Partnership Act - Part 1
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The legal provisions relating to Partnerships are contained in
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The Partnership Act,1930
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The Indian Partnership Act,1930
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The Partnership Act,1932
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The Indian Partnership Act,1932
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Questions on :
1)Introduction and Definition of Partnership.
2)Test of Partnership and Non-Partnership Interests.
3)Partners,Firm,Firm Name and Legal Status of a Firm.
4)Classification of Partners and Partnership.
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- 2.
The Indian Partnership Act, 1932, extends to
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Whole of India
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Whole of India except Jammu & Kashmir
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Northern India
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States notified from time to time
Correct Answer
A. Whole of India except Jammu & KashmirExplanation
The Indian Partnership Act, 1932, extends to the whole of India except Jammu & Kashmir. This means that the provisions of the Act apply to all states and union territories in India, except for Jammu & Kashmir which has its own separate laws governing partnerships.Rate this question:
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- 3.
Prior to the passing of the Indian partnership Act, 1932, the provisions relating to the partnerships were containesd in
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The Companies Act
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The Indian Contract Act,1872
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The Sale of Goods Act,1930
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The Indian Partnership Act,1872
Correct Answer
A. The Indian Contract Act,1872Explanation
The correct answer is The Indian Contract Act, 1872. This is because prior to the passing of the Indian Partnership Act, 1932, the provisions relating to partnerships were contained in the Indian Contract Act, 1872. The Indian Contract Act, 1872 provides the legal framework for contracts in India, including the formation and enforcement of partnerships. Therefore, it is the most relevant legislation in this context.Rate this question:
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- 4.
The legal definition of the 'Partnership' is given in which of the following section of the Indian Partnership Act, 1932 ??
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Section 2
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Section 3
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Section 4
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Section 5
Correct Answer
A. Section 4Explanation
The correct answer is Section 4. The legal definition of the 'Partnership' is given in Section 4 of the Indian Partnership Act, 1932.Rate this question:
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- 5.
Partnership is the relation between persons who have agred to share the profits of a business carried on by
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All of them jointly.
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All of the partners or any of them acting for all.
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Any of the partners acting on his own behalf.
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A manager appointed to carry on the business.
Correct Answer
A. All of the partners or any of them acting for all.Explanation
Partnership is a business structure where two or more individuals agree to share the profits of a business. In this structure, all of the partners have the authority to act on behalf of the partnership, either individually or collectively. This means that any partner can make decisions and carry out business activities on behalf of all the partners. Therefore, the correct answer is "All of the partners or any of them acting for all."Rate this question:
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- 6.
Which of the folowing is an essential feature of a Partnership ??
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Result of an Agreement
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Sharing of Profits
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Mutual agency between Partners
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All of these
Correct Answer
A. All of theseExplanation
All of these options are essential features of a partnership. An agreement is necessary for the formation of a partnership, as it outlines the terms and conditions that govern the partnership. Sharing of profits is a key characteristic of a partnership, as partners contribute capital and share in the profits and losses of the business. Mutual agency between partners means that each partner has the authority to act on behalf of the partnership and bind it legally. Therefore, all of these features are necessary for a partnership.Rate this question:
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- 7.
Which of the folowing is not an essential feature of Partnership ?? (i) Association of two or more persons. (ii) Seperate legal entity. (iii) Mutual agency between partners. (iv) Registration
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(i), (ii)
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(ii), (iii)
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(iii), (iv)
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(ii), (iv)
Correct Answer
A. (ii), (iv)Explanation
The essential features of a partnership include the association of two or more persons, mutual agency between partners, and the absence of a separate legal entity. However, registration is not considered an essential feature of a partnership. Additionally, a partnership does not have a separate legal entity, meaning that the partnership and the partners are considered as one and the same. Therefore, the correct answer is (ii), (iv).Rate this question:
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- 8.
The minimum number of persons required to form a partnership is
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2
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5
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7
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11
Correct Answer
A. 2 -
- 9.
The maximim number of persons in a Partnership firm carrying on the Banking Business, should not exceed
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5
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7
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10
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11
Correct Answer
A. 10Explanation
A partnership firm is a business structure where two or more individuals come together to carry on a business with a view to making a profit. In the case of a partnership firm carrying on banking business, the maximum number of persons allowed should not exceed 10. This is because banking business involves handling sensitive financial transactions and requires a high level of trust and confidentiality. Having a smaller number of partners allows for better control and coordination within the firm, ensuring smooth operations and effective decision-making.Rate this question:
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- 10.
