Notes of Commerce Karachi Board

Principles of Commerce 1st Year


Discuss the Procedure of Export

The procedure of export trade is as follows:


The first stage in the export trade is the receipt of an order from a foreign merchant. the order directs the exporter to forward certain goods. The order should give the necessary instructions, such as marks, number, mode of forwarding, insurance, quantity, quality, size etc and also the prices which the importer is ready to pay for the commodities.


It is required to be taken by the exporter from the Chief Controller of exports and imports. Export license is a permission from the government for the export of certain goods. The export license helps the government in regulating and controlling the exports of a country.


Before the exporter arranges for the shipment of goods, he asks the importer to open L/C in his favour with the bank. L/C is a security given by the issuing banker that the exporter will be paid for the goods exported by him. It authorizes the exporter to draw bills of exchange on the banker for receiving payment and the bank permits their honour.


When L/C has been opened, the exporter will proceed to collect the goods. He will send the order to his warehouse for the goods for packing. If the goods are not in stock, he will purchase them from the local markets. The goods must be according to the order and all conditions should be duty followed.


Packing is an important part of the export procedure and should receive due attention. Any instruction given by the importer bust be strictly observed. The measurements should be marked on the outside. In some cases gross weights are also indicated on the package.


The services of a forwarding agent can be taken for forwarding the goods. The forwarding agents are paid a certain commission and they undertake all the custom formalities on behalf of the exporter.


Shipping order is received from a shipping company by an application. In the application, the full particulars of commodities with the port of destination are given. The shipping company, carry the goods to the port of destination at a certain shipping order.


In export trade the following custom formalities are undertaken:


The shipping bill is a form containing the detailed description of goods such as marks, numbers, quantity, quality, country of destination and the name of the ship. It is available from the custom office and is filled up by the agent for paying the export duty. This form enables the custom officials to calculate the amount of duty.


It is available from the lending and shipping office. It is filled up by the exporter or his agent by the payment because back authorities render some services regarding the export of the commodity.


After paying custom duty and dock charges, the exporter makes arrangement for loading them on the ship. The packages as they are received on the ship are counted and their packing is carefully examined. The captain at the ship then issues the receipt for the goods received and this receipt is called a mate receipt. A mate receipt is said to be claim, when it contains low, adverse remarks, regarding the goods. It is said to be dirty when it contains certain remarks regarding their defective packing.


The exporter, after receiving the mate receipt presents it to the shipping company and obtains in exchange a document called Bill of Lading. The Bill of Lading can be transferred freely and it performs three functions:

1. It is an official receipt of the goods, placed on board the ship.

2. It is a contract to carry goods to the port of destination.

3. Its holder is entitled to take delivery of goods by presenting it on the port of destination.


Certain goods are required to be insured before they are dispatched to a foreign country. Goods are insured with a marine insurance company and the policy is sent by the exporter to the importer.


This is the certificate which shows the origin of the commodities being exported. That shows the origin of the country in which they were manufactured. Due to special trade agreements between certain countries goods sent from one country to another generally receives preferential treatment in respect of the import duties. Certificate of origin is obtained by the exporter for being sent to the importer, so that he must be able to get advantage of preference in import duty.


The exporter having shipped and having gone through all the formalities is now in a position to prepare the invoices. the invoice contains a detailed description of the goods shipped and the charges incurred.


The exporter generally receives payments by drawing a bill of exchange upon the bank where the importer has opened a letter of credit. He also attaches with it the necessary documents such as Invoice, Bill of Lading, Marine Insurance Policy, Certificate of Origin etc. When all these documents are sent with the Bill of Exchange, it is called documentary of Bill Exchange.


The term market and marketing are often very really used in ordinary since but it has different meaning in commerce. marketing includes business activities involved in the flow of goods and service from production to consumption.

Mr. C.C Knight says: “ Marketing embraces all those efforts made in the discovery of consumers actual and potential requirement for the commodities and service and the steps taken fro securing their adequate distributing”

According to Prof. Hall “ the word marketing describes number of association activities which move towards a common objectives: the determination of consumer demand for sale and distribution of goods and services”

In simple words all those business activities which effect the transfer of ownership of goods and services and provide for there physical distribution come within the scope of marketing. Marketing activities may be divided into two main groups;

1.those which effect the transfer of title of the goods 2. those which are involved in the physical distribution of goods from one place to another.

Market creates time, place and possession utility. It is for their creation that study is becoming more and more important every day.


Marketing is a very comprehensive term and include all efforts to

1. discover the present and potential requirement of consumer.

2. the evolution of the product which would satisfy those requirements.

3. all the effective methods of production distribution

4. all the efforts to improve and modify the products.


Marketing function can be defined as fundamental activities or services carried out in the marketing process. These functions are performed by manufactures, marketers, wholesalers etc. However the functions are as follow.

Buying is an important marketing function for everyone connected with the distribution and consumptions of good. Generally the wholesaler buy from the manufactures, the retailers from the wholesalers and consumer from the retailers. The performance of this function involves the activities relating to determination of needs, selection of proper source of supply, date of shipment etc. the function also considers the quality of goods with prospects of high profit.

The second important function is to arrange for the sale of goods. Selling involves a a wide Varity of task. These include the discovery of customers, introducing them with the available goods and encouraging them to purchase them to purchase goods. Selling add possession utility to commodities. Sometimes selling is a specialized function as in case of brokers auctioneers and other sales agent who don’t handle the goods at all but merely serves as a connection link between buyer and sellers.

The age of competition compels the seller to be alert in the creation of demands for their goods through auxiliaries like advertisement and salesmanship. The main objective is to draw attention of a large number of people to the products and to convince them of the excellence of the product. As a result the number of consumers increases. Without publicity the goods may not be noticed and marketing may come to stand still.

It creates place utility. In order to have goods must be transported from one place to another. To a very great extent the marketing system is built up upon economical and effective transportation. For the distribution of goods over a wide area, effective transportation must be available. and it should be adequate to meet the normal demands. Therefore, the efficiency of marketing depends upon quick and cheap means of transportation. With the increase in the distance between the producer and consumer the importance of transportation has further been increased.

Storage and warehouses:
Storage of good is an another important function of marketing. In many lines of business goods are produced considerably in advance of their consumption. Storing creates the utility. Because marketers often maintain extensive inventories, the consumers desire to buy is satisfied without waiting.

Standardization and grading:
It determines the form and classifies goods according to their quality. The producer standardize his goods according to the requirement of the market. It saves the time of consumers in selecting the goods. Consumer relay upon manufacturers that their goods are of uniform quality and of standard measure and size.
By grading we mean that actual sorting out the commodities according to established specification relating to size , quality , color , weight etc. Graded products facilitate buying and selling and the elements of risk is also reduced .

It consist of the supply and management of money of money and credit. A considerable amount of time elapse between the production and the sale of good, during that period finance is required at every step. The whole marketing mechanism is based upon financing. The retailers demand credit from the wholesalers , the wholesalers from the producers and the producers from the banks and finance companies.

Risk taking:
The mere act of owning goods carries with it the burden of assuming certain risks in connection with them. Some of the risks involved relate to physical deterioration theft, damage , waste, change in demand or supply or price. It is possible to minimize some of these risk through shifting them to insurance company.

