aakar account 9 final

101 Postal Service & Electronic Communication Service Even though this method is more reliable, the post office doesn’t bear the legal responsibility for any loss or damage of a registered letter. For the total security of such a letter or parcel, the sender can insure it with the post office in payment of some additional insurance charges. Under such an insurance, the sender may legally be able to claim the compensation for the loss or damage so caused by the negligence of the office. Key Point Letter which is registered in the post office for the security and the sender pays additional cost for postal ticket is called registered letter. Advantages i. It is safe and confidential method. ii. No changes of loss or missing. iii. It insures the sender for timely delivery of letter to the right person. iv. Post office takes financial responsibility for the loss and damage of such letters. v. It is useful for urgent and important letters. Disadvantages i. It is an expensive method. ii. It is not suitable for ordinary matters. iii. Proper knowledge and skills are needed while registering the letter. iv. It does not assure the sender for timely of the letter. iii. Aerogramme It is a simple method of sending news, message, etc. It was named as aerogramme in the sense that it was supposed to be carried by aeroplanes in the past. At present, it may be carried by means of air, water and land transport as desired. It is a form prepared by the post office with a preprinted postal stamp, little space for writing the news and message. No enclosures are allowed in aerogramme. It also does not contain urgent, important and confidential matters. Key Point A letter which is sent through aircraft and has place to write message, news, etc. within the letter and ticket is already affixed is called aerogramme. Aerogramme

102 Aakar’s Office Practice and Accountancy - 9 Advantages i. It is simple and easy method. ii. It is the cheapest method. iii. It is suitable for short and ordinary matters. iv. It does not require additional sheet of paper and envelope. Disadvantages i. It is not suitable for confidential and importance messages. ii. It is not fully secrecy, some part of the messages are visible. iii. Post office is not taken fully responsibility for the loss or damage of the letter. iv. It is not useful for long writing due to limited space. iv. Postcard It is the card prepared and issued by the post offices for writing and sending short news and message like greetings, wishes, congratulations, condolences, complaints, advertisements, business information, etc. It has a little place for writing the name and address of the addressee and the sender as well. It also provides a space for writing a few lines of the news or message. The postal stamp of the required value is affixed on the card itself. It is completely naked and thus cannot maintain secrecy of the matters. Key Point Postcard is a kind of naked card which is used to send short and less important massage through post office. Advantages i. It is simple and easy method. ii. It is not require additional sheet of paper and envelope. iii. It is suitable for short message. iv. It is cheapest method. v. It is suitable for sending best wishes and congratulation. Disadvantages i. It is not suitable for confidential and important message. ii. No responsible of the loss or damage of card. Post card

103 Postal Service & Electronic Communication Service iii. It is not possible to write long text. iv. The sender has no right to any claim. v. It can’t maintain secrecy. v. Express Mail Service (EMS) EMS is the advanced customer focussed technology and the latest postal service. It is the best solution for delivery of documents. The postal service which is time bound and guaranteed with faster and affordable cost is called as express mail service. It is available in 62 major towns and cities of the country and 38 countries of the world. Nowadays, it is popular because it has lower cost, high speed and time bound guaranteed delivery service. Some of the best Express Mail Service provider of the world are DHL, FedEx, Aramex, TNT, etc. Key Point Express Mail Service is the act of exchanging documents and materials between or among the individuals and organizations using fast means of transportation and technology. Advantages i. It is the fastest method to sent letters, parcels and documents. ii. It is the modern technology based postal service.. iii. It is suitable for urgent and confidential matters. iv. The post office is fully responsible for the loss and damage of documents in transits. Disadvantages i. It is not available everywhere. ii. It is costlier method. iii. It is not familiar for every people. iv. It is difficult to handle by every people because it is technology based service. Points to Remember i. Ordinary letter ii. Registry letter iii. Aerogramme iv. Postcard v. Express Mail Service Express Mail Service

104 Aakar’s Office Practice and Accountancy - 9 5. Differences between Ordinary letter and Registered Letter Point of Difference Ordinary Letter Registered Letter 1. Meaning The letter which is sent to deliver simple and less important matters is called ordinary letter. The letter which is sent by keeping record in the post office is called registered letter. 2. Record It is not recorded by the post office in its book . It is recorded by the post office in its book. 3. Cost It is a cheaper method. It is a costlier method. 4. Responsibility Past office is not responsible for the loss or damage of letter. Post office is responsible for the loss or damage of registered letters. 5. Method It is a simple and easy method of sending letter. It is a complex method of sending letters. 6. Evidence It has no provision of issuing a receipt. It has a provision of issuing a receipt. 7. Compensation It has no provision of giving any compensation for loss and damages of letters and documents. It has a provision to give the compensation for loss and damage of letters and documents. Electronic Communication Service The transformation of information through electronic medium is known as electronic communication. The rapid development in technology has brought revolution in communication service. Nowadays, information is exchanged by using various electronic means such as telephone, computer, fax, etc. These means have replaced the old and traditional ways of postal services. Organizations are using the electronic communication because of its promptness and reliability. Merits: i. It is fastest method of sending documents. ii. It is the latest and advanced technology. iii. It is useful for sanding urgent, important and confidential matters. iv. The post office in responsible for the loss or damage of the documents, etc. Demerits: i. It is not available all over the world. ii. Everybody can not handle it properly. iii. It is costlier than the other method of sending documents. iv. Trained manpower is needed to handle it, etc.

105 Postal Service & Electronic Communication Service Some of the major means of electronic communication are described below: i. Fax It is an electronic means, which transmits the written or printed message or photograph through radio waves or telephone connection. Under this means, the sender dials the receiver’s fax number from his fax machine and feeds the printed materials into it. The machine reads the data and sends it into the receiver’s fax machine. Then the receiver’s fax machine prints the exact copy of the message. It is a more reliable and speedy means of written communication in the present day world. ii. E-mail E-mail is an electronic means of exchanging information through computer device. The sender types the message in his/her computer and sends to the computer address of the receiver known as e-mail address, eg. [email protected] is e-mail address of Chetan Sednai. It is faster than ordinary mail and not so costlier and thus has brought a revolution in the field of communication. In Nepal, World Link Pvt. Ltd., Mercantile Pvt. Ltd., Global Net P. Ltd, Broadlink, Ncell, Nepal Telecom, United Telecom, etc. are the e-mail service providers. www.hotmail.com, gmail.com, yahoo.com, etc. provide free mail sites to its clients. iii. Internet (website/facebook/social media) Internet is a network of computer which is linked with one another through a kind of electronic transmission medium such as telephone lines or satellite system. It consists of information centres called websites through which information and notices are collected and used by the people all over the world. It is the most advanced technique of communication in the present day. Most of the business transactions are done through the internet means. One can order the articles from any corner of the world by using credit cards with the use of internet facility. The difference between the e-mail and internet is that e-mail is a means of transmitting message to a certain person or organization but internet is a huge storage of information and can be used by any person with the help of websites i.e. the code address of an organization like website: www.moes.gov.np. The full form of www is World Wide Web. We can get information on sports, movies, music, literature, history, science and technology, etc. through internet. The basic requirements for internet facility are a computer, a modem and a telephone line, etc. E-mail Fax Internet

106 Aakar’s Office Practice and Accountancy - 9 Glossary Enclosures : attachment/includes Philatelic : collection and study of postage stamps Accessible : available Topography : geography Immense : huge Compensation : payment for loss/give back Affixing : attaching Exercise A. Answer the following questions in one sentence. 1. What is postal service? 2. Define post office. 3. Write the full form of e-mail. 4. When did your country get membership of world postal union? 5. Define registry letter. 6. Name the postal systems practiced during the regime of King Prithvi Narayan Shah. 7. When was the post office formally established in Nepal? 8. When was the first postal stamp released in Nepal? 9. What is post card and EMS? 10. What is aerogramme? B. Give short answers to the following questions. 11. Briefly describe the importance of postal service. 12. What are the different methods of sending letters and parcels through post offices? Discuss. 13. Distinguish between ordinary letter and registry letter. 14. Why is aerogramme is more popular in Nepal? 15. Describe the electronic communication service and its means. C. Give long answer to the following question. 16. Explain the historical development of post office in Nepal. 17. Postal service shows the national identify of country. Justify. Project Work a. Collect any one of aerogramme, postcard, registry letter and postage stamp from nearby post office. b. Collect various types of postal stamps.

107 Postal Service & Electronic Communication Service Business Unit 6 Business CDC Syllabus 6.1 Introduction Sole Trading Concern: Introduction, Merits and Demerits Partnership: Introduction to Partnership, Merits and Demerits Joint Stock Company: Introduction, Merits and Demerits 6.2 Public Enterprises: Introduction and necessity 6.3 Cooperative societies: Introduction, Characteristics and Types 6.4 Multinational Corporations: Introduction and Characteristics 25 Periods After studying this unit, students will be able to : understand the concept, characteristics and importance of business, know the types of business, write the meaning of business organization, explain the meaning, advantages and disadvantages of types of business, explain the types of partner, describe the features and types of joint stock company, know the characteristics and types of cooperatives, know the characteristics of multinational company. Learning Objectives

108 Aakar’s Office Practice and Accountancy - 9 1. Introduction The literal meaning of business is the state of being busy. This meaning cannot satisfy the real meaning of business because some people seem to be busy in some sort of non-economic activities and some others in employment or profession and such an engagement does not mean business in its real sense. Business refers to those human activities which involve money or money’s worth by means of regular production and/or distribution of goods or services, for earning profit through customer satisfaction. C.F. Abbct, ‘Business without profit is not business.’ Prof. L.H. Haney has defined business as “The human activities directed towards producing and acquiring wealth through buying and selling goods.” Poterson and plowman, “ Business may be defined as activities in which different persons exchange something of value, whether, goods or services of mutual gain or benefits.” Besides, production and buying and selling of goods, banking, carriage and insurance, warehousing. etc. are also concerned with business. Thus, business may be defined as the human activities directed towards acquiring wealth i.e. earning profit through a regular production and/or distribution of goods and services with the help of other management services. In business, involves some elements of risks, uncertainty, profit, regularity, etc. Key Point Business is the act of regular production and distribution of goods and services for earning profit through customer satisfaction. 2. Characteristics of Business The characteristics of a business have been discussed below: i. Economic Activity It is an economic activity in the sense that it involves monetary worth in terms of dealing of goods and services. All the economic activities may not be business but all business activities are economic activities. ii. Regularity in Dealing with Goods and Services There should be a regular process of production and distribution of goods or rendering of services to mean any economic activity as business; otherwise it does not mean business. For example, if Ram sells his book to somebody for a certain value, it does not mean his business but if he continues such selling to a number of persons regularly, it becomes his business.