The maximum number of persons in a firm carrying on any business, other than Banking Business, should not exceed
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5
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7
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10
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20
Correct Answer
A. 20Explanation
The correct answer is 20 because there is no specific limit mentioned in the question for the maximum number of persons in a firm carrying on any business. Therefore, the maximum number can be any number, including 20.Rate this question:
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- 11.
The limit for maximum number of partners in a firm is provided in
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Section 11 of The Indian Partnership Act,1932
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Section 11 of The Companies Act,1956
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Section 11 of The Indian Contract Act,1872
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None of these.
Correct Answer
A. Section 11 of The Companies Act,1956Explanation
The correct answer is Section 11 of The Companies Act,1956. This section of the Companies Act specifies the maximum number of partners allowed in a firm. The Indian Partnership Act,1932 does not provide the limit for the maximum number of partners in a firm. The Indian Contract Act,1872 is not relevant to determining the maximum number of partners in a firm.Rate this question:
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- 12.
Where the maximum number of partners in a firm carrying on banking bussiness exceeds ten and in any other firm exceeds twenty , then the partnership become a _____
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Company
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Illegal Association
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Corparation
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Legal Association
Correct Answer
A. Illegal AssociationExplanation
The correct answer is "illegal Association" because according to the given information, if a firm carrying on banking business has more than ten partners or any other firm has more than twenty partners, it becomes an illegal association. This suggests that there are legal restrictions on the maximum number of partners in a firm, and exceeding those limits would result in the partnership being considered illegal.Rate this question:
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- 13.
Where in an existing partnership firm, the number of partners is reduced to one , the firm is compulsorily dissolved
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True, as there must be at least two persons in a partnership firm.
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False,as once a partnership firm is formed. It continues to exist till it dissolved by a court order.
Correct Answer
A. True, as there must be at least two persons in a partnership firm.Explanation
In a partnership firm, there must be at least two partners. If the number of partners is reduced to one, it means that there is no longer a partnership as it requires a minimum of two individuals. Therefore, the firm is compulsorily dissolved in such a situation.Rate this question:
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- 14.
Two partnership firms can enter into an agreement to form a patnership firm between them
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True, as a firm is legally regarded as a person and can enter into a partnership agreement with another film.
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False, as a firm is not regarded as a person in legal sense of the term.
Correct Answer
A. False, as a firm is not regarded as a person in legal sense of the term.Explanation
The statement is false because a partnership firm is not regarded as a person in the legal sense. A partnership is a business structure where two or more individuals come together to carry on a business and share the profits and losses. While a firm can enter into agreements and contracts, it does not have the legal status of a person.Rate this question:
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- 15.
Can a company become a partner in a firm?
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Yes, as the company is regarded as person in legal sense of the term.
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No, as the partnership is an association of natural persons only.
Correct Answer
A. Yes, as the company is regarded as person in legal sense of the term.Explanation
A company can become a partner in a firm because it is considered a legal person. This means that a company has the legal capacity to enter into partnerships and engage in business activities. While partnerships are typically formed between natural persons, there is no legal restriction preventing a company from becoming a partner. Therefore, it is possible for a company to participate in a partnership with other individuals or entities.Rate this question:
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- 16.
The relation of Partnership arises from
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Agreement
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Status
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Feelings
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None of these
Correct Answer
A. AgreementExplanation
The correct answer is "Agreement" because a partnership is formed when two or more individuals agree to come together and conduct a business with the intention of making a profit. This agreement outlines the rights, responsibilities, and obligations of each partner and establishes the terms of their partnership. Without an agreement, there can be no partnership.Rate this question:
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- 17.
A Partnership firm comes into existence by
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Operation of Law
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Agreement
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Status
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None of these
Correct Answer
A. AgreementExplanation
A partnership firm comes into existence by agreement. This means that the formation of a partnership requires a mutual agreement between two or more individuals to carry on a business together with the intention of making a profit. The agreement can be oral or written, and it outlines the rights, responsibilities, and obligations of each partner. This agreement is essential for the creation of a partnership firm and sets the foundation for the partnership's operations and governance.Rate this question:
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- 18.
A Partnership Firm comes into existence by agreement between all the partners, and such agreement should be
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Express Agreement only.
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Implied Agreement only.
