Tag: partnership 4 - dissolution of a partnership firm

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Questions Related to partnership 4 - dissolution of a partnership firm

Multiple choice 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

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

  1. Dormant partner

  2. Active partner

  3. Managing partner

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

Multiple choice 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

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

  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.
Reveal answer Fill a bubble to check yourself
C Correct answer
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.

Multiple choice 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

A partner by holding out is personally liable to _______________ .

  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
Reveal answer Fill a bubble to check yourself
C Correct answer
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.

Multiple choice 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

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

  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
Reveal answer Fill a bubble to check yourself
C Correct answer
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.

Multiple choice 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

Features of a partnership firm are _____________________.

  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
Reveal answer Fill a bubble to check yourself
D Correct answer
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. 

Multiple choice 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

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

  1. Indian Partnership Act, 1932

  2. Indian Partnership Act section 45

  3. Companies Act section 48

  4. Companies Act section 45
Reveal answer Fill a bubble to check yourself
A Correct answer
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. 

Multiple choice 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

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

  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
Reveal answer Fill a bubble to check yourself
A Correct answer
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. . 

Multiple choice 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

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

  1. Dissolution of firm

  2. Dissolution of partnership

  3. Firm will continue to exist

  4. Both a & c
Reveal answer Fill a bubble to check yourself
A Correct answer
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. 

Multiple choice 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

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

  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
Reveal answer Fill a bubble to check yourself
A Correct answer
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. 

Multiple choice 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

Garner vs. Murray gave accounting treatment regarding 

  1. Insolvent of a partner

  2. Death of partner

  3. Admission of a new partner

  4. Dissolution at will
Reveal answer Fill a bubble to check yourself
A Correct answer
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.