Category: Commerce Notes PPT

The determination of the price for a product or service is not easy. Several other factors govern it. The theory of cost definition states that the costs of a business highly determine its supply and spendings. The modern theory of cost in Economics looks into the concepts of cost, short-run total and average cost, long-run cost along with economy scales. 

 

The cost function varies concerning factors such as operation scale, output size, price of production, and more. The theory of cost production needs to be understood in detail by economists to run their company and increase its profit and productivity. This article covers all you need to know about cost concepts.

 

Types of Costs

• Accounting Costs / Explicit Costs: The cost of production including employee salaries, raw material cost, fuel costs, rent expenses and all the payments made to the suppliers from the accounting costs.

• Economic Costs / Implicit Costs: According to the modern theory of cost in economics, the investment return amount of a businessman, the amount that could have been earned but not paid to an entrepreneur and monetary rewards for all estates owned by the businessman form the economic costs. These costs include accounting costs and the money also returned which the owner could have earned from elsewhere apart from the business.

• Outlay Costs: These are the recorded account costs or actual expenditure spent on wages, rent, raw materials and more.

• Opportunity Costs: These are the missed opportunity costs. They are not recorded in the account books but show the cost of sacrificed or rejected policies.

• Direct / Traceable Costs: These costs are easily pointed out or identified expenditures such as manufacturing costs. Such costs cater to specific operations or goods.

• Indirect / Non-Traceable Costs: These costs are not related directly or identifiable to any operation or service. Costs such as electric power or water supply are some examples because these expenses vary with output. They generally have a functional relationship with production.

• Fixed Costs: Such costs do not vary with output and are fixed expenditure of the company. For example, taxes, rent, interests are all fixed costs as they do not vary within a constant capacity. Any company cannot avoid these costs.

• Variable Costs: These costs vary with output and are known as a variable cost. For example, salaries of the employee, raw material costs all fall under variable costs. These directly depend on the fixed amount of resources.

 

Theory of Cost in Economics

The modern theory of cost in Economics also specifies economies of scale where an increased production decreases the cost per unit of production. The returns to scale first increase, then stabilize for some time and then decrease. Let’s take a look at the different types of economies—

• Technical: Technical economies include investment in machinery and more efficient capital equipment to increase production efficiency.

• Effective Management: When an organization increases operation, they need a better division of labor into various sub-departments for efficient management.

• Commercial: A large amount of components and raw materials is needed with increased production. Hence raw material costs decrease. The advertisement cost for a unit of production also falls, which increases.

• Finance: With a raised Finance, any company becomes popular. Their banking securities increase and Finance is raised at a much lower cost.

• Risk Management: As the firm becomes more diverse, risk-taking factors also increase.

 

Comparing Short Run and Long Run Costs

As per the theory of cost analysis, during the short run period, a company tries to increase its output by changing only the variable factors such as raw materials or labor. The fixed variables remain untouched. The long-run period is where the company can change any factor to obtain desirable outputs as per their interests. Ultimately all these factors result in cost.

 

Solved Examples

1. Draw a relationship between Total Cost, Total Fixed Cost and Total Variable Cost of a Business.

For any business, 

 

Total Costs (TC) = Total Fixed Cost (TFC) + Total Variable Cost (TVC).

 

2. What is the average fixed cost?

Average fixed cost is defined as the total fixed cost per unit of production. The total fixed cost divided by the number of units gives the average fixed cost.

 

Fun Facts

• The average total cost is the sum of the average variable cost and average fixed cost.

• Marginal cost can be calculated as the total change in cost upon a total change in output.

• Electricity charges are neither fixed nor variable costs. Instead, they are semi-variable costs.

• Stair Step variable cost remains constant for a fixed output. But when the output suddenly exceeds its limit, the cost immediately jumps to a new higher level. The graph of total variable cost v/s output looks exactly like a staircase for such cases.

• According to the modern theory of cost in Economics, the positive slope in the long-run total cost average curve is due to diseconomies of scale.

When you are defining a transport system, you can define it as a set of relationships that occurs between sets, networks and demand. All the components of transport are designed in such a way so that the movement of passengers, freight and information can be facilitated either as a separate component or as joint components.

First let’s get information about what the basics of this transport system is, then we will move towards its relationship with economic growth.

Firstly the Transport System Includes the:

• Nodes: These are the points where the movements are basically generated, transmitted or ended, that is it is the exit or entering point in a transport system. There is variation in them according to the geographical systems

• Locations: These are the nodes where demands are expressed as origin, destination or they are expressed as a point of transit. In simple language, it defines demands and where it is taking place

Here we get to know about the transport system in brief and the details will show up further in this article. Now let’s look at its role in economic development. 

