Chapter 4 Business Services

At Saralstudy, we are providing you with the solution of Class 11 Business Studies Business Services according to the latest NCERT (CBSE) Book guidelines prepared by expert teachers. Here we are trying to give you a detailed answer to the questions of the entire topic of this chapter so that you can get more marks in your examinations by preparing the answers based on this lesson. We are trying our best to give you detailed answers to all the questions of all the topics of Class 11th business-studies Business Services so that you can prepare for the exam according to your own pace and your speed.

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Exercise 1 ( Page No. : 114 )

  • Q1 Define services and goods.

    Services: Services are all those economic activities that are intangible and imply an interaction to be realised between service provider and consumer.
    Goods: A goods is a physical product capable of being delivered to a purchaser and involves the transfer of ownership from seller to customer. Goods also generally used to refer to commodities or items of all types, excepting services, being involved in trade or commerce.

    Q2 What is e-banking. What are the advantages of e-banking?

    Today’s world is of computers. Computers are affecting each and every walk of life of an individual or an organisation. By the extensive network of computers connected through internet, the world is rendered into global village. With the emergence of Internet banking, banking scenario is also changing rapidly. E- banking implies performing all the functions of commercial banks to be conducted electronically. Advantages of e-banking.
    1. helps to manage savings and checking accounts, apply for loans quickly and easily round the clock.
    2. Customers can see balances on line and find out whether cheques or deposits have cleared.
    3. Customers can easily transfer funds between accounts.
    4. It provides demat services for shares.
    5. Customers can easily down load financial information (relating to their FDs, A/c, cheques, Bills etc.) into personal computer quickly.

    Q3 Write a note on various telecom services available for enhancing business.

    Different types of telecom services are as follows:
    1. Cellular Mobile Services : These are all types of mobile telecom services including voice and non-voice messages, data services and PCO services utilizing any type network equipment with in their service area. They can also provide direct inter-connectivity with any other type of telecom service provider.

    2. Radio Paging Services : Radio Paging Service is an affordable means of transmitting information to persons even when they are mobile. It is a one- way information broadcasting solution, and has spread its reach far and wide. Radio paging services are available including tone only, numeric only and alpha/numeric paging.

    3. Fixed line Services : These are all types fixed services including voice and non-voice messages and data services to establish linkages for long distance traffic. These utilize any type of network equipments primarily connected through fibber optic cables laid across length and breadth of the country. They also provide inter connectivity with other types of telecom services.

    4. Cable Services: These are linkages and switched services within a licensed area of operation to operate media services, which are essentially one way, entertainment related services. The two way communication including voice, data and information services through cable network would emerge significantly in future. Offering of the services though the cable network would be similar to providing fixed services.

    5. VSAT Services: (Very Small Aperture Terminal) is a satellite-based communication services. It offers business and government agencies a highly flexible and reliable and uninterrupted service that is equal to or better than land-based services. It can be used to provide innovate appellations such as Tele-Medicine, Newspapers-on-line, Market rates, the teleeducation even in the most remote areas of our country.

    6. DTH Services: DTH (Direct to Home) is again a satellite based media services provided by cellular companies. One can receive media services directly through satellite with the help of a small dish antenna and a set top box. The service provider of DTH services provides a bouquet of multiple channels. It can be viewed on our television without being dependent on the services provided by the cable network services provider.

    Q4 Explain briefly the principles of insurance with suitable examples.

    Principles of insurance:
    (a) Utmost good faith: It is the principle of insurance that insured person should disclose all the facts to the insurer. Non disclosure of these facts by the knowledgeable party, could affect the validity of such contract e.g. in a court case decided in England, the court decided that the insurance company could not be made to pay the claim, since it had come to know of the illness after the person has died.

    (b) Indemnity: A contract of indemnity is one where the insured person is paid only the actual amount of loss or the amount of the policy, whichever is less e.g. a person insured his house against fire. Later he agreed to sell his house to another person. Before the completion of sale the house was destroyed by fire. The seller received not only compensation from the insurance company but also, as per the contract of sale, the price of the house from the buyer. The court decided that the insurance company could recover the amount it had paid. But life insurance contracts are treated.