Protecting goods from breakage, spoilage and leakage while they are being transported or stored is another important function of marketing process. Considerable efforts and research has been carried out in this fields as packing represents a vital and expensive activity.

It is applicable to all identifying marks by which a manufacturer or wholesaler identifies his products. The brand enable the purchaser to know what he is buying.

A considerable amount of recording is recording in order to know who made the purchase, the amount of investors. Therefore it is an important function.

In order to show goods to distant customers the producer has to adopt the prospect of sampling of the goods. It denoted the selection of apart of commodity from a bulk in such a way that it would be representative enough to render a correct idea about the commodity ti recipient of the sample.

Having Market Information:
It is important function and it is extremely helpful to both the consumer and the manufacturer. As markets for various articles are widening the importance of research and information in increasing. Producers are made aware of coming trends because marketers inform them of changes in consumers want supply and demand and the new market development, position of the computtors etc.

The chief objective of this stage of marketing process is to bring a potential buyer into contact with the seller. Thus this is also an important marketing function.


Wholesale Trade

Generally speaking trade may be carried on either on retail or wholesales basis. When the goods are purchase in a large quantity by a person to be sold in smaller quantities to retailers it is known as wholesale trade. It may be defined as follow.

“ A wholesale transaction is one in which the purchaser dose no buy for his own private or personnel use but is guided by a profit or business motive ib the making of purchase.”

The wholesaler has following characteristics:

1. He deals in a larger quantity of goods which are being purchased from the manufacturer.

2. His business is specialized

3. He sells goods to retailers.

Thus the wholesalers are said to be marketing institution who buy goods and then resell them. They are neither the manufacturers themselves nor the retailers but acts as a link between them.

The wholesaler render very valuable and important services to the manufacturer which are as follow.

1. By buying in large quantities the wholesaler enables the manufacturer to benefit from the economies of lager scale production. So the wholesaler grants financial assistance to producers.

2. A manufacturer is not expected to be expert seller. He is an expert technician and must pay all hs attention to production. The wholesaler enables him to do this by taking upon his shoulder the responsibilities of distribution.

3. The wholesaler relieves the manufacturer of the necessity for carrying larger stock . thus enabling him either to release his capital for future production or to carry on the business with less capital then would otherwise be necessary.

4. The wholesaler direct the manufacturer as regards the quality and quantity of the goods demanded, new market developments ,coming trends etc as they are in direct contact with the retailer who know the market conditions.

5. The wholesalers often enable the manufacturers to minimize his total distribution cost eg. The manufacturer of consumer goods would behave to establish and maintain an enouomus sales force in order to reach all outlets in which he would like his product stocked.

6. The manufacturers are already short of funds and cannot afford to allow credit to retailers, however the wholesalers can do so and relieve the manufacturers from credit burden.

7. The wholesalers simplifies the marketing process and makes fewer transactions necessary. A manufacturer deals only with a selected number of wholesalers rather than hundreds and thousand of retailers.


The wholesalers render very useful services to retailers which are as;
1. Supplying goods according to the demand: the retailers due to smaller capital cannot hold a big stock of any commodity but he the wholesaler by holding large stock of different varieties of goods enables the retailers to make purchase in small quantities at interval and to carry on business with less capital.

2. Facilitating choice of selection: a wholesaler hold large stocks of different varieties of goods and thus enables the retailers to exercise there choice and selection.

3.Credit facility: most wholesaler grant credit. This reduces the capital requirements of the retailers and enable him to maintain huge stocks of goods.

4. The stocks held by wholesalers enable the retailer to obtain supplies more quickly than they can from manufacturer.

5. The wholesaler makes the retailers buying function easier as he needs to deal only with a small number of wholesalers, rather than hundreds of manufacturers.

6. He often enable a retailer to reduce his total buying cost . they are often able to take advantages of volume discounts.

7. He regulates the price by controlling the supply and thus minimize the risk of retailers.

8. Since they perform a storage service, therefore they absorb a part of retailers storage burden. If the retailers were to buy direct from the manufacturer they would have to store the goods themselves.

9. They provide suggestion to retailers in connection with the store display, selling technique, and maintenance of accounts etc.

10. The supply of goods in small quantity enables the retailers in avoiding wastage.

Retail Trade


It fulfills the requirements of the final consumer by placing the goods at his disposal for final consumption. it is the link between the wholesaler and final consumers. The retailers provide an opportunity of choices to final consumers amongst the variety of product kept by the retailer. He can also buy the goods in small quantities nearest to his door in accordance with his requirements ..


1. the retailers supply goods at the very door of consumers. The consumer need not to go far to purchase the good because retailers are situated at very little distance. He may bring the goods with himself or he may leave them with the retailers to be delivered at his place as soon as possible. 
2. the greatest advantage of retailer is the stored goods and sell them in small quantities when the consumer requires. He thus relieves the consumers from the necessity of storing goods which may of them cannot do for the lack of resources.
3. he tries to study the taste of the consumers and keeps the goods likely be in demand. He again keep wholesale merchants in touch with changing fashion and tastes and thus enables those goods to be produced which are really in demand. 
4. he keeps the large variety of goods manufactured by different manufacturer with a view to enable his consumer good choice and selection. 
5. if the customer is dissatisfied by the good the retailers quite willingly makes good the complain. 
6. he adopts diverse methods for reaching the customers. His beautiful display and scientific advertisement are very educative. 

They are those who wander house to house selling their goods. Hawker and peddlers go into street, and different parts of the city in an effect to sell their goods. These person requires little capital and need no shop. 

They are not regular retailers. They only sell goods from door to door in their spare time. they sometimes deal only in the seasonal goods and as soon as the season is over they stop selling the goods. 

A large volume of retail trade is conducted by ordinary shopkeepers. They may be divided into small and big according to their scale of operations. Small shopkeepers require little capital and are established in lanes , unimportant streets. Big shopkeepers commands considerable capital and make shop in the most frequent areas in the heart of the city. Shop may be general or specialized. A general shop is the one where numerous varieties of goods of every day use are sold. A specialized shop on the other hand, is specialized in the sale of certain articles only for example fountain pens, jewelers shop. 

Now days, as the production of goods is done on large scale , the flow of good in the market is huge and varied. The distribution is also to be done on large scale. The flow of good in market is huge and varied. The distribution is also on large scale so as to reap the higher profits avoiding competition from small organization. When retailers purchase goods on large scale they save much as they can get many advantages from the wholesalers and manufacturers. Beside they can accumulate variety of commodities and thus attract the buyers. The large scale retailers are discussed as follows; 

Such stores requires investment of huge capital and involves considerable risk. The special features of this store is that they try to sell almost every considerable commodity of commerce, almost from an apple to an airplane. The store is divided into number of departments , suitated into the same roof, each department specializing in commodities of the nature. That is why it is known as the departmental store. it is thus an combination of large number of specialized shops, under unitary control. An attempt is thus made to supply to the customer all that he requires from this very place so that he may not require to visit any other shop. 

The advantages of running a departmental stores are as follow; 
1. The central side of departmental store gives it more advantages over a small scale retail store. 
2. It provides efficient service to the customers like saving of time, car parking, telephone etc. 
3. Such stores often create a demand for a commodity. A customer is sometimes induced to purchase other things also when finds them nicely placed in various section of store. 
4. The price in departmental stores are less than in retailers shops because of the economy of large scale buying. 
5. One department advertises for the other department. 