Transport System and Economic Development 

The Transport System and Economic Development are tightly coupled with each other. A well-knit transport system that is well-coordinated contributes to the sustained growth of any country. One can say that it is the transport routes that govern the basic arteries of the economic system of a country. It is the link between production and consumption; hence a transport system can also be deemed as the controller of the national economy. A country is progressing if there is transport moving in and out of it. This article will look closely into the elements of a transport system and see how the Transport System and Economic Development in India are interrelated.

If a product is produced at a  place it is necessary for the producer to make that product to reach its consumer. For that this transport system will work. Let’s take an example: if you have ordered anything online from an app, your producer will produce the product and this app will have its own delivery people who will transport your product to your doorstep. This provides them with the money and you with the thing of your necessity, it is as simple as that. Thus, it will only play a role in increasing the economic growth of the country also.

Role of the Transport System in Daily Life

A transport system plays a vital role in providing and improving access to different parts of a geographical region which is important for businesses as well as individuals. A transport system supports both freight and personal movements. In the business sector, the business and supplier or the business and the market need an efficient transport system to work smoothly. In the household sector transport is used as the means to go to offices, schools, shops, etc. The transport system is used widely by individuals for personal and leisure activities as it connects them to recreational, social, and medical facilities. 

Even for the people who are required to travel or for normal people who are going to their work daily, they use the method of transport to travel to their workplace and this transport can be anything: a bike, a car, a bus or anything that will make the person reach their destination.

The transport system is the main thing that connects people all around the world. If you want to meet someone, then also you are going to take help from the transport system. All the things in this world now seem to be impossible without a transport system. Thus, it is the basic necessity of all people across the world.

Core Components of a Transport System

Although you get a brief overview of these components, let’s have a look at what are the basic core or necessary components that are going to make a transport system.

Transportation can take place if the below described 4 essential components of the transport system are in place:

1. Modes 

These mostly take the form of vehicles that are used for conveyances. They support the mobility of freight and passengers. There are modes which carry only freight or only passengers, and then there are the mixed kinds which carry both.

2. Infrastructure 

The transport system needs physical support in the form of routes (rail tracks, highways, canals, etc.), and terminals (bus depot, airports, etc.). Superstructures or moveable assets also form part of the infrastructure, for example, the runway of an airport. The moveable assets have a shorter life span.

3. A System of Linked Locations Denotes Networks 

The spatial and functional organization of a transport system. This system defines which are the connected locations and how they are serviced. There could be locations that are more accessible with more connections while others could be poorly accessible with a lesser number of connections.

4. Flows

This describes the movement of freights, people, and information over their networks. A flow is characterized by an origin, intermediate locations, and a final destination.

Forms of Transport

There is not just a single mode of transport for people to travel; there are many. Let’s have a look at different forms.

The transport system has many forms like roads, railways, air, and water.

Road Transport

Road transport is the oldest form of transport and comprises cars, hand-pulled rickshaws, bullock carts, auto, tempo, buses, etc. This is the transport where you need to use the roads. Short distances can be easily covered by using road transport, but only for long traveling, you will require other modes of transport like that of rail or air or water. Like if you want to travel overseas it is a fact that for the whole journey, you can not use road transport, you need to change your mode of transport.

Rail Transport

In India, the central government owns and manages the railway system. This system has numerous benefits, as outlined below:

It can be used for transporting bulky goods. Often the bulky goods can not be traveled through roads and for that, you are required to use this mode of transport only.

Rail transport is less polluted. As compared to other modes of transport, trains cause very less pollution.

It is economical for traveling longer distances. If you want to travel long distances then the road or air mode of transport is going to cost you a lot so you can say this is the cheapest means of transportation.

Water Transport

India has a long coastline as it is surrounded by water with the Bay of Bengal, the Indian Ocean, and the Arabian sea bordering the country. Water transport in the form of the movement of goods and people on waterways is common in India. Water transport carries people and goods within, as well as outside of the country. Although it doesn’t sound that interesting, traveling through water is the kind of experience that you should go for.

Air Transport 

Air transport is the fastest means of transportation and in India is a relatively recent development. Air transport is also the costliest means of transportation in general. The Indian air transport now ranks amongst the fastest growing aviation sectors in the entire world. If you want to reach a place a bit early or even if you are looking for an adventurous ride you should go for air transport. It provides you with a safe journey over long distances.

The Economic Importance of the Transport System in India

In a country like India, which is the size of a continent, the importance of efficient, dependable, affordable, and safe transport facilities is very high. The commercial markets in India and the economic resources are dotted across the length and breadth of the nation. Below are mentioned some of the important roles that the transport system plays in the economic development of India:

The entire production system of India depends on the seamless movement of inputs like raw materials, machinery, fuels, etc. In a similar manner, the output from various sectors needs the transport system to bring them to the market. Thus, the transport system in India is key in raising the volume of production of different sectors of this country.

Labor can move smoothly between different regions of the country, which helps in the expansion of industries. It also provides jobs to workers and opens up gainful employment opportunities for the unemployed laborers of India.

