In Commerce, we study such issues, which guide the statesmen, politicians, industrialists, bankers and economists to make statutory recommendations to solve related problems. The issues like production, export of goods, foreign exchange ratio, deficit financing, small-scale and cottage industries, nationalization of banks and insurance companies, etc., affect the society. Thus, the study of Commerce is of great importance to an individual as well as to the society as a whole.
&97-2)77 Business is considered to be as old as civilization itself. Man has been found to be engaged in economic as well as non-economic activities since ages. But all his activities cannot be termed as business. Business includes only certain economic activities. In business, one seeks to earn profit by exchange of goods and services for money, but some exchange of goods and services may not be considered as business, as there is no monetary transaction involved in it. Therefore, we can rightly say that business activities are undertaken to make profits.
1IERMRKSJ'SQQIVGI&YWMRIWW8VEHIŤŤŤ'SQTER]
13
“Business may be defined as a human activity directed towards producing or acquiring
wealth through buying or selling goods. Business consists of those processes of human activity by which desirable things are extracted from earth, fashioned and transformed by man and machine, carried from place to place and stored through time and placed in the hands of those who are ready to pay for them.” —Haney “Economic activities performed for earning profits are termed as ‘Business’.”
—James Stephenson “Business is a sum of all the activities involved in production and distribution of goods
and services for private profits.”
—A. Keith & Carld
From the above definitions, we can conclude certain characteristics of business which are as follows: It consists of only economic activities. It
implies buying and selling of goods and services with a view to making gains.
It
is based on the exchange of goods which is advantageous to the parties involved or concerned.
'LEVEGXIVMWXMGWSJ&YWMRIWW The salient features of business are given Characteristics of Business below: Sale, Transfer or Exchange Sale, Transfer of Exchange All business activities involve sale or Dealing in Goods and Services exchange of goods and services for some Regular Dealings consideration. Buying and selling of goods and services for a price are the essence of Profit Motive business. If there is no sale, transfer or Risk exchange for a price, it will not be a business activity. For instance, cooking food for Creation of Utilities personal consumption is not business. But Economic Activity cooking food and selling it to others for a price, becomes business. Dealings in Goods and Services Every business enterprise produces and/ or buys goods and services for selling them to others. Goods may be consumer goods or producer goods. Consumer goods are meant for direct use by the ultimate consumers, e.g., bread, clothes, shoes, etc. Producer goods are used for the production of consumer goods, e.g., materials, machinery, etc. Services are intangibles such as supply of electricity, insurance, banking, etc. Regular Dealings Business involves a series of dealings recurring. A single transaction cannot be called business. Purchase and sale is the hallmark of business. For instance, if a person sells his old scooter, it is not business. But if he sells scooters on regular basis as its dealer, it will become business.
14
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Profit Motive A business is not charity. The primary objective of business is to earn money and acquire wealth. A business that does not earn profit cannot survive for a long. Profit is also essential for the growth and expansion of business. Business must earn profit by serving the society. Risk Risk or uncertainty of return is an essential feature of business. Risk involved in business is of two kinds. The first kind of risk can be forecasted and insured, e.g., loss by fire, flood, theft, etc. The second kind of risk cannot be forecasted and insured, e.g., loss due to fall in demand, change of fashion, etc. Creation of Utilities A business makes the goods more useful to satisfy human wants. It adds time, place, form and possession utilities to various types of goods. In the words of ROGER, “a business exists to create and deliver value satisfaction to customers at a profit.” Economic Activity Business is primarily an economic function as it involves production and distribution of goods and services for the satisfaction of human wants. However, business is a part of social activity and it reflects the aspirations, values and beliefs of people. Therefore, business may be described as socio-economic function.
'PEWWMJMGEXMSRSJ&YWMRIWW
Business Business can be classified as follows: Industry Industry Trade Industry implies production of goods Commerce alongwith steady application of human Aids to Trade labour. The process of production of goods may involve men, machines, materials, and money. It may be concerned with the process of extraction, manufacturing, conversion, construction, processing or fabricating of products. Industry may produce capital goods to be used for further production of goods or consumer goods for direct satisfaction of various wants of the consumers, e.g., clothes, books, etc. Trade Under trade, we study the activities of exchange of goods. The exchange of goods may be for cash, for credit or for services. By means of trade, we exchange those goods, which are not needed by someone, but which are needed by others. The traders and merchants act as an intermediate link between production and consumption, through their distributive activities. The activities of traders and merchants are, of utmost importance for producers as well as for consumers. Aids to Trade To overcome the difficulties regarding transportation, financing, sales promotion, storing of goods during exchange of goods, there are various agencies known as aids to trade. They are:
1IERMRKSJ'SQQIVGI&YWMRIWW8VEHIŤŤŤ'SQTER]
(i) Transportation (ii) Warehousing (iii) Banking
15
(iv) Insurance (v) Advertising and Publicity (vi) Communication
-RXIVVIPEXMSRWLMTEQSRK-RHYWXV]'SQQIVGIERH8VEHI Industry Provide base for
Depends upon Commerce
Provide base for
Depends upon Trade
Industry, commerce and trade are closely related to each other. Industry produces goods which are distributed through commerce. No commercial activity is possible in absence of industry. At the same time, industrial production is meaningless without the distribution of goods through commerce. If industry is the backbone of commerce, commerce serves as the lifeline of industry. Trade provides the necessary support to industry and maintains a smooth flow of commerce. Thus, there is a high degree of interdependence among industry, commerce and trade. The words ‘Trade’ and ‘Commerce’ do not have the same meaning. The term ‘trade’ means the activity of buying and selling of products. A trader is a person who acts as a link between the producer and the consumer through distributive activity. The term ‘Commerce’ is used in a wider sense. It includes trade and all those activities which are necessary to remove the hindrances of place, time, finance and risk. Thus, the term ‘Commerce’, includes the activities of trade, transport, warehousing, banking, insurance, packaging, publicity and advertisement. 'SQTEVMWSRSJ-RHYWXV]'SQQIVGI 8VEHI &EWMWSJ 'SQTEVMWSR
-RHYWXV]
'SQQIVGI
8VEHI Buying and selling of goods and services.
1. Meaning
Extraction, reproduction, processing and construction of useful products.
Activities concerned with distribution of products to consumers.
2. Scope
Consists of all activities concerned with the production of commodities.
Comprises trade and Consists of activities auxiliaries of trade. involving purchase and sale.
3. Capital
Generally large capital required for large scale industry.
Comparatively less capital required.
Capital required to keep stocks.
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