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Either Express or Implied
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Registered.
Correct Answer
A. Either Express or ImpliedExplanation
A Partnership Firm can come into existence through either an express agreement or an implied agreement. An express agreement refers to a formal written or verbal agreement between all the partners, where they explicitly state their intention to form a partnership. On the other hand, an implied agreement refers to a situation where the actions and conduct of the parties involved indicate their intention to form a partnership, even if there is no formal written or verbal agreement. Therefore, a Partnership Firm can be formed by either an express or implied agreement between the partners.Rate this question:
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- 19.
A written agreement by which a Partnership firm is created is known as
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Partnership Deed
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Deep Document
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Licence Agreement
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None of these.
Correct Answer
A. Partnership DeedExplanation
A written agreement by which a Partnership firm is created is known as a Partnership Deed. This document outlines the terms and conditions of the partnership, including the rights and responsibilities of each partner, the profit-sharing ratio, capital contributions, and other important details. It serves as a legally binding contract between the partners and helps establish clarity and understanding among them. The Partnership Deed is essential for the smooth functioning and governance of the partnership firm.Rate this question:
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- 20.
A partnership can be created only by a Partnership Deed.
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True, as it is the requirement of Law.
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False, as it can also be created by an Oral Agreement.
Correct Answer
A. False, as it can also be created by an Oral Agreement.Explanation
A partnership can be created by an oral agreement, not just by a partnership deed. While a partnership deed is a written agreement that outlines the terms and conditions of the partnership, it is not the only way to establish a partnership. In some cases, a partnership can be formed through a verbal agreement between the partners, without any written documentation. However, it is always recommended to have a partnership deed in order to avoid any misunderstandings or disputes in the future.Rate this question:
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- 21.
A partnership deed usually contains the particulars relating to
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Name of the Firm and Partners.
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Nature of the business and duration of the Firm.
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Capital contribution, Profit/Loss sharing ratio and other agreed terms.
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All of these.
Correct Answer
A. All of these.Explanation
A partnership deed is a legal document that outlines the terms and conditions of a partnership agreement. It typically includes the name of the firm and partners, the nature of the business, the duration of the partnership, the capital contributions of each partner, the profit/loss sharing ratio, and any other agreed-upon terms. Therefore, the correct answer is "All of these" as all of these particulars are typically included in a partnership deed.Rate this question:
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- 22.
A partnership deed is necessary for getting the firm registered under the Indian Partnership Act,1932, with the Register of Firms.
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True,as it is the requirement of law.
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False,as there is no such requirement for registration.
Correct Answer
A. False,as there is no such requirement for registration. -
- 23.
A partnership firm is formed to carry on some joint business and such business should consist of a
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Long and permanent undertaking.
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Single business venture of undertaking.
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Any of these two,as the only requirement is that there has to b some business.
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None of these, as the requirement is of joint property and not of joint business
Correct Answer
A. Any of these two,as the only requirement is that there has to b some business.Explanation
A partnership firm can be formed for either a long and permanent undertaking or a single business venture. The key requirement is that there must be some business involved. Therefore, any of these two options can be considered as the correct answer.Rate this question:
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- 24.
A and B agreed to produce a film and share the profits of hiring it out. In this case, there is
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Partnership
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Co-Ownership
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Joint-Ownnership
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None of these
Correct Answer
A. PartnershipExplanation
The correct answer is Partnership. A partnership is a business structure in which two or more individuals agree to share the profits and losses of a business venture. In this case, A and B have agreed to produce a film together and share the profits from hiring it out, which aligns with the definition of a partnership. Co-ownership and joint-ownership typically refer to shared ownership of a physical asset, such as property or a vehicle, and are not applicable in this context.Rate this question:
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- 25.
A and B agreed to buy 100 bags of rice and share the same between them equally. In this case there is no Partnership.
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True, as there is no business between them.
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False, as single transaction results in partnership.
Correct Answer
A. True, as there is no business between them.Explanation
The statement is true because there is no mention of any business or commercial activity between A and B. They simply agreed to buy bags of rice and share them equally, which does not constitute a partnership.Rate this question:
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- 26.
An agreement to carry on business at some future time does not result in Partnership unless that time arrives and the business is started.