Concerning production, the transport system is clearly promoting geographical specialization. By developing the market for a variety of products in distant parts of the country, transport increases the extent of the market, thereby facilitating specializations.

The vast and unexplored resources of our country (forest, mineral, agricultural wealth) lie in many remote regions. Roads and railways are making it possible to venture into these areas and tap into their potential.

The cultural, political, and social outlook of people is getting widened by the transport system. It helps in removing superstitions, conservative attitudes, and ignorance amongst various sections of society.

A contract is a legal agreement binding two parties that defines what can and what cannot be done by either party. This agreement is enforceable by law and provides legal protection to both parties in case of a potential business deal. The purpose of a contract is:

There are many kinds of contracts that are classified on the basis of mode of creation, its enforcement, and the extent of its execution. In this article, we will consider the types of contracts that are based on their enforcement or validity.

Classification of Contracts 

Contracts are broadly classified into three different categories, as follows:

• Contracts Based on the Validity or Legal Effects – Contracts that are based on legal implications fall in this category of contracts.

• Contracts Based on Performance or Execution – The signing parties perform their duties based on the contractual agreement, and contract execution is the process that defines it. 

• Contracts Based on Formation or Mode of Creation – When a contract is created, various aspects are taken into consideration, like whether it is a written contract or not, etc. 

Contracts Based on Validity

Contracts are divided into five types based on their enforcement/validity:

1. Valid Contract

2. Void Contract

3. Voidable Contract

4. Illegal Contract

5. Unenforceable Contract

Valid Contract

The valid contract definition says it is a contract that is enforceable by the law. For a contract to be enforceable, it has to meet the requirements of section 10 of the Indian contracts Act 1872, which are:

A lawful offer and acceptance must exist to form a valid contract. In section 2(a), the definition of an offer is specified. Section 2(b) states that after an offer is accepted, it becomes a promise.

There is a lawful consideration to it, which is defined in section 2(d). Consideration is something to be given in return to the promisor and is the foundation of every contract. Without consideration, the contract does not exist. The consideration should not be immoral, unlawful, or against public policy.

The Signing Parties Must be Competent, which is Defined as:

• They must be a major, i.e. 18 years or above.

• They must possess a sound mind.

• They are not disqualified by the law.

• Parties have free consent, as defined in section 14 of the act.

Let Us Clarify this With a Valid Contract Example Given Below:

• X says to Y that he will sell his car to him for Rs.1,00,000. This is a valid contract if:

• X wants to sell it, not under any influence.

• Consideration of X to sell the car is free.

• If Y accepts the offer, then there is acceptance.

Void Contract  

The void contract has been defined under section 2(j) of the Indian contracts act, 1872. A void contract was once a valid contract, but it has become void now due to changes in some of the original conditions. There is no obligation or rights concept in a void contract and is not enforceable by either the parties. These contracts are not covered by the law and cannot be made valid even if both parties consent. 

Section 24 to 30 Defines the Following Types of Void Contracts:

• Any agreement in which one party is restricted to enforce their legal rights is a void contract. These legal rights arise under the contract as per the usual legal proceedings in the ordinary tribunals.

• Any agreement where there is a limit on the time of enforcing the contract rights

• Agreements that are unlawful in parts

• Agreements in Restraint of Marriage– Any agreement (apart from involving a minor), where there is restraint in marriage, is a void agreement.

• Agreements in Restraint of Trade– Any agreement which restricts a lawful trade or profession is considered a void contract.

• Unmeaning agreements

• Wagering or gambling agreements.

Voidable Contract

A voidable contract has all the elements of a valid and enforceable contract but has some flaws that could enable either party to void it. In such a contract, either of the parties has a choice of avoiding their duties. Some of the examples where a void contract becomes voidable are:

• Either of the parties is a minor.

• There is an injured party involved.

• The consent of one party was not free.

• One party was suffering from a legal disability.

• Any of the parties was a victim of fraud at the time of execution of the contract.

The difference between valid and voidable contracts is that a void contract is not enforceable by law at any cost, but a voidable contract is treated as void only if a party chooses to treat it as voidable by opposing the enforcement of the contract.

Illegal Contract

An agreement may be unlawful or illegal, as outlined in section 23 of the act. A contract that breaks some rule that is criminal or is against public policy is deemed as illegal. 

One must distinguish between a void and an illegal contract. An illegal contract is one whose consideration is forbidden by the law, while in the case of a void contract, the law only says that the court will not enforce it in the event it is made. By this definition, all illegal contracts are void, but not all void contracts are illegal.

Unenforceable Contract

These contracts are good in substance, but due to some technical flaws, they are not enforceable by the law. The flaws could be:

• Absence of writing

• No registration

• Absence of proper stamp

• Time-barred due to the law of limitation

• Ambiguous terms of the contract

• One of the parties has a voidable contract.

