NOTES

BUSINESS, TRADE AND

COMMERCE
In simple words, Business refers to an occupation in which people
regularly engage in activities related to purchase, production, sale or
procurement of goods and services with the main objective of earning
profits. (by satisfying human needs in society)
Activities
Non Economic
{performed out of love, sympathy etc}
Economic
{performed to earn money }
Manager working in office. Housewife feeding her family.
worker in factory etc. Respecting own national flag etc.

Economic Activities

Business Profession Employment

Profession It refers to the activities which require special knowledge

and skill to be applied by an individual in his work to earn living,
which are subject to the guidelines or Code of conduct laid down by
the professional bodies.
Ex ICAI - for CA
Bar council of India - for lawyers.

CLASS 11 BUSINESS
 NOTES
BUSINESS, TRADE AND
COMMERCE
Employment It refers to the an activity in which an individual works
regularly for another person & get remuneration (wages or salaries) in
return.
Those who are employed by others are known as employees and the
one who employ them is known as employer.

Features of Business activities

1. Economic activity non economic activities should not be considered
as Business, as Business is basically guided towards earning profits.

2. Production or Procurement of goods & services

Manufacturing Acquiring from others
Goods may includes Consumable items or Capital

sugar, ghee, pen, notebook etc. machinery , furniture etc.

Services may include facilities

Ex Banking, transportation etc..

3. Sale or exchange of goods & services

(ie..... production for self consumption is not Business)

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CLASS 11 BUSINESS
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4. Regular Basis one single transaction should not be considered as
Business. {even if it has been sold for profit }

5.Profit motive no Business can survive longer without profit.

6. Uncertainity ie.. lack of information/knowledge relating to the

amount of return of invested money from Business .
(ie..their is a possibility of loss)

7. Risk - "risk hai to ishk hai" {due to uncertainty}

Risk is related to many factors (unfavorable)
Ex change is pattern of demand , consumer taste , preference etc.

Classification of Business Activities

Industry Commerce
Related to production or Concerned with activities which
processing of goods & is necessary for Facilitating the
materials exchange of goods & services

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group of firms producing. similar related goods
Industry
It refers to the economic activities, which are concerned /connected
with conversion of resources into useful goods
(it also includes breeding and raising of animals)

Primary Secondary Tertiary

Primary Industry [concerned with extraction & production of natural

resources & reproduction & development of living beings & plants etc.]

Extractive industries Genetic industries

Extractor or Draw out Breeding & raising of plants &
products from natural sources. animals
Ex - farming, mining, fishing etc. Ex- poultry farms , nursery
,fish hatchery etc.

FORMS OF MARKET (ECONOMICS)

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Secondary industries
They are those industries which process the extracted or genetic (of
primary) materials to produce goods for final consumption or for further
processing units .
Ex manufacturing of steel from iron are done by secondary industries
(which comes from primary)

Secondary industries are divided into 2 parts

1) Manufacturing - they are engaged in producing goods through

processing raw materials and finally creating for utilities (want
satisfying)

Analytical industry Synthetical industry processing industry Assembling

Stage 1 2 3 4

Final product

ex - oil refinery ex cement ex sugar,paper ex mobile, tv

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2. Construction Industries
Involved in construction of Road, Dams, Building etc.

Tertiary industries
(providing support services to primary & secondary )

transportation, Insurance, Bank, advertising, packaging etc.

Note These can also be treated as a part of commerce as they are

auxiliaries to trade (helps / assist)

Commerce Provides link B/W producer & consumer

Trade Auxiliaries to trade / services

buying & selling of Activities required to facilitates trade
goods transport, Banking, advertising etc.

Commerce is Basically guided to remove the hindrances in process

of Exchange. pareshaani

FREQUENCY DIAGRAM (STATISTICS)

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Auxiliaries to trade

the hindrances of persons is removed by trade

the hindrances of place is removed by transport
the hindrances of time is removed by storage & Warehousing
the hindrances of risk is removed by insurance
the hindrances of capital is removed by banking
the hindrances of information is removed by advertisement

Hence, we can say that, commerce consist of activities of removing the

hindrances of place, person, time, Risk, finance & information in the
process of exchange of goods & services.

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Trade Buying and selling of goods

Internal External
within the geographical B/w personal or organisation
Boundaries of a country. (operating is 2 or more countries)

wholesale Retail Import Export

trade of huge Sold in comparatively purchase from sold to other

quantity for small quantities other country country

further resale for final consumption

Entrepot
Import to make export.
not for self consumption.

Objective of business
It refers to the end result where all the activities of Business are
guided.
Profit is termed to be as a primary objective of every business,
But it is not the sole objective of any Business.

RECTIFICATION OF ERRORS (ACCOUNTS)

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Note Why profit is considered to be as a primary objective ?
Growth
Survival Proof of eficiency

Profit

Reward of taking risk Helps to build goodwill

Multiple objective

Organisational Survival Personal

survival As the organisation takes Towards the employees of the
↓ resources from the organisation
Profit society, so it should give ↓
↓ something to society too. in order to keep them
growth ↓ motivated
{sequence is good quality product ↓
necessary} employment good working environment
social servive competitive salary
no unfair means peer recognition
minimum pollution medical facility (insurance
paid leaves etc.)
free education to children

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Business Risk
{ possibility of inadequate profits or even losses}
due to uncertainity or any other reason
Ex Change in demand , incresing competition & Supply chain
disturbance, etc.

Speculative risk Pure risk

↓ ↓
can result in gain or loss. (but no gain )
↓ either loss or no loss
fluctuation of demand & ↓
supply, fashion changes, chances of fire ,
↓ theft etc.
Favourable Change = profit/gain ↓
Unfavourable Change = loss happening = loss
non-happening = no loss

FORMS OF BUSINESS ORG. (BUISNESS)

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Nature of Risk
1. Arises due to uncertainity - no uncertainity no loss.
2.↑ Risk = ↑ profit - profit is reward of risk
(No pain no gain)
3.Essential part of Business - No Business avoids risk
4. Risk depends on Nature of Business,
ie.. Size, volume of production & sale etc.

Causes of Business Risk

1. Natural causes Flood, earthquake, lightning etc.

2. Human causes carelessness ,power failure, strike ,dishonesty etc.

3. Economic causes Change in demand pattern,

Change in price,
Change in technology,
Rise in interest rate etc..

4. Other causes political disturbance, machine failure etc.

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