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True
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False
Correct Answer
A. TrueExplanation
An agreement to carry on business at some future time does not result in a partnership unless that time arrives and the business is started. This means that simply having an agreement or intention to start a business in the future does not automatically create a partnership. The partnership only comes into existence when the agreed-upon future time arrives and the business is actually started. Therefore, the statement is true.Rate this question:
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- 27.
The sharing of profits of partnership business also means to include the sharing of losses in case of loss.
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True
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False
Correct Answer
A. TrueExplanation
In a partnership business, the sharing of profits refers to the distribution of profits among the partners. However, it also implies that the partners are equally responsible for any losses incurred by the business. This means that if the partnership business suffers a loss, the partners are obligated to share the financial burden and contribute towards covering the losses. Therefore, the statement is true as sharing profits in a partnership also includes sharing losses.Rate this question:
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- 28.
Which of the following statement is incorrect ?
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All the partners must be entitled to profits in case of profits.
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All the partners must agree to share the loss in case of losses.
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Partners may agree that one or more of them shall not be liable for losses.
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No partner can be excluded form sharing the profits of a film.
Correct Answer
A. All the partners must agree to share the loss in case of losses.Explanation
The statement "All the partners must agree to share the loss in case of losses" is incorrect because in a partnership, partners are generally obligated to share both the profits and the losses of the business. It is a fundamental principle of partnership that all partners bear the losses in proportion to their share of the partnership. Therefore, it is not necessary for partners to agree separately to share the losses as it is already implied in the partnership agreement.Rate this question:
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- 29.
In a partnership firm, each partner is considered as an
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Employee of the firm
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Officer of the firm
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Agent of the firm
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Both (a) and (b).
Correct Answer
A. Agent of the firmExplanation
In a partnership firm, each partner is considered as an agent of the firm. This means that each partner has the authority to act on behalf of the firm and bind it legally in business transactions. As agents, partners have the power to enter into contracts, make decisions, and represent the firm in dealings with third parties. This is a fundamental principle of partnership law, where partners are seen as representatives of the firm rather than employees or officers.Rate this question:
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- 30.
One of the important features of a firm, which distinguishes it form other similar associations,is the
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Sharing of profit
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Mutual agency
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Joint business
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None of these
Correct Answer
A. Mutual agencyExplanation
Mutual agency is an important feature of a firm that distinguishes it from other similar associations. It refers to the authority given to each partner to act on behalf of the firm and bind it legally. This means that each partner has the power to enter into contracts, make decisions, and represent the firm in business transactions. Mutual agency allows for efficient decision-making and flexibility within the firm, as partners can act independently and collectively. It also implies that partners are responsible for each other's actions and liabilities, making it a crucial characteristic of a firm.Rate this question:
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- 31.
A partner is the agent of the firm for the business of the firm.
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True, as the mutual agency relationship is the foundation of the law of partnership
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False, as in that case a firm is reduced to the status of a mere agency.
Correct Answer
A. True, as the mutual agency relationship is the foundation of the law of partnershipExplanation
The explanation for the given correct answer is that a partner is indeed the agent of the firm for the business of the firm. This is true because the concept of mutual agency is a fundamental principle in the law of partnership. Mutual agency means that each partner has the authority to act on behalf of the firm and bind it legally to contracts and obligations. This allows partners to make decisions and conduct business on behalf of the partnership. Therefore, the statement is true.Rate this question:
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- 32.
The important case of Cox v. Hickman, (1960) HLC 268 lays down the principle of
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Registration of a firm
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Sharing of profits
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Number of partners
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Registration.
Correct Answer
A. Sharing of profitsExplanation
The correct answer is "Sharing of profits." In the case of Cox v. Hickman, the principle established is related to the sharing of profits in a firm. This means that in order to be considered a partnership, there must be an agreement between the parties to share the profits generated by the business. This case highlights the importance of the profit-sharing aspect in determining the existence of a partnership.Rate this question:
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- 33.
The true test of the existence of a patnership is the
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Agency relationship
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Sharing of profits
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Number of partners
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Registration.
Correct Answer
A. Agency relationshipExplanation
The true test of the existence of a partnership is the agency relationship. This means that the partners have the authority to act on behalf of each other and bind the partnership in legal agreements. The agency relationship is a fundamental aspect of a partnership, as it establishes the responsibilities and obligations of each partner towards the partnership and its business operations. It also ensures that the partners have a fiduciary duty to act in the best interest of the partnership and its stakeholders.Rate this question:
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- 34.
Which of the following statement is incorrect?