Such contracts cannot be enforced against any of the parties involved. Let us consider an unenforceable contract example to understand it better:

Let us say there is a contract where parties negotiate to sell paper clips for 10 Rs. But due to a printing mistake, the contract says 100 Rs. In this case, the contract would be declared unenforceable and would need to change to conform to the original intent of both parties.

How to Prepare for a Test on Types of Contract in Commerce

• Go through Types of Contracts Based On Validity – Explanation, Classification, and FAQs on

• Read the entire page and then make mini notes on topics that matter

• Follow the sequence while jotting down important pointers from the page

• Refer to your course textbook in addition to this page and see if all the points have been covered

• Write everything down in your own words instead of copying and pasting

• Highlight all the key portions using a colored pen

• Revise from this page to clear any doubts and also before an exam so as to score well

provides free-of-cost study material on Types of Contracts for Commerce students. is India’s topmost online tutoring portal that has quality study material on its website. The study material on has been designed keeping in mind the board’s general guidelines and so, students and parents can rest assured that they are preparing for the examinations in a proper manner. The matter is free of cost and can be accessed by downloading in the form of a  PDF as well.

As you progress through the multiple disciplines of commerce, you will become familiar with how companies raise their capital. Raising capital is perhaps the most challenging task for any company. Most private and public limited enterprises increase their corpus via share capital. 

There are several different types of share capital. At first glance, it might seem complicated. But here – at – we will try and highlight these technical issues in lucid language.

You will have to first understand what share capital means.

Meaning of Share Capital

Simply put, share capital is the total sum raised by any organisation by issuing shares. All organisations need a steady flow of capital to continue their expanding business. Remember that a company is an artificial person with its own legal identity.

When people voluntarily contribute money to an entity’s owned corpus, they automatically become co-owners of that entity. Keeping this in mind, the total capital collected by any organisation is its share capital, and its contributors are shareholders.

When modern business structures first started, share capital and its types were limited and easy to understand. Shareholders were co-owners of a company whose shares they had bought.

As businesses evolved, share capital types increased. Since the ownership of an organisation also amounts to bearing responsibility, sharing day-to-day operations and passing around losses incurred, individual shareholders backed away. They buckled under the added pressure.

Others stepped in. They were rewarded with preferred shares. Promoters of large companies were also offered extra advantages. Thus, the kinds of share capital became complicated.

The Companies Act (2013) has specific guidelines for all existing companies and the various ways they issue shares.

When it comes to organisations, the terms ‘capital’ and ‘share capital’ are practically synonymous. 

When a company is registered, its papers, including the Articles & Memorandum of Association, must reflect the total capital.

Break Down of Share Capital 

The shareholders equity section on the balance sheet has a report of the share capital by the firm. The same is bifurcated in different sections and line items based on the source of funds. There are usually three different line items as follows: 

On a balance sheet, the stock sales are listed at nominal par value. Whereas, the additional paid-in capital is listed at the actual price paid over par for the shares. 

When a company publishes the amount of share capital it would contain only the payments which are made directly from the company of acquisitions. The share capital of the company is not impacted later by the sales and acquisitions of the securities or even the rising and falling rates of the same on the open market. 

It is the company’s choice to have more than one public offering after the initial public offering also known as IPO. The later sales would have an impact and increase the share capital on the balance sheet. 

The term share capital has a different context and could mean different things. A company can legally raise an amount of money on selling the shares and hence there are few contexts to the term as it could mean several types of share capital. 

Classification of Share Capital

There are two different classes of share capital. They are:

Equity Share Capital

• Consisting only of equity shares and sans preference shares, this class carries the maximum benefits and also maximum losses. If a company’s shares are doing well on the Stock Exchange, shareholders will benefit as their company will pay extra dividends. Plus, their shares will also have higher resale values.

• However, if an organisation loses money, its equity shareholders have to bear the burden of losses. At times, they might even have to sell their shares at below-par values. It is this risk factor that many prospective shareholders cannot stomach. 

• Note that those who hold equity shares are eligible to vote at every organisation’s Annual General Meetings or AGMs.

• It consists only of preference shares. As the name suggests, those who hold preference shares receive preferential treatment. These extra advantages are laid out clearly under Section 43(b) of the Companies Act (2013).

• Preferential shareholders have the right to receive dividends before an equity shareholder. They are, indeed, treated differently. Note that if a certain company is running in losses and is unable to issue dividends, preferential shareholders will also receive no extra bonuses.

• Furthermore, preference shareholders are eligible to receive their share of a company’s capital if the organisation winds up. 

Tasks for advanced commerce students: Now that you know of Stock Exchanges, find out the details of some of the world’s largest exchanges. You will be surprised by the wide range and how various exchanges operate. Then, you can look up on NASDAQ, FTSE, Tokyo Stock Exchange and other entities.

In India, the BSE and NSE are the largest exchanges. Did you know that every day, a brass bell is rung to announce the commencement of operations?

Different Types of Share Capital

There are several types of shares capital. Follow this list carefully and try and differentiate what each kind entails.