109 Business iii. Profit Motive A business is motivated by profit and thus is directed towards earning of profit by the regular dealing of goods and services. It does not however mean that there will never be loss in it i.e. it may also suffer from losses. A profit is necessary for a business for its smooth running, growth and development and thus a business should have profit motive. iv. Risk and Uncertainty Risk is the chance of occurring losses and uncertainty refers to unpredictable future. The internal and external forces like organizational structure, office resources, working environment, personnel policies, labour unions, market, government policies, etc. may lead to risk and uncertainty. As the result, business activities are supposed to be risky to some large extent. v. Production and Distribution Business involves the production and distribution goods and services for earning profit. Production and distribution of goods and services are done according to the wants and needs of the customer and business satisfies them. vi. Customer Satisfaction In this age, for the continuity of business, customer satisfaction is a must. No business can survive without satisfying the customer. So business activities should be customer centred. Points to Remember i. Economic activity ii. Regularity in dealing with goods and services iii. Profit motive iv. Risk and uncertainty v. Production and distribution vi. Customer satisfaction 3. Importance of Business Business, which is comprised of industry and commerce, has become the backbone of the economy of the developed countries and has a growing participation in the economy of the developing countries. The following points may highlight the importance of business: i. Economic Development Business is a major economic activity, which mobilizes the idle money in different productive sectors in terms of the investment in materials, production and distribution process. It helps to strengthen national economy by developing all economic sectors like industry, trading, banking, insurance, etc.

110 Aakar’s Office Practice and Accountancy - 9 ii. Utilization of Resources With the growth and development of business activities, human and nonhuman resources are utilized in industrial and commercial sectors so as to make all round development of a country. Besides, agro-based industries are also developed by the optimal utilization of agricultural resources in the country. Hence, business activities help to utilize the national resources for a country’s development. iii. Creation of Employment Business activities help to create employment opportunities through the development of industrial and trading enterprises. Employment assures the income of people of different qualification and calibre through which their standard of living can be improved. iv. Earning Foreign Currency Business is the major source of earning foreign currency. The development of business and its advancement can maintain the quality and thus the international standard of the product easily enters the international market. It helps to earn foreign currency especially by export trade. v. Maintaining International Relation With the expansion and development of business, especially the foreign trade, there begins a regular contact with the business parties of the various countries. In course of time, it helps to establish friendly relationship among the countries at the government level. Then they begin the exchange and mutual cooperation in different sectors by means of financial and technological partnership. Hence, business helps to maintain good international relationship. vi. Increase in Government Revenue Business helps to increase the government revenue. Every business should pay different forms of tax like VAT, corporate tax, excise duty, custom duty, income tax, etc. The establishment of business also helps to increase the revenue of the government. Points to Remember i. Economic development ii. Utilization of resources iii. Creation of employment iv. Earning foreign currency v. Maintaining international relation vi. Increase in government revenue 4. Field/Scope/Type/Classifications of Business Business relates to the entire field of industrial and commercial activities. The production and creation of utilities and services are the primary concepts of industrial activities, whereas distribution of goods and services is within the coverage of commerce. Hence, the business activities are classified into two categories, viz.

111 Business (A) industry and (B) commerce. The classification of business is shown in the following chart. Industry Extractive industry Genetic industry Construction industry Manufacturing industry Commerce Home trade Foreign trade Trade Service Oriented Tourism Hotel & Restaurant Entertainment etc. Analytical industry Synthetic industry Processing industry Assembling industry Business Advertisement Warehousing Insurance Banking and finance Transportation Communication Import trade Export trade Entrepot trade Wholesale trade Retail trade Primary industry Secondary industry Service industry A. INDUSTRY Industry refers to the production of goods and services by converting the inputs into outputs and/or creation of utilities to customers. Goods produced by an industry are used either by consumers to satisfy their wants and needs or by other industries for further production. An industry may refer to an extraction, generation, conversion or production of goods and services or construction of building products for a certain price. According to the process of production and the nature of the products, an industry can be divided into the following categories: Key Point Industry refers to the process of producing new goods and services by converting the inputs into outputs for the utilities to customers. i. Primary industry Primary industries are involved in creation of utilities by extracting materials from natural resources or the growth and development of vegetation and animals by means of process of the reproduction. Primary industries are further classified as (a) extractive and (b) genetic industries. a. Extractive Industry It refers to the extraction or drawing out goods from the natural resources like land, water, air, etc. and creation of utilities in them. It supplies raw materials to other types of industry. Mining, hunting, fishing etc. are the examples of this sort of industry. Fish farming

112 Aakar’s Office Practice and Accountancy - 9 b. Genetic Industry It is related with the growth and development of flora and fauna i.e. vegetation and animals by multiplying a certain species of plants and breeding of animals. Plant nurseries, forestry, farming, animal husbandry, poultry, etc. are the examples of genetic industry. ii. Secondary Industry The industries, which produce finished goods by the use of materials and supplies taken from the primary industries, are known as secondary industries. Such industries convert raw materials and semi-raw materials into finished products by way of processing the materials, assembling components, constructing building products, etc. According to the process applied and the nature of the products, these industries are divided into the following two types: a. Manufacturing Industry Generally, the term industry refers to the manufacturing industry. It is concerned with the production of goods by using raw materials or semiraw materials as inputs and also creates utility in them. Production of sugar from sugarcane, petroleum products from the crude oil, manufacturing vehicles by assembling various components, etc. are some of the examples of this sort of industry. It is again divided into four types: Analytical Industry This industry is related with analysing and separating of different components from a single material. For example, crude oil is processed and separated into petrol, diesel, kerosene, etc. Synthetic Industry This industry is related with the putting of various raw materials together to make a final product. For example, cement is produced by mixing concrete, gypsum, coal, etc. together and through chemical reaction. Poultry farming Sugarcane factory Crude oil refinery industry

113 Business Processing Industry An industry which produces the final products by using raw materials and semi- finished goods through different stages of production is known as processing industry. Textile industry, paper and sugar mills, etc. are some of the examples of this sort of industry. Assembling Industry Assembling industry refers to that industry which assembles various component parts that are already manufactured to make a new product. Manufacturing of vehicles, electronic equipment, etc. are some of the examples of this type of industry. b. Construction industry The industries which are concerned with engineering, erecting and construction of building products are known as construction industries. They use materials produced by other industries like cement, iron rods, concrete, bricks, etc. Their distinctive characteristic is that the products of such industries are not generally sold in the ordinary market but built at a certain place and its ownership is transferred or it is constructed as the order of the customer at the said site/ place. Construction of bridges, roads, dam canals, building, etc. are the examples of construction industry. iii. Service industry Service industries are those industries which do not produce physical goods but create utility services and sell them for a price. Nursing home services, film industries, travelling and lodging services, etc. are the examples of service industries. B. COMMERCE Goods produced by an industry should be distributed in time to appropriate market either by the producer himself or through middlemen. It is commerce which Hotel Soaltee Crown Plaza Hongshi cement factory Textile industry Assembling industry

114 Aakar’s Office Practice and Accountancy - 9 makes the entire management for the distribution of goods with the help of necessary services. Hence, commerce is the process of distribution of goods in different places. It is an organized system of buying and selling goods, transportation, insurance, banking, warehousing and communication, etc. between the trading parties. Commerce is divided as trade and management services. Key Point Commerce refers to the process of buying and selling of goods and services with the help of banking, insurance, communication, transportation, etc. i. Trade Trade refers to the purchases and sales of goods and services between the parties. It is the process by which goods are transferred from the producers to the consumers along with their ownership. According to the nature and field/scope of trade, it can be divided into home and foreign trade. a. Home Trade The trade, which is conducted inside the territory of the same country, is known as home trade. Goods and services, which are produced in one place of a country, are distributed to the same or different places of the same country. Trades between Kathmandu and Pokhara, Biratnagar and Butwal, Birgunj and Chitwan are known as home trade. As per the size and nature of home trade, it is also classified as wholesale trade and retail trade. Wholesale Trade This trade refers to one in which goods are bought in bulk quantities directly from producers or suppliers or dealership agents and sold in smaller quantities to various retailers. Wholesale traders, commonly, do not sell the goods to final consumers. Manufacturer Wholesaler Retailer Retail Trade Retail trade is that in which goods are bought from wholesalers in necessary quantities and sold to the final consumers. Sometimes, retailers purchase goods from dealership agents or producers directly in case of small industries. Wholesale trade is the link between the producers and retailers whereas retail trade is the link between the wholesalers and the final consumers. Manufacturer Wholesaler Retailer Customer Retail trade

