CBSE Class 11th Business Studies Notes - n4

Business Studies - Class 11th (CBSE) - Chapter 4 (Business Services)

Here are the quick details:

• Subject: Business Studies
• Class: 11th (CBSE)
• Chapter Number: 4
• Chapter Name: Business Services

Table of Content

Services & Goods

Business Services

Let's start!

Services & Goods

• Services are those which are separately identifiable, essentially intangible activities that provides satisfaction of wants and are not necessarily linked to the sale of a product or another service.
• Goods can be defined as physical products which are delivered to a buyer ad also involves the transfer of ownership from the seller to the buyer.

Features/Characteristics/Nature of Services

Intangibility	Services are intangible in nature i.e., they cannot be touched. They are experiential in nature. One cannot taste a doctor's treatment, or touch entertainment. One can only experience it. Therefore, the suppliers must try to offer good quality services to customers so that they demand them again after experiencing them.
Inconsistency	The second important characteristic of service is inconsistency. Service providers are required to change their offers according to the expectations and demands of the customers.
Inseparability	Another important characteristic of services the simultaneous activity of production and consumption being performed. This makes the production and consumption of service seem to be inseparable.
Inventory	The main feature of service is that services are consumed at the same time when they are produced. So, there is no need to maintain inventory. If services are not consumed immediately then it is a total loss.
Involvement	Involvement of customers in the service delivery process is the most important feature of the services. An opportunity is given to the customer to bring changes in the services according to his/her requirement.

Differences between Goods and Services

Basis	Goods	Services
Meaning	Goods can be defined as physical products which are delivered to a buyer and also involves the transfer of ownership from the seller to the buyer.	Services are those which 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.
Nature	Goods are physical objects For Example railway tickets.	Services can be an activity or process. For example railway journey.
Type	Goods are homogenous.	services are heterogeneous.
Intangibility	It is tangible.	It is intangible.
Inconsistency	Different customers getting standardized goods.	Different customers have different demands.
Inventory	Goods can be kept in stock.	Services cannot be kept in stock.
Inseparability	There is a time gap between production and consumption.	Services are produced and consumed simultaneously.
Involvement	Involvement at the time of delivery is not necessary.	The involvement of customers at the time of service delivery is essential.

Types of Services

Business Services	›Business services are those services 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 : health care and education services provided by certain non-government organizations (NGOs) and government agencies
Personal Services	›Personal services are those services which are experienced differently by different customers. ›These services are not consistent in nature. For example : tourism, recreational services, restaurants etc.

Business Services

• These are those services which are used by business enterprises for the conduct of their activities.
• For example: banking, insurance, transportation, warehousing and communication services.

Types of Business Services

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

Below is the explanation:

1. Banking

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

Definition of a Bank

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

Types of Banks

Type of Bank	Details
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 lending funds. ›There are two types of commercial banks : a) Public Sector Banks : These are those in which the government has a major stake and they usually need an emphasis on social objectives than on profitability. For example: PNB, SBI etc. b) 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 for providing 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 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 : a) Act as a banker’s bank. b) Act as a banker to the government. c) Currency authority and controller of money supply d) Custodian of foreign exchange reserves. ›Reserve Bank of India (RBI) is the central bank of India.

Types of Bank Accounts

Banks provide different types of accounts to meet various needs and to mobilise savings for investment. These accounts help people save money and use it efficiently for personal or business purposes. A bank account is a record of the financial transactions between the customer and the banking institution.

Bank Account	Details
Savings Account	It is an account meant for people who wish to save a part of their income to safeguard the future and earn interest on savings. People can deposit their surplus income and withdraw funds using a withdrawal form, cheque, or ATM card. A minimum initial deposit is required to open the account, and there is no limit on deposits, though withdrawals may have some restrictions. Interest rates are nominal and vary from bank to bank. The account is of a continuing nature and has no fixed maturity period.
Current Account	It is opened by businesspeople who have a number of regular transactions with the bank, both deposits and withdrawals. This bank account is mainly for businesspeople to manage frequent deposits and withdrawals smoothly. Funds can be deposited or withdrawn anytime without giving any notice. There is no restriction on the number and amount of deposits and withdrawals. This account enables the account holder to obtain an overdraft facility. Banks do not pay any interest on these accounts. Rather, they impose service charges for running these accounts. The account is ongoing, has no fixed period, and is also called a Demand Deposit.
Fixed Deposit Account	It is an account in which the amount is deposited with the bank for a fixed period of time. Money is deposited for a fixed period to earn higher interest. The amount can be deposited only once in a fixed deposit account. For further such deposits, separate accounts need to be opened. These deposits carry a higher rate of interest as compared to a savings account. The rate of interest may vary according to the amount, period, and bank. Withdrawals are allowed only after maturity, though premature withdrawal is possible with reduced interest. It is also called a Term Deposit or Time Deposit Account.
Recurring Deposit Account	A recurring deposit account is opened by those who want to save regularly for a certain period of time and earn a higher interest rate. The minimum period is six months, and the maximum period is ten years. It encourages regular savings and offers higher interest. Depositors receive a passbook, and withdrawals before maturity are not allowed, though loans can be taken against the amount deposited, or the account can be closed.
Multiple Option Deposit Account	It is a special account that combines the features of a Savings or Current Account and a Fixed Deposit. The account holder sets a threshold limit for the savings or current account. Any money exceeding this limit is automatically transferred to a Fixed Deposit, which earns a higher rate of interest. This automatic transfer is called the Auto-Sweep facility. If the account holder needs to withdraw more than the available cash in the savings or current account, the Fixed Deposit is automatically broken to provide the required amount. This process is known as Sweep-out or Reverse-Sweep. This account helps account holders earn better returns while keeping funds flexible for daily use. It is ideal for those who want the benefits of higher interest like a Fixed Deposit and also want easy access to cash when needed.