1. The elaborated service provided by the store tends to increase overhead expenses. 
2. The location of such stores ia sway from population residential areas. It is difficult for the large scale retailers enterprises ie departmental store to take away the share of profit of the small retailers because they are located in central parts of the city and the people living in the suburbs and the other parts may not be served. 

Sometimes the manufacturer himself wants to eliminate all the intermediateries and reach consumers directly. This he does by opening multiple shops. Shops are opened in various parts of big cities and in all important cities in province or country. These shops are mean to sell only those goods in which the producer or manufacturer is interested. The range of commodities kept and sold is thus very narrow. The advantages accruing as a result of specialization are those of economy in buying together with speedy and larger turn over at lower price eg BATA shoe manufacturing company whose multiple shops are spread all over the big cities of Pakistan. 

The multiple shop system enjoys all the advantages which normally accrue to large scale enterprise namely , economies of buying in larger quantities, centralized and highly sufficient control and experts advertising of firm’s special lines. In addition to these there are the following advantages particular to multiple shops; 
1. Shortages of stock at any branch may be made up by transfer from one branch to another. 
2. A speedy turnover of stock is attain and be accentuated by studying sales figures to discover which of the goods are slow moving and then concentrating advertising effort on these items only. 
3. As a result of speedy turnover, multiple shops are able to run their business at slightly lower cost than the other types. 
4. As sales are made on cash basis , there are no bad debts and no expense of maintaining a large clerical staff. 
5. The multiple stop benefits also from the fact that numerous branches can cater easily and efficiently for customers at comparatively short distance from their residence. The total number of its customers is larger than that of a single store or departmental store. 
6. Each branch in itself is an advertisement for other branches and so long as the goods sold are of good quality in relation to the price, there is no limit to the number of branches that an efficient concern my control 

Multiple shops suffer two limitation. Firstly they have to meet heavy expenses. Much of the difference between their buying and selling prices is absorbed by high rents of big promises in busy streets, with rules proportionately higher and by provision for writing off the initial cost of new shop fronts and new equipment and by the maintenance of poorly paying branches in places where the trade is not enough. Secondly many managers and staff do not, without constant supervision, take the same interest in their duties as the proprietors would be. 

In mail order business goods are sold and delivered through the post and not across the counter. From buyers point of view, it may be describe as shopping by post. Payment is made by several methods, varying with the type of stores and customers standing. If the customer has an account, the goods are charged against it. If he is unknown the goods are supplied either on “ cash with order” basis or the goods are sent through the post office on cash on delivery basis. In later case the VPP( value payable post) system is utilized. 

1. Expenses and expensive shop, fronts etc. Are eliminated. 
2. The sales in direct touch with the buyers and therefore it is generally to know the demands of customers more easily. 
3. Advertising may be more effectively carried out since the results may be checked up with fair accuracy. 
4. The actual selling is reduced to routine the work being performed by low grade workers and hence cheaper labour. 
The sales appeal may be designed by experts and is not dependent upon the capacity of individual salesman. The customer buys sitting at his home and therefore saves himself from botherations of different types. 

1. The small retailer is still able to compete with mail order house in most lines and ho has “convincing appeal” in his varied shook. 
2. All retail shops have the advantage of enabling customer to see and examine goods but mail order business may not provide the facility to their customer’s ordinal. 
3. Heavy expenses on advertising increase the cost to the customer as compared with normal retailers. 
4. Publicity through advertisement also include quality of goods; the wordings of advertisement often create confusion and also sometimes mislead the customer. 
5. The sales appeal is stereotyped and may not be easily altered. 
6. It is not easy to find causes of failure to affect sales nor is it easy to get the orders.




It is necessary for a businessman to plan financial aspect in the early stage of starting any new business and it should not be left to chance. From the starting and to any later expansion in the firm’s business, finance plays a very important role in purchasing aspects and to meet the expenses if necessary for carrying on the business affairs. The financial needs of business are assessed by the size and the nature of work. For a large business, financial needs are high as compared to a small business. For example, the joint stock companies require large amount of funds whereas sole proprietorship and the partnership business require small amount of funds. Finance can be obtained through two major resources owners’ capital and borrowed money. The requirements of funds depend upon utilization that is how much funds will be needed for circulating and fixed capital. The capital credit obtained from any financial institution is known as borrowed money. Funds which are required to purchase any asset and to meet the expenses from the initial stages to the extension of any business is known as finance.

Kinds of Finance

Long Term Finance
Long term finance is that part of capital which is required by a business enterprise to finance its blocked or fixed assets such as land buildings, machinery and other appliances of permanent nature. In the established undertakings, it is required for extending the scale production and for the renewal and replacement of the fixed assets, or for taking the advantages of new discoveries. Thus, it is needed for considerable period of time, usually for 10 or more years and hence it involves a high cost due to higher amount of interest.


The following are the various sources of obtaining long term finance.

The initial capital is obtained by a new concern by floating shares. Shares represent equal portion into which the capital of a company is divided. Shares may be issued directly by the company or through the under writers. Selling of shares is the most important method of securing fixed capital and the contributors are the general public.

To raise sufficient capital and to draw the attraction of those people who don’t find interest in investment, debentures are issued b y a company. Debenture is a promissory note for the repayment of money borrowed and the payment of interest at fixed rates. The contributor is again the general public.

The state aid in the form of guarantee of dividend of new companies, taking of securities, plays a definite role in the financing of industries. In our country, industrial-finance Corporation was established to give long term loans.

In Pakistan there are the following institutions from which different industries can take their finance for long periods:

This corporation aims at stimulating promotion of new industries, the expansion of the existing ones and the furnishing of the technical know-how as to increase production.

This bank was setup to provide credit and other facilities for the development of industries. Other institutions are NDFC, BEL, investment trusts, insurance companies and commercial banks.

An enterprise can raise finance by the acceptance of deposits from the public directly for fixed terms and at fixed rate of interest. This method is however, dangerous and has declined in importance in recent years.

This is very easy method of financing and is available to only Established of a part of the profits is an ideal means of financing, expansion and improvements.

Short Term Finance
A common problem of every business is financing day –to –day operations. Normally business finances these items out of the receipts from sales, but some times the firms financing is needed. It is required for pour hasting raw materials, additional inventory etc. for meeting purposes’ .it is required for short period ,generally foe one year .it is needs because of the fact that the stock is to kept ready before it is actually consumed.


Sources of Short Term Finance

The main sources of obtaining short–term loans are as following:

1. Commercial Banks
Finances are acquired from banks by means of loans, discounts overdrafts etc. they provide short term finance in the shape of discounting bills, granting loans and accepting bills on behalf of their customers.

2. Commercial Credit Houses

These institutions provide short term finance against mortgage of property or promissory notes.

3.Proprietor‘s Personals Funds
This is an important source of financing a small business. The proprietors themselves supply the capital of the business from their own pockets. But in large scale undertakings, this source is insufficient.

4. Borrowings from Friends and Relatives
Sometimes business is also finance by taking loans from friends and relatives. Finance from this source is very limited and uncertain.

5. Public Deposits
Some units accept deposits from the public from short period on attractive rates of interest and utilize the funds for their currents financial requirements.

