Business Services Class 11 Notes Bst

Business services are those intangible things that help a business to run its operations smoothly. Here are the business services class 11 notes.

Services

Services are those that are separately identifiable, essentially intangible activities that provide the satisfaction of wants and are not necessarily linked to the sale of a product or another service.

Goods

Goods can be defined as physical products which are delivered to a buyer and also involve the transfer of ownership from the seller to the buyer.

Characteristics/Features of Services

Difference between Goods and Services

Types of Services

There are 3 types of services:

• Business Services: Business services are those which are used by business enterprises for the conduct of their activities. For example: Banking, insurance, transportation, warehousing, and communication services.
• Social Services: Social services are those services that are generally provided voluntarily for achieving certain social goals. For example, certain non-government organizations (NGOs) and government agencies provide health care and education services.
• Personal Services: Personal services are those services that are experienced differently by different customers. These services are not consistent. For example: Tourism, recreational services, restaurants, etc.

Business Services

Business services include the following types of services:

1. Banking
2. Insurance
3. Warehousing
4. Transportation
5. Communication

Banking

Banking means accepting, lending, and investing deposits of money from the public, repayable on demand or otherwise and withdrawable by cheques, draft, and order or otherwise.

A bank may be defined as an institution that performs the function of accepting deposits, lending funds, and making investments to earn profits.

Types of Banks

There are 4 types of banks:

1) Commercial Banks

Commercial banks are institutions governed by the Indian Banking Regulation Act 1949. These are the institutions dealing in money and perform two functions i.e. accepting deposits and leading funds.

There are two types of commercial banks:

• Public Sector Banks: These are those in which the government has a major stake and they usually need an emphasis on social objectives rather than on profitability. For example: PNB, SBI, etc.
• Private Sector Banks: These are owned, managed, and controlled by private individuals to earn profit. For example: HDFC, ICICI bank, etc.

2) Cooperative Banks

Cooperative banks are governed by the provisions of the State Cooperatives Societies Act. They meant essentially to provide cheap credit to their members.

It is an important source of rural credit, i.e., agricultural financing in India.

3) Specialized Banks

Specialized banks are foreign exchange banks, industrial banks, development banks, and export-import banks catering to the specific needs of these unique activities.

These banks provide financial aid to industries, projects, and foreign trade.

4) Central Banks

The central bank of the country supervises, controls, and regulates the activities of all the commercial banks of that country.

Central bank performs various functions like:

1. Act as a banker’s bank.
2. Act as a banker to the government.
3. Currency authority and controller of money supply
4. Custodian of foreign exchange reserves.

The Reserve Bank of India (RBI) is the central bank of India.

Formation of a Company Class 11 Short Notes

Functions of Commercial Banks

1) Acceptance of Deposits

The first important function performed by commercial banks is the acceptance of deposits. Any person who wishes to deposit any amount with the bank and the bank provides interest on these deposits.

Deposits are of 5 types:

• Saving Account: Usually, small investors and salespeople have savings accounts. In saving accounts, there are certain restrictions on the number of transactions.
• Current Account: Generally, businessmen open a current account because of numerous daily transactions. There are no restrictions on operating a current account but the bank did not provide any interest on the current account.
• Fixed Deposits: Under this account, an amount is deposited for a fixed time and the bank provides a high rate of interest. Usually, two transactions take place i.e., deposit and withdrawal.
• Recurring Deposit: In this type of deposit, money is required to be deposited at regular intervals and after the expiry of a fixed period, the bank repays the whole amount along with the interest.
• Multiple Option Deposit: Under the account deposit over a specified limit is automatically transferred into their deposits. Hence, we can say it is a combination of a savings account and a term deposit.

2) Granting of Loans

The second major activity of commercial banks is to provide loans and advances out of the money received through deposits.

There are various types of loans and advances like overdrafts, cash credit, and discounting trade bills.

E-Banking (Electronic Banking)

E-Banking means any user with a PC, and a browser can connect with the bank to get the benefits of all the banking services without the intervention of any human operator.

All the services that the bank has permitted are displayed on the menu. Any service can be selected and benefits can be availed with just a click of a mouse.

In other words, E-Banking is a service provided by banks that allows customers to conduct banking transactions over the Internet using a PC or a mobile phone.

Benefits of E-Banking

• E-banking facilitates digital payments and promotes transparency.
• E-Banking provides 24-hour, 365 days year services to customers.
• Customers can make transactions from the office or house or while traveling.
• It inculcates a sense of financial discipline.
• Greater customer satisfaction by offering unlimited access to the bank.

Benefits to Banks

• E-banking provides a competitive advantage to the bank.
• E-Banking provides an unlimited network to the bank and is not limited to the number of branches, ultimately it also helps the banks to gain a greater number of customers.
• The burden on branches can be considerably reduced by establishing a database and by taking over some of the accounting functions.

Insurance

Life is full of uncertainties and risks that include death, disability, fire, burglary, cyclones, and other happenings beyond human control. Thus, insurance is a means of providing against loss caused by natural and man-made factors.

