Acca F4 Quiz

1. What is a sole trader/sole practitionership?

- The owner of a sole trader/sole practitionership is not responsible for any debts incurred by the business.

- Sole trader businesses are suitable for all sizes and types of businesses, including large corporations.

- Sole traders are required to go through extensive legal procedures to set up their businesses.

1 Types of Business Organisation - The owner 'is' the business - owns the assets and is liable for all the debts. - No legal formalities are required to set up a sole trader business/practitionership - This form of business is inappropriate for large businesses or those involving a degree of risk.

2. What is a general partnership?

1 Types of Business Organisation Defined by Partnership Act 1890 (PA 1890) as the relationship which subsists between persons carrying on a business in common with a view to profit.

A sole proprietorship with multiple owners.

A business structure where the liability of owners is limited to their investment.

A type of corporation where ownership is publicly traded on stock exchanges.

3. What is a limited partnership?

1 Types of Business Organisation Formed under the Limited Partnerships Act 1907

A form of business with only one owner

An organization with unlimited liability for all partners

A business structure regulated by the Limited Liability Partnership Act 2000

A limited partnership is a specific type of business organization formed under the Limited Partnerships Act 1907, where there are both general partners, who have unlimited liability, and limited partners, whose liability is limited to the amount of their investment.

Explanation

A limited partnership is a specific type of business organization formed under the Limited Partnerships Act 1907, where there are both general partners, who have unlimited liability, and limited partners, whose liability is limited to the amount of their investment.

4. What is a limited liability partnership?

An individual business structure where the owner is personally liable for all debts and obligations of the business.

1 Types of Business Organisation An artificial legal entity where the liability of the members is limited to the amount of capital they have agreed to contribute.

A corporation where the liability of the shareholders is not limited to the amount of capital they have invested.

A partnership where all members have unlimited liability for the debts and obligations of the business.

A limited liability partnership (LLP) is a type of business structure that combines elements of partnerships and corporations. In an LLP, the personal liability of the partners is limited to the amount of capital they have agreed to contribute, providing some protection for their personal assets.

Explanation

A limited liability partnership (LLP) is a type of business structure that combines elements of partnerships and corporations. In an LLP, the personal liability of the partners is limited to the amount of capital they have agreed to contribute, providing some protection for their personal assets.

5. What is a company?

1 Types of Business Organisation A corporation is an artifical legal person.

A partnership is a business owned by two or more individuals who share responsibilities and profits.

A cooperative is an organization owned and operated by a group of individuals for their mutual benefit.

A sole proprietorship is a business owned and operated by one person.

The correct answer defines a company as a corporation, which is a legal entity separate from its owners. The incorrect answers provide information on other types of business organizations like sole proprietorship, partnership, and cooperative.

Explanation

The correct answer defines a company as a corporation, which is a legal entity separate from its owners. The incorrect answers provide information on other types of business organizations like sole proprietorship, partnership, and cooperative.

6. What are the 2 types of partnership?

3) A partnership is always limited to two individuals.

2 Types of partnership 1) A partnership is a relationship which subsists between two or more persons carrying on a business in common with a view to profit. 2) A partnership can be a small operation or as with some large firms of solicitors and accountants partnerships with several hundred partners.

1) A partnership is only between married couples.

2) A partnership can only be between family members.

The correct answer explains that a partnership can involve multiple individuals, regardless of their relationship, and the size of the partnership can vary from small operations to those with numerous partners.

Explanation

The correct answer explains that a partnership can involve multiple individuals, regardless of their relationship, and the size of the partnership can vary from small operations to those with numerous partners.

7. What are the three types of partner in a partnership?

2) Managing partner - A partner who is solely responsible for the management and decision-making of the firm.

2 Types of partnership 1) General partner - Actively involved in the day-to-day business 2) Limited partner in a limited partnership - Contributes a specific amount of capital, Liability limited to that amount. Cannot take part in the management of the firm. 3) Salaried partner - Will received a fixed amount in income. Not a real partner unless he also receives a share of the profits.

