Tag: elements of business

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Questions Related to elements of business

Multiple choice 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

At the time when a new partner enters, Good will _________________________.

  1. belongs to all partners, new and old

  2. belongs only to the new partner who is going to be admitted.

  3. belongs only to the old partner who have credited it

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

Goodwill is an intangible asset built by the existing partners over time. Therefore, when a new partner is admitted, the existing goodwill belongs to the old partners who created it.

Multiple choice 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

If the behavior of a person shows that he is a partner in a firm (when actually he is not), such a person is known as _________.

  1. Nominal partner

  2. Sleeping partner

  3. Sub-partner

  4. Partner by estoppel
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A person who represents themselves as a partner, or allows others to do so, is liable as a partner by estoppel to anyone who relies on that representation.

Multiple choice 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

A _________ partner is like an undisclosed principal.

  1. sleeping

  2. active

  3. nominal

  4. sub partner
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A sleeping partner is like an undisclosed principal because they are liable for the firm's acts, but their identity is not known to third parties dealing with the firm.

Multiple choice 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

Towards goodwill a new partner at the time of admission contributed ___________________.

  1. in cash

  2. does not pay cash

  3. may or may not pay cash for good will

  4. none of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A new partner may pay their share of goodwill in cash (premium method) or it may be adjusted through their capital account without an actual cash payment.

Multiple choice 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

For a minor to be admitted to a partnership firm _____________.

  1. all the partners should agree
  2. there should be $2$ major partners

  3. minor can not be admitted in a partnership firm

  4. both a & b
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The admission of a minor to the benefits of a partnership requires the consent of all existing partners. The requirement of '2 major partners' is a standard interpretation of the minimum number of partners required to form a firm.

Multiple choice 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

As per partnership Act Minor on becoming major _______________.

  1. liability becomes unlimited

  2. liability becomes unlimited only when he accepts the partnership

  3. he has only rights and no liabilities

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

When a minor attains majority, they have a choice to either become a partner or leave the firm. If they choose to become a partner, their liability becomes unlimited from the date they were admitted to the firm.

Multiple choice 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

New incoming partner pays his share of goodwill in cash, and profit sharing ratio of old partner is changed, Goodwill be distributed among old partners ____________.

  1. as their old profit ratio

  2. according to new ratio

  3. according to sacrifice ratio

  4. none of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When a new incoming partner brings their share of goodwill in cash, it is distributed among the existing partners in their sacrificing ratio, compensating them for the share of profit they surrender.

Multiple choice 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

Parties are not competent to contract if any of them is __________________.

  1. minor

  2. insane

  3. declared

  4. all the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Competency to contract requires that a person is of sound mind, not a minor, and not disqualified by law. Since all listed categories (minor, insane, declared disqualified) lack competency, 'all the above' is correct.

Multiple choice 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

Agency by Estoppel means ____________.

  1. a person is being posed by the person as his agent

  2. a person himself believes that he is the agent of some other person.

  3. a person who becomes the agent because of some kind of necessary requirement.

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

Agency by estoppel occurs when a principal, by their conduct or words, leads a third party to believe that someone is their agent, even if no formal agency exists. The principal is then 'estopped' from denying the agency.