Banking Services

The primary functions of banks are borrowing and lending money. Besides these two main functions, a bank also offers various services to attract customers. Let us discuss some of the services offered by banks.

Service	Details
Bank Draft	It is an order (cheque) issued by a bank to pay the specified amount to the person named in it. A requisition slip has to be filled in by the customer (drawer) for the issue of a bank draft. The bank withdraws the amount from the customer's account or accepts cash and guarantees full payment to the payee. So, there is no risk of a bank draft being dishonoured. It is always payable on demand, and a small fee or commission is charged for issuing it. It is also known as a Demand Draft or Banker's Draft.
Banker's Cheque (Pay Order)	It is almost like a bank draft. It refers to a bank draft that is payable within the town. It is issued by the bank with a full guarantee of payment to the payee. So, there is no risk of it being dishonoured. It carries lower charges than a bank draft. A banker's cheque is generally payable at the branch of issue and is used for payment within the local clearing area. It is also known as a Pay Order. Banks issue banker's cheques for the local jurisdiction and bank drafts for outstations.
Bank Overdraft	It refers to a facility in which a customer is allowed to overdraw his or her current account up to an agreed limit. It is a temporary loan, given against security or guarantee, and interest is charged only on the overdrawn amount. This facility is extended by the bank to its regular customers with good creditworthiness.
Cash Credits	It refers to a loan given to the borrower against his or her current assets like shares, stocks, bonds, etc. A credit limit is set, and the borrower can withdraw any amount within it. Interest is charged only on the withdrawn amount, which helps in meeting daily working capital needs.
Term Loans	A loan is a lump sum amount given by banks that has to be repaid after a fixed period, either in one go or in instalments. It may be secured (with collateral) or unsecured. Loans are given either for the short, medium, or long term.

Functions of Commercial Banks

Function	Details
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 bank provides various interest on these deposits Deposits are of five types: ›1) Saving Account: Usually, small investors and salary people open savings accounts. In saving accounts there are certain restrictions on the number of transactions. However, deposits can be made any number of times. ›2) 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. ›3) Fixed Deposit: Under this 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. ›4) Recurring Deposit: In this type of deposit money is required to be deposited at regular intervals and after the expiry of a fixed period bank repays the whole amount along with interest. ›5) Multiple Option Deposit: Under this 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 Overdraft Cash Credit Discounting Trade Bills

E-Banking (Electric 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 which allow 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-a-year service to customers.

Customers can make transactions from the office, home, or while travelling.

It inculcates a sense of financial discipline.

It ensures greater customer satisfaction by offering unlimited access to the bank.

Benefits of E-banking for 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 banks gain a greater number of customers.

The burden on branches can be considerably reduced by establishing a database and taking over some of the accounting functions.

Functions of Insurance

Function	Details
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 to the assured for the loss.
Protection	›The second main function of insurance is to protect against the probable chance of loss. ›Insurance cannot stop the happening of a risk or event, but it can compensate for losses arising out of it.

Principles of Insurance

Principle	Details
1) Utmost Good Faith:	›A contract of insurance is a contract of uberrimae fidei, i.e., a contract founded on 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 and accurate disclosure of all facts material to the risk being proposed, and of 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 such losses which are caused by perils stated in the policy. ›In the case of two or more causes, the proximate cause, i.e., the most dominant and most effective cause, is the actual cause considered.
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 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 the 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 may be lost.