1. Authorised or Registered Capital: Also known as ‘nominal capital’, it is the maximum share capital, which any company can legally issue. When a company is registered, it has to provide its Memorandum of Association, as previously mentioned. This MoA indicates how much capital a specific company can raise via the issue of shares.

This type of share capital indicates an organisation’s maximum amount of share capital. If it is a Limited company, its MoA will also have details on how much capital is being used to start that enterprise besides how many shares it intends to issue.

If the authorised share capital is increased under any situation, the concerned regulators must be notified. 

2. Issued Capital: Whenever shares are floated for general consumption, only part of the total authorised share capital is perused. This portion of the total share capital is issued capital. Issued capital will always be much lower than an entity’s authorised or registered capital. 

In extraordinary situations, a company may decide to issue its entire share capital. Such situations arise when a market is in a bear-hug. Only then will issued capital be equal to registered capital.

Find out what the words ‘bear’ and ‘bull’ mean when it comes to stock markets. You can also use the Internet to see the famous sculpture of a bull standing menacingly near New York’s Wall Street. 

Fun Fact: It is popularly called ‘Charging Bull’ and was installed following the 1987 stock market crash.

3. Subscribed Capital: Once the issued capital is put up for shareholders, the total subscribed part – that which is booked by potential stakeholders – is termed as subscribed capital.

Of note here is the fact that not the entire issued capital may be lapped up immediately. Some companies may have difficulties finding buyers. The performance of a share issue depends on its subscribed capital. If this percentage (subscribed/issued capital) falls too low, that organisation may have to sell another round of shares.

4. Called-up Capital: It must be kept in mind that shareholders may be unable to pay the total sum of the shares they buy in one episode. They require time to settle the full amount outstanding. Therefore, terms like ‘First Call’ and ‘Final Call’ are used in every stock exchange.

Companies do not like waiting, however. Shareholders will be asked to pay a certain amount whenever they purchase shares. The total amount thus collected constitutes a company’s called-up capital.

5. Uncalled Capital: Remember called-up capital? Well, the unpaid portion that all shareholders will have to pay later, and which will then be regarded as subscribed capital, is uncalled capital.

A company may set a fixed date by which all outstanding dues are to be settled. Note that the terms mentioned during the share issue is final and no organisation can breach those pre-set conditions. 

One reason why every share issue has terms and conditions is to ensure that companies do not resort to mala fide practices while a certain amount is yet to be paid by a shareholder. Usually, uncalled capital constitutes a large portion of share capital.

6. Paid-up Capital: The amount which shareholders pay as soon as they buy shares of an entity is known as paid-up capital. It is shown on the asset side of a balance sheet. The greater the paid-up capital, the higher the sum raised during the share issue. The amount thus generated is channelled into an organisation’s cash flow.

7. Reserve Capital: Reserve capital is defined as that uncalled capital owned by an enterprise that can be issued only in the event of that company’s dissolution of business – regardless of the reason. If a certain firm is not going ‘under’, it cannot issue its reserve capital.

This concept of reserve capital is governed by The Companies Act’s Sec. 99.

Under existing law, no company can turn reserve capital into ordinary capital, save for a court’s orders. This reserved portion cannot be put up by an enterprise as collateral for any loans. Also, if a firm decides to reduce its core capital, it cannot cancel its portion of reserve capital.

8. Fixed Capital: A company’s existing assets constitute its fixed capital. Such assets may include land, machinery, Intellectual Property, plants or mills and any similar unmovable assets. 

Knowing these topics will give up an edge over your competitors in exams! Refer to ’s website to read up on more such topics. You can also go through study materials for senior secondary commerce and attend live interactive classes for difficult topics.

Advantages of Raising Share Capital

Raising capital through sales of shares has many advantages to the company raising capital through sales of shares. The company does not have to pay any interest on the raised capital nor it has any repayment terms that have to be adhered to by the company. In case of loans from banks or investors the company will be entitled to regular repayments and will be charged interest as well depending upon the current market and lender terms. 

There are payments of dividends to shareholders that have to be paid but the same is not a compulsion and can be halted if necessary. Hence, the company gets more flexibility over its financial management. 

There are no set rules or obligations attached to the share capital raised through sales of shares. Whereas, a creditor can have certain terms of usage of the capital invested or loaned. This will restrict the company from taking relevant and quick decisions related to finance. 

Raising capital through equity shares can be controlled by the company. The number of shares to be released to the public is decided by the company. The amount per share is decided by the company too. In case, there is any further requirement of capital the company can again decide to release more shares to the public for buying and raising more capital. 

The risk of bankruptcy subsides as well as shareholders cannot force a company into bankruptcy unlike banks and creditors if the company fails to pay the interest or repayments. 

Disadvantages of Raising Share Capital

Every share sold to the public to raise share capital is losing a bit of ownership of the company. It effectively reduces the control over the company as shareholders have the right to vote on business deals and decisions. The corporate policy and even the management of the company would have interference by the shareholders. In the event, the shareholders have the majority of the shares of the company, they can decide to change the current leadership and bring their choice of management into the company. 