6. Indigenous Bankers
There are large number of money lenders i.e. Mahajan, Sahukar, Shroff in the country who provide considerable sums for the business, though at a high rate of interest.

7. Land Mortgagment
The financial institutions give loans on short–terms to he business man or industrialists on the security of land and bearable.

Foreign Exchange Banks
These banks also provide short term funds. They mainly provide finance to the foreign business undertaking of their nationality.

9. Unsecured Loans
This type of financing includes:

A) Promissory Notes:
They are the legal instruments used in advancing banks loans. It is the major source of the short–term finance.

b) Commercial Drafts:
A draft is an instruments made by one person ordering the second person to pay a sun of money to a specified individual on sight or at a future date. Secured loans: There are times when short term financing may be accompanied by collaterals, which gives the lender the right to seize certain property if the borrower does not replay the loan.

10. Secured Loans
There are times when short term financing may be accompanied by collaterals, which gives the lender the right to seize certain property if the borrower does not repay the load.



A system of arranging o r preserving documents received and copies of letters issued in a proper way is known as filing system. Such a preservation of all the letters and documents enables the businessman to have ready reference as and when needed. Business concerned, big or small, carry correspondence wit a number of customers or clients. Such correspondence forms a permanents record of what has happened between the businessman and the customer. Reference of the previous correspondence is to be made for carrying any business activity and also forming new policies to make a business a successful one. There fore a copy of incoming and outgoing letters is to be preserved and arranged in a systematic way so that they may be easily available with out any lose of time. This whole process is known as Filling.

Essentials of A Good Filing System

For an efficient filling system it is necessary to have the following qualities:

1. Simplicity
The filling system should be quite easy and simple so that every one in the office and use it with out any technical knowledge. It would be so simple that even an inexperienced employee can use it.

The preservation of the letters is the foremost object of filling system. The letter should be kept in a lock or other device to prevent unauthorized persons to approach the correspondence

3. Elasticity
With the development of business some times it becomes necessary to alter the filling system. Therefore it is essential that filling system should be elastic

4.Minimum space
The space occupied by a filling system should be as small as possible

5.Cheapness and Economy
To avoid any financial pressure the system of filling should be cheap and economical in proportion to the size of business.

6.Rapidity of Reference
Filling of letters should be easy in order to trace the required letter with out any loss of time

Again the system of filling must suit the requirements of the business in connection with which it is used.The requirements of each business house vary according to the nature and extent of its business and the actual system of filling best suited to it varies accordingly.

8.Rapidity of Filling
The system should be such that the papers could be filled rapidly with out any loss o time

The records should be kept in a place and in a manner easily accessible to all. otherwise there is bound to be a waste of time in making references.

Various Systems of Filling Letters

I. Wire Filling
2. Pigeon Hole Filling System
3. Flat or Horizontal Filling System
4. Vertical or Upright Filling System

I. Wire Filling
In this system of filling a hard and thick steel wire is used. The wire is fixed on a small round wooden base and has a sharp point. in this thick wire all the letters are pushed and the wire is hung. it is usually used in small business houses.

II.Pigeon Hole Filling System
This system requires a wooden almirah containing 24 compartments like pigeon holes. There is usually a shutter in the front of the almirah to protect the letters. each compartment is labeled with one letter of alphabet. the last compartment bears the label of X,Y and Z. this is very old system of filling letters.

III. Flat or Horizontal Filling System
In this system in an iron almirah, the card board files are flatly, or horizontally kept in a number of holes duly alpha bated . this is a very popular and scientific system of filling letters. this system is a great advancement over pigeon hole system. It is known as flat filling system because of the fact that the letters filled under it are kept in a flat position files are specially designed for use in this system and their different makes are available in the market. The available files can be grouped into the following classes

1.The Cardboard File
It is a primitive form of filling. under this system either the cardboard covers or drawers of specially made cabinets are used, as files .the letters are put upon the cardboard and fastened with the help of a clip.

2.The Box File
This is also not in much use. Here wooden boxes are used as files .the letters are kept flat inside the box in an alphabetic or numerical order. It is used in very small business houses .

3.The Arch Files
This is the most popular form of flat files. A businessman generally keeps a number of flat files according to the volume of correspondence and the system and the system of classification he adopts. If the volume is small , one file may be sufficient ,but if it is large one file may be used for containing the correspondence of a single individual and there will be as many files as correspondents . the letters are arranged date wise. these files may be kept just like books or hung on the walls, or they may be kept in shape of drawers fitted in a cabinet.

4.The Shannon Files
The Shannon file is the best known system of flat filling .this form consists of a filling cabinet containing many compartments in accordance with the requirements of the business .each drawers contains index sheets below which the letters are filled.

Whatever the make of the flat files, they possess the following special features which should be carefully noted

1. The files keep the letters in a flat position and contain a device for fastening the letter s

2. Each file consist of alphabetical index cards which are made of loose stiff sheets .

3. The letter are placed date wise, with the latest letter date on the top.

4 All the letters contained in the file are carefully fattened together.

5 The file may be hang on the wall , or kept in the shape of the drawer in a cabinet or made to stand like a book.

6 When a file is full , the letter are removed to be transferred in binding cases.


1 The letter filed cannot get out of order or cannot be misplaced or lost as they are fixed on the arches.

2 If at any time , the letter of a particular correspondent is to be removed , it can be done without disturbing the order of other letters.

3 A file drawer may be dropped accidently, but there is no fear of mixing the letters.


1 Since the letters are fastened together , inconvenience is felt filling or taking out a letter.

2 The relative slowness is getting access to the letters as they have to be re-shuffled and turned forward and backward to find the required letter is inconvenient.

3 It is absolutely necessary to punch the papers , which makes the system time consuming.

4 Trouble is involved in re –organizing the cabinet to maintain an increasing volume of correspondence.

A still further advancement the art of filling letters is the vertical filling system . It is the most leading method of filling suited to a large concern having innumerable correspondence . The system is called vertical because the letters are kept in a vertical position . It requires a cabinet with deep drawers , folders and guide cards . In this system the letters remain unfastened.

The following are the things which are needed for the proper maintenance of the vertical filling system.

This cabinet contains drawers which are made of wood or steel . The requirement of drawer depends upon the volume of correspondence and nature of the business. Cabinets with locks also provide safety.

A folder is made of strong paper and is folded in the middle so that the letters can be easily arranged in it. They are usually placed date wise. On the projection edge of the folder is written the correspondent’s name, subject etc.

Small groups are made in each drawer by sheets having in a tab. These tabs are marked alphabetically, geographically or numerically. The folder are kept behind them according to the mark on the tab.

The folders containing the correspondence are arranged in the drawers either alphabetically, geographically or numerically. The most common is the numerical arrangement , but sometimes alphabetical arrangement is also preferred thus they may be arranged in the following order:-

Each folder is giving a certain number which is put down on the raised portion of its back. If a folder holds the letter of the single correspondents then all the papers will also carry the same number as that of the folder. If a folder contains documents related to more than one correspondents then the decimal system will be applied e.g if the folder carries a no. 53 then the correspondents will be numbered as 53-1, 53-2 etc. folders are bearing numbers like 10, 20, 50 and so on inserted in the proper places so that they indicate the position of the various folder of different numbers.

