Law Legal Studies · Commerce Accountancy

Partnership and Business Law

1,019 Questions

Test your knowledge of partnership regulations and business law with these practice questions. The topics include the rights of minor partners, firm dissolution, retirement rules, and public notices. This material is crucial for law exams and legal studies.

Rights of minor partnersPublic notice requirementsFirm dissolution rulesPartner retirementHolding out partner principlePartnership deed provisions

Partnership and Business Law Questions

Multiple choice

The rule in Clayton case becomes applicable in banking transactions in the following cases:

(a) when death of a customer takes place (b) when the partner retires (c) when the guarantor withdraws his guarantee (d) when the director of a company dies who has been operating the account

  1. (a), (b) and (c) only

  2. (b), (c) and (d) only

  3. (a), (c) and (d) only

  4. (a) to (d) all
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Appropriation of Clayton's Rule is in following cases:

  1. Death/Insolvency of borrower
  2. Death/Retirement/Insolvency of a partner in partnership firm
  3. Death of a guarantor of a Cash Credit/Overdraft Account
  4. Joint account
Multiple choice

A partnership firm of X, Y and Z has been adjudged insolvent and its loan account is showing a debit balance of Rs. 3 lac. Its partner Y is having a saving bank account in which there is balance of Rs. 1.50 lac.

  1. The balance in partner’s account cannot be utilised for payment of dues of an insolvent firm.

  2. The balance in partner’s personal account cannot be utilised as that balance belongs to official assignee.

  3. The balance in partner’s account can be utilised by exercising the right of set off sue to his joint and several liabilities.

  4. The balance can be utilised before it is objected to by the partner.

  5. Any of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The balance in partner’s account can be utilised by exercising the right of set off sue to his joint and several liabilities.

Multiple choice

A joint venture company can be formed

a. by the transfer of a business to a new company by one party and the transfer of cash by the other. b. by both the parties subscribing to the shares in cash to an agreed ratio. c. when the promoter shareholder of an existing company collaborates with the other party through a cash payment for shares. d. when two parties share the business resources with each other.

  1. Both a and b

  2. Only a, b and c

  3. Only a, c and d

  4. Only a, b and d
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

This is the correct answer.

Multiple choice

Which of the following is/are correct about the joint ventures?

a. A joint venture is based on a MoU and should be signed by both the parties. b. Only the Foreign Investment Promotion Board (FIPB) can give approval for a joint venture in case of a foreign partner. c. Special parliamentary approval is taken for the joint venture companies incorporated in India.

  1. Only a

  2. Only b

  3. Only c

  4. Both a and c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This is the correct answer.

Multiple choice commerce sources of business finance - 2 lease financing non-institutional sources - medium-term long term sources of finance public deposits

The normal business operations may be affected in case the lease is not renewed.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The normal business operations may be affected in case the lease is not renewed- this is a true statement. For using an asset, a contract has to be made between the leaser and the leasee, which is known as a lease.

Multiple choice book keeping and accountancy admission of a new partner accounting treatment of admission of a partner partnership accounts: admission of a new partner reconstitution of partnership

General Reserve at the time of admission of a partner is transferred to ____________ .

  1. Revaluation Account

  2. Old Partner's Capital Account

  3. Capital Accounts of all partners, including new partner

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Sometimes a firm may have accumulated reserves not yet transferred to the partner's capitals accounts. These are in the form of general reserve, reserve fund etc. The new partner is not entitled to share in these reserves. Hence, at the time of admission, these reserves are transferred to the old partner's capital accounts in their profit sharing ratio. 
Multiple choice book keeping and accountancy admission of a new partner accounting treatment of admission of a partner partnership accounts: admission of a new partner reconstitution of partnership

In the absence of any agreement, it is presumed that the new partner acquires his share in profits from the old partners in the:

  1. New ratio

  2. Old ratio

  3. Sacrificing ratio

  4. Gaining ratio
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In the absence of a specific agreement, a new partner is assumed to acquire their share of profits from the existing partners in their old profit-sharing ratio.

Multiple choice book keeping and accountancy admission of a new partner accounting treatment of admission of a partner partnership accounts: admission of a new partner reconstitution of partnership

__________ is not essential requirement of a partnership. 

  1. An association of two or more persons

  2. Existence of a contract

  3. Sharing of profit

  4. Mandatory registration
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A partnership is formed by an agreement (contract) between two or more persons to share profits. Registration of a partnership firm is optional under the Indian Partnership Act, 1932, not mandatory.

Multiple choice book keeping and accountancy admission of a new partner accounting treatment of admission of a partner partnership accounts: admission of a new partner reconstitution of partnership

A new partner may be admitted to partnership

  1. With the consent of all the old partners

  2. With the consent of any one partner

  3. With the consent of two-thirds of the old partners

  4. With the consent of three-fourths of the old partners
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

According to the Indian Partnership Act, a new partner can only be admitted with the consent of all existing partners unless otherwise agreed in the partnership deed.

Multiple choice book keeping and accountancy admission of a new partner accounting treatment of admission of a partner partnership accounts: admission of a new partner reconstitution of partnership

A firm has an unrecorded investment of Rs 5,000. Entry in the firms journal on an admission of a partner will ________.

  1. Revaluation A/c dr. 5,000 to unrecorded investment A/C 5,000

  2. Unrecorded investment A/c dr. 5,000

  3. Partner's capital A/c dr. 5,000 to unrecorded investment 5,000

  4. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Multiple choice organization of commerce and management business risks and insurance meaning, importance and principles of insurance features and principles of insurance meaning and definition of insurance

An agent is_________between his principal and the third party.

  1. Connecting link

  2. Sub agent

  3. Partner

  4. None of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

An agent is not a connecting link, sub agent or partner between his principal and the third party. An agent can be referred as a person who acts on behalf of some other person. Agent always take an active role in order to create a specific effect on an activity.

Multiple choice adjustment of partners capital and death of a partner retirement/ death of a partner elements of accounts

In partnership, a minor _______________ .

  1. Cannot be a partner

  2. Can be a partner

  3. Can be admitted only to the benefits of a partnership

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A partnership is a contract between the partners. Hence a minor cannot be a partner in a partnership firm. However, according to the Partnership Act, a minor may be admitted to the benefits of a partnership. So while the minor will not be a partner he will enjoy all the benefits of a partnership.