Insurance is a contract or agreement under which one party agrees in return for a consideration to pay an agreed amount of money to another party to make good a loss, damage, or injury to something of value.

Policy: The agreement or contract is known as policy.

Insured: The party whose risk is insured is known as the insured.

Insurer: The party who ensures the risk is known as the insurer or assurance underwriter.

Functions of Insurance

• Risk Sharing: On the happening of a risk event, the loss is shared by all the persons exposed to it. The share is obtained from every insured member by way of premiums.
• Assist in Capital Formation: The accumulated funds of the insurer received by way of premium payments made by the insured are invested in various income-generating schemes.
• Providing Certainty: Insurance provides certainty for the risk of loss. The insurer charges a premium and helps in removing these uncertainties by guaranteeing payment fo the assured for the loss.
• Protection: The second main function of insurance is to protect probable chances of loss. Insurance cannot stop the happening of a risk or event but can compensate for losses arising out of it.

Principles of Insurance

1) Utmost Good Faith

A contract of insurance is a contract of utmost good faith. Both the insurer and the insured should display good faith towards each other regarding the contract.

Thus, it is binding on the proposer to disclose all material facts about the subject matter of the proposed insurance.

It is the duty of the insured to voluntarily make full, accurate disclosure of all facts, and material to the risk being proposed and the insurer to make clear all the terms and conditions in the insurance contract.

2) Insurable Interest

The insured must have an insurable interest in the subject matter of insurance. Insurable interest means some pecuniary interest in the subject matter of the insurance contract.

3) Indemnity

All insurance contracts of fire or marine insurance are contracts of indemnity. The insurer undertakes to compensate the insured for the loss caused to him/her due to damage or destruction of the property insured.

This principle of indemnity does not apply to life insurance.

4) Proximate Cause

According to this principle, an insurance policy is designed to provide compensation only for losses that are caused by perils that are stated in the policy.

In the case of two or more causes the proximate cause i.e., the most dominant and most effective is the natural consequence.

5) Subrogation

It refers to the right of the insurer to stand in the place of the insured, after the settlement of a claim, as far as the right of the insured in respect of recovery from an alternative source is involved.

After the insured is compensated for the loss or damage to the property insured by him/her, the right of ownership of such property passes on to the insurer.

This is because the insured should not be allowed to make any profit, by selling the damaged property or in case of lost property being recovered.

6) Contribution

According to this principle, in the case of double insurance, the insurers are to share the losses in proportion to the amount assured by each of them.

In the case of multiple policies, the insured has no right to recover any extra amount above the amount of loss.

7) Mitigation

The principle states that it is the duty of the insured to take reasonable steps to minimize the loss or damage to insured property.

The insured must behave with great prudence and not be careless just because there is an insurance cover. If reasonable care is not taken then the claim be lost.

Emerging Modes of Business Class 11 Notes

Types of Insurance

1) Life Insurance

A life insurance policy is a protection against the uncertainty of life, that is death.

Life insurance may be defined as a contract in which the insurance company (called the insurer) undertakes to insure the life of a person (called assured) in exchange for a sum of money called a premium and promises to pay a certain sum of money either on the death of the assured or expiry of a certain period.

Importance of Life Insurance

• Life insurance protects the family from the premature death of an individual.
• It gives an adequate amount at an old age when earning capacities are reduced.
• Life insurance is not only a protection but is a sort of investment because a certain sum is returnable to the insured at the time of death or the expiry of a certain period.

Main Elements of a Life Insurance Contract

• The contract of life insurance is a contract of utmost good faith. The insured should be honest and must disclose all material facts about his/her health to the insurer.
• In the case of a life insurance policy, a person has an insurable interest in his/her own life, in the life of his/her spouse, or the lives of his/her children. The assured must have insurable interest at the time when the insurance is affected.
  Insurable interest at the time of maturity is not necessary.
• It is to be noted that an employer has an insurable interest in the life of the employees. Similarly, a creditor has insurable interest in the life of the debtor up to the amount of debt.
• A life insurance contract is not a contract of indemnity. The life of a human being can not be compensated and only a specified sum of money is paid.
  That is why the amount payable in life insurance on the death of the assured is fixed in advance.

2) Fire Insurance

Fire insurance is a contract where the insurer, in consideration of the premium paid, undertakes to make good any loss or damage caused by a fire during a specified period up to the amount specified in the policy.

A claim of loss by fire must satisfy the following two conditions:

1. There must be an actual loss.
2. Fire must be accidental and non-intentional.

The risk covered by the fire insurance contract is the loss resulting from the fire.

Main Elements of a Fire Insurance Contract

• In fire insurance, the insured must have an insurable interest in the subject matter of the insurance.
• A contract of fire insurance is a contract of utmost good faith.
• The contract of fire insurance is a contract of strict indemnity i.e. no person should be allowed to gain by insurance.
• The insurer is liable to compensate only when the fire is the proximate cause of damage or loss.

3) Marine Insurance

A marine insurance contract is an agreement whereby the insurer undertakes to indemnify the insured in the manner and to the extent thereby agreed against marine losses.