In this folder contains the name of the correspondents on the raised back portion and not the number. Each guide card indicate the initial letters of the correspondents e.g. the letters to and from Mubarak Ali, Mahmud Ahmed etc will be placed together and their position will be indicate by the guide card bearing the letter ‘M’. The folders are arranged one after the another according to the first vowel occurring in the correspondents name. t he advantage of this system is that it does not need a separate index but it posses the disadvantage of causing conclusion between the customers bearing same names.

This is merely a variation of either the alphabetical or numerical systems adopted geographically to meet the requirements of a particular business. One may allot each drawer for correspondence in each province, and guide cards may be put indicating each town. Traders having flourishing foreign trade and big merchants usually adopt this arrangements.

Where the subjects are of more importance than the name of correspondents it is useful to file all papers behind alphabetically arranged subjects guides using tabbed folders for sub- divisions of the subject or individual correspondents.

5. ABSENT OR OUT GUIDES: These are cards with ruled columns. When a folder is removed for reference the filing clerk puts an out guide in its place and enters in the ruled columns the particulars of the folder removed.


1. SPEED OF LOCATION: Speed of location is possible as the system combines admirably with the visible system of indexing. They can be traced out quickly without must effort.

2. CONVENIENCE AND CHEAPNESS: The vertical filing system has the advantages of handling a large volume of correspondence more conveniently and cheaply.

3. EASY REMOVAL OF DOCUMENTS: Access to the folders and to the documents is simple and that is why the removal of documents is easy.

4. FLEXIBILITY: This system is more adaptable in increasing the correspondence.

5. TIME SAVER: The papers need not be punched under this system, therefore it is a time in this respect.

6. NO FEAR OF MIXING: Since the correspondence of one individual is quite separate from others, therefore there is no fear of mixing up of the correspondence.

1. DANGER OF LOSING: Since the letter are left lose in the vertical system therefore, there is danger of losing them.

2. INSECURITY: This system has no security and in case a letter is dropped, it upsets the whole order.

3. LARGE SPACE: This system requires a large space as compared to the flat files.




Index is simply a list arranged alphabetically showing the required reference. An index to file may be set out in the form of a bound or loose leaf book whereas a separate page or group of pages is allotted to every letter of the alphabet, the field no. being entered against each name. Thus indexing is a system through which the location of the records may be found easily. It may be placed near to the records or may be kept apart from the records or the records themselves may be so arranged as to be self indexing eg . 1 index of a book (apart from the records) and 2. Telephone directory (self- indexing).
Indexing Equipment

There are number of card in it and each card deals with one item of the index. On the top edge of the card, reference heading is written. On the remaining part of the card, the location of the item is written, where the self- indexing system is in use, the remaining part of the card contains the record itself. These cards are arranged vertically in a drawer or tray in such a way that they can be used very conveniently for reference to make the function or finding the reference more easily, tabbed guide cards may be inserted at required intervals.

It is consisted of frame into which strips of shout paper or card can be fitted in any required order and subsequently withdrawn and rearranged whenever changes are to be made. Each strip is devoted on one item of not more than two or three lines. Frames can be made up in various forms to suit different purposes; they can be fixed to the wall made up in book form or where a large number is necessary arranged on a rotary stand which is easily turned to give reference to any desired portion of the index.

This is an index which offers the ready visibility of the strip index and also the additional record space provided by the vertical card index. It consists of series of cards, arranged so as to overlap leaving a strip of each card exposed. This exposed edge is used for the reference heading, the remaining part of the card is readily available for record purpose. The trays in which these cards are kept are fitted with devices which enable the cards to be held in position and yet permit individual cards to be written upon withdrawn replaced or rearranged as may bar required. The trays of cards are usually kept in cabinet but as in the case of the strip index frames can be arranged in book form when they make an easily portable record.

Overlapping visible index records can also be kept in book form. A viable book consist of a loose leaf binder in which paper pages are arranged in a similar formation the cards in visible card index.

This is a form of vertical card index in which the cards are arranged about the circumference of wheel set in a cabinet or desk. Thousand of such cards can be attached to one wheel and as many as six wheels set up within the reach of one clerk seated at his desk.


This is an arrangement of the vertical card index which has been developed to give easier reference to headings. Cards are arranged in groups and overlapped so that the reference headings on the cutaway concern of a whole group can be seen at once. This system of indexing is sometimes applied to ledger cards to facilitate the extraction of accounts for posting.

The cards are punched with holes along one or more edge, each hole represents a classification or figure in code number. Written information is recorded by hand or typewriting in the centre of the card. The information in term of which it is required to deselected or sort can be recorded along the edge of card by cutting the appropriate holes into slots. Once they have been prepared the card may be filed in trays in any order. To select the card for a particular classification batch of several hundred cards is removed from the tray and a long needle is passed through the holes representing the class required. When the needle is lifted the cards which have been slotted at these holes fall out so separate themselves from the remainder.



Inflow and Outflow of Paper


Correspondence is of great importance in modern times. Almost each business transaction involves exchange of papers of different kinds and other material, letters orders samples, cheques drafts, bills , government instruction through circulars and official letters invoices and so on. It is therefore imperative that the correspondence department must be vigilant and efficient in disposal off the letters and maintaining the accurate and complete records of all the papers concerning the commercial transactions.

The correspondence in commercials office had been divided into two categories.

1. Inflow or inward correspondence.

2. Outflow or outward correspondence. Inflow and outflow of papers are guided by the individual requirements and environment or business location and the type of business. They are discussed as below.


This letters are usually opened in the presence of the general manger of some responsible officer who by quick glance over each letter assertions whether it deals with matters of routine or required any special notice to be taken. He is particularly watchful of letters which contain a discordant note or complain. Care has to be taken to see that the contents of the letters are properly emptied before the outside covers are thrown away. If the letters is addressed by human name or is marked privateer it is not opened but is handed over to the person concerned. Remittances received are sent to the cashier for entry in cash book. All the cheques received are crossed and endorsed before being sent to the bank for collection and credit to account.


The letters are then sorted out and marked with the date and time of their receipt noted on each of them; this is done with a view to prevent laziness and irresponsibility on the part of the staff in dealing with the letters. They are then sorted out bin batched according to their nature and each is handed over the person entrusted with the dealing letters of that type. Sometimes each letters is impressed with an identification mark indicating the department which it belongs to. The officers are thus enabled to ensue that prompt action is taken on all the letters by each department and filing is up to date and correct. The letters may also then be numbered for quick reference in the office n, if a numerical system of reference is maintained.

The letters received are briefly recorded in a let ter received book. It records a date of receipt the name of the sender, and the subject of the letter , the departments to which they have been handed over , the manner of their disposal and the reference through which they have been disposed off.

The concern department then deals with the letters take any action necessary upon them and draft replies which are forward to officers, for correction and approval, along with the letter to which they are replies. When the draft is approved the officer sends it to the typist and also initials in the last column of the letters received book to indicate that the letter has been dealt with. Officers my also dictate letter to the typist who may take them down in shorthand and then final letter to be dispatched.

It means all those letters invoices, documents etc which are being sent from the office. The outflow paper includes the replies of the letters received by the office as well as the original correspondence done by the office. The outflow correspondence passes through the following stages.

The outgoing letters must be prepared with promptness and accuracy and they must be politely worded. They have been described as the silent ambassadors of the business concerns and as such they must have an up to date finish to capture the imagination of the reader. A typewritten letter makes a better impression on the addresses than a hand written letter, since the former is better to look and can be read more easily.

