Account 9

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, Aerogramme
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.

Postal Service & Electronic Communication Service 101

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 Post card
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.

102 Aakar’s Office Practice and Accountancy - 9

iii. It is not possible to write long text. Express Mail Service

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

Postal Service & Electronic Communication Service 103

5. Differences between Ordinary letter and Registered Letter

Point of Difference Ordinary Letter Registered Letter

1. Meaning The letter which is sent The letter which is sent by

2. Record to deliver simple and less keeping record in the post
3. Cost
4. Responsibility important matters is called office is called registered

5. Method ordinary letter. letter.

It is not recorded by the post It is recorded by the post

office in its book . office in its book.

It is a cheaper method. It is a costlier method.

Past office is not responsible Post office is responsible

for the loss or damage of for the loss or damage of

letter. registered letters.

It is a simple and easy method It is a complex method of

of sending letter. sending letters.

6. Evidence It has no provision of issuing a It has a provision of issuing

receipt. a receipt.

7. Compensation It has no provision of giving It has a provision to give
any compensation for loss the compensation for loss
and damages of letters and and damage of letters and
documents. 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.

104 Aakar’s Office Practice and Accountancy - 9

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 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 E-mail
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 Internet

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.

Postal Service & Electronic Communication Service 105

Glossary : attachment/includes
: collection and study of postage stamps
Enclosures : available
Philatelic : geography
Accessible : huge
Topography : payment for loss/give back
Immense : attaching
Compensation
Affixing

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.

Pr oject Work

a. Collect any one of aerogramme, postcard, registry letter and postage
stamp from nearby post office.

b. Collect various types of postal stamps.

106 Aakar’s Office Practice and Accountancy - 9

Unit 6 Business

CDC Syllabus 25 Periods

6.1 Introduction ObjeLcetiarvneisng After studying this unit, students will
Sole Trading Concern: be able to :

Introduction, Merits and understand the concept,
Demerits characteristics and importance of
Partnership: Introduction business,
to Partnership, Merits and
Demerits know the types of business,
Joint Stock Company:
Introduction, Merits and write the meaning of business
Demerits organization,
6.2 Public Enterprises: Introduction
and necessity explain the meaning, advantages and
6.3 Cooperative societies: disadvantages of types of business,
Introduction, Characteristics and
Types explain the types of partner,
6.4 Multinational Corporations:
Introduction and Characteristics describe the features and types of
joint stock company,

know the characteristics and types of
cooperatives,

know the characteristics of
multinational company.

Postal Service & Electronic CBousminmesusnication Service 107

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.

108 Aakar’s Office Practice and Accountancy - 9

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.

Business 109

ii. Utilization of Resources

With the growth and development of business activities, human and non-
human 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.

110 Aakar’s Office Practice and Accountancy - 9

(A) industry and (B) commerce. The classification of business is shown in the
following chart.

Business

Industry Commerce

Primary Extractive industry Trade Service Oriented
industry Genetic industry
Construction industry Home trade Foreign trade Advertisement
Secondary Manufacturing industry Warehousing
industry Wholesale trade Import trade Insurance
Retail trade Export trade Banking and finance
Service Entrepot trade Transportation
industry Communication

Tourism Analytical industry
Hotel & Restaurant Synthetic industry
Entertainment etc. Processing industry
Assembling 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 Fish farming
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.

Business 111

b. Genetic Industry

It is related with the growth and development Poultry farming
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 Sugarcane factory

Generally, the term industry refers to the
manufacturing industry. It is concerned with the
production of goods by using raw materials or semi-
raw 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 Crude oil refinery industry
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.

112 Aakar’s Office Practice and Accountancy - 9

Processing Industry Textile 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 Assembling 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 Hongshi cement factory
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 Hotel Soaltee Crown Plaza
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

Business 113

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 Retail 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

114 Aakar’s Office Practice and Accountancy - 9

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

Business 115

b. Warehousing Warehousing
National Life Insurance Company
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 Nepal Bank Limited
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 Sajha Yatayat
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 Ncell
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.

116 Aakar’s Office Practice and Accountancy - 9

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.