115 Business b. Foreign Trade Trade which is conducted between two or more than two countries is known as foreign trade. Goods and services which are produced in one country are consumed in another country through foreign trade and thus it establishes friendly international relationship with the foreign countries. Trades between Nepal and India, China and Nepal, Japan and America or any other countries are known as foreign trades. The buying and selling of goods in the foreign trade are said to be import and export of goods. Thus, foreign trade is also further classified as import trade, export trade and entrepot trade, each of which is briefly discussed below: Import Trade Import trade implies the purchase of goods from a foreign country. The party which purchases goods, is known as importer. For example, if a merchant in Kathmandu purchases/ imports goods from a merchant in Calcutta, it is called import trade to the Nepalese merchant. Export Trade Export trade implies the sales or supply of goods to a foreign country. The party which supplies or sells the goods is known as exporter. For example, if a merchant in Biratnagar supplies/ exports goods to a merchant in Sanghai, it is said to be an export trade to the Nepalese merchant. Entrepot Trade When the goods imported from one country are exported to some third countries, it is said to be an entrepot trade. The first importer country does not consume the goods. For example, when a Nepalese merchant imports goods from India and then exports them to China, it is called entrepot trade. ii. Service Oriented Business Service oriented business refer to the integration of all the agency services which facilitate in the distribution of goods and services. The important management services of trade and industry are briefly discussed below: a. Advertisement and Publicity Advertisement and publicity let the customers know about the goods and services with their necessary details. It can draw their attention towards the products and thus promotes the trade dealings in the wider market. Media hub advertising agency

116 Aakar’s Office Practice and Accountancy - 9 b. Warehousing It is a way of storage of goods which creates time utility in them. Some goods are produced seasonally but demanded throughout the year. They need to be stored so that they can be supplied when demanded. Thus, warehousing promotes trade activities by providing storage facilities for the goods. c. Insurance Insurance is a way of transferring business risks to an agency in consideration of the payment of a certain premium. There may occur any sort of loss in every stage of production, storage, carriage, etc. and it may create obstacles in regular trade dealing. It is insurance which transfers the risks and assures the recovery of the possible future losses and promotes and develops the trade activities. d. Banking and Finance For the development of trade activities, bank and other financial institutions frequently provide capital in terms of loan under different terms and conditions. Banks also render agency services like credit guarantees, remittance of money, etc. to the business parties and maintain reliability between them. e. Transportation Trade refers to the distribution of goods from producer to ultimate consumers. It is transportation, which carries over the goods upto the various consumers from their manufacturers. Many carrier companies are established and developed in public as well as private sectors for the carriage/transportation of the goods. It plays a significant role in promotion of trade. f. Communication It is a process of transmission of information among persons and places. With the development of communication technology, the whole world has become a small village. Most of the business information is transmitted through various means like radio, television, telegram, telephone, fax, e-mail, internet, etc. and most of the trade dealings are performed by way of communication. Thus, communication of business information has assisted the trade dealings between the business parties to perform the activities without delay and difficulty. Warehousing National Life Insurance Company Nepal Bank Limited Sajha Yatayat Ncell

117 Business Forms of Business Organization An organization is an integrated mechanism of human and non-human resources working together towards the accomplishment of some specific common goals. In this sense, business organization may be defined as the combination of the means of production i.e. land, labour, capital and entrepreneurship for the purpose of acquiring wealth through the regular process of production and distribution. According to Dr. A.N. Agarwala, “Business organization is the act of bringing into effective cooperation the available resources for production and distribution of goods with a view to earn profit.” Likewise, Wheeler, “Business organization is a concern, company or enterprise which buys and sells, is owned by one person or group of persons and is managed under or specific set of operating policies.” From the above definitions, business organization is the cooperation efforts of various factors to promote trade, industries and commerce for the purpose of earning profit. Alternatively, it maybe defined as a systematic combination of various resources in the form of men, money, machinery, materials and management for acquiring wealth through a regular process of production or distribution of goods and services. Key Point The systematic combination of various resources for production and distribution of goods and services in order to earn profit is known as business organization. Types of Business Organization With the development of the economic sectors and globalization of business activities, a number of business organizations developed all over the world. The ever increasing market demand, establishment of large sale industries, massive production by power-driven machines, etc. have led the expansion and development of business organization in the world from the early stage of economic development till the present economic stage. Various forms of business organizations are found in practice. On the basis of ownership and structure, business organizations may be categorized into different forms. The common and important types of business organizations are briefly discussed below. Sole trading concern Partnership organization Joint stock company Public enterprises Cooperative society Multinational company Unlimited partnership Limited partnership Private limited company Public limited company Forms of business organization

118 Aakar’s Office Practice and Accountancy - 9 A. SOLE TRADING CONCERN This is the oldest and simplest form of business organization. It has been in operation from the beginning of the human civilization. Even today, it has not lost its utility. Most of the small concerns requiring a small amount of capital and less managerial skill are found established under sole proprietorship. A sole trader is an individual who owns and manages a business by investing his own capital or borrowed capital, enjoying the entire managerial rights and sharing all the profits and losses by himself. The same can hire a number of employees in different posts and responsibilities but all of them work under him as his subordinates. According to James Stephenson, “A sole trader is a person who carries on business exclusively by and for himself.” Likewise A.N. Agrawala, “A person who establishes and manages a business for his own account and risk is known as a sole proprietorship business.” The leading feature of this kind of concern is that the individual assumes full responsibility for all the risks connected with the conduct of the business. He is not only the owner of the capital of the undertaking, but usually the organizer and manager and takes all the profit and responsibilities of losses. In this way, a sole proprietorship may be defined as a form of business organization established under a sole ownership and management in which the proprietor assumes full responsibilities in sharing the profit and bearing its risk and losses. Even though it is not necessary to get its registration in Nepal, it can be registered under the Private Firm Registration Act 2014. Micro Nepal Computer, Poudel Kirana Pasal, Muskan Beauty Parlour, etc. are the examples of sole trading concern. Key Point A sole trading concern is a business organization in which a single person invests capital and manages the business, enjoys all the profit and bears all the risk and responsibilities. Characteristics of Sole Trading Concern 1. It is easy to establish and dissolve. 2. The owner enjoys the whole amount of profit and bear all amount of losses of the business. 3. The liability of the owner is not limited to his investment. 4. The owner manages all activities of the business like; capital, management, controlling, decision making, etc. 5. sole trader is independent for taking any kind of business decision. Tailoring shop

119 Business 6. A sole trader keeps all the business secrets withing himself/herself. 7. The owner make quick decision without consulting anybody. 8. The life of business is connected with the life of owner. The advantages and disadvantages of a sole proprietorship are discussed below. Advantages of Sole Trading Concern i. Easy Formation A sole proprietorship firm can be formed with a small amount of capital and just a nominal legal formality of registration. It does not need agreement with other people. Even the registration is also not necessary in some countries. ii. Economy in Management Since, the entire management and control over the organization are done by a single person i.e. specially by the proprietor himself with a small number of his subordinates, its management expense is not of huge amount. Sometimes, the proprietor may hire some management experts and some additional employees to have the smooth running of that undertaking. But the expenses are generally incurred in a controlled way and with a short management procedure. iii. Maintaining Secrecy A sole proprietorship is established under an individual ownership and control. All the important decisions are taken by the proprietor himself. On the other hand, it does not need to publish its financial statement i.e. income statement and balance sheet for public knowledge. Thus, a sole trader can maintain due secrecy of its managerial and financial matters. iv. Prompt Decision In this type of organization, a single person, i.e. the proprietor himself or his executive, handles the entire management and thus makes every business decision by himself. It does not take long procedures in such decision process and for their implementation. Sometimes, suggestions maybe obtained or asked from the subordinates but it is not a must. Thus, the decision making in a sole proprietorship is prompt and easy. v. Personal Supervision and Control The proprietor is the boss of his business undertaking. All the risk and responsibility of the concern solely come on his shoulder. It is therefore, he makes a regular supervision over the performance of his employees. He controls the entire resource directly so as to conduct the business activities through a planned way towards its success. And this act leads towards a close and cordial relationship with the employees.

120 Aakar’s Office Practice and Accountancy - 9 vi. Personal Contact and Relation The entire profit of the business belongs solely to the proprietor himself. This motivates him to manage and carry out the business activities more efficiently and skilfully. In this regard, a sole proprietor can maintain personal relation with his customers, becomes sincere toward their interest and wants and can adopt all the possible means and methods to serve them. On the other hand, he also makes a close and cordial relationship with the employees and can personally motivate them towards better performance to increase the productivity. vii. Incentive to Work Since, the entire profit remains with the proprietor and all the employees work under his direct instruction and order, the sole trader has a good incentive to work hard. Commonly, a sole trader is known to the fact that hard working will lead him towards success. viii. Easy to Obtain Loan This type of business has not a separate entity from that of the proprietor and thus its liability is unlimited, i.e. if the business could not pay out the firm’s obligation, he must pay it even by selling his private property. Besides, the proprietor maintains a good relation with the public, relatives and the financial institutions. Thus, it can create confidence among creditors and can obtain loan from them easily. ix. Flexibility and Changeability This type of business is carried by one person at his interest and will. There is no partner in it. Since, it is carried out in smaller size and under an individual’s ownership and control, it does not need agreement of others in its expansion, contraction, or even change of business. Thus, it is flexible and changeable as time and situation. x. Easy Dissolution Sole proprietor can easily be dissolved if he finds the business is no more profitable or at his will. He does not need to take any consent from others and does not require fulfilling long legal formalities except the submission of a dissolving application to the concerned authority of Government of Nepal. Points to Remember i. Easy formation ii. Economy management iii. Maintaining secrecy iv. Prompt decision v. Personal supervision and control vi. Personal contact and relation vii. Incentive to work viii. Easy to obtain loan ix. Flexibility and changeability x. Easy dissolution

