Tag: elements of business

Questions Related to elements of business

Any partner who invests in the business but does not take active part in the business is ___________.

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. secret partner

  2. sleeping partner

  3. active partner

  4. nominal partner

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Correct Option: B
Explanation:

A sleeping or dormant partner is one who is reality a partner but whose name does not appear in any way as a partner and who is not known to the outside world as a partner. He is liable to third parties if he is subsequently discovered by them. 

He has no duties to perform but has the right of access to the books of accounts which he can examine and copy. 
As a dormant partner he has no duty to perform,a firm is not dissolved on his insanity or permanent incapacity. He contributes capital and shares profits or losses in agreed ratio.

Each partner is __________.

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. required to contribute capital in the partnership firm

  2. not required to necessarily contribute capital in the partnership firm

  3. requiredto work in the partnership firm

  4. none of the above

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Correct Option: B
Explanation:

In partnership business, partners are to contribute capital to the firm and the individual amount of such capital is determined by an agreement . However, it is not  necessary for the partners to contribute capital in the partnership firm it is also not necessary that they are to contribute capital equally or in the profit sharing ratio.

There are instances where partners  contribute capital equally though they share profits unequally . It is also found that partners contribute capital unequally though they share profits equally.

Which type of partner is not personally liable?

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. Active

  2. Dormant

  3. Nominal

  4. Minor

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Correct Option: D
Explanation:

A minor cannot be a  full fleged partner in the partnership firm , he is not personally liable for the debts of the third party. He is only admited for profit . He can be admiited only by consent of all partners.

A partner who is entitled to share in the profits of a partnership firm without being liable to the losses, is called _________.

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. partner is profits only

  2. sleeping partner

  3. active partner

  4. dummy partner

Show answer
Correct Option: A
Explanation:

A person who becomes a partner for sharing profits only is known as a partner in profits. 

He contributes capital to the firm but does not take part in the management of the business . He is liable to the third parties like other partners.

When a minor attains majority, he is liable for ___________.

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. the date of attaining majority

  2. all the liabilities

  3. only for liabilities which are dealt by him

  4.  all liabilities since the date of admission to the firm as a minor

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Correct Option: D
Explanation:

He is not personally liable to third parties for the debts of the firm, on attaining majority, if he continues as a partner, his liability will become unlimited with effect from the date of his original admission into the firm. When a minor becomes major then within $6$ months of his attaining the majority he has to elect whether he wants to be a partner or not he may give a public notice regarding his wish to be a partner or not but if he fails to give any notice then he is deemed to be a partner.

Minor may be admitted in the firm for ________.

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. sharing of profits

  2. mutual benefit

  3. both (a) and (b)

  4. none of these

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Correct Option: A

A partner who is entitled to share in the profits of a partnership firm without being liable to the losses, is called ___________.

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. partner in profits only

  2. sleeping partner

  3. active partner

  4. dummy partner

Show answer
Correct Option: A
Explanation:

Partners in profit, is a partner who contributes in the capital , who dont share losses but only comes in the share for profit.

A person whose behaviour arouses misunderstanding that he is a partner in the firm but actually he is not,is called __________.

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. nominal partner

  2. dormant partner

  3. ostensible partner

  4. partner by estoppel.

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Correct Option: D
Explanation:

Partner by Estoppel or holding out - If person styles the character of a partner in a business before a third party (outsiders) by words or in writing or by his act, he is called a partner by estoppel. The third party mistaking him as a partner in the business advances loans on his creditability, that person would be personally responsible for the liability attaching to the position of a partner.

Which type of partners is not personally liable?

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. Active

  2. Dormant

  3. Nominal

  4. Minor

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Correct Option: D
Explanation:

Partnership arises from contract and a minor is not competent to enter into contract. Therefore, strictly speaking, a minor cannot be a full-fledged partners. But with the consent of all the partners he can be admitted into partnership for benefits only. He is not personally liable to third parties for the debts of the firm.

Partnership gives special protection to minors.

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. Partly true

  2. False

  3. Partly false

  4. True

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Correct Option: D