Shareholders take more risk than creditors as they can not force a company into bankruptcy and hence demand higher ROI (Return on Investment) from the company. 

The World Trade Organisation or the WTO is the only such global international entity that deals with the rules and regulations related to international trade between different countries. Such regulations and obligations only cover countries that hold membership to the World Trade Organisation. The functioning of the WTO is based on negotiated and signed WTO agreements between member countries. It has to be kept in mind that the WTO agreements will have to be ratified by the parliaments of the member countries. 

In Which Year Was WTO Established? 

The World Trade Organisation was established on January 1, 1995, following the Marrakesh Agreement which was ratified on April 15, 1994. The General Agreement on Tariff and Trade was substituted by the Marrakesh Agreement. 

Do You Know? 

The income in the annual budget of the World Trade Organisation is accumulated from the contribution made by member countries. The formula for the contribution is consistent with the volume of international trade of each member country. India has already made an advance payment to the tune of Rs.33 crores as its due contribution to the WTO for the year 2020. 

Objectives of WTO 

The six key objectives of the World Trade Organization have been discussed below. 

1. Establishing and Enforcing Rules for International Trade 

The international trading rules by the World Trade Organisation are established under three separate agreements – rules relating to the international trade in goods; the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the General Agreement on Trade in Services (GATS). 

The enforcement of rules by the WTO takes place by way of a multilateral system of disputes settlement in the instances of violation of trade rules by member countries. The members are obligated under ratified agreements to honor and abide by the procedures and judgments. 

2. Acting As A Global Apex Forum 

World Trade organization is the global forum for monitoring and negotiating further trade liberalization. The premise of trade liberalization measures undertaken by WTO is based on the benefits of member countries to optimally utilize the position of comparative advantage due to a free and fair trade regime. 

3. Resolution Of Trade Disputes 

Trade disputes, before the WTO, usually arise out of deviation from agreements between member countries. The resolution of such trade disputes does not take place unilaterally but through a multilateral system involving set rules and procedures before the dispute settlement body. 

4. Increasing Transparency in The Decision-Making Process 

The World Trade Organisation attempts to increase transparency in the decision-making process by way of more participation in the decision-making and consensus rule, in particular. The combined effect of such measures helps to develop institutional transparency. 

5. Collaboration Between International Economic Institutions 

The global economic institutions include the World Trade Organisation, the International Monetary Fund, the United Nations Conference on Trade and Development, and the World Bank. 

With the advent of globalization, close cooperation has become necessary between multilateral institutions. These institutions are functional in the sector of formulation and implementation of a global economic policy framework. In the absence of regular consultation and mutual cooperation, policymaking may be disrupted. 

6. Safeguarding The Trading Interest of Developing Countries

Stringent regulations are implemented by the WTO to protect the trading interests of developing countries. It supports such member countries to leverage the capacity for carrying out the mandates of the organization, managing disputes, and implementing relevant technical standards. 

Features of WTO 

The major features of the World Trade Organization are –

• The scope of WTO is far more expensive than the erstwhile General Agreement on Trade and Tariff. For instance, GATT solely focused on goods while excluding textiles and agriculture. On the other hand, WTO covers all goods, services, and investment policies along with intellectual property. 

• WTO Secretariat has formalized and bolstered the mechanisms for the review of policies as well as the settlement of disputes. This aspect has become crucial due to the proliferation of member countries and more goods and services being covered by the WTO. Another important consideration in this regard is the substantial increase in open access to different international markets. 

• There are rules implemented for the protection of small and weak countries against the discriminatory trade practices of developed countries. 

• National Treatment articles and Most Favored Nation (MFN) clause permits equal access to markets for just treatment of both domestic and foreign suppliers. 

• Each member country of the WTO carries a single voting right and all members enjoy privilege on the global scale. 

• The WTO agreements encompass all the member states and act as a common forum of deliberation for the members. 

Roles and Functions of WTO 

The broad reach of WTO and its functions have been mentioned below. 

The international rules of trade provide stability and assurance and lead to a general consensus among member countries. The policies are reviewed to ensure that even with the ever-changing trading scenarios, the multilateral trading system thrives. It also helps in the facilitation of a transparent and stable framework for conducting business. 

The WTO, as a forum, allows for trade negotiations in the multilateral trading system. In the absence of trade negotiations, growth may stunt, and issues related to tariff and dumping may go unaddressed. Further liberalization of trade is also subject to consistent trade negotiations. 

The bilateral or multilateral trade agreements have to be necessarily ratified by the parliaments of respective member countries. Unless such ratification comes through, the non-discriminatory trading system cannot be put into practice. The executed agreements will ensure that every member is guaranteed to be treated fairly in other members’ markets. 