121 Business Disadvantages of Sole Trading Concern i. Unlimited Liability The liability of a sole trader is unlimited which means that he should sell his personal property to pay out the business debts in case the business assets cannot meet them. This is a notable demerit and thus a large scale business organizations involving more economic risks are not established under sole proprietorship. ii. Limited Capital Since, a sole proprietorship is established with one person’s capital i.e. his own or borrowed, it has inadequate capital. It is comparatively smaller than other forms of business organization. Because of the limited capital and scarcity of financial and other resources, it cannot utilize various business opportunities. As a result, it cannot enter the productive sectors. iii. Limited Managerial Skill As already discussed earlier, a sole proprietorship is managed and controlled by the proprietor himself or sometimes by a management expert hired by him but the effort paid by an individual may not be enough in all sectors of management. On the other hand, because of the high pay scale and other high scale facilities, it is commonly not possible to hire the managerial body of the experts. In this way, an individual management of a sole proprietorship and he is not likely to have efficient management skills in all aspects of administration. Thus, it has limited managerial skill. iv. Instability A sole proprietorship may be dissolved as the interest and wish of the proprietor. Moreover, in case of illness, death or madness of the proprietor, it is dissolved. So this type of business form has uncertain future in the sense that if any adverse situation arises, it can be easily dissolved. Thus, a sole proprietorship has no stability in its business operation. v. Limited Opportunity for Staff A sole trading concern is a small scale business undertaking. It cannot offer enough facilities to its staff e.g. higher studies opportunity, foreign visits, training and seminar, medical and educational facilities, higher pay scale and to other retirement facilities in considerable extent. Besides this, the staff are responsible to the proprietor and there are only nominal rules regulations for the staff and thus there’s no job security for the staff. vi. Loss in Absence A sole trader may remain absent for a long time, by means of any causes like illness, foreign visits, etc. In such a situation, he may assign all the responsibilities to

122 Aakar’s Office Practice and Accountancy - 9 his representative and if the representative has not a good and influencing skill and behaviour, the employees may not pay sincere interest towards his performance. It leads an organization to heavy losses. vii. Chances of Impractical Decision Since, the entire management of an individual proprietorship is run by a single person, with his personal skill and judgement, there is likely to be impractical decisions. It is because of the fact that a single person is not likely to be expert enough in all the business matters. On the other hand, the decisions are taken, to some extent, as the mode of that individual rather than on the basis of rules and regulations. viii. Limited Public Relation Even though a sole trader seems to be keenly interested in maintaining a good relation with the customers and the general public, he cannot do so as he contributes his almost all the time and mind towards his managerial tasks and the business affairs as well. Under such a single person ownership, the public relation cannot be maintained in considerable extent. ix. Limited Expansion Because of the limited capital, inefficient manpower and insufficient resources, this sort of business cannot be expanded in large size and thus cannot occupy a large area of market. So this business has very little chance of expansion. Points to Remember i. Unlimited liability ii. Limited capital iii. Limited managerial skill iv. Instability v. Limited opportunity for staff vi. Loss in absence vii. Chances of impractical decision viii. Limited public relation ix. Limited expansion B. PARTNERSHIP ORGANIZATION Due to limited capital, limited managerial skill and limited resources, a sole proprietorship could not carry out the business activities in a large size and volume. In course of time, such business organizations could not satisfy the increasing national and international market demand. As such, a sole proprietorship has been proved to be unsuitable to the large scale business activities. In this regard, the business organization gradually develops from sole proprietorship to partnership and then partnership to company, by combining the necessary resources of the entrepreneurs. A person may possess exceptional business ability but may not have any capital; he may get a financing partner but may not have any managerial and technical experts. Partnership

123 Business Thus, a partnership is always formed by combining the capital, labour and other various specialized skill and ability for carrying on large scale business for mutual profit. In this regard, it is better to study some definitions of some distinguished scholars. Dr. J.A. Shubin has defined partnership as, “Two or more individuals may form a partnership by making a written or oral agreement that they will jointly assume full responsibility for the conduct of a business.” In the words of Prof. L.H. Haney, “Partnership is the relationship between persons competent to make contract who agree to carry on a lawful business in common with a view of private gain.” Indian Partnership Act, 1992, has defined partnership as “A relationship between persons who have agreed to share profits of a business carried on by all or any of them acting for all.” Likewise, Nepal Partnership Act, 2020, “Partnership means any business registered in a book of Nepal Government, which is carried on by some persons keeping one name sharing the profit with its agreement of participation in the transactions by all partners or a single partner acting for all.” In conclusion, partnership may be defined as an agreement between two or more individuals to carry out a business under common ownership and assuming joint responsibility for its conduct. It should be registered under the concerned act of a country. In Nepal, it is registered under The Partnership Firm Act, 2020. The individual who have contributed capital to the firm are known as partners and they are jointly known as partnership. All or any of them may handle the management for all. From the above meanings and definitions, a partnership firm essentially requires the following elements. There must be at least two or more persons to form partnership. There must be a written agreement or partnership deed between the competent persons. Profit or loss is shared according to the agreement. Business in managed by all or any of them acting for all. They assume joint responsibilities. It should be registered in the concerned office of the government. Key Point A partnership is a form of business organization in which two or more persons make agreement to carry on business for profit by assuming joint responsibility.

124 Aakar’s Office Practice and Accountancy - 9 a. Types of Partnership A partnership business may be of two types from its liability point of view. They are: a) General or unlimited partnership and b) Limited partnership. Unlimited partnership Limited partnership Partnership for an uncertain period Partnership for a certain period Types of Partnership i. General/Unlimited Partnership In general partnership, all the partners have unlimited liability. When the firm cannot meet its obligations, every partner is liable to pay it even by selling his private property. Most of the partnerships, in the business world, are of this type. Generally, the word partnership refers to the general partnership. It can be further divided into following two groups: a. Partnership for an Uncertain Period or Partnership at Will This nature of partnership performs the business activities for unlimited period without any provision of its termination. It can continue its business for any length at time depending upon the will of the owner. The liability of all the partners is unlimited until and unless the partnership dissolves. b. Partnership for an Certain Period or Particular Partnership This type of partnership is established to carry on business either for a fixed period or for the completion of a particular objective. Such partnership is dissolved immediately on the completion of the project or termination of specified time. ii. Limited Partnership Limited partnership refers to such a partnership in which, at least, one partner bears the unlimited liability and the rest of all may have the limited liability towards the firm. In order words, it is the partnership in which the liability of some of the partners is unlimited and that of all others is limited just to the extent of their capital contributed to the firm. There’s no existence of such partnership in Nepal and India but it is still found in practice in some western countries like United Kingdom, America, etc. b. Types of Partners A partnership is formed by a number of persons with their joint resources, abilities and efforts under their joint ownership. The persons who form a partnership are individually known as partners. As their participation, role and responsibility towards the firm, the partners may be categorized into various types. The common types of partners are discussed below:

125 Business i. General Partner General partner is a normal partner of a partnership firm. He/she has unlimited liability towards the firm. Such partner serves the firm according to the agreement among the partners and as the necessity of their firm. ii. Active Partner A partner who takes active part in the regular conduct of the business is known as active partner. He is also a general partner in the sense that he contributes capital and bears unlimited liability. For being active to the day-to-day management of the business, he is entitled to a certain remuneration. iii. Limited Partner A partner whose liability towards the firm is limited only to the extent of his capital investment in the firm is known as limited partner. There’s no provision of such partner in Nepalese and Indian partnership firm but it is still found in practice in western advanced countries like UK, USA, etc. iv. Dormant/Passive Partner A dormant partner also known as a sleeping partner is the one, who contributes capital in the firm but does not take part in the management. He shares profit or loss of the business and bears unlimited liability. He enjoys the rights of a partner but remains passive from managerial duties. v. Nominal Partner A nominal partner is not a real partner. He does not contribute capital to the firm neither shares profit but wants to be called as a partner just for name sake. He lends his name and credit to the firm and thus is liable to them who believe him as a partner. vi. Holding out Partner/Partner for Estopel This person represents himself as a partner of the firm by his work or by written agreement but does not contribute capital and does not share profit. He is not entitled for any rights of partnership. He is believed to be a partner to the firm by all and thus liable for the debts of the firm. It is, in many ways, similar to a nominal partner. This partner acts as a guardian of other partners of the firm. vii. Quasi Partner A quasi partner is one who is no longer a partner but has left his capital in the firm as a loan. He receives interest of a certain percentage on such loan as long as it is not paid off. viii. Profit Sharing Partner A profit sharing partner is that who contributes capital to the firm, shares the profit but not liable for the losses and debts of the firm. Some distinguished

126 Aakar’s Office Practice and Accountancy - 9 personalities may be requested for such a partner for a good public relation and a good reputation in the community and society. ix. Sub-partner When a general partner enters into the agreement with another person to share the profit or losses and even the debts of his portion in the firm than the other person, he is known as a sub-partner. He has no right in and against the firm and is not liable for the firm’s debt. x. Secret Partner A partner who contributes capital, shares profit and losses and bears unlimited liability but remains secret from outsiders is known as a secret partner. He can also take part in the management. Such partners do not want to be exposed to the public. xi. Minor Partner A minor partner is the one who has not attained the age of majority according to law to which he is subject. Even though he cannot give his signature in the partnership agreement and other legal documents, he contributes capital, shares profit and losses and bears a limited liability towards the firm’s debt. He can also inspect the books of account of the firm. After he attains the age of majority, he should give a notice to the public about his continuation in the firm. He can then enjoy with the general rights and responsibilities of the firm and thus he should bear unlimited liability. xii. New/incoming Partner A person who has newly joined as a partner in the firm is called a new or incoming partner. In general, he is not held liable for the debts and obligations of the firm before his joining and thus not entitled to share such profits. The new partner should bring his share of capital and also a part of the value of goodwill as agreed by both of them, i.e. the firm and the new person. xiii. Retiring/Outgoing Partner The partner who gets retirement from the existing partnership by taking his share of capital, profit, goodwill and other responsibilities is called a retiring partner. He is liable for all the debt and obligations of the firm before his retirement and also entitled to such profit. The notice of his retirement from the partnership should be publicly notified. Points to Remember i. General partner ii. Active partner iii. Limited partner iv. Dormant/ passive partner v. Nominal partner vi. Holding out Partner/Partner for Estople vii. Quasi partner viii. Profit sharing partner ix. Sub-partner x. Secret partner xi. Minor partner xii. New/incoming partner xiii. Retiring/outgoing partner

