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 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. 

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)

Under the Partnership Act, on which of these grounds a partner of a firm may sue for dissolution of the firm :

  1. Insanity of a partner

  2. Misconduct of a partner

  3. In both the cases

  4. Marriage of any partner
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Dissolution of the firm by the court can be done in both the cases when there is insanity of a partner or if a partner misconduct according to Section 44 of the Indian Partnership Act. Section 44 provides the various grounds for dissolution of firm by court.

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)

Which of the following will result in dissolution of firm?

  1. Retirement

  2. Death

  3. Explusion

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

Retirement, Death, Expulsion does not result in dissolution of firm. It only result in dissolution of partnership. Remaining partners can still agree to continue the business of partnership firm. But dissolution of firm resulted in a complete closure of business. All the assets are sold and liabilities are paid and business ceases to exist.

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)

According to the Partnership Act, which of this statement about the dissolution of the partnership is true.

  1. Dissolution of partnership is called dissolution of the firm

  2. Dissolution between the two partners is called the dissolution of the firm

  3. On the completion of the venture of the firm is called the dissolution of the firm

  4. Dissolution between all the partners of a firm is called dissolution of the firm
Reveal answer Fill a bubble to check yourself
D 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. No firm can work without partners. For partnership minimum two persons are required. If there are no partners then there is no partnership 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)

Under section $44$ of the Partnership Act, a firm may be dissolved on happening of certain contingencies like :

  1. Insanity of a partner

  2. Marriage of a partner

  3. By retirement of a partner

  4. Partner joining political parties
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Marriage of a partner does not affect the working of partnership. Retirement and a partner joining political parties can also not be a ground for dissolution because remaining partner can continue the business of partnership. But According to Section 44 of Indian Partnership Act, When a partner becomes of unsound mind and is unable to continue further then the court may order for dissolution of firm. Insanity can be ground for dissolution.  

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)

Non-registration of firm does not effect :

  1. Right to sue for dissolution

  2. Right to sue any partner

  3. Right to claim for set-off

  4. All the three
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Registration of partnership is not compulsory under law. If partnership firm is not registered, it can not enforce its claims against a third party in the court of law. Partner of non - registered firm can not file a suit against other partner. But if there exist a just and equitable cause for dissolution, partners can file a suit for dissolution in court.

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 means :

  1. Dissolution of firm

  2. Business of the firm is continued

  3. Partnership amongst all the partners comes to an end

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

Dissolution of partnership is different from dissolution of partnership firm. In dissolution of partnership firm business comes to an end. But Dissolution of partnership means end of old partnership agreement and reconstruction of partnership due to admission, retirement and death of partner. In this business of the firm does not comes to an end.