Scope of Commerce

Scope of commerce means or implies the coverage of commerce.

The scope of modern commerce has become very wide, perhaps it has no boundary at all,
because it has crossed the boundaries of nations, and it has acquired an international status.

Scope of commerce includes the role played by trade and aids to trade, banks and insurance
companies; transport and advertising agencies which have contributed to a large extent for
widening the scope of commerce.

1. Trade

Trade plays a key role in the scope of commerce.

It relates to the study of various procedures involved in buying and selling of goods both in
home trade and foreign trade. It takes place not only, between individuals on limited scale but
also between multi-national corporations (MNC) and governments of different countries on a
very vast scale.

2. Aids to trade

Aids to trade play a significant role in bringing commodities from centers of production to
centers of consumption. It includes a detailed study of all the various auxiliaries of trade such
as transport and communication, warehousing, banking, insurance, advertising, mercantile
agents, etc. Each one of these further has several branches.

Aids to trade supplement smooth functioning of trade and is therefore, also included in the
scope of commerce.

3. Documents of trade

The detail study of various documents that are used in home as well as foreign trade is included
in scope of commerce.
The important documents used in home-trade are:

 Cheques,
 Bill of exchange,
 Promissory notes, Vouchers,
 Warehousing receipts,
 Hundies,
 Railway receipts, etc.

 Letters of credit,

4. Commercial office

Commercial office is the nucleus of business activity because it is through the office that
planning, execution of business activity is conducted.

Commercial office is the backbone of business.

In words of Prof. Dicksee,

“The office is to a business, what the mainspring is to a watch.”

5. Commercial organisations

Business activities are conducted by various commercial organisations.

Scope of commerce includes various forms (types) of commercial organisations like:

1. Sole trading concerns also known as sole-proprietary organizations,

2. Partnership firms,
3. Joint-stock companies,
4. Co-operative societies and
5. Public sector or state enterprises like government companies.

6. Marketing services

Scope of commerce also includes marketing services.

There are numerous intermediaries, which ensure a smooth flow of goods by undertaking
marketing functions like assembling, warehousing, grading, packing, etc.

7. Goods and services

Commerce deals with exchange of goods and services.

Goods include tangible goods such as toothpaste, soaps, computers, etc.

Services cover intangible and invisible functions of banks, insurance, airlines, hotels, hospitals,
etc.

The exchange of all types of goods and services come under the scope of commerce

Evolution of business

The historical development of business and its processes of development up to now is called
evolution of business. Business was not evolved in one or two days. It can be studied in two
ways.

Evolution of industry

It is dated with the evolution of human beings. It is as old as human civilization. It was
developed through various stages.

A. Hunting stage

In ancient times people lived in caves and fulfilled their basic needs of food an clothes through
hunting the wild animals in forest. They were not civilized and hovered here and there. Their
needs were also limited.
B. Pastoral stage

The stage of further development of human from barbarism is called pastoral stage. This stage
is basically called the age of keeping animals. Animals were used for milk, meat, wool, skin
and so on beyond food and clothes. The wants went on increasing and development also started.

C. Agriculture stage

Slowly, human beings became a little bit civilized and got idea about farming and keeping
cattle. This stage was the major stage of development of industry. In this stage people started
to do agriculture and live in river banks. They started to cultivate crops and domesticate the
animals. Development of agriculture is divided into 5 stages they are

I. Handicraft stage:

It is the beginning of industrial era. It is the stage of development of industry. Simple hands
made tools were also developed. Local resources were the major source of raw materials. In
the beginning of this stage people were only limited to their own needs but later own surplus
products were used to exchange the goods with the roods basically called barter system.
Products were exchanged with product and market was starting to develop. Capital invested
was minimized.

Ii. Guild stage:

It was the beginning of organized activities. Organized groups of traders, craftsmen, artisans
used to collect various resources from the local areas and produced goods using them.