    (c) Insurable interest: It represents a legally recognisable relationship between the person insuring another person or thing, (b) the person or thing which is insured, such that he will stand to gain in financial terms if the person or thing insured by him continues to exist, and he would suffer a financial loss if that person dies or that thing is destroyed. Thus, X cannot
    insure the life of Y if there is no relationship between the two.

    (d) Cause proxima: An insured person can recover the loss only if it is caused by any of the risks insured. Such risk should be the nearest, and not a distant or remote, cause of the loss e.g. a ship carrying oranges has met with an accident as a result of which there is some delay in unloading and the oranges were spoilt. In this case the loss is not due to the accident but because of the delay in unloading. Hence, the shipper would not be able to recover the loss from the insurance company.

    (e) Contribution: When we take insurance company, we have to pay contribution. Its object is to divide the actual amount off loss among the different insurers who are liable for the same risk in respect of the same subject matter, under different policies. However, this does not apply to life insurance e.g. X insures his house against fire for Rs. 20,000 with insurer Y and Rs. 40,000 with insurer Z. If the house catches fire and the actual loss amounts to Rs. 24000 then Y will be liable to pay Rs. 8,000 and Z Rs. 16000. If the whole amount of loss is paid by Y, he can recover Rs. 16000 from Z and if it is paid by Z, he can recover Rs. 8,000 from Y.

    (f) Subrogation: The principle of subrogation applies in the fire and marine insurance only. It implies that one paying the amount of loss to the insured person, the insurance company will become entitled to all the signs which were available to the insured person to protect himself against the loss i.e. after paying full indemnity in respect of the loss to the assured the insurer will step into the shoes of the assured and exercise all rights and remedies to which the assured was entitled against third parties and continue doing so until he has recouped the entire amount paid under the policy to the assured.

    (g) Period of insurance: A contract of life insurance is a continuing contract subject to regular payments of premium. A contract of fire insurance is for a fixed duration. A contract of marine insurance may be for certain period or for a certain voyage.

    Q5 Explain warehousing and its functions.

    Warehousing: It refers to preserving a quantity of goods for use when required. Functions of warehousing are as follows:

    1. Consolidation: In this function the warehouse receives and consolidates, materials/ goods from different production plants and dispatches the same to particular customer on a single transportation shipment.

    2. Break-Bulk: This function refers to the shipment of bulk quantity of goods from the production plants to the distribution warehouse and then reshipment in small quantities to different customers.

    3. Stock Piling: The next function of warehouse is the seasonal storage of goods to select business for e.g. Agriculture products are harvested at specific times with subsequent consumption throughout the year.

    4. Value-added Services : Certain value added services are also provided by the ware houses, such as in transit mixing, packaging and labelling.

Exercise 2 ( Page No. : 114 )

  • Q1 What are services? Explain their distinct characteristics.

    Services: “Services are those separately identifiable, essential, intangible activities which provide want satisfaction and are not necessarily tied to the sale of a product or another service. Characteristics of services:

    1. Intangibility: The most distinguishing feature of a service is that it is intangible. It has no shape, size or other physical dimensions. Intangible nature of services has much implication.
    a) A service cannot be routed.
    b) Precise standardization is not possible.
    c) A service cannot be patented
    d) There is no transfer of ownership.
    e) There are no inventories.

    2. Irreparability: In most cases a service cannot be separated from the person who sells it. For example, an electrician has to be physically present to provide the services. Therefore, production and consumption of services are inseparable. This is in sharp contrast to products which can be produced and stored for sale in future.

    3. Perishability: Services cannot be produced before sale and stored for future demand. An empty seat in an aircraft, a spare birth in a train, and an unsold seat in a cinema hall represent a service capacity which is lower forever. Thus service not fully utilised represent a total loss.

    4. Heterogeneity: Since the human element is dominant in rendering services, it is almost impossible to standardize the quality of services. Two waiters in a restaurant or two clerks in a bank rarely provide the same quality of service. Even the same provider may not provide identical service. The doctor who gave you complete satisfaction on your first visit may behave different on you next visit. This is despite the fact that rules and procedures have been laid down to ensure maximum efficiency.

    5. Ownership: when you buy a product e.g. a shirt or a book you become its owner. But when you buy a service e.g. a seat in an aircraft you do not become its owner. In case of services the payment is not for but only for the use of the facility. A service purchase is but purchased only of for the use the benefit it provided.