The dispute settlement by the WTO is concerned with the resolution of trade disputes. Independent experts of the tribunal interpret the agreements and give out judgment mentioning the due commitments of the concerned member states. It is encouraged to settle the disputes by way of consultation among the members as well. 

Resources across the world can be further optimally utilized by harnessing the trade capacities of the developing economies. It requires special provisions in the WTO agreements for the least-developed economies. Such measures may include providing greater trading opportunities, longer duration to implement commitments, and also support to build the sue infrastructure. 

Test Your Knowledge – 

1. Where is the headquarter of the World Trade Organisation located?

(a) Melbourne 

(b) New York 

(c) Doha 

(d) Geneva 

2. How many countries are members of the World Trade Organisation? 

(a) 164 member countries 

(b) 160 member countries 

(c) 144 member countries 

(d) 194 member countries      

3. Which of the following is the official language of the World Trade Organisation?

(a) Spanish 

(b) French 

(c) English

(d) All of the above   

4. Who among the following is the current director-general of the World Trade Organisation?

(a) Roberto Azevedo 

(b) Antonio Guterres 

c) Peter Sutherland 

(d) Kristalina Georgieva 

The World Trade Organization is introduced in schools when the topic of globalization is discussed. The world trade organization is a part of globalization as this organization is concerned with the facilitation of international trade between nations. It is an intergovernmental organization. There are a certain set of rules of the trade that are set between nations, the World Trade Organization is in charge of dealing with the rules of trade between nations. It is based on the set of world trade organization agreements that are negotiated and signed by the bulk of the world trading nations. The goal of this organization is to facilitate and help the businessmen and the producers of goods and services, exporters and importers to conduct their business according to the rules laid by The world trade organization.

The world trade organization is headquartered in Geneva, Switzerland it was established on 1 January 1995, it was created by Uruguay Round negotiations. The world trade organization‘s membership includes 164 members representing 98% of world trade, the budget is one 97 million Swiss Francs for 2020, the secretariat staff includes 623 members, the head of the organization is Ngozi Okonjo Iweala Who is known as the director-general.

The World trade organization has various aspects as it is an organization known for trade opening. It is also considered a forum where governments can negotiate trade agreements. It is also known as a place for governments to settle trade disputes. It is known as a system of trade rules. Most importantly the world trade organization is a forum where governments of various countries sit and try to sort out the many trade problems that they might face with each other.

While studying commerce it is extremely important to learn about this important organization. ’s team has curated the study material based on the World Trade Organisation this study material is a product of extensive research done by ’s expert team and The study material contains important facts and definitions which a student must know in order to get a good hold over the many functions and aspects of the world trade organization. The sari material on ‘s website is available for free download. The link is easily accessible and the material is available in a PDF format which will help students to download it and study it anywhere they want. It helps in glancing over the concepts before the examination so that students can learn about the main aspects.

This article mainly deals with the definition of World Trade Organisation the year in which it was established some important facts and objectives of portrait organization,  The features of World Trade Organisation and roles and functions of World Trade Organisation along with this ’s team has also curated practice questions so that students can keep in check their progress and check how much knowledge they have about the concerned topic.

The World Trade Organization is introduced in schools when the topic of globalization is discussed. The world trade organization is a part of globalization as this organization is concerned with the facilitation of international trade between nations. It is an intergovernmental organization. There are a certain set of rules of trade that are set between nations, the World Trade Organization is in charge of dealing with the rules of trade between nations. It is based on the set of world trade organization agreements that are negotiated and signed by the bulk of the world trading nations. The goal of this organization is to facilitate and help the businessmen and the producers of goods and services, exporters and importers to conduct their business according to the rules laid by The world trade organization.

The world trade organization is headquartered in Geneva, Switzerland it was established on 1 January 1995, it was created by Uruguay Round negotiations. The world trade organization‘s membership includes 164 members representing 98% of world trade, the budget is one 97 million Swiss Francs for 2020, the secretariat staff includes 623 members, the head of the organization is Ngozi Okonjo Iweala Who is known as the director-general.

The World trade organization has various aspects as it is an organization known for trade opening. It is also considered a forum where governments can negotiate trade agreements. It is also known as a place for governments to settle trade disputes. It is known as a system of trade rules. Most importantly the world trade organization is a forum where governments of various countries sit and try to sort out the many trade problems that they might face with each other.

While studying commerce it is extremely important to learn about this important organization. ’s team has curated the study material based on the World Trade Organisation this study material is a product of extensive research done by ’s expert team and The study material contains important facts and definitions which a student must know in order to get a good hold over the many functions and aspects of the world trade organization. The sari material on ‘s website is available for free download. The link is easily accessible and the material is available in a PDF format which will help students to download it and study it anywhere they want. It helps in glancing over the concepts before the examination so that students can learn about the main aspects.