127 Business Advantages and Disadvantages of Partnership A partnership business enjoys a number of merits by overcoming some of the limitations of sole proprietorship. The important advantage and disadvantages are briefly discussed below: Advantages i. Easy to Form Like a sole proprietorship, this firm can also be easily established through some sorts of formalities. It is registered under the “Partnership Firm Act 2020” of the country in the concerned department of the government. An application with the specification of the business and the Partnership Deed should be submitted to the concerned department and it can start its regular activities. ii. Adequacy of Capital A partnership firm is established by combining capital, skill, ability and efforts of different individuals. Therefore, it has comparatively more capital and even the other resources than that of a sole proprietorship. Thus, it can take advantages of large scale business by using profitable opportunities. It also harmonizes different skills and abilities of the partners for the betterment of the firm. Thus, it can take advantages of adequate capital. iii. Effective Management The management of a partnership firm may be handled either by all the partners or by any of them for all. It can maintain close and cordial relationship with the employees. The decisions are also taken for the goodness of the firm as far as possible from the available resources and for the goodness of the employees as well. It tries to motivate the employees. It again tries to apply the management concept that management is the getting things done through others by motivating the employees. iv. Protection of Minority Every partner has a right to participate in the management of the business. In case, if any of the partners has handled the management, he must not take everyone’s consent in taking decisions. It does not apply only the democratic process in decision making but seeks the mass consensus. Since, every partner’s consent is to be taken in the business operation, it protects minority interest. v. Incentive to Work Hard A partnership is established and run under joint ownership and responsibility. Its profit and loss and obligations are shared as their agreement. Since, the profit is the motivation factor, it works as the incentive to hard working. Therefore, they work hard for maximizing profit and avoiding risks.

128 Aakar’s Office Practice and Accountancy - 9 vi. Credit and Loan Facilities With the involvement of different entrepreneurs and having unlimited liability towards the firm, a partnership gains the confidence and faith of the creditors and other financial institutions. It can obtain credit facilities from the suppliers because of its sound credit worthiness. Similarly, banking and other financial institutions can also easily grant loan to such a firm. vii. Maintaining Secrecy The management of a partnership firm is handled by the partners themselves. All the decisions remain within themselves and only the instructions are sent to the subordinates. On the other hand, a partnership does not need to publish its financial statement i.e. Profit and loss A/c and the Balance Sheet for public knowledge. Thus, it can maintain due secrecy. viii. Flexibility This sort of business can be easily expanded and/or contracted as the availability of human and non human resources and the interest and will of the partners. There’s no legal restriction for its expansion or contraction. ix. Easy to Dissolve It is very easy to dissolve a partnership. The partners should submit an application to the concerned department of the government along with their consent on it for its dissolution. Death, insolvency or insanity, etc. of any of the partners may cause its dissolution. Points to Remember i. Easy to form ii. Adequacy of capital iii. Effective management iv. Protection of minority v. Incentive to work hard vi. Credit and loan facilities vii. Maintaining secrecy viii. Flexibility ix. Easy to dissolve Disadvantages i. Limited Capital Even though a partnership is formed by combining capital and other resources of different entrepreneurs, it has still a limited capital because it cannot invite the general public to contribute their capital. It is limited only to a certain community or within the relatives and thus can raise only a limited capital. ii. Unlimited Liability The liability of the partners, in the partnership, is unlimited which means that their liability goes up to their personal property as in the sole proprietorship. In case of critical conditions and when the firm falls in economic crisis, the partners are afraid

129 Business of the firm’s obligations and debts. Because of such conditions they may restrict its growth and expansion. iii. Uncertain Existence The partnership may be dissolved on the death, lunacy, or insolvency of any of the partners or even on their agreement to dissolve it. It has no perpetual existence like a company. Thus, firm may be closed at any time. This may lose public faith and confidence and thus lose profitability. iv. Restriction on Transfer of Shares There is restriction on free sale or transfer of share i.e. ownership of a partnership firm. It is only possible with the consent of all the partners. It is very difficult to get such consent and therefore, one should remain a partner in a firm even he/she does not want to continue his/her connection with the firm. This discourages entrepreneurs to join partnerships. v. Delay in Decision Making The modern business world is very much complex and competitive. If the manager cannot take appropriate decisions in time, the entire organization may be pushed back and miss the business opportunities, which hampers its productivity and profitability. The decisions in business affairs are to be taken by taking the consent of all the partners. Thus, it takes a long time in decision procedures. vi. Lack of Public Faith and Confidence A partnership has uncertain existence on one side, and it does not need to publish its financial affairs for public knowledge on the other and more important side. Thus, the public will not be sure about its continuity and may lose faith and confidence towards the firm. As a result, this sort of business may lose an important property i.e. public faith and confidence. vii. Chances of Misunderstanding and Disputes There are many owners in a partnership firm. Every partner, as a owner, may want to show his importance in the managerial responsibilities. Thus, there may be conflicts of personalities and misunderstandings about the matters among them. Again various misunderstanding between the employees and the partners may exist in course of business operation and the performance appraisal. Points to Remember i. Limited capital ii. Unlimited liability iii. Uncertain existence iv. Restriction on transfer of shares v. Delay in decision making vi. Lack of public faith and confidence vii. Chances of misunderstanding and disputes

130 Aakar’s Office Practice and Accountancy - 9 C. JOINT STOCK COMPANY Before the Industrial Revolution, production was made at the cottage and small level, specially for fulfilling the demand of local market. Sole traders and partnership firms traditionally carried out business activities. The industrial and transport revolutions have brought about radical changes in the system of production and distribution. With the advanced factory system, large-scale industries and mass scale production came into being. As a result, trade dealing also began to develop from sole and partnership to the companies of national and international levels. In the second half of the 19th century, a new business organization in the name of Joint Stock Company was introduced in many countries in the world. This sort of business organization was intended to overcome some of the limitations of the traditional forms of business. In Nepal, a joint stock company should be registered under Nepal Company Act 2063. A joint stock company, simply, is an association of individuals created by law having a common seal and a limited liability. It is such an organization, which carries out the business activities in its own name and with a common capital divided into a number of transferable shares. The capital of a company is collected from the public by means of subscription of its shares. It is better to study some of the definitions of a joint stock company. According to Nepal Company Act 2063, “A company means any company incorporated under this act.” This definition is just a legal definition, thus, cannot clear its concept. Similarly, Prof. L.H. Haney has defined it as “A voluntary association of individuals for profit, having a capital divided into transferable shares and the ownership of which is the condition of membership.” The ownership of a company is the condition of its membership. The members of a company are known as the shareholders and they enjoy their rights and responsibilities according to the company act. It should get its registration under Nepal Company Act 2063, in the concerned department of Government of Nepal. It may undertake to carry out any industrial, trading or even management service activities. Key Point A joint stock company may be defined as an artificial person created by law with a distinctive name, common seal, and a common capital divided into a number of transferable shares and having limited liability and perpetual succession. Stock company

131 Business Characteristics/Features of Joint Stock Company A joint stock company is a legal entity and thus it is different from that of its shareholders. It is also different from the other traditional forms of business organization, viz., sole proprietorships and partnerships. It has some certain characteristic, features, which differentiate it from others. They are as below: i. Voluntary Association A joint stock company is a voluntary association of a number of persons, established under a certain company act to carry on certain business. The persons freely apply for its membership and freely join to such an association. Thus, a joint stock company is a voluntary association of different individuals. ii. Artificial Person A joint stock company is an artificial person created by law in the sense that it can practise all the rights and privileges independently like a person as prescribed by law. It can conduct the business transactions like purchase and sales of properties on its own name, enter into contracts, can sue the cases against outsiders and be sued by them as a natural person. Moreover, it has a separate entity than that of its shareholders. Thus, the shareholders are not personally liable for the acts of the company even though they are its real owners. iii. Share Capital A joint stock company is formed with a common capital divided into a number of shares of a fixed and equal value. A person legally competent can apply for the shares. These shares are transferable from one person to another openly. Company shares can be sold or purchased through brokers or stock exchange centres but the transfer of shares should be registered in the books of the company. But in case of private limited company, the shares cannot be transferred freely. iv. Common Seal A company being an artificial person cannot sign the documents. So, it manages a common seal with its name and symbol in order to use as a token of the company’s approval on the documents. It is the official signature of a company. v. Limited Liability It is a basic feature of a joint stock company. The liability of its shareholders is limited to the extent of the value of shares they have purchased. It means the shareholders need not to use their personal property to pay out the debts and obligations of the company.