Forms of business organization

Sole trading Partnership Joint stock Public Cooperative Multinational
concern organization company enterprises
society company

Unlimited partnership Limited partnership Private limited company Public limited company

Business 117

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 Tailoring shop

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.

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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.

Business 119

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
vii. Incentive to work v. Personal supervision and control vi. Personal contact and relation
x. Easy dissolution
viii. Easy to obtain loan ix. Flexibility and changeability

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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

Business 121

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 Partnership

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.

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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.

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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.

Types of Partnership

Unlimited partnership Limited partnership

Partnership for an uncertain period Partnership for a certain period

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:

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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

Business 125

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

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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.

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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
vii. Maintaining secrecy v. Incentive to work hard vi. Credit and loan facilities

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

128 Aakar’s Office Practice and Accountancy - 9

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

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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 Stock company
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.

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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.

Business 131

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
vi. Perpetual succession
iv. Common seal v. Limited liability

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

132 Aakar’s Office Practice and Accountancy - 9

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.

Business 133

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 ix. Social benefits
credit facility

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

134 Aakar’s Office Practice and Accountancy - 9

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

Business 135

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 Recruitment company
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 Global IME Bank

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 Partnership Firm Joint Stock Company
Difference
It is an agreement of different It is a voluntary association
1. Meaning

individuals to carry out a certain of individuals formed for

business for mutual profit. business purpose with a

distinctive name and a common

capital divided into a number

of transferable shares and

perpetual succession.

136 Aakar’s Office Practice and Accountancy - 9

2. Formation It requires simple, easy and It requires long, complicated
short procedures for its legal procedures for its
3. Membership formation. It is registered under formation. It is compulsory to
Nepal Partnership Act 2020. get registration under Nepal
4. Share Company Act 2063.
provision Its members are said to be the
partners and it should have at Its members are said to be the
5. Entity least two partners to run it. shareholders it has two to fifty
shareholders in case of private
6. Financial The partners have no right to company and seven to limitless
affairs transfer their share to others shareholders in case of public
without the consent of all other limited.
7. Dissolution partners.
It is created by law and So, it
It has no separate legal entity has a separate legal entity from
from that of the partners and that of its shareholders and the
thus their liability to the firm is liability of the shareholders is
unlimited. limited.

There is no obligation of It is created by law and So, it
the financial statements of has a separate legal entity from
partnership to be audited and that of its shareholders and the
they need not be published for liability of the shareholders is
public knowledge. limited.
It may be dissolved on the
lunacy, insolvency or death of There is a statutory obligation
any of the partners. And on the for the financial statements
agreement of all the partners to to be audited and should be
dissolve it. compulsorily published for
public knowledge.

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 Nepal Oil Corporation

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

Business 137

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.

138 Aakar’s Office Practice and Accountancy - 9

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 Members of Bharatpur SACCOS
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.”

Business 139

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.

140 Aakar’s Office Practice and Accountancy - 9

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

Business 141

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.

142 Aakar’s Office Practice and Accountancy - 9

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 Pepsi Company
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.

Business 143

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.

144 Aakar’s Office Practice and Accountancy - 9

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
vii. Professional management v. Mass production and selling vi. Joint management and control

viii. Monopoly in market

Business 145

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

146 Aakar’s Office Practice and Accountancy - 9

Glossary : take legal action
: industrialist
Sue : fake/false
Capitalist : drain off/draw off
Fraudulent : close
Siphoning : loan/amount to be paid
Dissolve : running for long time, existence
Debts : being an unsuccessful business organization, failure
Perpetual : loss
Liquidation
Deficit

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.

Business 147

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.

Pr oject 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.

148 Aakar’s Office Practice and Accountancy - 9

Unit 7 Meeting, Assembly,

Seminar & Minuting

CDC Syllabus 5 Periods

7.1 Introduction and Types ObjeLcetiarvneisng
7.2 Minute: Introduction, Points to

be kept in mind while preparing
minutes
7.3 Endorsement of Minute

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.

Meeting, AssemblyB,uSseinmeisnsar and Minuting 149

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.

150 Aakar’s Office Practice and Accountancy - 9