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Business Services

Q. What do you mean by Service Sector? What are its Classes? Mention its features. Why Business services are needed?   

Ans: - Meaning: Service sector includes commercial firms engaged in banking, communication, transport, insurance, warehouses etc. It constitutes the basic infrastructure which is must for smooth flow of business activities.

                Classification of Services:

(a)    Business Services

(b)   Social Services

(c)    Personal Services

Features of Services:

(a)    Intangible

(b)   No requirement for inventory

(c)    No transferability

(d)   Customer’s Participation

Business services are needed because:

(a)     For financing business activities

(b)    For distributing the goods

(c)     For providing safety against risk

(d)    For creating awareness among consumers


Q. Distinguish between Goods and Services.                                                                                                                                    


Basis of Difference



  1. Intangible

Services are Intangible.

Goods are tangible.

  1. Inventory

No requirement of inventory.

Inventory must be maintained.

  1. Transfer of ownership

Ownership cannot be transferred.

Ownership can be transferred.


Q. Define Banking. Mention its features. What are its types?                                                                                   

Ans: - Bank:   A bank is an institution, which deals in money and credit. It accepts deposits of money from public for the purpose of lending and investment.

                Features of Banks:

(a)    Mobilises Capital

(b)   Role of Creditor and Debtor

(c)    Role of an intermediary

(d)   Creator of money

 Types of Banks:

(a)    Commercial Banks

(b)   Industrial Banks

(c)    Exchange Banks

(d)   Agricultural Bank

(e)   Regional Rural Banks

(f)     Indigenous bankers

(g)     Central Bank


Q. What are the functions of commercial banks?                                                                                                            

Ans:  Most common functions of commercial banks are:

(1) Accepting the Deposits: A bank accepts deposits from the public through different types of accounts e.g. (i) Fixed Deposit account (ii) Savings deposit account, (iii) Current deposit or current account, (iv) Recurring deposit or recurring account

(2) Lending Money: Bank lends money to Businessmen and other persons through (i) Loans and advances, (ii) Overdraft, (iii) Cash Credit, (iv) Discounting of bills

(3) Agency Functions :( i) Collection of cheques, drafts, bills, hundies, dividend, interest, school fee, rent etc.

(ii) Payment of cheques, drafts, hundies, rent, subscription, insurance premium, taxes, fees, electricity and water bills etc (iii) Acts as trustee, executor etc.(iv)Buying and selling securities.(v) Dealing in foreign exchange(vii) Advisory Functions.

(4) Electronic Banking Services :( i) Direct Credit (ii) ATM (iii) Debit Card (iv) Credit Card (v) Tele Banking


Q. Define the meaning of insurance. What are its various types? Mention its importance.         

Ans:  Insurance is a contract in writing under which one party (insurer) promises to compensate the other party (insured) in case of loss as per the premium. It is a protection against risks.


Types of Insurance contract

(1)    Contract of Indemnity: it includes

(a) Fire Insurance (b) Marine Insurance (c) Fidelity insurance (d) Health insurance

(2) Contract of Guarantee (Life Insurance Contract): It Includes

                                (a) Whole life assured policy and (b) Endowment Life assurance policy.


 Importance of Insurance Contract: Insurance provides the following services to the insured person:

(a)    Protection against the risk

(b)   Better utilisation of Capital

(c)    Social welfare and Credit Facility

(d)   Promotes Foreign trade


Q. Mention the Basic Principles of Insurance Contract.                                                                                                 

Ans: The Basic Principles of insurance are:

(a)    Principle of Utmost Good faith

(b)   Principle of Insurable interest

(c)    Principle of indemnity

(d)   Principle of contribution

(e)   Principle of Subrogation

(f)     Principle of Causa proxima

(g)    Principle of Mitigation of loss.

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