Text Book Back Questions and Answers - Chapter 4 Sole Proprietorship 11th Commerce Guide Samacheer Kalvi Solutions - SaraNextGen [2024-2025]

Updated On May 15, 2024

By SaraNextGen

Chapter 4 - Sole Proprietorship - 11th Commerce Guide Samacheer Kalvi Solutions - Text Book Back Questions and Answers

Textbook Exercise Questions and Answers

I. Choose the Correct Answer

Question 1.
Which is the oldest form of Business organisation?
(a) Sole Proprietorship
(b) Partnership
(c) Co – operative Society
(d) Company
Answer:
(a) Sole Proprietorship

Question 2.
In which form the owner, establisher and manager is only one?
(a) Joint Enterprise
(b) Government Company
(c) Co – operative Society
(d) Sole Proprietor
Answer:
(d) Sole Proprietor

Question 3.
A major disadvantage of sole proprietorship is
(a) Limited liability
(b) Unlimited liability
(c) Easy Formation
(d) Quick decision
Answer:
(b) Unlimited liability

Question 4.
From the following which one is Non – corporate form of business?
(a) Joint stock company
(b) Sole trading business
(c) Government company
(d) Co – operatives
Answer:
(b) Sole trading business

II. Very Short Answer Questions

Question 1.
Who is called Sole Trader?
Answer:
Proprietorship is a form of business organisation in which an individual introduces his own capital, uses his own skill and intelligence in the management of its affairs and is solely responsible for the results of its operations.

Question 2.
What are the non – corporate enterprises?
Answer:

1. Sole trading concern
2. partnership firm
3. Joint Hindu family business.

Question 3.
What are the corporate enterprises?
Answer:

1. Government – Public Undertakings, Public Utilities.
2. Private – Joint stock companies
3. Co – operative society

Question 4.
For which of the following types of business do you think a sole proprietorship form of organisation would be more suitable, and why?

1. Grocery store
2. Medical store
3. Craft centre
4. Legal consultancy
5. Internet cafe

Answer:
Grocery store is more suitable for sole proprietorship business because of limited risk and less educated or uneducated can start the business.

III. Short Answer Questions

Question 1.
How is it possible to maintain secrecy in sole proprietorship?
Answer:
In sole proprietorship as the trader is the sole owner of the business, the secrecy can be maintained easily.

Question 2.
What is unlimited liability?
Answer:
The liability of the proprietor for the debts of the business is unlimited. The creditors have the right to recover their dues even from the personal property of the proprietor in case the business assets are not sufficient to pay their debts.

Question 3.
Write any three characteristics of sole proprietorship.
Answer:
1. Ownership by one man:
This is owned by single person. The sole trader contributes the required capital. He is not only the owner of the business but also manages the entire affairs.

2. Freedom of work and Quick Decisions: Since.an individual is himself as a owner, he need not consult anybody else. Hence he can take quick decisions.

3. Unlimited Liability: When his business assets are not sufficient to pay off the business debts he has to pay from his personal property.

Question 4.
Give some examples of sole trading business.
Answer:
Saravana Stores, Hotel Saravana Bhavan, Grocery store, Petty shop.

Question 5.
Define Sole trading business.
Answer:
“Sole proprietorship is that form of business organisation which is owned and controlled by a single individual. He receives all the profits and risks of his property in the success or failure of the enterprise” – Wheeler.

IV. Long Answer Questions

Question 1.
Explain the characteristics of sole trading business.
Answer:
1. Ownership by one man:
This is owned by single person. The sole trader contributes the required capital. He is not only the owner of the business but also manages the entire affairs.

2. Freedom of work and Quick Decisions:
Since an individual is himself as a owner, he need not consult anybody else. Hence he can take quick decisions.

3. Unlimited Liability:
When his business assets are not sufficient to pay off the business debts he has to pay from his personal property.

4. Enjoying Entire Profit:
He strives tirelessly for the improvement and expansion of his business and enjoys all the benefits of his hard work.

5. Absence of Government Regulation:
A sole proprietor concern is free from Government regulations. No legal formalities are to be observed in its formation, management or in its closure.

