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Nature and ScopeC O M M E R C E | S T D - 1 1
GSEB / CBSE
B.O.M
ACCOUNTS
STATISTICS
ECONOMICS
C.A., C.S., C.M.A.
Sector-2c, 737/2, Nr GH 1.5,opp. Andra Bank, Gandhinagar
Sector 28, First Floor,Above KabhiB Bakery, Gandhinagar
Sector 5c, 1683/1,Nr. Shiv Shakti Chowk,Gandhinagar
of Business
Organization of commerce & Management
01
02
03
An activity performed with an intention to earn
economic reward or money is called economic activity.
All economic activities are called productive activities
An activity performed without an intention of getting
economic reward is known as non-economic activity.
An act iv i ty performed with an intention of getting an economic reward is known as economic activity.
Prot, salary, fees and wealth maximization etc.
Type of economic activity is business, profession, employment.
There is risk and uncertainty
A farmer producing grains, a weaver manufacturing cloth, a teacher teaching in the schools etc.
An activity performed without an intention of getting economic reward is known as non-economic activity.
Service to country and social service
Social activity by a social worker, volunteer working in a relief camp to help people who are affected by ood, earth quake etc.
There is no uncertainty
a social worker doing social work etc.
Economic Activity
Non � Economic Activity
Di�erence Between Economic And Non-Economic Activity
RACHNA SEKHANI
Economic Activity
Objective
Expectation
Type
Risk and Uncertainty
Example
Non-Economic activity
1
For eg. A farmer producing grains, a weaver manufacturing cloth, a teacher teaching in the schools etc.
Chapter 01: Nature and Scope of Business
04“Business means any legal economic activity with the
motive of earning prots”
Prot making is the main objective of business. Every
businessman wants to earn maximum return over his
capital employed and earn maximum prots. Prot is
the motivating force and barometer of efciency of
business.
Exchange of goods and services takes place in the
business as the business is set up with the intention
of making prots
As the business is set up with a prot motive, the
more the risk more will be returns but at the same
time there is a lot of uncertainty in business.
Transactions are carried out continuously and business is set up with
an intention to continue them for a long time.
A businessman does the activity of purchase and sale continuously with
the objective of prot.
Business creates three types of utility namely time, place and form utility.
It provides goods and services at different places so place utility is created.
It converts raw material into nished goods so form utility is created.
It provides goods to customers as and when they need it creating time utility.
Business
Characteristics of Business1
Pro�t
Exchange of Goods and Services
Risk and Uncertainty
Continuance of Activity
Creation of Utility
RACHNA SEKHANI 2
Chapter 01: Nature and Scope of Business
Money is required in business from beginning
till the end for all the processes of business.
It is required to manufacture nished goods
from the raw materials in the factory and also
by a trader to purchase goods.
Economic activities are only carried out in business
as it is set up to earn prots.
Requirement Of Money
Economic Activity
Since business is an economic activity, a
reasonable return on the capital employed must
be obtained. This return is called prot. Prot is
required not only for the existence but also for the
growth of the business. Prot is the barometer of
efciency and life blood of business. These days,
concept of reasonable prot is accepted in place
of maximum prot. By earning reasonable prot,
a business gets recognition in the society and
can survive in the competition
Maximization of wealth is a long
term objective. The projects that
i nc rease the wea l th o f t he
organizations in the long run are
accepted.
Other economic objectives include economic development and growth,
market expansion, best possible utilisation of resources, application of
modern technologies etc.
Pro�t
Maximization of Wealth
Other economic objectives
Characteristics of Business
RACHNA SEKHANI 3
2
Chapter 01: Nature and Scope of Business
Different groups like customers, creditors,
government etc. are associated with the
business so the objective of social responsibility
of business is maintenance of Environment,
employee's welfare act, factory act, consumer
protection act etc.
The unemployment ratio is increasing day
by day so some business units are
established with the purpose of creating
new employment opportunities.
It is the objective of business units to
provide good quality goods and services
at fair price to the consumers.
Black marketing of goods, accumulation of
goods, misleading advertisement etc. are
unfair trade practices in business. Business
units must adopt fair trade practices for the
customers and society.