132 Aakar’s Office Practice and Accountancy - 9 vi. Perpetual Succession A joint stock company is created by law and can only be dissolved by law. Its life does not depend on the conditions of its shareholders, i.e. bankruptcy, lunacy or death, etc. of the shareholders does not affect its existence. The existing shareholders may go out by selling their shares and new shareholders may come but a company will continue. Thus, a joint company has a perpetual succession. vii. Management by Representatives Since, there are a large number of shareholders in a company, it is not possible for them all to participate in the day-to-day management. Thus, its management is conducted by the elected representatives of the shareholders called the board of directors. They are usually professionals and have adequate knowledge, skill and experiences. Sometimes a company may also hire some professional management experts to boost up its productivity. viii. Other Features Publication of financial statement, involvement of different classes of people, based on rules and regulations, government by law, etc. are other features of a company. Points to Remember i. Voluntary association ii. Artificial person iii. Share capital iv. Common seal v. Limited liability vi. Perpetual succession vii. Management by representatives viii. Other features Advantages and Disadvantages The important advantages and disadvantages of a company are discussed below. Advantages i. Adequate capital A joint stock company is formed by a number of persons with common capital collected by means of the subscription of shares. So, it has a large amount of capital. It can be conducted in large volume and use profitable business opportunities. It can also use high technology and modern and sophisticated resources for its advancement. Thus, adequacy of capital is a notable merit of a joint stock company. ii. Limited liability It is another notable merit of a joint stock company. Many people who do not want to take unlimited risk in the business but want to contribute a small portion

133 Business of their saving in it, as its owner, are encouraged by this sort of business. The shareholders of a company may be wealthy but no creditors of the company can claim on them personally, beyond their share of capital. They can look only at the assets of the company for the satisfaction of their debts. Thus, limited liability enables the richer persons to contribute capital in a company on one side and it motivates the petty saving holders to invest their petty saving by purchasing the shares of company to get benefit of large-scale business undertaking. iii. Perpetual Existence As a company is an artificial person, having a separate legal entity than that of its shareholders, it is not terminable by insolvency, lunacy or even with the death of any of its shareholders or directors. Thus, it enjoys a perpetual life and a permanent existence, which helps to lunch long term objectives and projects. iv. Free Transfer of Shares A share of a company is a movable and liquid property and is transferable in the manner laid down by the articles of the company. A company’s shareholder can enjoy a legal right to sell his share and get it transferred in the name of the buyer by entering into the company’s register of members. If the company has listed its shares on a recognized stock exchange, the shareholders can enjoy a ready and open market facility to sell or purchase a share. v. Diffusion of Risk As the membership of a joint stock company is very large, even hundreds and thousands, the total risk of the failure of business is spread over the large number of its members i.e. the shareholders. Individually, a shareholder of a limited company has to bear a very low risk of loss i.e. limited by the face value of his shares. Thus, risk can be diffused in a company by means of the wide distribution of such risk. vi. Efficient and Effective Management The shareholders of a company are its real owners and the elected representatives of them manage it. They are professional management experts and so they can take appropriate decisions on the business affairs and can lead a company toward its prosperity by means of the real execution of plans and policies of the company. There’s no any interference in its management from its shareholders because the management of a company is separate from its ownership. vii. Benefit of Large Scale Production Being a large scale business undertaking, a company enjoys the benefits of mass production, division of labour and specialization, utilization of resources and business opportunities etc. Qualitative products can be produced at a minimum cost and a large area of market can be occupied at national and international levels.

134 Aakar’s Office Practice and Accountancy - 9 viii. Public Confidence and Credit Facility Since, it is compulsory to publish the audited financial statements for the public knowledge, a company can get public faith and confidence. So, it can get loan from the banking institutions and from other loan investors i.e. the leaders. It also gets credit facilities from different suppliers in purchasing the materials and goods. ix. Social Benefits The company provides opportunities to mobilize the scattered savings of the people in different communities. It also creates employment opportunities by developing large scale business undertaking. Since, goods are produced in a large quantity, it helps to supply qualitative products at a cheaper price to the consumers and also helps government to generate revenue through corporate taxes, etc. Thus, a company gives a number of social benefits through its business operation. Points to Remember i. Adequate capital ii. Limited liability iii. Perpetual existence iv. Free transfer of shares v. Diffusion of risk vi. Efficient and effective management vii. Benefit of large scale production viii. Public confidence and credit facility ix. Social benefits Disadvantages i. Complicated Formation/Difficultly in Establishment A company requires a lot of formalities and efforts to be formed. The company promoters can register it with the specifications of business they are going to conduct, authorise or nominal capital, articles and memorandum of association, etc. These documents should be submitted to the Registrar of the company in the concerned department of Government of Nepal. The capital of a company should be collected by issuing shares to the public which is also a time consuming matter. The issue of capital should be done according to the prescription of the act. Thus, it is very complicated and tedious to form a company. ii. Fraudulent Management A company is formed by the promoters and the directors i.e. the elected representatives of the shareholders conduct its management. Thus, the company management is controlled by the company promoters and its directors. There is enough chance of gaining private benefit in the cost of the ordinary shareholders by altering and manipulating figures to their favour. Moreover, the directors do not represent the shareholders in the real sense. iii. Speculation in Share Transactions The shares of a company are listed on the recognized stock exchange centre in order to provide continuous, open and wide market for the existing and new

135 Business shareholders. The promoters and the directors of the company can twist or manipulate the value of shares for their advantage. They lower the rate of share when they want to purchase the shares and vice versa. iv. Lack of Secrecy A company should follow many legal formalities. Most of the business affairs should be decided from different meetings and should be disclosed for the knowledge of all the shareholders. This act may disclose the business affairs to the general public. Moreover, a company should compulsorily publish its audited financial statements for public knowledge. Thus, a company cannot maintain due secrecy of its business affairs. v. Ignoring a Large Number of Shareholders The shareholders who are the real owners do not have much voice in the management of a company. A handful of shareholders, who also manage the affairs of the company are able to have control over it. Besides this, they can also unduly influence the shareholders. In this way, a large number of shareholders may be ignored or isolated from the managerial decisions and from the business benefit. vi. Delay in Decision A joint stock company holds different types of meeting for different purposes. General Assembly of the Shareholders, Board of Directors Meeting, etc. are some of them. There should be a quorum to hold a meeting on one hand, and a certain time interval is necessary from one meeting to another on the other which causes the delay in holding meeting. Moreover, notice should be sent to each of its members a long time before the date of the meeting. All the procedures of meeting and again the decision procedures are long and time consuming. Thus, a joint stock company cannot take the decisions promptly and as a result, it may miss the profitable business opportunities. vii. Conflict of Interest The top management has to secure effective solution of many conflicting interests: employees’ demand, higher wages, salaries and safety measures. Consumers expect better quality at lower prices. Shareholders raise demands of dividends. It is difficult to satisfy such diverse interests. Points to Remember i. Complicated formation/Difficultly in establishment ii. Fraudulent management iii. Speculation in share transactions iv. Lack of secrecy v. Ignoring to a large number of shareholders vi. Delay in decision vii. Conflict of interest

136 Aakar’s Office Practice and Accountancy - 9 Types of Company a. Private Limited Company A private company is the one which is incorporated under the prevailing Company Act by limiting its shareholders to fifty, prohibiting any invitation to the public to subscribe for the shares or debentures and restricting the transfer of its shares. A private company is similar to partnership business in many ways. A private limited company can immediately commence its activities after its registration. The members of a private limited company are more or less confined to the relatives and friends or within a certain community. Surya Tobacco Co. (Pvt.) Ltd., Sayapatri Films Pvt. Ltd., etc. are some examples of private company. b. Public Limited Company A public limited company is the one which is incorporated under the prevailing Company Act with common capital divided into a number of transferable shares and a perpetual succession. At least, seven members are required for the formation of this type of company. But there is no limit for the maximum number. This company can invite the public, by means of prospectus, to subscribe for its shares and debentures. It should get first of all, the commencement licence, immediately after its registration in order to carry out its business. Janakapur Cigarette Factory Ltd., Biratnagar Jute Mill Ltd., Morang sugar Mill Ltd., Megha Bank Ltd., etc. are some examples of public limited company. Differences between Partnership and Joint Stock Company Points of Difference Partnership Firm Joint Stock Company 1. Meaning It is an agreement of different individuals to carry out a certain business for mutual profit. It is a voluntary association of individuals formed for business purpose with a distinctive name and a common capital divided into a number of transferable shares and perpetual succession. Global IME Bank Recruitment company

137 Business 2. Formation It requires simple, easy and short procedures for its formation. It is registered under Nepal Partnership Act 2020. It requires long, complicated legal procedures for its formation. It is compulsory to get registration under Nepal Company Act 2063. 3. Membership Its members are said to be the partners and it should have at least two partners to run it. Its members are said to be the shareholders it has two to fifty shareholders in case of private company and seven to limitless shareholders in case of public limited. 4. Share provision The partners have no right to transfer their share to others without the consent of all other partners. It is created by law and So, it has a separate legal entity from that of its shareholders and the liability of the shareholders is limited. 5. Entity It has no separate legal entity from that of the partners and thus their liability to the firm is unlimited. It is created by law and So, it has a separate legal entity from that of its shareholders and the liability of the shareholders is limited. 6. Financial affairs There is no obligation of the financial statements of partnership to be audited and they need not be published for public knowledge. There is a statutory obligation for the financial statements to be audited and should be compulsorily published for public knowledge. 7. Dissolution It may be dissolved on the lunacy, insolvency or death of any of the partners. And on the agreement of all the partners to dissolve it. It is not dissolved on the lunacy, insolvency or death of any of its shareholders. It can only be dissolved by law. D. PUBLIC ENTERPRISES Before the Industrial Revolution in England, the roles of the government were to maintain rules and order, internal security and defence from foreign attack and the construction and maintenance of religious matters and cultural properties, etc. But after that, the industrial and trading activities developed and expanded all over the world. The handling Nepal Oil Corporation

138 Aakar’s Office Practice and Accountancy - 9 of business activities by the private sector caused the concentration of the means of production in the hand of a few persons. Private enterprises essentially aimed at profit maximization and therefore, could not ensure a full public service at the altar of profitability. It led the government to enter into business activities, specially in public utility sectors like water, electricity, transport, communication, banking insurance, etc. Therefore, the governments of different countries started to own and manage some of the industrial and trading undertakings fully or partly i.e. majority portion in order to supply goods and services of public utilities to its people. These types of business undertakings are known as public enterprises. Thus, a public enterprise may be defined as an industrial or commercial undertaking incorporated under a special Act with some privileges in order to supply the goods and services of basic utilities under a full or partial ownership i.e. at least 51% shares and control of the state or central government. It is an autonomous body. Public enterprises are categorized into four types they are ka, kha, ga,gha. Since, a public enterprise is a business undertaking, it has also a profit motive but to a very small extent and thus it charges a minimum price for the goods supplied or services rendered. Different enterprises are incorporated in different economic sectors like Nepal Electricity Authority (NEA), Water Supply Corporation, Nepal Telecom in public utility service sector; Rastriya Banijya Bank (RBB), etc. in the banking service sector, Udaypur Cement Factory, etc. in the manufacturing sector; Nepal Oil Corporation, National Trading Limited, Nepal Food Corporation, etc. in trading sector; Gorkhapatra Sansthan, Radio Nepal, Nepal Television, etc. in social and cultural sector and so on. According to A.N. Agrawal, “Public enterprises are established, controlled and operated by the government to produce and supply goods and services to the society.” Likewise, Encyclopedia Britannica, “Public en enterprises may be defined as an undertaking that is owned by a nation, state or local government and supplies services or goods at a price and operated on a more or less self supporting basic.” Key Point A public enterprise is a business organization established and managed by government holding at least 51% of the total shares for producing and distributing goods and services at a minimum possible price to the general public. Objectives/Need/Importance of Public Enterprises With the industrialization and planned economic development, the government of any country has an ever increasing role to be played in the production and distribution of goods and services of public utilities. Moreover, the government should have monopolistic control in the security and defence sector. Thus, the need and importance of public enterprises cannot be overemphasized in any sense.