Iii. Age of domestic system

After the stage of guild the age of domestic system was initiated. Crafts men were not able to
fulfill the unlimited and increasing wants of people by using the limited resource. So, use of
hands and tools for producing quality goods was introduced. People were employed and were
paid according to the units of goods produced. However salary was very low because the value
of money was much higher at that time.

Iv. Industrial revolution:

It began with the replacement of old system. It is the turning point of modern industrialization.
Domestic system of production was replaced by large scale factory system. There was
invention, innovation .development of scientific techniques which encouraged mass production
and distribution. There were numerous job opportunities. Salary was increased and quality was
maintained.
V. Present age:

Today’s modern era with industrialization, use of technology, computerization, modernization

robotizing is the most developed stage of industries. Goods are being produced meeting the
demand of large number of people. There are huge number of industries producing large
number of goods to meet large amount of needs and wants by providing many jobs and salaries.

Evolution of commerce:

It is related with the distribution and exchange of goods and services. It is related with
transportation, communication, Banking, warehousing import export, trade and so on. It links
between producer and consumer. It gradually develops along with the development of human
and society. There are many stages of evolution of commerce

A. Self sufficiency stage

It is the initial stage of commercial evolution. The wants are very limited. In this stage people
produced goods themselves to satisfy their own basic needs. They survived through hunting
and gathering foods. There was no market. There was thus no exchange of goods. They were
independent.,

B. Barter system:

The wants of people increased with development of society. There was both advancement and
civilization of market. Self sufficiency stage didn’t remain with advancement. They started to
exchange the goods they produced with goods that other people produced to fulfill other
requirements. This is called barter system. There was exchange of goods and services with
goods and services.

C. Origin of money:

From the beginning of barter, people felt that there was difficulty in deferred payment,
commerce, divisibility and place of exchange .That’s why money was originated. People
developed coins but there was difficulty in large payment. So paper money was introduced.
Money was used as medium of exchange, Measurement of value, deferred payment,
redistribution of income and wealth, credit system and many more. After the origin of money,
national and international trade started.
D. National economy:

In this stage, buying and selling of goods and services was done within the country. The local
market converted into regional and city market. There was division of work and specialization.
Then goods were produce not only for local people but also for national market. There was also
development in banking, advertising, insurance, warehouse and other auxiliaries,.

E. International economy:

International economy s called global economy. The globalization of trade introduced to speed
up the activities of trade in the international level. It is not possible for a country to produce all
demanded goods according to needs and wants. Therefore the countries started to import the
goods and other countries exported. Slowly, import and export was introduced in all counties.
Trade started to extend in world market. WTO (world trade organization) was also established
to control the level of import, export and evils associated with them

Scope of Business – Components of Business

1. Industry
The word “Industry” refers to that part of business activities which is apprehensive
with the extraction, production or fabrication of products. The products which are
raised, produced or processed by an industry may either be used by the ultimate
consumer or by another concern for further production. If the goods produced by an
industry are consumed by the final customers, these are named as ‘consumer’s
goods’ e.g. clothes. If the goods are used for further production of wealth they are
called producer’s or capital goods. In case the goods produced by an industry are
further processed into finished products by another concern they are called as
intermediate goods. i.e Plastic.

Types of Industry:

On the basis activity industry is further classified into various types are as under:-

 Extractive Industries

Extractive industries are those industries which extract, raise or fabricate raw
materials from above or beneath surface of the earth. i.e. Mining, fisheries forestry,
agriculture.

 Genetic Industries

Those industries which are engaged in reproducing and multiplying certain species
of animals and plants and selling them in the market for profit are named as genetic
industries. i.e. Cattle breeding farms, poultry farms, plant nurseries.
  Constructive Industries

Constructive industries as the name signifies are engaged in the construction of

building, canals, brides, dams, roads etc.

 Manufacturing Industries

Manufacturing industries are those which are concerned of converting raw material
or semi finished products into finished products. E.g. Shoes Company, Textiles Mills.

 Service Industries

Service industries are usually engaged in the manufacturing of intangible goods

which cannot be seen or touched by naked eye. The service of professionals such as
doctors, lawyers is examples of service industries.

