BBA - BASICS OF BUSINESS ECONOMICS - BBA I SEM - UNIT -III STUDY NOTES

BBA - BASICS OF BUSINESS ECONOMICS - UNIT -1 STUDY NOTES (OSMANIA UNIVERSITY)

 

                                        UNIT I

 

1. Concept of Business, Profession, and Employment

 

Business

Business is any activity where people produce, buy, or sell goods and services to earn money. The word "business" comes from “busy,” which means being active. Everyone does some work to earn a living, and when that work involves making or selling goods or services for profit, it is called business.

 

Examples of business activities:

Industrial activities: buying raw materials, producing goods, assembling products.

Trade activities: wholesalers buying from producers, retailers selling to customers.

Aids to trade: services that support trade like transport, banking, warehousing, insurance, advertising, etc.

So, a shopkeeper selling clothes, a banker lending money, or a transporter carrying goods are all doing business. The main purpose is to earn profit by providing goods or services.

 

Profession

A profession is a type of work where a person uses their specialized knowledge and training to provide services in return for a fee. A profession needs education, qualifications, and membership in a professional body. Professionals must also follow rules and a code of conduct set by their governing bodies.

 

Examples:

A doctor with an MBBS degree registered with the Medical Council of India.

A lawyer with an LLB degree registered with the Bar Council of India.

A Chartered Accountant (CA) who is a member of the Institute of Chartered Accountants of India.

 

Main features of a profession:

 

Needs special education and training.

Membership in a professional body is compulsory.

Professionals must follow ethical rules (code of conduct).

They charge a fee for their services.

Self-promotion or advertising is often restricted.

 

Employment (or Service)

Employment means working for someone else under an agreement, usually in return for a salary or wages. The work may be in government or in private organizations.

 

Features of employment:

 

A person works in an organization by joining as an employee.

There is an employer–employee relationship. The employer assigns duties, and the employee performs them.

Employees do not need to invest money in the job.

They earn salary or wages regularly.

Employees must follow the organization’s rules.

Qualifications depend on the type of job.

 

Examples: A teacher in a school, a clerk in a bank, or an engineer in a company.

 

 2. Forms of Business Organization

 

A) Sole Proprietorship

A sole proprietorship is a business owned and managed by one person. The owner and the business are the same – there is no separate legal identity. It is the simplest form of business and is common for small shops, local businesses, or self-employed people.

Features:

1.     Easy to start and close – No special registration is required (except a basic license).

2.     Unlimited liability – If the business cannot pay its debts, the owner must pay from personal assets.

3.     Risk and profit – The owner takes all the risk but also keeps all the profits.

4.     No separate identity – Legally, the owner and business are one.

5.     Dependent on owner – If the owner dies, retires, or becomes incapable, the business usually ends.

Advantages:

• Full control and quick decision-making.
• Owner keeps all profits.
• Privacy – financial details don’t have to be shared.
• Sense of achievement – being your own boss.

Disadvantages:

• Unlimited liability – personal property can be lost if debts remain unpaid.
• Limited capital – funds depend on owner’s savings or borrowings.
• Limited skills – one person may not handle all areas of business.
• Uncertain life – business may close if something happens to the owner.

  

B) Partnership

A partnership is a business owned by two or more people who agree to share profits and responsibilities. In India, it is governed by the Indian Partnership Act, 1932.

Features:

1.     Agreement/Contract – Partners sign an agreement (written or oral) about profit-sharing and responsibilities.

2.     Unlimited liability – Partners’ personal assets can be used to pay business debts.

3.     Not permanent – Partnership ends if a partner dies, retires, or becomes insolvent (unless others form a new contract).

4.     Number of members – Minimum 2; maximum 10 for banking, 20 for other businesses.

5.     Mutual agency – Each partner can act on behalf of others in business matters.

Types of Partners:

• Active Partner – Invests money, works actively, takes risk.
• Dormant Partner – Only invests money; does not manage business.
• Secret Partner – Is a partner but not known publicly.
• Nominal Partner – Lends his name and reputation but does not invest or share profits.
• Partner by Estoppel – Acts like a partner in front of others but is not officially one; still liable.

 

C) Company

A company is a legal entity created by law. It has its own identity, separate from its owners (shareholders). People invest money by buying shares, and the company is managed by directors.

Features:

1.     Separate Legal Entity – A company is separate from its owners. It can own property, sue, or be sued in its own name.

2.     Limited Liability – Shareholders are only liable up to the value of their shares; their personal assets are safe.

3.     Transferability of Shares – Shares can be bought and sold easily (in public companies).

4.     Large Capital – Companies can raise big amounts by selling shares.

5.     Artificial Person – Created by law, works through human representatives (directors).

6.     Continuous Existence – The company continues even if owners or directors change.

 

D) Cooperative Society

A cooperative society is a voluntary group of people who come together to promote their common interests, usually to help weaker sections of society. It is registered under the Cooperative Societies Act, 1912.

Features:

1.     Voluntary membership – Anyone can join or leave freely.

2.     Open membership – No restriction of caste, religion, or gender.

3.     Registered entity – It becomes a legal organization after registration.

4.     Limited liability – Members’ liability is limited to their capital contribution.

5.     Democratic control – Managed by an elected committee; one member = one vote.

6.     Service motive – Formed mainly to provide service, not maximize profit.

7.     State control – Accounts are audited and regulated by the government.

Types of Cooperative Societies:

• Consumer Cooperative – Provides goods to members at reasonable prices.
• Producer Cooperative – Supports small producers with resources and fair pricing.
• Credit Cooperative – Provides loans to members at low interest.
• Housing Cooperative – Helps members get affordable housing.
• Marketing Cooperative – Helps producers sell goods directly, avoiding middlemen.

 

Advantages:

• Goods sold at cheaper rates.
• Loans available easily.
• Removes middlemen.
• Benefits weaker sections of society.

Disadvantages:

• Limited capital (members usually have low income).
• Often weak management.
• Less efficiency compared to private businesses.

                                             IMPORTANT QUESTIONS- UNIT -III  DEMAND CONCEPTS