Types of Insurance

Insurance Type	Section	Details
Life Insurance		›A life insurance policy is basically 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 the assured, in exchange for a sum of money called premium, which may be paid in a lump sum or monthly, quarterly, half-yearly, or yearly, and promises to pay a certain sum of money either on the death of the assured or on the expiry of a certain period.
	Importance of Life Insurance	›Life insurance provides protection to the family against the premature death of an individual. ›It gives an adequate amount in old age when earning capacities are reduced. ›Life insurance is not only protection but also a sort of investment because a certain sum is returnable to the assured at the time of death or at the expiry of a certain period.
	Main Elements of a Life Insurance Contract	›The contract of insurance is a contract of utmost good faith. The assured should be honest and must disclose all material facts about his health to the insurer. ›In the case of an insurance policy, a person has an insurable interest in his/her own life, in the life of his/her spouse, or in the lives of his/her children. ›The assured must have an insurable interest at the time when the insurance is effected. 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 an insurable interest in the life of the debtor to the amount of debt. ›A life insurance contract is not a contract of indemnity. The life of a human being cannot 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.
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 fire during a specified period up to the amount specified in the policy. ›A claim for loss by fire must satisfy the following two conditions: a) There must be an actual loss. b) Fire must be accidental and non-intentional. ›The risk covered by the fire insurance contract is the loss resulting from 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 fire is the proximate cause of damage or loss.
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, e.g., a collision of the ship with rocks, a ship attacked by enemies, or the risk of theft of goods.
	Marine Insurance Ensures	›1) Ship or Hull: This is an insurance policy for indemnifying the insured for losses caused by damage to the ship. The ship is exposed to much damage from the sea. ›2) Cargo: The cargo, while being transported by ship, is subject to many risks, i.e., the risk of theft and loss of goods. Thus, an insurance policy can be issued to cover such risks to cargo. ›3) Freight Insurance: If the cargo does not reach the destination due to damage or loss in transit, the shipping company is not paid shipping charges. Therefore, freight insurance is for reimbursing the loss of freight to the shipping company, i.e., the insured.

Various Types of Life Insurance Policies

Policy Type	Details
1) Whole Life Policy:	›In this kind of policy, the amount payable to the insured will not be paid before the death of the assured. ›The premium will be payable for a fixed period, such as 20 or 30 years, or for the whole life of the assured.
2) Endowment Life Assurance Policy:	›The insurer, or insurance company, undertakes to pay a specified sum when the insured attains a particular age or on his/her death, whichever is earlier.
3) Joint Life Policy:	›This policy is taken by two or more persons. ›The premium is paid jointly, either by both of them in installments or as a lump sum. ›The policy money is payable upon the death of any one person to the other survivor or survivors.
4) Annual Policy:	›Under this policy, the assured sum or policy money is payable after the assured attains a certain age in monthly, quarterly, half-yearly, or annual installments. ›Premiums may be paid over a certain period, or a single premium may be paid by the assured. This is useful for those who prefer a regular income after a certain age.
5) Children's Endowment Policy:	›This policy is taken by a person for his/her children to meet the expenses of their education or marriage. ›The agreement states that a certain sum will be paid by the insurer when the children attain a particular age. ›The premium is paid by the person entering into the contract. However, no premium will be paid if he/she dies before the maturity of the policy.

3. Communication Services

• 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.

Facilities Provided by the Postal Department

Facility	Details
1) Financial Facilities:	These facilities are provided through the post office’s savings schemes like Public Provident Fund (PPF), Kisan Vikas Patra, and National Savings Certificates, in addition to normal retail banking functions such as monthly income schemes, recurring deposits, savings accounts, time deposits, and money order facilities.
2) Mail Facilities:	Mail services consist of parcel facilities that involve the transmission of articles from one place to another. It also provides an insurance facility to provide insurance cover against all risks during 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 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 applications.

Various Types of Telecom Services

Service	Details
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 areas.
Cable Services:	These are entertainment-related services that provide for the operation of media services within the licensed area of operation. They provide two-way communication, including voice, data, and information services through cable networks.
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. The services are used to provide innovative applications such as telemedicine, online newspapers, and tele-education, even in the most remote areas of our country.
DTH Services:	DTH (Direct To Home) is a satellite-based communication service provided by cellular companies. Services can be obtained through a satellite with the help of a small dish antenna and a set-top box.
Fixed Line Services:	These services help in establishing a link for long-lasting traffic. They use network equipment connected through fibre optic cables laid across the country. They are also connected with other types of telecom services.

4. 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.

5. Warehousing

• The warehouse was initially viewed as a static unit for keeping and storing goods in a scientific and systematic manner to maintain their original quality, value, and usefulness. 
• It helps in removing the hindrance of time.

The End

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A List of Notes:

Chapter 1  |  Chapter 2  |  Chapter 3  |  Chapter 4  |  Chapter 5  |  Chapter 6  |  Chapter 7 (Coming Soon)  |  Chapter 8  |  Chapter 9  |  Chapter 10