Marine insurance protects against loss by marine perils or perils of the sea. Example: a collision of the ship with the rock, or a ship with the rock, or a ship attacked by the enemies, risk of theft of goods, etc.

Marine insurance ensures:

• Ship or Hulk: This is an insurance policy for indemnifying the insured for losses caused by damage to the ship.
• Cargo: The cargo while being transported by ship is subject to many risks i.e., risk of theft, and loss of goods.
• Freight: If the cargo does not reach the destination due to damage or loss in transit.

Types of Life Insurance Policies

Communication

Communication services are helpful to the business for establishing links with the outside world i.e., suppliers, customers, competitors, etc.

The main services which help businesses can be classified into postal and telecom.

Postal Services

Indian post and telegraph departments provide various postal services across India. For providing these services the whole country has been divided into 22 postal circles.

The various facilities provided by the postal department are:

1) Financial Facilities

These facilities are provided through the post office’s savings schemes like public provident fund (PPF), Kisan Vikas Patra, and National Saving certificates in addition to normal retail banking functions of monthly income schemes, recurring deposits, saving accounts, time deposits, and money order facility.

2) Mail Facilities

Mail services consist of parcel facilities that are the transmission of articles from one place to another.

It also provides an insurance facility to provide insurance cover all risks in the course of transmission by post.

3) Allied Facilities

• Greeting Post: A range of delightful greeting cards for every occasion.
• Direct Post: It is for direct advertising and can be both addressed as well as unaddressed.
• Speed Post: It has over 1000 destinations in India and links with 97 major countries across the globe.
• E-bill Post: It is the latest offering of the department to collect bill payments across the counter for BSNL and Bharti Airtel.
• Passport Facilities: A unique partnership with the Ministry of External Affairs for facilitating passport application.

Telecom Services

1) Cellular Mobile Services

These are all types of mobile telecom services including voice and non-voice messages, data services, and PCO services utilizing any type of network equipment within their service area.

2) Cable Services

These are entertainment-related services that provide for the operation of media services within the licensed area of operation.

3) VSAT Services

VSAT (Very Small Aperture Terminal) is a satellite-based communication service. It offers business and government agencies highly flexible and reliable communication in both urban and rural areas.

4) DTH Services

DTH (Direct To Home) is a satellite-based communication service provided by cellular companies.

5) Fixed Line Services

These services help in establishing a link for long-lasting traffic. They use network equipment connected through fiber optic cables laid across the country.

Transportation

Transportation comprises freight services together with supporting and auxiliary services by all modes of transportation i.e., rail, road, air, and sea for the movement of goods and international carriage of passengers.

Transportation removes the hindrance of place i.e., it makes goods available to the customer from a place of production.

Warehousing

The warehouse was initially viewed as a static unit for keeping and storing goods scientifically and systematically manner to maintain their original quality, value, and usefulness.

It helps in removing the hindrance of shortage/time.

Types of Warehousing

1) Private Warehouses

Private warehouses are operated, owned, or leased by a company handling their goods, such as retail chain stores or multi-brand multi-product companies.

The benefits of private warehousing include control, flexibility, and other benefits like improved dealer relations.

2) Public Warehouses

Public warehouses can be used for the shortage of goods by traders, manufacturers, or any member of the public after the payment of the shortage fee or charges.

The government regulates the operation of these warehouses by issuing licenses for them. They also provide other facilities like packaging, labeling, etc.

3) Bonded Warehouses

The government licenses bonded warehouses to accept imported goods before payment of tax and customs duty. These goods are imported from other countries.

Importers are not permitted to remove goods from the docks or the airport till customs duty is paid. The goods are kept in bounded warehouses till the time duty is paid by the importer.

4) Government Warehouses

These warehouses are fully owned by the government and are managed through organizations like the Food Corporation of India (FCI), Central Warehousing Corporation, etc.

5) Cooperative Warehouses

These warehouses are established by cooperative societies like marketing or agriculture cooperative societies for the use of their members.

Functions of Warehousing

1) Consolidation

In this function, the warehouse receives and consolidates, goods from different production plants and dispatches the same to a particular customer on a single transportation shipment.

2) Break the Bulk

The warehouse performs the function of dividing the bulk quantity of goods received from the production plants into smaller quantities.

These smaller quantities are then transported according to the requirements of clients to their places of business.

3) Financing

Warehouse owners advance money to the owners on the security of goods and further supply goods on credit terms to customers.

4) Stock Piling

The next function of warehousing is the seasonal storage of goods to select businesses.

Goods that are not required immediately for the sale of manufacturing are stored in warehouses and are made available whenever demanded by customers.

Agriculture products that are harvested at specific times also need to be stored.

5) Value-Added Services

Certain value-added services are also provided by the warehouses, such as in-transit mixing, packaging, labeling, etc.

Goods sometimes need to be opened and repackaged again at the time of inspection. Grinding and dividing goods according to quantity is another function.

6) Price Stabilization

By adjusting the supply of goods with the demand situation, warehousing performs the function of stabilizing prices.

Thus, prices are controlled when supply is increasing and demand is slack, and vice versa. So, with this business services class 11 notes come to an end.