Tag: partnership 4 - dissolution of a partnership firm

Questions Related to partnership 4 - dissolution of a partnership firm

The court may not order dissolution of a firm on permanent incapacity of a ______________ .

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. Dormant partner

  2. Active partner

  3. Managing partner

  4. Senior partner

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Correct Option: A
Explanation:

Dormant partner is a partner who takes no share in the active business of partnership but share profits or losses.  Permanent incapacity of a dormant partner does not have much effect on partnership because dormant partner does not manage its working. But permanent incapacity of active partner or managing partner may stop the working of business. So the court may not order for dissolution on permanent incapacity of a dormant partner. 

Guarantee given to a partner 'A' by the other partners 'B & C' means _________________.

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. In case of loss 'A' will not contribute towards that loss.

  2. In case of insufficient profits 'A' will receive only the minimum guarantee amount.

  3. In case of loss or insufficient profits 'A' will receive the minimum guarantee amount.

  4. All of the above.

Show answer
Correct Option: C
Explanation:

Guarantee given to a partner means partner will be given a fixed minimum amount of profit. and if any deficiency arise will be met by the other partner.  So in this A is given guarantee of minimum amount and if there is  loss or insufficient profit then B and C will pay the amount remaining short.

A partner by holding out is personally liable to _______________ .

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. all outsiders

  2. all existing suppliers

  3. who has given credit to the firm on his representation

  4. to all who have given credit to the firm

Show answer
Correct Option: C
Explanation:

A partner by holding out means a person who is not a member of firm but allows himself/herself to be represented as a partner. Such person is responsible to person who has given loan to firm on his representation because loan has been given by assuming that he/she is member.

When it is not registered, a partnership firm is _____________________.

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. deemed to be an illegal association and is disallowed to carry on business

  2. allowed to carry on business subject to payment of penalty

  3. allowed to carry on business subject to certain disabilities

  4. allowed to carry on business only with the special permission of the Registrar of Firms

Show answer
Correct Option: C
Explanation:

Registration of partnership is not compulsory under law. But if a partnership firm is not registered, it can not file a suit against the third party. No partner can file a suit against any other partner. The firm can not file a suit against any partner. But third party can file a suit against the firm.

Features of a partnership firm are _____________________.

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. Two or more persons are carrying common business under an agreement.

  2. They are sharing profits and losses in the fixed ratio.

  3. Business is carried by all or any of them acting for all as an agent

  4. All of the above

Show answer
Correct Option: D
Explanation:

All these are features of partnership. To form a partnership minimum two persons are required. A single person can not form partnership. Partnership is made to share profits and losses in the ratio mentioned in partnership deed. In partnership business is carried by all or any one of them can work for all. 

Under _________ there have been made rules regarding the dissolution of firm.

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. Indian Partnership Act, 1932

  2. Indian Partnership Act section 45

  3. Companies Act section 48

  4. Companies Act section 45

Show answer
Correct Option: A
Explanation:

In India, Partnership is one of the most practiced form of organisation. So to control partnership business Indian partnership Act was framed. It came into force on 1st October, 1932. It extends to the whole of India except Jammu and Kashmir. Section 40 to 44 of Indian Partnership Act contains provisions regarding dissolution of partnership firm. 

Distribution of loss in case of insolvency is to be charged ____________.

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. From solvent partners first

  2. From insolvent partner

  3. In insolvency debts cannot be cleaned as one partner is insolvent

  4. No solvent partner is responsible for the debts due for insolvent partner

Show answer
Correct Option: A
Explanation:

According to Garner vs. Murray rule, if the partner becomes insolvent, he is unable to pay back the amount due to him. The amount not paid is a capital loss which should be charged from the solvent partner in the ratio of their capitals standing in the balance sheet on the date of dissolution of the firm. . 

In a partnership firm one partner is solvent and rest all partner becomes insolvent. What will be the effect on partnership firm?

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. Dissolution of firm

  2. Dissolution of partnership

  3. Firm will continue to exist

  4. Both a & c

Show answer
Correct Option: A
Explanation:

According to Section 41 of Indian partnership act, 1932, If in a partnership one partner is solvent and rest all partner becomes insolvent then it leads to compulsory dissolution of firm. The court orders in this case to dissolve the firm. 

Correct sequence of payment after the dissolution of firm will be :

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. Debt to parties, advances given by partners, each partner account of capital residue to be divided amongst partners in profit sharing ratio

  2. Debt to parties, account of capital of each partner, advances given by partners, residue to be divided amongst partners in profit sharing ratio

  3. Debt to parties, balance from P&L account amongst partners in their profit sharing ration

  4. All of the above

Show answer
Correct Option: A
Explanation:

Option A is correct. After the dissolution of firm, first of all loan given by any partner is paid because loan and advances are liability for the firm. After paying all the liabilities any amount left is divided divided among partners in their profit sharing ratio. If this sequence is not followed debt could not be paid because amount available has already been taken by partner. 

Garner vs. Murray gave accounting treatment regarding 

business organisation and correspondence partnership 4 - dissolution of a partnership firm meaning of dissolution of partnership firm modes of dissolution of firm dissolution of firm difference between realisation account and revaluation account payment of firm's debts and separate debts, realisation of assets and liabilities

  1. Insolvent of a partner

  2. Death of partner

  3. Admission of a new partner

  4. Dissolution at will

Show answer
Correct Option: A
Explanation:

According to Garner vs. Murray rule, if the partner becomes insolvent, he is unable to pay back the amount due to him. The amount not paid is a capital loss which should be borne by the solvent partner in the ratio of their capitals standing in the balance sheet on the date of dissolution of the firm.