139 Business The important objectives need/importance of public enterprises are mentioned hereunder: i. To have the entire management and control over the security and defence sector of the country. ii. To render services and supply goods of public welfare sectors to general people at a minimum possible price. iii. To control over the pricing system and also to increase government revenues by conducting business activities. iv. To promote and develop all economic sectors for strengthening the national economy. v. To make equitable distribution of the available resources to all sectors and parts of the country rather than letting them to be concentrated in the fewer hands. vi. To overcome the unfair trade practices by establishing public enterprises in such sectors. vii. To carry on business activities in unprofitable but public utility sectors because private sectors do not want to conduct business in such sectors. viii. To create many employment opportunities to the different classes of people. E. COOPERATIVE SOCIETY With the ever growing involvement of the private sector entrepreneurs into business activities, most of the factors of production began to be centralised in the hands of a few capitalist people. The growth and development of the capitalist form of business organization led the total business toward the complicated chain of middlemen between the producers and the consumers. As a result, the middle and lower class people started to be exploited by them. Thus, the consumers began to unite together to form their cooperative in order to fight against such exploitation. In a simple sense, the word cooperation stands for the idea of ‘living together and working together’. or ‘one for all and all for one’. A cooperative is a form of business organization wherein persons voluntarily associate together as human being on the basis of equality, for the promotion of their economic interest and getting the goods consumed in reasonable price. M.C. Shukla has defined a cooperative society as “A voluntary association with unrestricted membership and collectively owned funds, organized democratically by individuals of moderate means and incomes such as wage earners, small producers and consumers to supply their needs through mutual actions in which the motive and distribution is service rather than profit.” Members of Bharatpur SACCOS

140 Aakar’s Office Practice and Accountancy - 9 Likewise, Prof. E.H. Calvert, “A cooperative is an organization wherein persons voluntarily associate together as human beings on the basis of equality for the promotion of economic interests of themselves.” The cooperative form of business organization is found to have started at Rochdale in England from 1844 October 24. Such societies, then expanded to Italy, France, Japan and Germany and gradually, to the rest of the world. In our context, such cooperative movement started from the ancient time, specially in agricultural and other social and religious sectors. Manka Guthi in Kathmandu valley, Parma in the western Nepal, Dhikuri in the Thakali community, etc. were different forms of cooperative in Nepal. The modern history of cooperative development in Nepal started with the establishment of Department of Cooperative in 2010 B.S. under the Food and Agriculture Ministry. The first multipurpose cooperative Rapti Valley Development Project was started in 2011. In the year 2016 B.S., ‘Nepal Cooperative Act 2016 B.S.’, was enacted and immediately a cooperative development fund was established in 2017 and then Sajha Prakashan, Sajha Swasthya Sewa, Sajha Bhandar, Sajha Yatayat, etc. were also established in course of time. Key Point A voluntary association of economically weak people organised democratically to fulfil their common interest and to raise their economical condition through joint effort is known as cooperative society. Characteristics/Features According to the above meaning and definitions, a cooperative society may process the following characteristics. i. Voluntary Organization A cooperative society is a voluntary association of a number of persons of common interest and the membership of which is open and unrestricted. It means there is no bar on the basis of cast, creed or religion, similarly, no person is forced to become its member. In Nepal, at least 25 members are required to form a cooperative organization but no limit has been made for the maximum number. ii. Equality A cooperative organization is based on democratic principles. There is equality of status among its members irrespective of number of shares i.e. one member one vote. It creates equal voice in the organization. iii. Separate Legal Entity Since, it is incorporated under the Cooperative Act of the country, it has a separate legal entity than that of its members, just like a company. It also gets exemptions and privileges under the Act.

141 Business iv. Unity Joint and the united action is the basis of cooperative. A poor man cannot fight against the evils of capitalism. Unity is the real strength and this is fully recognized by such cooperatives. The group of individuals can easily fight against such evils and exploitation of capitalism and the middlemen therein. v. Spirit of Cooperation The spirit of cooperation works under the motto ‘each for all and all for each’. This means that every member of a cooperative organization works in the general interest of the organization as a whole. Under cooperatives, service is of primary importance. vi. Cash Dealing All the transactions of a cooperative organization should be carried in cash basis. Cash transactions ensure economy in expenses by minimizing overhead expenses, bad debt losses and collection costs. vii. Disposal of Surplus A cooperative society is not motivated by profit, but in ordinary course of dealing, it tries to earn surplus for its survival. A portion of such surplus may be allocated to various reserve funds, some other to its members’ welfare programmes and the remaining to its members in proportion to their purchase of shares and the rest as bonus to its employees. viii. Limited Liability The liability of the members of a cooperative society is limited to the extent of their shares subscription. Thus, the society must mention the word `Limited’ after its name. ix. Share Provisions The shares of a cooperative are not transferable assets. But instead of transfer, withdrawal is permitted. No members can transfer the shares to other outsiders without the consent of all members but he/she is permitted to draw out his/her membership from the cooperative. Points to Remember i. Voluntary organization ii. Equality iii. Separate legal entity iv. Unity v. Spirit of cooperation vi. Cash dealing vii. Disposal of surplus viii. Limited liability ix. Share provisions

142 Aakar’s Office Practice and Accountancy - 9 Types of Cooperatives Different people form cooperative societies for different purposes and in different sectors of economy. Some important and popular cooperatives are discussed below. i. Consumers’ Cooperative A cooperative society which is formed by the consumers of a common interest and moderate income to ensure the regular supply of the necessary goods and services to themselves at a minimum possible price is known as a consumers’ cooperative. It tries to eliminate the middlemen and attempts to establish the direct business link with the authorised distributors or even with the producers to purchase the goods. ii. Producers’ Cooperative This refers to such a cooperative which is formed by the small producers having moderate means of production and a common interest to ensure themselves with the necessary resources and factors of production at a reasonable cost. It has been established with a view to eliminate the capitalist forces, which control over the factors of production and other resources. It attempts to protect the small producers and craftsmen from the various industrialists. iii. Credit Cooperative It refers to such a cooperative which is formed by a group of economically weak persons of common interest to establish the habit of saving and providing loan under easy conditions and at a minimum interest rate. This type of cooperative is established in the form of cooperative finance company or cooperative bank, etc. in urban areas and Dhukuti, Agricultural Cooperative society etc. in the rural areas. It is specially intended to eliminate the exploitation of money lenders, banks, financial institutions, etc. iv. Housing Cooperative This society is formed by the persons of moderate income and common interest who cannot individually solve their housing problems. It grants loan to its members at lower rate of interest for housing management. It also sells building materials, plots of land, etc. on installment basis or as their facility. It is generally popular in urban areas. v. Marketing Cooperative Marketing is very competitive in the present day business world. With the large-scale production of goods and a complicated chain of middlemen, marketing has become a complicated task specially to the small producer and craftsmen. Thus, the small producer and the craftsmen having a common interest in marketing may form such a cooperative to ensure themselves for the management of all the services like storing, carriage and sales of the goods, etc. at minimum costs and expenses. It also attempts to eliminate middlemen’s exploitations over them and it is specially intended to promote market for their products.

143 Business vi. Farming Cooperative A farming cooperative is the one, which is formed by small and moderate farmers to take advantage of large-scale group farming. Small farmers handover their land to such a farming society in which they are involved in order to get better production. The small and poor farmers cannot use modern and high technology in farming; so they combine their fragmented land and make collective farming therein for better production. vii. Multi-purpose Cooperatives Multi-purpose cooperatives refer to such cooperatives which are established by a group of farmers of moderate income and common need of seeds, fertilizer, equipment and tools, storage facilities, marketing, etc. mostly in the rural areas in order to ensure themselves for the supply of such needs at a reasonable price. viii. Miscellaneous Cooperatives Out of the above mentioned, there are other many form of cooperatives are found. Such as poultry farming, animal husbandry, dairy products, etc. Points to Remember i. Consumers’ cooperatives ii. Producers’ cooperatives iii. Credit cooperatives iv. Housing cooperatives v. Marketing cooperatives vi. Farming cooperatives vii. Multi purpose cooperatives viii. Miscellaneous cooperatives F. MULTINATIONAL COMPANY Business activities have exceeded national boundaries and spread over the world with the industrialization and development of information technology, transportation and financing services, etc. Specially, after the two Great World Wars, the capitalist and power nations introduced the concept of multinational company in order to capture the world market and raw materials and resources. Multinational company refers to such a company which carries out its activities (mostly the manufacturing activities) in two or more countries by establishing the head office in one country and its branch offices in other countries. Multinational companies set the production units in several countries under the direct or collaborated ownership and control of the central company by utilizing the local resources at a negligible cost. It has two types of business operations viz. a) the parent company established in one country as the central company and b) host or subsidiary company established in the other countries as the branch company with the same name and incorporated under the provisions of the Company Act of the concerned countries. Pepsi Company