1) Silent partner - A partner who is not actively involved in the day-to-day operations of the business.

3) Equity partner - A partner who receives a share of the profits based on the amount of capital invested.

The correct answer includes General partner, Limited partner in a limited partnership, and Salaried partner. Silent partner, Managing partner, and Equity partner are not among the three main types of partners in a partnership.

Explanation

The correct answer includes General partner, Limited partner in a limited partnership, and Salaried partner. Silent partner, Managing partner, and Equity partner are not among the three main types of partners in a partnership.

8. What are the three types of partnership?

2) Joint partnership - Governed by Joint Partnerships Act 1921

2 Types of partnership 1) General or ordinary partnership - Governed by Partnership Act 1890 - this is the default position if a partnership is not formed under either of the two Acts below 2) Limited partnership - Governed by Limited Partnership Act 1907 3) Limited liability partnership (LLP) - Governed by Limited Liability Partnerships Act 2000.Legally separate from its members

3) Corporate partnership - Governed by Corporation Partnership Act 1945

1) Sole partnership - Governed by Sole Proprietorship Act 1855

The correct answer includes General partnership, Limited partnership, and Limited liability partnership. The incorrect answers provided do not align with the recognized types of partnerships under the specified acts.

Explanation

The correct answer includes General partnership, Limited partnership, and Limited liability partnership. The incorrect answers provided do not align with the recognized types of partnerships under the specified acts.

9. What is a key characteristic of a partnership?

2 Types of partnership In order for a partnership to exist, a business must be carried on with a view to profit. Therefore the persons involved in the partnership intend the business to yield a profit and they are all entitled to share in that profit.

Partnership can exist without any intention of making a profit.

Partnership only involves two partners.

Partnership requires all partners to invest equal amounts of money.

A partnership involves multiple partners working together to carry on a business with the intention of making a profit and sharing in that profit. It is not limited to only two partners, doesn't require all partners to invest equal amounts, and must involve a profit motive.

Explanation

A partnership involves multiple partners working together to carry on a business with the intention of making a profit and sharing in that profit. It is not limited to only two partners, doesn't require all partners to invest equal amounts, and must involve a profit motive.

10. When does a partnership begin?

A partnership begins when the partners sign a formal agreement.

A partnership begins after the partners have been in business for at least one year.

2 Types of partnership A partnership begins as soon as the partners start their business activity. The actual agreement may be made earlier or later than that date.

A partnership begins when the partners agree to start a business together.

A partnership does not necessarily require a formal agreement to begin, and can start as soon as the partners start their business activity.

Explanation

A partnership does not necessarily require a formal agreement to begin, and can start as soon as the partners start their business activity.

11. What formalities are required to form a general partnership?

2 Types of partnership No formalities are required to form general partnerships, no documentation and no registration. The reason for this is that The Partnership Act 1890 applies to every partnership whether written or oral. Many of the Act's provisions apply, unless they are excluded by a partnership agreement. The PA 1890 provides that partners shall share profits equally, but in cases where partners contribute different amounts of capital this may not be appropriate and partners will need to agree specific profit sharing arrangements within their partnership agreement.

Partners must sign a formal contract in front of a notary public.

Partners must submit a detailed business plan to a government agency.

Partners must undergo a background check and obtain a license.

In general partnerships, no formalities or documentation are required as The Partnership Act 1890 applies, whether the partnership is written or oral.

Explanation

In general partnerships, no formalities or documentation are required as The Partnership Act 1890 applies, whether the partnership is written or oral.

12. What forms can a partnership agreement take?

Verbal agreement

2 Types of partnership The partnership agreement is a contract. Like any contract it may be:- Express- Implied The partners are contractually bound by the terms they have agreed, even if they conflict with PA 1890.