    Q2 Explain the functions of commercial banks with an example of each.

    The main functions of banks can be study under two broad categories:

    (a) Primary functions.
    (b) Secondary functions or subsidiary functions.

    Primary functions:

    1. Acceptance of Deposits : Accepting of deposits from the public is the most important function of bank. It takes the savings and surplus of people. Banks provide a safe custody of the deposited cash. Depositors can easily transfer money and can make the payments through cheques. Banks provide an attractive rate of interest on their deposits. There are various types of deposits which can be opened in the bank like Fixed Deposit. Savings Deposit and Current Deposit.

    2. Making Loans and Advances : It is another equally important functions of bank. Banks accept surplus money of people and provide loans and advances to the needy persons. It is through loans and advances, banks earn profit. Loans and advances are provided through banks in the following forms :
    (I)Loan, (ii) Overdraft, (iii) Cash credit , (iv) Discounting of bills and exchange.

    (I) Loan: Loan is a lump sum advance made by a bank against security or otherwise. In it specified amount is either paid to the customer in cash or is credited in his account. The borrower is required to pay a prefixed rate of interest on the amount of loan from the date of the sanction of the loan. The loan may be refunded in instalment or in lump sum. Short and medium term loans are provided by commercial banks.
    (ii) Overdraft: Under this system a current account holder is allowed to overdraw his bank account i.e. ., he can draw upto a fixed limit more than the balance in his account withdrawal at any time.
    (iii) Cash-credit: In cash credit, custom is given credit upto a definite limit against surety bond or against other securities. The interest is charged on the amount overdrawn h customer on the daily balance and not on the entire amount of the limit.

    (iv) Discounting of Bills of Exchange: bill of exchange is a negotiable instrument. Iti drawn by the seller and is accepted by the buyer The drawer has got a facility to discount the bill of exchange before maturity if money is required immediately. The bank discounts the bill and deducts a certain amount as discounting charges and pays the remaining money to the drawer.

    Secondary functions or subsidiary functions: Secondary functions can be classified as:
    (a) Agency functions (b) Utility functions.

    (a) Agency functions: These are the functions which banks perform as an agent of their customers.

    1).Collection of cheques and bills: It collects local and outstation cheques, drafts, bills of exchange, and promissory notes of its customers and credit to their account.

    2). Collection of Interest and Dividend: It also collects interest and dividend on debentures and securities held by its customers.

    3. Purchase and sale of securities: On instructions from its customers banks purchase or sell stock securities, debentures, bonds etc.

    (b)Utility functions : Banks provide the following utility or miscellaneous functions :

    1. Safe custody of customers’ valuable articles and securities: Some banks provide the facilities of lockers where on nominal customer can keep its valuable articles such as ornaments, jewellery etc.

    2. Facility of Foreign Exchange: obtaining a license from the Reserve Bank India, commercial banks can deal in foreign exchange. The banks can exchange the various foreign currencies and even discount foreign bills of exchange.

    Q3 Write a detailed note on various facilities offered by Indian Postal Department.

    Following are the allied facilities provided by postal departments:

    1. Greeting Post: Beautiful greeting cards.
    2. Media Post: Effective media for indrain corporate to advertise their brand through post cards, envelops, telegrams etc.
    3. Direct post for direct advertising.
    4. International money transfer through collaboration with Western Union finance services, USA which enables remittances of money from 185 countries to India.
    5. Speed post: It has over 1000 destination in India and links with 97 major countries across the globe.
    6. E-bill post is the latest invention of the department to collect bill payment across the counter for BSNL and Bharti Airtel.

    Q4 Describe various types of insurance and examine the nature of risks protected by each type of insurance.

    Different types of insurance are as follows:

    1. Life Insurance: Life Insurance is a contract under which one person, in consideration of a premium paid either in lump sum or by monthly, quarterly, yearly payments, undertakes to pay to the person for whose benefit the insurance is made, certain sum of money either on the death of a person whose life is insured or on the expiry of a specified period of time.

    2. Fire Insurance: Fire Insurance is a contract whereby the insurer, in consideration of the premium paid, undertakes to make good any loss or damage caused by fire during a specified period. Normally, the fire Insurance policy is for a period of one year after which is to be renewed from time to time.