144 Aakar’s Office Practice and Accountancy - 9 Different authors have defined multinational companies in different words. Some of the important ones are given below. According to D.E. Lilenthan, “Multinational corporations are such corporations which have their home in one country and live under the laws and customs of other countries as well.” According to Brook and Remmers, “A multinational company is any firm which performs its main operations either manufacture or provision of service in at least two countries.” According to Jacoby, “A multinational corporation owns and manages business in two or more countries.” By considering the essential features of a multinational company, it may be defined as a company, incorporated in one country as the central company and runs its business in two or more countries in collaboration with the entrepreneurs of the countries as subsidiary or host companies, under the provisions of the Company Act of the concerned countries. Generally, multinational companies are found to have been established in manufacturing and financial sectors. Asian Paints, Bottlers Nepal Ltd., Everyday Battery, Nepal Lever Ltd., Everest Bank Ltd., etc. are some of the subsidiary multinational companies established in Nepal. Key Point Multinational company refers to such a company which conducts its business activities in two or more countries by establishing the head office in one country and its branch offices in other countries. Characteristics/Features of Multinational Company According to the meaning and definitions of a multinational company, it may possess the following characteristics: i. Joint Investment Multinational companies are run in very large scale, specialty in manufacturing activities to supply the goods and services to the international market. These companies are run in, at least, two countries as the central company in one country and subsidiary companies in other countries. The subsidiary companies in the host countries are incorporated under the provisions of the Company Act of the concerned countries, in joint investment or collaboration with the entrepreneurs of the countries. In this way, multinational companies are formed in the joint investment of capital and technology of the parent and the host companies in the various countries. ii. Productive Organization It is a productive organization because it involves in production or manufacturing of the goods by the utilization of necessary resources available in the respective countries. It runs its manufacturing activities on its own trade marks and patents. The production of same types of goods are done by both the parents as well as the subsidiary companies.

145 Business iii. World Wide Operation World-wide operation of business is another characteristic of a multinational company. it extends its business all over the world by establishing subsidiary of affiliated companies in different host countries. The main company controls over the affiliated companies through the investment of capital, technology, trade mark, patents, etc. iv. Transfer of Technology Multinational companies transfer the advanced technology in the host countries establishing branches or subsidiary companies for the same manufacturing activities. But in the name of transfer of technology, the parent companies exploit over the resources of the host countries and capture the major portion of the profits in the form of return on investment. v. Mass Production and Selling Multinational companies are established with a huge amount of capital and an advanced and high technology. It is operated in international areas for the same business and thus it has a mass and large scale production and selling in the international market. As a result, it can produce the goods at a minimum cost by proper control over their equality and standard. It can also take advantages of mass production, division of labour and specialization. vi. Joint Management and Control The ownership, management and control of a multinational company remain with the main company in case of the parent company, and with both the parent and host companies, in case of the subsidiary companies. But all such mechanism should be set up according to the provisions of the Company Act and the government policies of the respective countries. vii. Professional Management It is a large scale business with highly advanced technology. The multinational company employs professional managers having professional skills and specialized knowledge. It hires trained personnel and trains their employees to handle the activities efficiently. viii. Monopoly in Market Multinational company produce the goods in large quantity and maintain the high quality. By this the consumers found the qualitative goods low price. So such company may capture the market. Points to Remember i. Joint investment ii. Productive organization iii. World wide operation iv. Transfer of technology v. Mass production and selling vi. Joint management and control vii. Professional management viii. Monopoly in market

146 Aakar’s Office Practice and Accountancy - 9 Advantages/Merits i. Adequate capital and other resources and high technology can be invested in business sectors which assist in the development of industrial and commercial undertaking. ii. Economic development can be achieved through industrialization. iii. All the resources can be utilized in negligible cost. iv. Many employment opportunities can be created and the living standard of the people can be maintained. v. It is a source of collecting government revenue and it develops business undertaking by importing high technology and attracting foreign investment. Disadvantages/Demerits i. The parent companies have been siphoning wealth from the host companies in the form of return on capital investment, interest on financial loan, profit on trading of goods and services, etc. through multinational companies. It is a kind of exploitation of the host countries. ii. It exploits the resources and raw materials of the host countries through its subsidiary companies. iii. It adversely affects the local companies of the host countries and weakens their national economy. iv. The multinational companies hire the top executives from the parent country and pay high remuneration and other facilities and the junior executives and sub-ordinates from the concerned host countries with moderate and minimum remuneration. Thus, there is large income difference among the employees. It is an unfair policy. v. It has a monopolistic exploitation of the world’s consumers. Glossary Integration : mixing/combination Entrepreneur : industrialist Massive : huge Proprietor : owner Prompt : quick/timely Cordial : friendly Motivate : inspire/encourage Incentive : motivation/encouragement Liability : accountability/responsibility Deed : legal document Harmonize : match; complement Consensus : agreement Insolvency : liquidation/collapse Radical : fundamental/essential

147 Business Glossary Sue : take legal action Capitalist : industrialist Fraudulent : fake/false Siphoning : drain off/draw off Dissolve : close Debts : loan/amount to be paid Perpetual : running for long time, existence Liquidation : being an unsuccessful business organization, failure Deficit : loss Exercise A. Answer the following questions in one sentence. 1. What is business? 2. What is industry? 3. What is commerce? 4. What are the types of trade? 5. What is trade? 6. What is business organization? 7. Who is a partner? 8. Define limited liabilities. 9. Write a difference between primary industry and secondary industry. 10. What is sole trading organization? 11. Define partnership deed. 12. What is joint stock company? 13. What is meant by active partner? 14. How does a joint stock company raise its capital? 15. What is meant by public enterprises? 16. Which is the first public enterprise in Nepal? 17. Which act is used to establish the cooperative in Nepal? B. Give short answers to the following questions. 18. What is business? What are its characteristics? Discuss. 19. Describe the need/importance of business. 20. What is trade? Discuss its types. 21. What is management service? Explain in brief. 22. What is business organization? Explain.

148 Aakar’s Office Practice and Accountancy - 9 23. What are the various forms of business organization? Discuss. 24. Define sole trading concern. Briefly describe its characteristics. 25. What is a partnership organization? Briefly describe its important characteristics. 26. Distinguish between sole trading and partnership firm. 27. How do you classify joint stock company? Explain. 28. Distinguish between a partnership and a joint stock company. 29. What are the differences between private limited and public limited companies? 30. ‘Joint Stock Company is the most popular form of business organization in the present day business world.’ Discuss. 31. Define a public enterprise. Mention its objectives. 32. Mention the need or importance of public enterprises in the developing countries like Nepal. 33. Define a cooperative organization with its characteristics. 34. What is the need/importance of cooperative in Nepal? 35. Explain, in short, the advantages and disadvantages of a multinational company. 36. “Multinational companies are the evils for the developing countries.” Comment. C. Give long answers to the following questions. 37. What are the main types of business? Discuss. 38. What is meant by an industry? What are its different types? Explain. 39. What is a sole trading concern? Explain its advantages and disadvantages. 40. Define a partnership firm. Explain its advantages and disadvantages. 41. What are the different types of partnership firm? Explain. 42. Who is a partner? What are the various types of partner? Describe in brief. 43. What is joint stock company? What are their characteristics? Discuss. 44. Briefly describe the advantages and disadvantages of a joint stock company. 45. Briefly describe the development of cooperative in Nepal. 46. What are the different types of cooperatives? Briefly describe them. 47. Define a multinational company. Explain its important characteristics. Project Work a. Collect the different names of organizations which are situated in your locality and classify them into different forms of business organizations with reasons. b. Visit any two types of cooperative and listout the services provided to its members.

149 Meeting, Assembly, Seminar and Minuting Business Unit 7 Meeting, Assembly, Seminar & Minuting CDC Syllabus 7.1 Introduction and Types 7.2 Minute: Introduction, Points to be kept in mind while preparing minutes 7.3 Endorsement of Minute 5 Periods After studying this unit, students will be able to : know the meaning and importance of meeting, explain the types of meeting, assembly and seminar, write difference between meeting and conference, know the meaning, importance and drafting of minute, know the meaning of endorsement of minute. Learning Objectives

150 Aakar’s Office Practice and Accountancy - 9 1. Introduction An organization whether it is of business or service motive, takes hundred of decisions on many issues in the regular course of operation. In order to take more appropriate decisions, the top authority takes opinions and suggestions from its subordinates by mass gathering and democratic participation. Moreover, it should let all the employees and other concerned to know about the problems, situations, policies and plans, etc. of the organization. This is all possible by means of various meetings of the persons concerned. Simply a meeting gathers the persons at a place to discuss and draw decision on different topics. In order to get the concept of meeting, a person should be familiar with the following essentials: i. It involves two or more persons. ii. It gathers the persons by means of a pre-notice. iii. It is organized for discussion and for making decisions on certain topics. According to M.C. Kuchhnl, “A meeting is a gathering of related members of an organization to review its activities, performance, position and to pass resolutions.” In conclusion, meeting is the gathering of members for solving problems, making decisions and passing resolutions in a democratic manner. Key Point Meeting is defined as an assembly of number of persons in response to a pre-notice and for a determined purpose (agenda) for discussion and for making the decisions on them. 2. Importance/Need of Meeting Meeting is important for every type of organization to manage and conduct its activities. It provides information through mutual discussion and draws conclusions on different topics through democratic decision procedure. It creates the feeling of cooperation among the employees in an organization because they come closer to each other through different meetings and mutual discussion. Thus, the importance of meeting can be highlighted in terms of the following points: i. The rules and regulations of an organization are made and/or amended by the meeting of its members. ii. The first meeting of an organization helps with the necessary information for the formulation of plans and policies and to introduce each other. iii. Many problems and difficulties can be identified and useful opinions and suggestions can be obtained from different persons i.e. of its members in relation to such matters for their better solution. iv. Various alternatives can be identified for making decisions on different topics. v. It provides directions and instructions to the branch office and sub-ordinates as well. vi. It works as evidence in case when disputes and misunderstanding arise and also can be frequently used as reference materials for performance procedures.