It is very essential to have a copy of the letter sent on record for future reference. In case of any dispute this copy would be quite helpful in settling the same. The copy can be obtained by a carbon, press copying machine and in many other ways.


The circular letters are to be sent to a large number of firms. In such cases hundreds of copies of the same letter are needed. When these copies are prepared by the help of a machine the same is known as duplicating machines in use which help in the preparation of these copies.


The letters received and the replies of the letters sent or a copy of the original letter is to be then filed properly. The files are to be arranged in a systematic manner so that the previous correspondence when required may be found out quickly and easily.

The work of sending the letters away from the office is given over to a dispatch clerk. In sending away the letters, he must be very prompt and must also look to the postal requirements in connection with letters which are to be sent through the post office. Neat folding of letters, seeing that the letters are properly addressed and accompanied by the relative enclosures, and making sure that all letters are properly signed by the officers concerned, are matters which the dispatch clerk must look to. He is also required to send away all the telegrams from the office.

A brief record of all the outflow of papers is kept in a postage book which also serves the purpose of a letter outward book. The dispatch clerk is usually given an advance which he uses to buy postage stamps of various denominations. He uses the postage book to maintain an account of the money advanced to him the postage stamps used by him in dispatching letters.

Some letters are to be sent to the local businessman. These letters are not sent through post but through a peon duty entered in a peon book. The dispatch clerk before sending letters will sort out all those letters separately which are to be send to the local businessman. He will then make entries of all such letters in the peon book and hand over the same to the peon who will personally deliver these letters to the addresses concerned and obtain their signatures to the peon book maintains a complete record of all the letters sent locally.


Labour Saving Devices


There was a time when business used to be small and the total number of employees used to be quite a few. The office appliances were regarded merely as luxury. With the expansion of business, there has been a great development in the use of office appliances and labor saving devices, which have been introduced to save time and manpower. These machines can do the job more speedily, accurately and at lower cost. In fact, they have become a necessity for smooth and efficient working of the office. Labor saving devices can be classified into the following three groups:

A. General Machines

B. Communication Machines

C. Accounting Machines


It is a common machine and is used in each and every office, as time and labor saving devices. Through this machine, many letters and documents can be typed with speed and neatness. It can prepare more copies in no time. As the industry advanced and requirements increased the improvement in typewriting machines have also been made. Noiseless typewriters are used where typists work near executives and other clerks as noise is likely to cause disturbance. Electric power is also used for operating typewriters. Electric machines require less human exercise and can type more copies than the ordinary machines of typewriter. This is more liked by a typist as he gets less tired and maintains his output better than he does by an ordinary machine. Electric typewriters are more expensive and cannot be used in small offices.

There are a number of dictating machines but they are all based on same principles on which the gramophone works. These machines record the dictation given by the office executive who can be transcribed by the audio typists and thus, the presence of stenographer is not necessary. These machines however, usually consist of three machines the actual dictating machine, the transcriber and the shaver. The first is used by the person for dictating. The second on e is used by the typist an the third machine is used fo9r shaving of the dictated matter. This machine is most useful for secretaries, partners, managers and others who rare subject to frequent interruption. With special attachment, the dictating machine can be connected so as to record telephone, messages and by the use of microphones, it can also be used for recording speeches.

When 100 of copies are required the duplicating machines are used. Each class of machine has its advantages and in selecting a machine for use in particular office, these advantages should be be Given consideration. A variety of duplicators are in use nowadays and few of them are given below;

These duplicators can reproduce typewriting, hand-writing or drawings in a variety of colors. A master copy is prepared on a sheet or art paper by means of hectograph carbon paper. This is the only type of machine which can reproduce in several colors in one run. According to the quality of paper and carbon paper used, 100 to 250 copies can be made.

These duplicators can reproduce type writing .the stencil is out either on typewriting or by writing or drawing with a special pen. Up to 4,000 copies can be obtained and stencils can be stored and re –used if carefully handled and protected.

These duplicators can re-produce typewriting, hand writing and drawing. As in the case of stencil, different colors can be reproduced on the finished copy. Up to 50,000 copies can be obtained from the machine.

These machines are in fact, small printing press of letter press type. It is a sloe method and it also requires some skills to do job. Up to 500,000 copies may be printed.

This machine is bit different from the duplicators .these machines are generally used for addressing the envelope to the regular clients or for the preparations of labels. These machines are adaptable enough to take the wide variety of other work in the office .These machine are operated by electric power.

In this machine, addresses are embossed on metal plates or are stenciled on specially prepared fiber material. These plates are placed alphabetically or in any other manner. When the actual addressing work is t be done, these plate are placed and passed through the machine, and the address are printed on the envelopes.

The work of the cash department can be helped considerably by machines for handling coins. There are machine for sorting out coins of different denominations from a mixed heap of coins and appliances are also available for counting them. There are also machines for giving change quickly. As no mental calculation is necessary, a great saving of time is affected by such a machine where the number of transactions is very large.

There are number of appliances which may be used to check automatically the receipts of cashiers. They are usually known as cash registers. Some of them also have arrangement for adding up the receipts so that at any time the machine shows the total cash that should be in be the cash drawer attached to the machine. Some are also so constructed as to issue the receipts to customers while keeping the record for the office.

Franking machine saves a good deal of time in scaling the letters and in getting ready for the mail. This machine makes an impression on the envelopes showing in red ink the amount of the postage and the place of origin and date of posting. No postal stamps need to be used. The machine have matters attached to them and they are locked and sealed by the postal authorities to frank up the amount after which the machine gets automatically locked. Some of these machines also have an automatic envelope scaling device. Some business houses have the stamps affixing machine which are fed with postage stamps, and there are devices to cut the stamps off, to moisten and affix them and to count them.

These machine records the time of arrival and departure of the employees of he office. These type of machine is used in the office where payment are made on the basis of time spent on the job. This machine is like a clock and when the employee enters the office he cuts card in the machine which prints the time. Similarly when he goes out, further he cuts the card in the machine and departure time is printed on the card.

The use of telephone is so common and all its importance is so well known that it does not need further explanation. It is maintained by high business houses internally and externally. Internal system enables the executives of same organization to talk to each other on telephone whenever they need so. External systems enables them to talk outside parties. Every city is linked by telephone system so that through trunk call any one may have talk anywhere in the country with the required person.

It is a system which link by telephone mobile vehicles in city or may be in an area. This system is in advance countries. Under this system mobile units such as cars, vans, etc can control each other on radio-telephony through the central station located in the city.

In big factories, shops and offices this system is a useful means to give instructions to all of the employees or only those particularly concerned with any special instruction. This system has an advantage of quick communication of message to the concerned persons but it has also the disadvantage of distributing all of the employees while instructions are concerned with any particulars employee.



After typewriter, adding machine in perhaps the most commonly used machine in office routine working. Adding machine is basis for all further calculations. These machines are of two type: listing and non-listing. These machines have following advantages:

1. Cross-casting is much further faster. Most clerks, unless they are very highly skilled, cannot add horizontally with the same speed as they can add vertically.

2. Selected items can be added from different documents or from scattered positions in one document.

3. Less skill and concentration are required by the clerk.

4. With the aid of adding machines, junior clerks can add with speed and accuracy equal to or exceeding that of a skilled clerk.


