Demonetisation

Bank deposits can help examine the source and pattern of cash. In exams link it with transparency and tax compliance.

Quick adaptation in a changing economic environment creates opportunity. Proper billing and digital payments help maintain sales.

When payments stop in a supply chain operations can slow down. In hard questions identify both cause and effect.

Demonetisation created a sudden economic change. It showed that businesses must prepare for uncertainty.

Pressure is higher when both cash purchase and cash sale are affected. Cash dependence increases risk.

The governing concept is the distinction between demonetisation and taxation policy. Demonetisation means withdrawing the legal-tender status of a currency note or coin, so that it can no longer normally be used to settle payments after the specified process and deadline. A tax-rate policy, in contrast, changes the percentage or amount charged by the government on income, sales, profits, or another tax base. Since the two measures affect different economic instruments, demonetisation cannot be described as a reduction in tax rates. Option A states this distinction accurately. Options B, C, and D refer to school fees, production technology, or exports and do not explain the meaning of demonetisation.

In a less-cash economy cash does not end but digital payments increase. Avoid exaggeration of terms.

Reports by payment mode help monitor actual receipts. This strengthens the controlling function.

When cash availability falls customers may postpone purchases. Therefore old sales data may not give correct signals immediately.

The governing concept is goodwill as the value of customer trust and a favourable business reputation. During a sudden currency-related disruption, customers need transparent records, legitimate payment channels, reliable service, and timely guidance. A company that issues clear bills, protects payment information, explains available alternatives, and responds honestly can reassure customers and strengthen its reputation. Therefore, option C is correct. Selling without bills or accepting improper payments may create legal and ethical risks, which can damage goodwill rather than improve it. Hiding complaints also reduces trust. The positive effect is not automatic; it depends on responsible conduct and effective communication during the disruption.

Cash payment was common in the informal sector. Cash shortage could affect both wages and work.

Security risks also rise with digital payment facilities. In exams write risks along with opportunities.

The governing concept is trade credit as a short-term arrangement under which a supplier allows a buyer to receive goods or services and pay later. Demonetisation can create a temporary shortage of usable cash, delays in withdrawals, and uncertainty in routine transactions. In such circumstances, a trustworthy supplier may extend controlled credit so that a business can continue purchasing inventory and serving customers while arranging payment. Thus, option A gives the valid reason. Trade credit does not mean that goods are free, so B is incorrect. Bank accounts do not become illegal, and sales do not automatically double; therefore C and D are also implausible.

Greater use of bank accounts is linked with financial inclusion. It increases participation in the formal financial system.

Legal tender is recognised by law for payment. In demonetisation this recognition is withdrawn from some notes.

The governing concept is opportunity recognition in entrepreneurship. A crisis may disrupt established habits, but it can also reveal an urgent unmet need. When access to cash became difficult, many consumers and businesses looked for convenient digital payment methods. E-wallet companies that offered usable technology, acceptable security, and easy transactions could respond to that need and experience increased demand. Therefore, option A is correct: a difficult environment can produce a new market opportunity for an enterprise that solves a real problem. Options B, C, and D use absolute statements and are incorrect. Entrepreneurship does not always stop, customer convenience matters, and technology can either increase or reduce demand depending on how it serves users.

Cash shortage was a short-term effect while promotion of formal transactions was a long-term objective. Keep effects and objectives separate.

The governing concept is the cash budget, which estimates expected cash inflows and outflows over a future period. Demonetisation could change when customers paid, when money could be withdrawn or deposited, and when suppliers and employees had to be paid. These changes might create temporary shortages even when the business remained profitable on paper. Revising the cash budget would help the owner forecast available cash, rank urgent payments, negotiate supplier credit, and avoid avoidable default. Hence option A is correct. Expenses did not disappear, customers did not necessarily vanish, and budgeting is directly related to liquidity management; therefore B, C, and D are false.

After demonetisation, the availability and usability of cash could be disrupted. Keeping card, UPI and bank-transfer facilities along with cash reduces dependence on a single payment method and helps the shop continue sales. Accepting only cash is the closest but incorrect option because customers may be unable to pay during a cash shortage. Exam tip: diversification of alternatives and business continuity are key signs of risk management.

During cash shortage consumers prioritise essential goods. Purchase of luxury goods may be postponed.