Written agreement

Oral agreement

Partnership agreements can take the form of either express or implied contracts, not necessarily limited to written, oral, or verbal agreements.

Explanation

Partnership agreements can take the form of either express or implied contracts, not necessarily limited to written, oral, or verbal agreements.

13. What is a limited partnership?

2 Types of partnership A limited partnership is a partnership in which the liability of one or more partners is limited to their capital contribution.

An unlimited partnership in which all partners share unlimited liability

A sole proprietorship in which one person runs the business independently

A joint venture between two companies for a specific project

A limited partnership differs from an unlimited partnership, sole proprietorship, and joint venture as it specifically involves partners whose liability is limited to their capital contribution.

Explanation

A limited partnership differs from an unlimited partnership, sole proprietorship, and joint venture as it specifically involves partners whose liability is limited to their capital contribution.

14. What conditions must a limited partnership fulfil?

Limited partners have full control over the management of the business

The partnership must have an unlimited number of partners

Limited partners have the same liability as unlimited partners

2 Types of partnership - There must be at least one partner with unlimited liability - The partnership must be registered with the registrar of companies as a limited partnership - Limited partners may not participate in the management of the business. If they do, they forfeit their limited liability. - A limited partner has no power to bind the firm to contracts, i.e. unlike the unlimited partners, he is not an agent of the firm.

15. What is the agency relationship of partners according to the PA 1890?

Each partner is an independent entity with no relationship to the other partners.

Only one partner in a partnership can act as the agent for the firm.

PA 1890 does not provide any guidelines on the agency relationship of partners.

3 Authority of partners When entering into a contract to carry out the business, each partner is acting as the agent of all the partners PA 1890 states that every partner is the agent of the firm and of the other partners. This means that each partner has the power to bind all partners to business transactions entered into within their actual or apparent authority.

The correct answer emphasizes that each partner acts as the agent of all partners in a partnership, as stated in the PA 1890. The incorrect answers provide false information to mislead the participants into choosing the incorrect options.

Explanation

The correct answer emphasizes that each partner acts as the agent of all partners in a partnership, as stated in the PA 1890. The incorrect answers provide false information to mislead the participants into choosing the incorrect options.

16. Do implied powers of authority apply only to trading partnerships?

Implied powers apply only to the partners who have invested the most in the partnership.

Implied powers are not recognized in any type of partnership.

3 Authority of partners Implied powers apply to both trading and non-trading partnerships. Partners in trading partnerships have additional powers, such as to borrow money.

Implied powers only apply to non-trading partnerships.

Implied powers apply to both trading and non-trading partnerships because they are necessary for the efficient operation of the partnership. While trading partnerships have additional powers, such as borrowing money, the basic implied powers of authority are applicable to all types of partnerships.

Explanation

Implied powers apply to both trading and non-trading partnerships because they are necessary for the efficient operation of the partnership. While trading partnerships have additional powers, such as borrowing money, the basic implied powers of authority are applicable to all types of partnerships.

17. When is a firm liable for contracts made by a partner?

The firm is liable for contracts made by a partner only if they were explicitly approved by all partners.

The firm is liable for contracts made by a partner only if the partner acted without any authority.

4 Liability for partnership debts The firm is liable for contracts made by a partner if he was acting within his actual or apparent authority.

The firm is never liable for contracts made by a partner.

18. When is a firm not liable for contracts made by a partner?

If the partner has apparent authority but no actual authority

4 Liability for partnership debts The third party knows the partner has no actual authority, or the partner has no actual authority and the third party does not know or believe him to be a partner.

If the partner has express authority but the third party is unaware of it

If the partner acts within the usual scope of business for the firm

In order for a firm not to be liable for contracts made by a partner, the third party must either know that the partner has no actual authority, or the partner must have no actual authority and the third party must not know or believe him to be a partner. The other incorrect answers mentioned do not fully cover the scenarios in which a firm would not be liable for partner contracts.

