Introduction to Commerce

Topics: Business, Economics, Insurance Pages: 11 (3464 words) Published: September 5, 2013
Every human activity is carried on to satisfy their needs. All these activities may be classified in to two categories: Economic activity and Non- Economic activity. Economic activity is undertaken with the purpose to earn money or acquiring wealth. These activities involve production and distribution of goods and services. Examples: Business, profession and Employment. Non-economic activities are undertaken not for earning money but for personal satisfaction. Examples: A housewife looking after her family, A person visiting a temple are the examples of non-economic activities.

1.Introduction to Commerce

Difference between Economic and Non- Economic Activities. Basis Purpose Reward Economic Activity Profit Non-Economic Activity To satisfy personal, social, religious and patriotic beliefs. Not expected to create any financial reward Emotional and sentimental Consideration Serving Family and society For personal satisfaction and Family need Do not result in creation of wealth It satisfy psychological need

Creation of money or income Consideration Rational and Economic consideration –Using Land, Labour, Capital, Enterprise Examples Business, Profession, Employment Necessity It is necessary for livelihood Result Satisfaction Creation of wealth It satisfy Economic need

The term business is derived from the word ‗busy‘. Thus, business means being busy. However, in a specific sense, business refers to any occupation in which people regularly engage in an activity with a view to earning profit. ―Business refers to the set of organized activities for production and exchange of goods & services with an objective of earning profit.‖ ―All the activities involved in the production and sale of goods and services may be classified as a business activity‖ ―Economic activities performed for earning profit are termed as Business‖ Business maybe defined as human activity directed towards producing or acquiring wealth through buying and selling of goods. Characteristics


An economic activity: Business is considered to be an economic activity because it is undertaken with the object of earning money or livelihood and not because of love, affection, sympathy or any other sentimental reason. Production or procurement of goods and services: Before goods are offered to people for consumption they must be either produced or procured by business enterprises. Thus, every business enterprise either manufactures the goods it deals in or it acquires them from producers, to be further sold to consumers or users. Goods may consist of consumable items of daily use such as sugar, ghee, pen, notebook, etc. or capital goods like machinery, furniture, etc. Services may include facilities offered to consumers in the form of transportation, banking, electricity, etc.

Sale or exchange of goods and services: Directly or indirectly, business involves transfer or exchange of goods and services for value. If goods are produced not for the purpose of sale but say for internal consumption, it cannot be called a business activity. Cooking food at home for the family is not business, but cooking food and selling it to others in a restaurant is business. Thus, one essential characteristic of business is that there should be sale or exchange of goods or services between the seller and the buyer. Dealings in goods and services on a regular basis: Business involves dealings in goods or services on a regular basis. One single transaction of sale or purchase, therefore, does not constitute business. Thus, for example, if a person sells his/her domestic radio set even at a profit, it will not be considered a business activity. But if he/she sells radio sets regularly either through a shop or from his/her residence, it will be regarded as a business activity. Profit earning: One of the main purposes of business is to earn income by way of profit. No business can survive for long without earning profit. That is why businessmen make all possible...
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