2. Commerce
The second element that comes in the scope of business is Commerce. It is a very
important component of business and is concerned with the buying and selling of
goods. It includes all the activities which are connected to the transfer of goods from
the place of production to the ultimate consumers. The whole ranges of commerce
activities are classified are as under:-

Trade

The process of buying and selling of goods is called Trade. It is the exchange of
goods and services among buyers and sellers in which both the parties are
benefited. Trade is classified into two types.

1. Internal Trade

The process of buying and selling of goods within the edge of a country is called
internal trade.

1- Wholesale Trade. The process of purchase of goods in huge quantity from

producers and their resale to retailers is known as wholesale trade. The retailer then
further sells these goods to the final consumers.

2- Retail Trade. The retailer sale the goods and services to the ultimate consumers
is known as Retail Trade.

2. External Trade:

The purchase and sale of goods between two countries are called external trade. It
is also called foreign trade. There are two types of external Trade.

1. Import Trade ii. Export Trade.

Aid to Trade

The activities which help in the purchase of goods and services are called aids to
trade. The aids which are compulsory for the development of the trade are as
follows:-

1. Transport

The different ways of transport help in carrying goods from the places of production
to centers of utilization e.g. Railways, ships, airlines etc.

2. Insurance

Insurance is very essential aid to trade. The risk of damage of goods due to fire,
flood, earthquake or other causes us covered by insurance.

3. Warehousing

Warehousing is a kind of storeroom. Nowadays most of the goods are produce in

anticipation of demand. They are stored in safe places and are released as and when
demanded in the market. Warehousing thus helps in overcoming the barrier of time
and creates time utility.

4. Banking

The commercial banks play a vital role in financing the different trade activities.
They are funding the traders for stock holding and transportation of goods. They
also support the buyers and sellers of goods in receiving and making payments, both
at the national and worldwide level. The credit facility in the form of cash credit,
overdrafts and loans is provided to the traders.

5. Advertisement

Selling of goods is the most difficult problem for the producer. Advertisement
regarding the product through newspapers, magazines, radio and television has
greatly helped the consumers in choosing the goods of their taste. So
advertisements play a vital role in increasing sale of goods.

Definition of Private Company

Section 2(68) of Companies Act, 2013 defines private companies. According to that, private
companies are those companies whose articles of association restrict the transferability of
shares and prevent the public at large from subscribing to them. This is the basic criterion that
differentiates private companies from public companies.

The Section further says private companies can have a maximum of 200 members (except for
One Person Companies). This number does not include present and former employees who are
also members. Moreover, more than two persons who own shares jointly are treated as a single
member.

This definition had previously prescribed a minimum paid-up share capital of Rs. 1 lakh for
private companies, but an amendment in 2005 removed this requirement. Private companies
can now have a minimum paid-up capital of any amount.

Features of Private Companies

These are some features that distinguish private companies from other types of companies:

i. No minimum capital required: There was a minimum paid-up share capital

requirement of Rs. 1 lakh previously, but that is omitted now.
ii. Minimum 2 and maximum 200 members: A private company can have a minimum
of just two members (but just one is enough if it a One Person Company), and a
maximum of up to 200 members.
iii. Transferability of shares restricted: Private companies cannot freely transfer their
shares to the public like public companies. This is why stock exchanges never list
private companies.
iv. “Private Limited”: All private companies must include the words “Private Limited”
or “Pvt. Ltd.” in their names.
v. Privileges and exemptions: Since private companies do not freely transfer their shares
and involve limited interest by members, the law has granted them several exemptions
that public companies do not enjoy.

Types of Private Companies

Private companies are of three types depending on their members’ liabilities:

a. Limited by shares: The liability of the members is limited to the amount unpaid to the
company with respect to the shares held by them.
b. Limited by guarantee: Here the members’ liabilities are limited to the amount of
money they guarantee to pay in case the company is wound-up.
c. Unlimited liability: The liability of members is unlimited in this type of private
companies. Personal assets of members can be attached and sold when the company is
being wound-up.