6. No Separate Entity:
The sole trading concern comes to an end with death, disability, insanity and insolvency of the individual.

7. Maintenance of Secrecy:
Since he/she manages all the affairs of the business, secrecy can be maintained easily.

Question 2.
What are the advantages of sole trading business?
Answer:
1. Easy Formation:
No legal formalities are required to initiate a sole trading concern. Any person capable of entering into a contract can start it, provided he has the necessary resources for it.

2. Incentive to Work hard:
There is a direct relationship between effort and reward. The fact that the entire profit can be taken by himself without sharing with anybody else induces him to work ceaselessly.

3. Small Capital:
Small capital is an important as well as specific advantage of sole proprietorship. Sole proprietor can start business with small capital.

4. Credit Standing:
Since his private properties are held liable for satisfying business debts, he can get more financial assistance from others.

5. Personal Contact with the Customers:
Since sole proprietor knows each and every customer individually he can supply goods according to their taste and preferences. Thus he can cultivate personal relationship with the customers.

6. Flexibility:
The sole trader can easily adjust himself to the changing requirements of his business.

Question 3.
What are the disadvantages of sole trading business?
Answer:
1. Limited Capital:
Since the capital is contributed by one individual only, business operations have necessarily to be on a limited scale.

2. Limited Managerial Skill:
Single person’s intelligence and experience may not help him beyond a certain stage. Since he has to focus on each and every activity, his managerial ability is bound to be limited.

3. Unlimited Liability:
The creditors have the right to recover their dues even from the personal property of the proprietor in case the business assets are not sufficient to pay their debts.

4. Lack of Specialisation:
Since the business unit is small and the financial resources are limited, experts in different fields cannot be employed to secure maximum advantages.

5. Hasty Decisions:
A sole proprietor is more likely to take hasty decisions as he need not consult anybody else.

Additional Questions and Answers

I. Choose the Correct Answer:

Question 1.
On the basis of ownership of a business, forms of a business can be classified into ……………………….. groups.
a. 2
b. 3
c. 4
d. 5
Answer:
b. 3

Question 2.
…………….. is known as individual entrepreneurship.
(a) Partnership
(b) Sole trader
(c) Joint-stock company
(d) Cooperative
Answer:
(b) Sole trader

Question 3.
The reason for the end of the sole trading concern is ……………….
a. Death
b. Insanity
c. Insolvency
d. All the above
Answer:
d. All the above

Question 4.
“He receives all the profits and risks all of his property in the success or failure of the enterprise”- was said by
(a) Wheeler
(b) J.L. Hansen
(c) H.Haney
(d) O.R. Krishnasamy
Answer:
(a) Wheeler

Question 5.
Which of the following is under non – corporate enterprise?
(a) Government
(b) Cooperative
(c) Company
(d) Sole trading concern
Answer:
(d) Sole trading concern

II. Very Short Answer Questions

Question 1.
How is the liability of the owner in sole proprietorship?
Answer:
The liability of the sole trader is unlimited. When his business assets are not sufficient to pay off the business debts he has to pay from his personal property.

Question 2.
What should be the Government’s role in sole proprietorship?
Answer:
A sole proprietor concern is free from Government regulations. No legal formalities are to be observed in its formation, management, or in its closure.

III. Short Answer Questions

Question 1.
What is limited capital?
Answer:
Since the capital is contributed by one individual only, business operations have necessarily to be on a limited scale.

Question 2.
What is the other name for a sole proprietorship?
Answer:
A sole proprietorship is also called Entrepreneurship.

For future Learning

Question a.
Mahesh is a young graduate who has inherited a sum of Rs 1,00,000 by way of family savings. He also has a family house to which he has sole title as the only son of his father. He is thinking of starting a small factory for the manufacture of plastic toys. What form of ownership organisation will you advise him to choose?
Answer:
Sole Trader.

Question b.
Amar started a business on his own. He has his father helping him with the accounts and his brother helps him with looking after customers in the evening. Amar pays a monthly salary to his father and brother. Identify the form of business organisation.
Answer:
Sole Trader.