This article mainly deals with the definition of World Trade Organisation the year in which it was established some important facts and objectives of portrait organization,  The features of World Trade Organisation and roles and functions of World Trade Organisation along with this ’s team has also curated practice questions so that students can keep in check their progress and check how much knowledge they have about the concerned topic.

Abbreviations are short forms of many lengthy phrases or long words. It becomes easier for you to read challenging and sophisticated words. For instance, TTYL means Talk To You Later. Here, TTYL is the short form for Talk To You Later. Most ordinarily used short forms are Doctor, Mister or Miss. Some other common short forms used on various social media platforms are Laugh Out Loud, I Don’t Know, and many more.

Abbreviations are also referred to as Acronyms. However, there’s a small difference between them. It is best used when you are writing short-hand. Here, you will learn more about different rules of Short Forms or Abbreviations. Also, you will learn some common abbreviations in English that you can use frequently.

 

What do you mean by Abbreviations?

Abbreviations mean using the short term words for long-form phrases or words. You can pick up words from the phrases to use in the form of abbreviations. Sometimes, you can also read abbreviations as words itself.

In simpler terms, an abbreviation may be reduced or compressed words and phrases. Many abbreviations begin with an Uppercase letter and finally ends with a full stop. 

 

Abbreviations: Rules

Some rules for creating abbreviations and commonly used abbreviations are as follows:

Rule Number 1: You can also use short forms for titles and professions. For example, you can use Dr Sharma instead of Doctor Sharma. It is one of the most common abbreviations that you will use.

Rule Number 2: If an individual says a short form in the 1st time, he or she should place the words within the parenthesis after using the term. For example, if you are writing the National Institute of Technology, you will have to write NIT in brackets. These are also common abbreviations that you will come across in your colleges.

Rule Number 3: You will have to use proper nouns in Uppercase. For common nouns, you need not have to use it in Uppercase. For instance, SBI has to be in capital letters that stand for State Bank of India.

Rule Number 4: Use short forms for words that you are familiar with. For example, you can use TV for Television, IAS for Indian Administrative Service, etc.

Rule Number 5: You can also use short forms for a few Latin words. For instance, you can use “e.g.” instead of “example.” When working in offices or writing assignments in college days, these abbreviations for common words will be helpful to you.

Rule Number 6: If you are using the whole date, you can also use short forms for months or days. For instance, Aug 22, 2020. The rules are followed based on the English abbreviations list. You can research more about it on the online platforms.

Rule Number 7: You can use the short form for a time. An individual can use the Uppercase letters to write the short form for a time. For example, PM for Post-Meridiem and AM for Ante Meridiem.

Rule Number 8: You can use short forms for all the time zones. For instance, CST stands for Central Standard Time. Also, some abbreviations of time zones denote most of the countries.

Rule Number 9: You can also use short forms for all the scientific words or measurement units. For instance, you can use KG for Kilogram. Similarly, you can use mph for meter per hour. You can check the list of common abbreviations that includes “gm” for “grams,” “ml” for “millilitres,” and many more. Also, when you are doing maths, these abbreviations in maths play a major role.

Rule Number 10: No need of periods (.) for a few abbreviations to point dates. 400 BC, 400 AD are such examples.

 

There are basically four types of short forms used in English 

Initialism

An initialism is developed from the 1st few letters of the words. You will have to pronounce the evert letter separately. For example, when referring to the Chief Operating Officer, you can use the abbreviation COO instead of pronouncing the entire word. You just take the first letters of the words. Also, some business studies abbreviations fall under this rule that includes BKPR for Bookkeeper, CIO for Chief Information Officer and many more.

Acronyms

When you take the first letters from a set of words, it becomes an acronym. For example, when you are pronouncing the Indian Space Research Organization, you can just take the first letter of the word, and it becomes ISRO.

Shortenings

When you omit the first and the last letter of the word, it becomes shortened. There are two different types of shortenings:

Type 1: These words are the real words that are used daily. For example, you use a words site instead of a website, app instead of the application. We use these words to communicate in real-time. 

 Type 2: These words are not real words. These words are used to make it easier when you speak. For example, you use Sat for Saturday and Feb for February. 

Contractions

When you omit a letter amidst the word, they form Contractions. You don’t have to put full stops when you are writing contractions. The initial letter will be in Uppercase only when the word is starting with an uppercase letter. For example, you can write “Dr” instead of “Doctor.” This is Type 1 Contraction. Also, you can write “he’s” instead of “he is.” This is a Type 2 Contraction. You can also go through the abbreviation list, as mentioned below in the picture.

Source: Google

Do you like saving time? Have you ever thought about what it would be like to use shorter forms of certain difficult words? Well, then abbreviations are a perfect thing for you to understand! Abbreviations are shortened versions of words and phrases. 

Abbreviations are all around us. What is important to note about abbreviations is that many of them are non-standard or informal, which means that several abbreviations do not mean the same. Some of them are not even recognized as real words. With this in mind, it’s important to avoid using abbreviations if you’re writing something formal, like a written assignment in school.