Law Legal Studies · Commerce Accountancy

Partnership and Business Law

1,007 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

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

__________ 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 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.

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

In the absence of an agreement, partners are entitled to ___________.

  1. Salary

  2. Commission

  3. Interest on Loans and Advances

  4. Profit share in capital ratio
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A partnership deed is a written legal document to avoid unnecessary misunderstanding, harassment and unpleasantness among the partners in the event of any dispute.

Partners can make or insert clauses in their partnership deed.

In case if partner does not make agreement or deed, then partners are entitled for interest on loans and advances and their profit sharing ratio will be equal. They are not entitled for salary and commission.

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

At the death of a partner following entries can be made:

  1. Transfer all balance from capital account of partner to loan account.

  2. Pay cash immediately from his capital account.

  3. Transfer all balance from capital account of partner to partner's executions account.

  4. Both B & C
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

At the time of the death of a partner, firm gets reconstituted. In reconstitution assets and liabilities are revalued, and the resultant  profit and loss has to be transferred to the capital accounts of all partners after including the deceased partner. Value of goodwill is raised and surrender value of joint life policy, if any, is taken into account. After ascertaining the amount due to the deceased partner, it should be transfer to his capital account and from there transfer to his executor's account.

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

_____________ A/c is to be credited for amount of capital to be brought in by the partner.

  1. Cash/Bank

  2. Partners' Capital

  3. Partners' Current

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

When a new partner brings in capital, the journal entry involves debiting Cash/Bank A/c and crediting the Partners' Capital A/c to reflect the increase in equity contributed by the partner.

Multiple choice introduction of business laws business law and contract act business studies

The legal representative or any other person of an individual who is dead is liable to pay ta, x only if _________________________.

  1. The business has been carried on by the legal representative

  2. The business has been carried by the legal representative or any other person

  3. The business has been carried by any other person

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

Under tax law, a legal representative is liable for the tax of a deceased person only to the extent of the assets inherited or if they continue the business.

Multiple choice business organisation capital market money markets participants in money market types of markets

A partner of a trading or non trading firm signs a Negotiable instrument liability incurs in ______.

  1. the name of the firm.

  2. in the name of partner.

  3. both a & b.

  4. none of the above.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A partner of a trading or non trading firm signs a Negotiable instrument liability incurs in the name of the firm. When a maker or holder of the negotiable instrument signs a document, it should be signed in the name of the firm. Signing negotiable instrument in the name of the partners is not valid.

Multiple choice organization of commerce and management joint hindu family business and cooperative society cooperative organisation features, organisation, advantages and disadvantages of cooperative organisation introduction to huf

In HUF business, all the members own the business jointly.

  1. Partly true

  2. True

  3. Partly false

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

As established, members of an HUF own the business assets jointly by virtue of their birth into the family.

Multiple choice book keeping and accountancy adjustments drawing account of partners interest on drawings interest on partner's drawings and capital

Partners are supposed to pay interest on drawing only when provided by the ______________.

  1. Partnership Act

  2. None of these

  3. Agreement

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

Interest on Drawings: No interest is to be charged on the drawings made by the partners, if there is no mention in the Agreement and  If a partner carries on any business of the same nature as and competing with that of the firm, he/she shall account for and pay to the firm, all profit made by him/her in that business.

Multiple choice book keeping and accountancy adjustments drawing account of partners interest on drawings interest on partner's drawings and capital

The interest on partner's capital accounts is to be credited to_________. 

  1. partner's capital Accounts

  2. profits and loss Accounts

  3. interest account

  4. all of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Interest on capital is an appropriation of profit paid to partners. It is credited to the partner's capital account (or current account) to increase their equity in the firm.

Multiple choice book keeping and accountancy adjustments drawing account of partners interest on drawings interest on partner's drawings and capital

Where a partner is entitled to interest on capital contributed by him, such interest will be payable: 

  1. Only out of profits

  2. Only out of capital

  3. Either (a) or (b)

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Interest on capital is generally treated as an appropriation of profits, meaning it is only payable if the firm earns a profit. It is not a charge against profits unless specifically agreed upon in the partnership deed.