In a large business there is a lot of calculation work, in order to asses the position. In calculation various forms such as addition, subtraction, multiplication and division are involved. There is likelihood of accounting mistakes, and takes more time in corrections. Keeping in view both the important factors time as well as accuracy nowadays the calculation work is carried on through calculation machines. With the help of calculating machines addition, subtraction, multiplication or division can easily be made with accuracy and without loss of time. Apart form this with the help of said machine the problems of exchange, discount etc. can be solved with great accuracy. It does not require any special training to operate the machine, the mistakes can only occur when the machine in question is not properly handled or when out of order.


Posting means the transfer of amounts from original entries to the appropriate ledger accounts. Accuracy of entries and easy to read are the most important requirements of this function. These machines play an important role in maintaining the accuracy.


The computers operate at the fastest speed which ever is thinkable by human mind, because these machines do not depend on mechanical movements but on electronic pulses with duration of about one millionth of a second. Computers are able to perform the following functions:-

1. Receive a programme of orders representing the routing to be carried out, store this and refer to it as may be required.

2. Take in original information through one or more input channels and store it for reference as required by the programme.

3. Perform any arithmetical calculation as and when required by the programme.

4. Store the result of any calculation for further reference and accumulate totals as required by the programme.

5. Select any information from the store, arrange it in any required sequence and discharge it through one or more output channels to be printed punched into cards or paper tape, or recorded on.

Apart from computer speed, the principal characteristic of electronic computers is their flexibility as would appear from the following:-

1. They can be made to carry out any electrical operation only by feeding in the appropriate orders.

2. They can proceed from one kind of operation to another automatically.

3. They can automatically select alternative courses of action according to the nature of the date received or the results of previous operation.


Importance of Advertising



“Advertising is an art of providing market information through the various media of communication such as magazines, newspapers, television, radio etc. at the expense of the company for the purpose of increasing or maintaining effective demand and making easy the sale specific goods and services.”


The purpose of advertising is:

1) to enable the public to know the features and uses of the products and overcome traditions and prejudice that may reduce competition.

2) to make easy and increase the sale of present products, to maintain consumer’s awareness, to bring it equal with advertisement of competing firms and to reduce the amount of personal sales efforts required to receive an order.

3) to introduce a new product model of service in the market.


Media means the source in which the advertisement appears. It is a singular as well as plural term. Various types of advertising media are explained as under:-

Today radio has become very important and can be utilized for advertising the goods which are sold either within the country or all. Today’s commercial services of radio Pakistan are becoming very popular day by day .but life of this advertisement is very short .

Magazines can be used for the products which are sold out all over the country .this type of advertisement is not flexible as changes cannot be made in the advertisement copy easily it is becomes the copy of the advertisement is to be submitted to the advertising company 4 to 5 weeks earlier.

These newspapers which are daily or weekly are used for advertising the goods of local businessman . a newspaper has a very short life as it is destroyed usually after a period of 24 hours .
It means advertisement through bulbs . this type of advertisement media is becoming popular day by day in big cities of Pakistan like Karachi ,Lahore and Rawalpindi.

Small firms advertise their products through letters ,postcards ,catalogue etc.

F. ADVERTISING BY TELEVISION This type of advertisement delivered through a television is a combination of spoken words and visual presentation of products and their benefits .

It is widely used and includes postcards ,letters, catalogues, folders, booklets etc. they have variability of coverage .large and small business both can use it. basis of this kind of advertising is mailing list .this list which has the names of the persons to whom the letters are sent is compiled from time to time from many sources . It needs utmost care and up to datedness. This list can be made extremely selective regarding geographical and consumer interest .It is costly because of printing. Postage ,typing and packing.

They are used in street cars , buses , subways and rail road cars where they may be seen by people on the way to shopping trips etc. They are effective for all i.e national ,regional and local advertising .They are flexible and reached the people to whom the magazines don’t reach.

Advertising copy on package must be brief and should have pictures and brand name , qualities , companies name etc. Some are bottles and some are board packages.

Usually big shop decorates there windows of shop so as to attract customers. This is also one of the media of advertising. The window is dressed in such a way that it may attract attention of the buyers.

Some firms distribute there products free of cost so as to advertise its product to secure sales volume in future.

1. It creates demand for a new article by arousing interest of the public.

2. It increase the sales volume of establish articles constantly keeping the selling points afresh in minds of the customer.

3. It educates the general public about new use or uses of a product.

4. It reduces competition.

5. It creates goodwill by continues reminder to the public about the trademarks etc.

6. It increases additional sales by encouraging present customers in using the articles more frequently and in increased quantities.

7. It facilitates the job of the salesman and dealers by introduction the products to the public.

8. It reduces prices as the production volume increases, which in turn reduces the overhead expense.

9. It insures better quality, improving the quality of goods to have better appeals to the customer.

10. It increases the employment because production increases.


1. It results sometimes in exaggeration ( over-valuation) and misrepresentation. Such advertisement misleads the public and loses the confidence of the public in the enterprises.

2. It expands the market for the articles of luxury and comfort, because the goods which are needed to meet primary needs of life are not usually advertised.

3. It causes economic loss due to rapid changes in style creation of new objects of consumption and changes in style are waste and determinate to human good.

4. Advertising is impersonal and cannot answer the question asked for by the buyers.

5. It results in monopoly through brands.


It is not a waste at all. It is an aid to business expansion. Advertisement help buyers who usually do not know or are really aware of the existence of the seller. It expands the sellers market by spreading information about the product. Some people say the advertising increase the cost of production which is to be borne by the customer. It is completely wrong. It creates new demands of commodities and the service which lead t a production on large scale and when the production increases the cost of advertising is not waste but brings gain in the business.



1. Some definite message is communicated.

2. It is paid form of publicity.

3. It is non personal.

4. Its sponsor is known.


1. It is generally done in form of news, articles, features written in newspaper.

2. No direct payment is involved.

3. It may be personal.



Middlemen and Their Different Kinds



“ A business concern that is specialized in rendering services immediately involved in the purchase or sale of the goods in the process of distribution is known as middle man.”

There term middle man included all those who operates between producer and consumers. They function in buying and selling if the commodity. The wholesalers and retailers are middleman dealing in the ordinary function of buying and selling. There are other such as brokers. Commission agents, dealers and merchants who assist the buyers ans sellers in the market.

Some of the middle men are explained as follow

A broker is an agent involved to buying and selling on behalf of principal for a commission. He does not hold any stock nor deals with his own name. his function is only to negotiate and make contract of sales and purchases on behalf of others. He is paid for his labour called as brokerage. There are different classes of brokers. They are produce broker, stock broker, insurance broker and ship broker.

He is an agent whose function is to receive goods from his principal for sale in commission. He can sell goods in his own name, pledge goods in his own possession receive payments and gives receipts. He is liable on contract of sale he enters into on behalf of his principal. A factor is also called a consignment broker.

He acts on behalf of foreign importer. His function is to buy goods on behalf of client abroad and to dispatch them in accordance with the instructions. He receives a commission for his service.

They enter into agreement with promoters of newly started company which have not been taken up by the public. For this guarantee they are paid commission known as underwritten commission.

