MGT211 Assignment # 1 Solution

“Scope of Business Organization” 

Mr. Akram is working as Management Training Officer Grade II in Habib Bank Limited. He has joined the bank two months ago against a contract of 5 years. The terms of this contract states that if he resigns from this post before 5 years then he is required to refund a sum of Rs. 500,000 and all the training fees. His father Ansar Ali is running an auto workshop from the last 40 years. One day his father faces an accident and dies. Being the only son of his father, he is the legal heir of his father property. 

Now he has the entire responsibility of managing and handling his father business. He cannot resign from the job because of the legal contract between him and the bank. He does not want to windup/close his father business because his father has spent his entire life in setting up this business and has secured a strong Goodwill. On the other hand he does not possess the knowledge and technical expertise of running this business. So now he is feeling helpless. He discusses this problem with his friend Ajmal who is assisting his brother in running an auto workshop and possess technical expertise and knowledge in running it. Ajmal hears the entire problem and suggests a solution for it. He offers himself to render services in running Akram’s business. 

Furthermore he will invest in Akram’s business. Ajmal claims a share in profit for taking an active participation and for investing in the business. Akram agrees on this solution. Now Akram can continue doing his job and Ajmal will run the business. 

Questions 

1) What was the original form of business? 

2) What form of business will be created between Mr. Akram and Mr. Ajmal? 

3) What will be the Akram’s Status in this business? 

4) What will be the Ajmal’s status in this business? 

5) How Mr. Akram will benefit from this form of business? 

Introduction to Business

Assignment # 01

1) What was the original form of business? 

Answer: The original form of business was sole proprietorship, because Akram’s father was only one owner of the business. Therefore, where there is only one owner of a business, that business is known as Sole Proprietorship.

2) What form of business will be created between Mr. Akram and Mr. Ajmal? 

Answer: The form of business between Mr. Akram and Mr. Ajmal will be partnership, because now there are two partners who are running business. A business in which two or more than two persons agreed to run a business is known as partnership and the owner of business will be the partners.

3) What will be the Akram’s Status in this business? 

Answer: Akram will be the partner, and his status is as owner of business.

4) What will be the Ajmal’s status in this business? 

Answer: Ajmal will be the partner as well, and his status is also as the owner of business.

5) How Mr. Akram will benefit from this form of business? 

Answer: Both partners are agreed to share their profit in some agreed ratio between them. So, Akram is able to continue his job in Habib Bank, and as well as he will also get a share of profit from the business which is being run by Ajmal. Mr. Akram has only invested in the business and all the business is being handled by Mr. Ajmal, but profit will be shared among both.

....

1-Original Form of the business was sole proprietorship!!! 



2-Partnership 


3-sleeping partner 


4-active partner 


5-he can carryon his job as well as his business!!!

..........

(a) What was the original form of business?
ANS:-
The original form of a business is “Sole proprietorship”. According to this Paragraph Akram’s father was owner of that business such a kind of a business where only one person is owner of business then it is known as “Sole proprietorship”.
(b) What form of business will be created between Mr. Akram and
Mr. Ajmal?
ANS:-
The form of business where two or more person agreed to run a business such type of business is known as “Partnership”. According to this paragraph the form of business b/w Mr. Akram and Mr. Ajmal is called to be “Partnership” . Mr. Ajmal and Mr. Akram are partners.
(c) What will be the Akram’s Status in this business?
ANS:-
Mr. Akram will be the sleeping partner as well, and his status is also as the owner of business.
(d) What will be the Ajmal’s status in this business?
ANS:-
Mr. Ajmal will be the active partner as well, and his status is also as the owner of business.
(e) How Mr. Akram will benefit from this form of business?
ANS:- Mr. Akram and Mr. Ajmal both are partners and agreed to share their profit in agreed ratio settled b/w them. Mr. Akram carry on his job and as well as he will also get a share of profit from the business which is being run by Mr. Ajmal.


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ASSIGNMENT

1) What was the original form of business?
Sole proprietor ship, single person owning and running the business.

2) What form of business will be created between Mr. Akram and Mr. Ajmal?
Partnership
Partnership means a lawful business owned by two or more persons. The profit of
the business shared by the partners in agreed ratio. The liability of each
partner is unlimited. Small and medium size business activities are performed
under this organization.
(Keeping in mind that his father has died and he cannot leave his job at the
moment) 

3) what will be the Akram’s Status in this business?
Sleeping partner
a partner who only contributes is the capital but does not take part in the
management of the business is known as sleeping partner. He is liable to pay
the obligations of the firm.

4) What will be the Ajmal’s status in this business?
Active Partner
A partner who takes active part in the affairs of business and its management
is called active partner. He contributes his share in the capital and is liable
to pay the obligations of the firm.

5) How Mr. Akram will benefit from this form of business?
10. Flexibility
it is flexible business and partners can change their business policies with
the mutual consultation at any time.
Moral promotion: 
Partnership is the best business for small investors. It promotes moral courage
of partners.
Secrecy: In partnership it is not compulsory to publish the accounts. So, the
business secrecy remains within partners. This factor is very helpful for
successful operation of the business