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A person who receives the profits is always a partner.
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A person who receives the profits is not necessarily a partner.
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The true test of partnership is the mutual agency i.e., agency relationship among partners.
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The partnership comes into existence only by an agreement
Correct Answer
A. A person who receives the profits is always a partner.Explanation
The given statement is incorrect because a person who receives the profits is not always a partner. There are situations where someone may receive profits from a business without being a partner, such as an employee who receives profit-sharing bonuses or a lender who receives interest on a loan. Therefore, receiving profits does not necessarily indicate a partnership.Rate this question:
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- 35.
The person who receive profits but are not the partners, are specified in which of the following section of the Indian Patnership Act, 1932?
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Section 4
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Section 6
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Section 10
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Section 11
Correct Answer
A. Section 6Explanation
Section 6 of the Indian Partnership Act, 1932 specifies the individuals who receive profits but are not partners. This section outlines that a person who is not a partner but receives a share of the profits of a business is deemed to be a partner in that business. Therefore, Section 6 is the correct section that addresses this scenario.Rate this question:
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- 36.
Which of the following persons, though receive profits, are not the partners in a firm?
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Joint owners sharing profits
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Money-lenders receiving profits
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Seller of goodwill receiving profits
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All of these.
Correct Answer
A. All of these.Explanation
All of the mentioned persons, including joint owners sharing profits, money-lenders receiving profits, and sellers of goodwill receiving profits, may receive profits from a firm but they are not considered as partners. Joint owners may share profits but may not have a formal partnership agreement. Money-lenders may receive profits as interest on loans, but they are not actively involved in the management of the firm. Sellers of goodwill may receive profits as part of the sale agreement, but they are not partners in the firm. Therefore, all of these options are correct.Rate this question:
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- 37.
A money - lender who, in addition to or in place of interest on money lent to a firm, also receives a portion of profit of business, is regarded as
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Partner infirm
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Not a partner in firm
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Co-owner of firm
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None of these.
Correct Answer
A. Not a partner in firmExplanation
A money-lender who receives a portion of the profit of a business in addition to or instead of interest on money lent is not considered a partner in the firm. While they may have a financial stake in the business, they do not have the same rights, responsibilities, or decision-making power as a partner. Their involvement is primarily based on the financial arrangement and does not make them a formal part of the firm.Rate this question:
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- 38.
Which of the following statement is correct?
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A servant or an agent who agrees to receive, in addition to or in place of his regular remuneration. A portion of profits of business, is considered to be a partner.
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A window or child of a deceased partner who receives a portion of profits as annuity. Is considered to be a partner.
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A seller of goodwill who is given a share in die profits of a business he has sold. Is considered to be a partner.
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A joint - owner of property who receives a share of profit arising from the property, is not considered to be a partner.
Correct Answer
A. A joint - owner of property who receives a share of profit arising from the property, is not considered to be a partner.Explanation
A joint-owner of property who receives a share of profit arising from the property is not considered to be a partner because being a partner in a business involves more than just receiving a share of profits. It typically entails having a mutual agreement, sharing responsibilities, and having a say in the decision-making process of the business. In the given scenario, the joint-owner of the property is simply entitled to a share of profits from the property, but does not have the same level of involvement and responsibilities as a partner in a business.Rate this question:
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- 39.
A, a contractor, appointed B to manage his entire work. It was agreed that B would receive 50% of the profits as his remuneration and would bear all the losses,if any. Here, B is
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A's partner
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A's agent
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Sole proprietor
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None
Correct Answer
A. A's agentExplanation
B is A's agent because B has been appointed by A to manage his entire work. As an agent, B will act on behalf of A and make decisions and carry out tasks on A's behalf. B will receive 50% of the profits as his remuneration, which is a common arrangement between an agent and a principal. Additionally, B will bear all the losses, which further indicates the agency relationship between A and B. Therefore, B is A's agent in this scenario.Rate this question:
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- 40.
The person who receive the profits but are not the partners, fall in the category of
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Non- partnership interests
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Limited partners
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Profit-sharing partners
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Dormant partners
Correct Answer
A. Non- partnership interestsExplanation
Non-partnership interests refer to individuals or entities who receive profits from a partnership but are not considered partners. These individuals may have invested in the partnership or have some form of agreement with the partners to receive a share of the profits. However, they do not have the same rights, responsibilities, or liabilities as actual partners. Limited partners, profit-sharing partners, and dormant partners are all types of partners within a partnership structure.Rate this question:
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- 41.