He is an agent who in consideration for extra remuneration called del credere commission. Guarantees to his principal that the third person with whom he enters into contracts shall perform their obligation. Thus such an agent guarantees to his principal that he will only sell to person who will pay for what they buy and if the buyer does not pay, he will pay.

Sometimes wholesalers appoints number of agents who goes from place to place , show catalogues, price lists etc. to retailers , book orders and forward them to their principals who executes them. They receive their commission in return of their service.

Sometimes wholesalers and manufactures appoints certain shop-keepers in different parts of the country as their selling agents. These agents receive commission on all sales in addition to the expenses which they have incurred on behalf of principal.

An auctioneer is an agent who sells goods by auction ie to the highest bidder in public competition. He has no authority to hold the goods sold and can deliver the goods only on receipt of price. He is the agent of the vender.

9. FORWARDING AGENT: This is the type of agent who is engaged in forwarding the goods to there destination on certain charges.


This agent is involved in clearing the imports on behalf of their principal. The duties include taking the delivery of the goods from the ship and attending to custom formalities for certain commission.



1. He has the possession of goods or documents which entitle him to the possession.

2. He carries out the trade with his name.

3. He is himself liable in respect of the contract of sale.

4. He receives payment from the customer and gives him discharge.

5. He has lion in respect on goods in respect of his commission. Broker


1. He has no possession of the goods which he sells.

2. He brings together both the parties to a transaction. The sale is made in the name of the principal.

3. He is not liable in respect of such contracts.

4. He does not receive payment of the value of the goods from the customer and cannot give his discharge.

5. He has lien on goods.


Chamber of Commerce

Chamber of commerce and industry is a voluntary non-trading association of persons who are directly or indirectly connected with commerce and industry. Its purpose is to promote trade and business and protect the business interest of its members. Thus, only the businessmen, industrialists, bankers and professional men like accountants, auditors are entitled to be members of the Chamber of Commerce. The Chamber of Commerce is organized on regional basis. The businessmen of a particular area form such organization e.g. Karachi Chamber of Commerce, Lahore Chamber of Commerce, Peshawar Chamber of Commerce. 
Chamber of Commerce may be formed under Companies Ordinance as a Joint Stock Company or under Trade Union Act. Usually, the liability of the members is limited by guarantee. The members pay an annual fee to the Chamber of Commerce. Generally Chamber of Commerce and Industry is governed by a board of directors and a president. The board appoints a secretary who is responsible for discharging all the work of the organization. He formulates the program, holds the meeting and manages the office. 

Functions of Chamber of Commerce 

1. It helps to develop trade and industry of a country and looks after and protects their interest. 
2. It collects all sorts of information concerning commerce and industry and maintains numerous records which are necessary in connection therein. 
3. It issues reports and Journals at regular intervals full of information regarding commerce and industry for its own members as well as for the general public. 
4. Advisory services on labour practices and disputes are provided. 
5. It helps the members in recovering debts. 
6. It provides trade reference information about financial status of its members. 
7. It protects trademarks and patterns and thereby encourages the cause of national commerce and industry. 
8. It acts as arbitrator in case there is any dispute between businessmen. 
9. It helps the exporters and importers by furnishing information of various natures in connection with import and export. 
10. It issues export certificate and certificates of origin which are very common instruments in international commerce. 
11. It advances commercial and technical education in the country. 
12. Nowadays, an active part is played by the Chamber in influencing economic policy of the government. It examines the budget every year and suggests appropriated modification in the tax proposals. 
13. It invites the attention of the government and public on matters affecting trade, commerce and industry of the country



Co-Operative Society


Co-operative society is voluntary association of small producers or consumers for their mutual benefits. It is formed for producing and supplying goods in accordance with the needs and requirements of the member who compose it. The members form and carry on the business of co-operative societies themselves. They are the owners, workers and mangers of the society. They have democratic control over its organization and management. It is formed for the purpose of achieving economic, social and educative benefits. Profit making is not the man aim of such organizations. Its aim is to eliminate the services of middlemen. It brings benefits for the welfare of the members with the help of applying the principals of all for each and each for all into practice. Its success depends on how much mutual co-operation in between the members has been developed.


The following are the main features of the Co-operative society:-

Its main aim is to bring mutual benefit to the members who compose it. Money making is not the main aim of the Co-operative Society. The Society looks after the welfare of the members. It aims producing and supplying goods to meet requirement of the members.

It collects capital from the members. The members purchase shares in the cooperative society and provide necessary capital to it. The cooperate society is divided into fix number of shares. To become a member of the society one must purchase at least one share.


There must be at least 15 members in a cooperative society. But one cannot become a member of the society unless he attains the age of maturity.

The cooperate society is based on the principle of democracy. Every member enjoys rights. Everyone has got only one vote. Policies of the society can be criticized by the members. So the members have a democratic control over the affairs of the society.

The shares of the cooperative society can be transferred to the members of the society. They cannot be transferred to nonmember.

Although it is not the main idea of the cooperative society to earn profit at any cost yet it often earns a handsome profit. The profit of the society is distributed to the members on the paid up capital but the profits of the consumers cooperative society are distributed in proportion to their total purchases during the trading period.

The cooperative society has a separate artificial entity. Thus its entity is independent of the members.


The consumers get their requirements direct from the producers or they supply their own requirements. hence the cooperative society eliminated middleman and makes the goods available to the consumers at cheaper rate.

Certain economies can be enjoyed by the members of cooperative society in the field of production an distribution. The society has not to bother from marketing the goods. the members are its regular customers and it need not advertise its good in the market.

The cooperative society sells goods at a cheaper rate. hence it can easily attract a good number of customers.

The society has got regular customers so it has not to keep any surplus stock in hand.

Sometimes the members render free services to manage the affairs of the society. They do not demand any remuneration.

The members are able to learn the principles of cooperation. They learn how to render services for the mutual benefits of themselves. They learn about economic and social aspects of human life.

Poor people accumulate and invest their small saving in the society which brings for them a better standard of living particularly it increases the income of agriculturists and the people who have been engaged in small and cottage industry.

It develops self-confidence and self -reliance among the general people. They learn the principal 'Self-help is the best help'. At the same time it develops them a sense of cooperation and sacrifices.

It solves unemployment problems of the under developed countries. People find employment in small and cottage industries to earn their livelihood.

Under this system of production and distribution a complete integration between the manufacturers wholesalers and the retailers is possible.

Under the system of production and distribution wealth cannot be concentrated in few hands. Equal distribution of wealth takes place under this system.


There is no master servant relationship in between the members of cooperative society. All are the owners managers, and workers of the cooperative society.


It suffers from lack of capital because it is an organization of poor people. They cannot afford large amount of capital so they cannot afford to expand the size of the business.

As the market for the products of cooperative society has been guaranteed so the organizers and managers do not pay keen interest in the management of cooperative society.

It fails to accommodate men of talent, skills and initiative because it requires free services from them. Such people may not be interested to join the cooperative society.


It requires cooperation and selflessness and other facilities which are rarely found in the general people. There is no scarcity of mean minded people living within individuals of the society. The society remains for its success.

Most of the members of the cooperative society are uneducated and unskilled. So the management of the society may fall in the clutches of selfish people.

    The cooperative society cannot be carried on successively in the fields where the demand for goods changes frequently.


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Principles of Commerce 1st Year Notes