    3. Marine Insurance: Under a contract of marine insurance, the insurer undertakes to indemnify the insured in the manner and to the extent thereby agreed against. Marine insurance is an agreement by which the insurer undertakes to compensate the owner of a ship or cargo for complete or partial loss at sea.

    4. Other Insurance : Other Insurances are as follows :

    (I) Health Insurance: Health Insurance is a safeguard against rising medical cost. A health insurance policy is a contract between an insurer and an individual or group, in which the insurer agrees to provide specified health insurance at an agreed upon price. Depending upon the policy, premium may be payable either in a lump sum or in instalments. Health insurance usually provides either direct payment or reimbursement for expenses associated
    with illness and injuries. The cost and range of protection provided by health insurance depends on the provider and the policy purchased.

    (II) Motor Vehicle Insurance : In Motor Vehicle Insurance the owner’s liability to compensate people who were killed or insured through the negligence of the motorists or drivers ispassed on to the insurance company. The rate of premium under motor insurance is standardized because the business is tariff.

    (III) Burglary Insurance: Burglary insurance falls under the classification of insurance of property. In case of burglary policy, the loss of damages of household goods and properties and personal effects due to theft larceny, burglary, house-breaking and fact of such nature are covered. The actual loss is compensated.

    (IV) Cattle Insurance: A contract of cattle insurance is a contract whereby a sum of money is secured to the assured in the event of death of animals like bulls, buffaloes, cows and heifers. It is contract against death resulting from accident, disease, parturitions or pregnant condition as the case maybe.

    (V) Crop Insurance: A contract of crop insurance is a contract to provide a measure of financial support to farmers in the event of a crop failure due to drought or flood. This insurance covers adjacent all risks of loss or damages relating to production of rice, wheat, millets, oil seeds and pulses etc.

    (VI) Sport Insurance: This policy assures a comprehensive cover available to amateur sportsmen covering their sporting equipment, personal effect, legal liability and personal accident risks. If desired the cover can also be made available in respect of the named member of insurer’s family residing with him. This cover is no available to professional sportsmen. The cover is available in respect of any one or more the following sports: Angling, badminton, cricket, golf, lawn tennis, squash, use of sporting guns.

    (VII) Amartya Sen Siksha Yojana Insurance : This policy offered by the General Insurance Company secures the education of dependent children. If the insured parent/legal guardian shall sustain any bodily injury resulting solely and directly from accident, cause by external violent and visible means and if such injury shall within twelve calendar months of its occurrence be the sole and direct cause of his/ her death or permanent total disablement, the
    insurer shall indemnify the insured student, in respect of all covered expenses to be incurred from the date of occurrence of such accident till the expiry date of policy or completion of the
    duration of covered course whichever first occurs and such indemnify shall not exceed the sum insured as stated in the policy schedule.

    (VIII) Rajeshwari Mahila Kalyan Bima Yojana : This policy has been designed to provide relief to the family members of insured women in case of their death or disablement arising due to all kinds of accidents and/or death and/or disablement arising out of problems incidental to women only.

    Q5 Explain in detail the warehousing services.

    Warehousing provides different services:
    1. It facilitates production in anticipation of demand: In the modern world production of goods is undertaken in anticipation of demand rather than against existing demand. Hence, warehousing provides services to store these goods properly till the demand for them is made.

    2. Warehousing maintains the stock of seasonal production: Production of some of the commodities takes place only during a particular season of the year whereas the demand for the same exists and has to be net throughout the year. Hence, warehousing helps in maintaing the even supply of these goods throughout the year.

    3. Warehousing provides basis both to wholesalers as well as retailers: Storage constitutes the basis of operation by the wholesalers and retailers. Retailers store the goods to be made available to the customers on demand and wholesalers do so to maintain an uninterrupted supply-line to the retailers. Warehousing provides opportunity to wholesalers and retailers to avail the economies of bulk buying as they often buy goods far in excess of their immediate demand which requires storage.

    4. Warehousing enables the producers to respond according to production techniques: Sometimes the production processes may also necessitate storage of partly manufactured goods for varying periods.

    5. Price stability: Sometimes storage of goods may become necessary in order to correct any distortions in prices e.g. in case of seasonal goods, their plentiful supply in the season may create conditions of glut thus forcing the prices to fall. Warehousing enables producer to maintain stock of excess quantity during such period and thus, helps establishing the prices.

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