The 'non-partnership interests' can in no case become the partners in a firm.
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True, as they are barred form becoming partners under Section 6.
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False, as they can be partners if essentials of a firm are satisfied.
Correct Answer
A. False, as they can be partners if essentials of a firm are satisfied.Explanation
The statement is false because non-partnership interests can become partners in a firm if the essentials of a firm are satisfied. This means that if the non-partnership interests meet the requirements and criteria set forth by the firm, they can be accepted as partners. The statement also suggests that Section 6 bars non-partnership interests from becoming partners, but this is not the case if the essentials of a firm are met.Rate this question:
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- 42.
When the co-owners of a joint property agree to start a joint business and share the profits, they
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Remain co-owners only.
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Become partners.
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Become agents of each other.
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Both (b) and (c).
Correct Answer
A. Both (b) and (c).Explanation
When the co-owners of a joint property agree to start a joint business and share the profits, they become partners and also become agents of each other. As partners, they have a legal relationship where they share the profits and losses of the business. As agents, they have the authority to act on behalf of each other in the business transactions. Therefore, the correct answer is both (b) and (c).Rate this question:
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- 43.
Partners who have entered into patnership with one another are collectively called.
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Partners
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Firm
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Business
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Either (a)or (b).
Correct Answer
A. FirmExplanation
When partners enter into a partnership with one another, they collectively form a legal entity known as a firm. A firm is a business organization that is owned and operated by two or more partners who share the profits and losses of the business. Therefore, the correct answer is "Firm."Rate this question:
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- 44.
Persons who have entered into partnership with one another are individually called
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Partners
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Firm
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Business
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Agents
Correct Answer
A. PartnersExplanation
When individuals enter into a partnership with one another, they are referred to as partners. In a partnership, two or more people come together to carry on a business and share the profits and losses. Therefore, the correct answer is "Partners".Rate this question:
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- 45.
The name under which the partnership business is carried on is called.
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Business name
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Regular name
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Firm name
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None of these
Correct Answer
A. Firm nameExplanation
In a partnership business, the name under which the business is carried on is referred to as the firm name. This name represents the collective identity of the partners and distinguishes the business from others. It is used for legal and business purposes, such as contracts, licenses, and banking transactions. The firm name helps to establish credibility and recognition in the market, making it an essential aspect of a partnership business.Rate this question:
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- 46.
The partners may carry on their business under any name and style of their choice.
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True, as there is no legal restriction on the selection of a firm name.
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False, as certain names with words like Crown, Emperor, King, Empire etc. can be used with the consent of the State Government.
Correct Answer
A. False, as certain names with words like Crown, Emperor, King, Empire etc. can be used with the consent of the State Government.Explanation
The statement is false because certain names with words like Crown, Emperor, King, Empire etc. can be used only with the consent of the State Government. There is a legal restriction on the selection of a firm name when it comes to using these specific words.Rate this question:
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- 47.
A patnership firm
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Is a legal person
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Is not a legal person
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Has a legal status of its own
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Has separate legal entity apart form its partners.
Correct Answer
A. Is not a legal personExplanation
A partnership firm is not a legal person because it does not have a separate legal entity apart from its partners. In a partnership, the partners are personally liable for the firm's debts and obligations, and the firm itself cannot enter into contracts or sue or be sued in its own name. Therefore, it does not have the legal status of its own and is not considered a legal person.Rate this question:
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- 48.
The legal position (status) of a firm is that it has no independent existence apart form its partners.
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True
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False
Correct Answer
A. TrueExplanation
The legal position of a firm is that it has no independent existence apart from its partners. This means that a firm is not considered a separate legal entity and its partners are personally liable for the firm's debts and obligations. In other words, the partners and the firm are one and the same in the eyes of the law. Therefore, the statement is true.Rate this question:
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- 49.
Which of the following statement is incorrect?
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A firm has no separate legal entity.
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Same partners may constitute different firms
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Partners of a firm are considered its employees.
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A firm cannot enter into partnership with another firm.
Correct Answer
A. Partners of a firm are considered its employees.Explanation
The statement "Partners of a firm are considered its employees" is incorrect. Partners in a firm are not considered employees but rather co-owners or co-partners. They have a shared responsibility and authority in the firm, rather than being employees who work under the control and direction of the firm.Rate this question:
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