Explanation

In order for a firm not to be liable for contracts made by a partner, the third party must either know that the partner has no actual authority, or the partner must have no actual authority and the third party must not know or believe him to be a partner. The other incorrect answers mentioned do not fully cover the scenarios in which a firm would not be liable for partner contracts.

19. What is the general rule in deciding which partner is liable for debts?

B. Only the managing partner is liable for the debts of the partnership.

C. Liability for partnership debts is based on the personal assets of each partner.

D. Partners are only liable for debts incurred during their term in the business.

4 Liability for partnership debts Every partner is jointly and severally liable for the debts and contracts of the business. Outsiders can sue one partner alone or the firm.

A. The partner with the smallest ownership percentage is solely liable for the debts.

In a general partnership, all partners are equally responsible and liable for the debts and obligations of the business. This concept is known as joint and several liability, which means creditors can sue any partner individually or the partnership as a whole for outstanding debts or obligations.

Explanation

In a general partnership, all partners are equally responsible and liable for the debts and obligations of the business. This concept is known as joint and several liability, which means creditors can sue any partner individually or the partnership as a whole for outstanding debts or obligations.

20. What is the rule for new partners and liability for debts in a partnership?

A new partner is only liable for debts incurred after they joined the partnership.

4 Liability for partnership debts A new partner is not personally liable for debts incurred before they became a partner.

A new partner is fully liable for all partnership debts, regardless of when they were incurred.

A new partner can choose the extent of their liability for partnership debts.

In a partnership, a new partner is not personally liable for debts incurred before they became a partner, as they are not responsible for actions that occurred before their involvement in the partnership.

Explanation

In a partnership, a new partner is not personally liable for debts incurred before they became a partner, as they are not responsible for actions that occurred before their involvement in the partnership.

21. What debts are retiring partners liable for?

Retiring partners are not liable for any debts incurred while they were partners.

Retiring partners are only liable for debts incurred after their retirement.

4 Liability for partnership debts A retiring partner remains liable for any debts incurred while he was a partner. If no notice of the retirement is given, the firm continues to be bound by his actions as he is still being held out as a partner. Notification must take place prior to retirement if the retiring partner is to avoid liability for contracts entered into after his retirement.

Retiring partners are only liable for debts related to their specific contributions to the partnership.

22. Who is liable when there is a change in partners? What notice is required for previous customers and third parties not existing customers?

Notice is not required for any party when there is a change in partners

Only the new partners are liable for partnership debts with no notice necessary to previous customers or third parties

4 Liability for partnership debts Where a third party deals with a partnership after a change in partners, all of the partners of the old firm are still treated as partners, until the third party receives notice of the change: - Previous customers require actual notice - Third parties who were not existing customers can be notified by a notice in the London Gazette: PA 1890. This is known as constructive notice.

Partners are not liable for partnership debts after a change in partners

23. What is novation?

Each partner is individually liable for partnership debts

Novation refers to the process of dissolving a partnership entity

4 Liability for partnership debts A creditor agrees with the outgoing, continuing and/or incoming partners that liability for an existing debt will be that of the continuing and incoming partners.(Thus the liability of the outgoing partner is removed and the incoming partner becomes liable for the debt even though it was incurred before he became a partner.)

Partnership debts are the sole responsibility of the outgoing partner

24. What is indemnity in the context of liability for partnership debts?

An agreement where the outgoing partner is solely responsible for all debts incurred post-retirement.

Automatic assumption of all partnership debts by the outgoing partner.

A legal document exempting a partner from any responsibility for partnership debts.

4 Liability for partnership debts The continuing and incoming partners may agree to indemnify the outgoing partner against debts incurred pre- and/or post-retirement.

Indemnity in the context of partnership debts involves the agreement between partners to protect the outgoing partner from being solely responsible for debts incurred before or after retirement.

Explanation

Indemnity in the context of partnership debts involves the agreement between partners to protect the outgoing partner from being solely responsible for debts incurred before or after retirement.