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 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 drawings only when ______ by the _________. 

  1. Provided, agreement

  2. Permitted, Investors

  3. Agreed, partners

  4. A & C above

Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
Partners are supposed to pay interest on drawings only when they are provided by the agreement and are agreed by the partners. 
Multiple choice book keeping and accountancy cost accounting: an introduction fundamental concepts of cost meaning, elements and classification of cost methods of costing

A Joint Venture has a life of fixed period of time.

  1. True

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

A joint venture is typically formed for a specific project or purpose, but it is not strictly limited to a fixed period of time by definition; it can continue until the project is completed.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

The liability of a partner in profit is ________.

  1. limited.

  2. unlimited.

  3. limited to his capital.

  4. limited to his share of interest in the firm assets.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In a general partnership, the liability of each partner for the debts and obligations of the firm is unlimited.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

In the case of loss to any party caused by a partner due to negligence or tort the loss shall be borne by ___________________.

  1. All the partners in their capital ratio

  2. All the partners in their profit sharing ratio

  3. By defaulting partner only

  4. Managing partner only
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In the case of loss to any party caused by a partnerdue to negligence or tort the loss shallbe borne by all the partners in theie profit sharing ratio.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

In the case of loss caused by fraud or misrepresentation made by a partner the same shall be borne by ______________.

  1. All the partners in their capital ratio

  2. All the partners in their profit sharing ratio

  3. Defaulting partner only

  4. Managing partner only
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In the case of loss caused by fraud or misrepresentation made by a  partner the same shall be borne by defaulting partner only.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

Which of these is not an implied authority of a partner in the absence of any specific provisions in the partnership deed _____________________.

  1. To buy or sell goods on behalf of the firm

  2. To receive payment on behalf of the firm

  3. To sue on behalf of the firm and defend suit in the name of the firm

  4. to submit a dispute relating to the firm for arbitration
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Under the Indian Partnership Act, a partner does not have the implied authority to submit a dispute relating to the business of the firm to arbitration.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

Partner share profit or loss _______________.

  1. Equally

  2. Proportionate to their capital

  3. As agreed in the partnership deed

  4. Based on qualification and experience
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Partners share profits and losses according to the terms specified in the partnership deed.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

Which of these provisions are found in Partnership Act regarding sharing of profit and loss by partners ? 

  1. share the profits and losses in the ratio of their capital contributions

  2. share the profits and losses equally irrespective of any agreement between them to the contrary

  3. share the profits and losses equally in the absence of any agreement to the contrary between them

  4. share the profits and losses in the ratio of their personal effoks input
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

According to the Indian Partnership Act, in the absence of an agreement, partners share profits and losses equally.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

The right to indemnity is lost on ___________________.

  1. the dissolution of the partnership

  2. the death of the partner

  3. the retirement of the partner

  4. neither (a) nor (b) nor (c)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The right to indemnity is a fundamental right of a partner to be reimbursed for expenses incurred on behalf of the firm; it is not lost upon dissolution, death, or retirement.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

Interest on capital is given from profit and loss appropriation account to a partner __________________.

  1. Only if allowed as per agreement

  2. Only if there are any profits in P&L appropriation account

  3. Both a & b

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

Interest on capital is that amount which any partner receives at the end of financial year beacuse of his capital being invested in business. Moreover, interest on capital is not charge on profits, that is, interest is based on the profits earned by business in that year.

Interest on capital is given to partners only when it is mentioned in the partnership deed or agreement and if the company has earned any profit in the respective year.
If there is any loss in the business, interest on capital will not be provided to partners.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

Which of the following would not be found in a partnership appropriation account?

  1. Interest on capital

  2. Interest on loan by partner to partnership

  3. Interest on drawings

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

partnership appropriation account is to allow adjustments to be made to the net income from the profit and loss account before distribution of any residual net income is made to the partner capital accounts. The adjustments include such items as partner salaries and interest on partner capital, loans and drawings accounts.

Multiple choice book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

At the time of dissolution of the firm, loan from partners relative is _________ .

  1. transferred to Realisation Account

  2. not transferred to Realisation Account

  3. transferred to the Partner's Capital Account

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

A loan from a partner's relative is an external liability of the firm. Therefore, it must be paid off to outsiders before any payments are made to partners, and it is transferred to the Realisation Account.

Multiple choice book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

On the dissolution of a firm, loan from the wife of a partner is treated as ____________.

  1. Loan from the partner

  2. Outside liability

  3. Preferential liability

  4. Liability payable after all other debts have been paid
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Loan from a partners’ wife is to be treated as a normal creditor. 

The basic aim of providing a loan in the name of partner’s wife is to by-pass the legal restrictions on the loan from a partner to the firm.

Multiple choice book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

Application to court for dissolution of a firm can be made :

  1. Where the partnership is at will

  2. Where the partnership is not at will

  3. Where is the partnership is for a fixed duration

  4. In all cases
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When the partnership is not at will dissolution can be made by application to court. Any partner can file a suit in the court for dissolution. Where the partnership is at will partner in a partnership can dissolve the firm by giving notice of dissolution to other parties. Where the partnership is for a fixed period, the partnership comes to an end on a date specified in partnership deed.

Multiple choice book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

Dissolution of partnership between all the partners of the firm is called __________.

  1. Dissolution of the firm

  2. Dissolution of partnership

  3. Winding up of firm

  4. Termination of firm
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Dissolution of partnership is different from dissolution of firm. Dissolution between partners does not lead to dissolution of firm. But if dissolution is between all the partners of a firm then it leads to dissolution of firm because if there are no partners to work then firm will automatically get dissolved. For partnership minimum two persons are required. If there are no partners then there is no partnership firm.