Other objectives are to establish special identity in society, conduct
research work, to be helpful in economic development etc.
Social Responsibility
Employment Opportunities
Quality goods and services
Adopt Fair Trade Practices
Social Objectives
Other Objectives
RACHNA SEKHANI 4
3
4
Chapter 01: Nature and Scope of Business
05
06
The risk that is cause by nature and not in the
control of man is natural risk.
Changes are necessary in production
method due to inventions in technology.
New technology has to be adopted to
produce quality goods.
The customers may turn to substitute products
due to change in technology as a result of
which prots may decrease.
Competition increases the business risk which
directly affects the business prots.
The risk that is caused to business due to
strike of employees, change in technology,
change in taste and preference of
customers, political instability, risks of
competition in market and so on.
Business Risk
Causes of Business Risks
Natural Risk
Change in Technology
�reat of Substitute Products
Competition
Man Made Risk
For e.g : Flood, earthquake, tycoon etc.
RACHNA SEKHANI 5
Chapter 01: Nature and Scope of Business
As there are changes in the law and
legislations, complexities increases and
risk increases.
Uncertainty of demand for the product creates
the risk for the business.
Changes in customer 's income, taste,
preferences, price, ination etc. creates
uncertainty in demand.
Damage to the assets which
are used in the business
constitutes physical risk.
A person with specialised skill,
knowledge, training and professional
education renders services and in
return receive fees, it is known as
profession.
Legislation
Uncertainty of demand
Physical Risk
07 Profession
CharacteristicsA professional has to obtain specialised knowledge, skill and professional education.
He charges fees for providing services.
The primary objective of a professional is to render service.
It is an independent activity.
It satises personal and business needs.
Professional has to obey code of conduct.
Returns are not xed, they are uncertain.
RACHNA SEKHANI 6
Chapter 01: Nature and Scope of Business
Trade among different regions within the boundaries of a country is called
internal trade. There is two types of internal trade
When the trade takes place between two
countries, it is called international trade.
Commerce means trade and auxiliary
services to trade. These include banking,
insurance, transportation, communication,
warehousing and agents.
08
09
Types of Trade
International Trade
Characteristics
Commerce
Trade is a part of commerce
Economic activity
Banking, insurance, transportation, communication etc. Are included
Increases time and place utility of goods
Demand oriented yet continuous
Goods can be supplied at fair price due to these services.
Wholesale Trade
Retail Trade
Wholesale trade a wholesaler purchases goods
from the retailer and supplies them to the
customers as per the requirement.
Retailer purchases goods from the
wholesaler and sells it to the customers
as and when required.
RACHNA SEKHANI 7
Chapter 01: Nature and Scope of Business
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Di�erence between Trade and Commerce
Industry
Exchange of goods or services in return of money
Both the parties of trade are known to each other
Scope of trade is limited
Commerce includes trade and auxiliary services to trade
Both the parties may be at distant place and not known to each other
Scope of commerce is wide
Trade Commerce
The process of converting raw material into nished goods by
adding utility to satisfy human wants is called an industry.
There are three types of industry.
Primary
Secondary Industry
Tertiary industry
These industries are fundamental industries that are
connected with the sea, land and air. Production is relied on
nature. Agriculture, animal husbandry, poultry, shing,
farming etc. are examples of primary industry.
Various types of machines and technology is
used. Here natural produce is processed to
make it consumable and supplied to
customers. For e.g. Chemical and fertilizer
industry.
This industry has a wide scope. It provides
help to primary and secondary industry.
Tertiary industry also includes banking,
transportation, warehousing etc.
RACHNA SEKHANI 8
Chapter 01: Nature and Scope of Business
GSEB / CBSE
B.O.M
ACCOUNTS
STATISTICS
ECONOMICS
C.A., C.S., C.M.A.
Sector-2c, 737/2, Nr GH 1.5,opp. Andra Bank, Gandhinagar
Sector 28, First Floor,Above KabhiB Bakery, Gandhinagar
Sector 5c, 1683/1,Nr. Shiv Shakti Chowk,Gandhinagar
