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Partnership Act 1932 MCQs

Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.

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Partnership Act 1932 MCQs

Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Here on MCQs.club we have written easy useful Multiple-Choice Questions (MCQs) on partnership act 1932 that fully cover Indian partnership act 1932, partnership act 1932 notes/ summary/ definition/ bare act, ip act 1932 MCQs, these also explain types of partners in partnership act 1932. These partnership at will Indian partnership act mcqs with answers are useful for Professional Accountancy exams, Competitive exams, Business management exams.

Partnership – is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.

1. True
2. False

Firm and partners – Persons who have entered into partnership with one another are called individually “partners” and collectively “a firm” and the name under which their business is carried on is called the “firm name”.

1. The above definition is correct
2. The above definition is incorrect

Act of firm – An act of firm means any act or omission by all the partners, or by any partner or agent of the firm which gives rise to a right enforceable by or against the firm

1. The above definition is incorrect
2. The above definition is correct

Essential elements of a partnership include:

1. 1. Association of two or more persons
  2. Agreement
  3. Sharing of profit
  4. Business
  5. Mutual agency

1. All of the above
2. (I) and (III) only
3. (I) (IV) and (V) only
4. None

All of the following are correct EXCEPT:

1. The partnership is an association between two or more persons and all persons must be competent to contract.
2. There can be no partnership consisting of a single individual.
3. The partnership Act 1932 limits the number of partners to 50.
4. If the number gets reduced to one, for any reason, it ceases to be a partnership.

The written agreement is known as:

1. Memorandum of Association
2. Articles of Association
3. Partnership deed
4. None

Partnership arises from:

1. Joint Family Business
2. Operation of law inheritance
3. Succession
4. None

Identify from the following what a partnership deed usually sets out:

1. Firm name, Place or principal place of business of the firm, Number of partners
2. The date when each partner joined the firm, Purpose of the partnership
3. Rights and duties of the partners, Duration of partnership
4. All of the above

If the partnership agreement does not specify what the rights or duties of the partners should be in particular circumstances, the rules set out in the Partnership Act 1932 are assumed to apply.

1. True
2. False

All of the following are correct EXCEPT:

1. To constitute a partnership, the parties must have agreed to carry on a business.
2. An agreement to carry on business at a future time does not result in partnership unless that time arrives and the business is commenced.
3. If the purpose is to carry on some charitable work it will not be a partnership.
4. None

A partner may not share in the losses of the business, yet his liability towards outsiders shall be unlimited.

1. False
2. True

Identify from the following the circumstances where a person receiving profits is not necessarily a partner:

1. Lender of money to persons engaged or about to engage in any business
2. Servant or agent as remuneration
3. Widow or child of a deceased partner as annuity
4. A minor who is admitted to the benefits of an existing partnership
5. All of the above

All of the following are correct EXCEPT:

1. A partnership does not have a legal personality. It is not a legal person.
2. A third party entering into business transaction with a partnership do have a contractual agreement with the “partnership”.
3. Partners in a partnership do not have limited liability, and are personally liable for any liabilities of the partnership business that the partnership cannot pay.
4. None

What things to consider in determining whether a group of persons is or is not a firm

1. Association of two or more persons
2. Agreement and Carrying on business
3. Sharing of profits
4. Mutual agency
5. All of the above

Which of the following is Type of partnership?

1. Partnership-at-will
2. Particular partnership
3. Both A&B
4. None

Which of the following is true for “Partnership-at-will”?

1. No provision is made between the partners for the duration of their partnership, or for the determination of their partnership.
2. Any partner is free to dissolve the partnership by giving a notice in writing to all other partners of his intention to dissolve the firm.
3. If freedom to dissolve the firm at will is curtailed by agreement, only then will it not constitute a partnership at will.
4. All of the above

Which of the following is true for “Particular partnership”?

1. A partnership created for any particular adventure or undertaking or for a specific time period
2. If the partners decide to continue partnership even after the expiry of the specific period or completion of specific venture then it becomes partnership at will.
3. Both A&B
4. None

Types of partners are:

1. 1. Actual or ostensible partner
  2. Sleeping or dormant partner
  3. Nominal partner
  4. Partner in profits only
  5. Sub-partner
  6. Silent partner
  7. Partner by estoppel or holding out

1. All of the above
2. (I) (IV) and (VII) only
3. (III) (V) and (VII) only
4. None

Sleeping or dormant partner –

1. A sleeping partner is not known as such as a partner to third parties dealing with the firm.
2. He may or may not take active part in the conduct of the business of the firm.
3. He is equally liable along with other partners for all the debts of the firm, even though his existence is kept a secret from the outsiders dealing with the firm.
4. All of the above

Nominal partner – A partner who does not contribute any capital or share in profits, but lends his name to the firm is called a nominal partner. He along with other partners is liable to the outsiders for all the debts of the firm.

1. True
2. False

Which of the following is correct for a Partnership firm?

1. It is created by an agreement alone and registration is optional.
2. A partner cannot transfer his interest without getting consent from other partners.
3. Minimum two competent to contract persons are required and a maximum of 20 persons can carry partnership other than banking business.
4. All of the above

General (mandatory) duties of partner include:

1. To be just and faithful
2. Carry on business to the greatest common advantage
3. Render true accounts
4. Indemnify for loss caused by fraud
5. All of the above

What the “Duty to be liable jointly and severally” implies?

1. The third party may take legal action for non-payment of a debt or losses incurred as a result of a breach of contract against all the partners jointly.
2. The third party may take legal action for non-payment of a debt or losses incurred as a result of a breach of contract against any individual partner.
3. Option A or B
4. None

Every partner is bound to act within the scope of his actual or apparent authority. Where he exceeds the authority conferred on him and the firm suffers a loss _____________ shall have to compensate the firm for any such loss.

1. The firm
2. All partners jointly and severally
3. The defaulting partner
4. None

In case of emergency a partner can even exceed his authority in order to save the firm from any loss

1. True
2. False

Qualified duties of partner include:

1. 1. Duty to attend diligently to his duties
  2. Duty to contribute to the losses
  3. Duty to indemnify for willful neglect
  4. Duty to use firm’s property exclusively for the firm
  5. Duty to account for personal profits derived
  6. Duty not to compete with the business of the firm
  7. Duty not to assign his interest

1. (I) (III) and (V) only
2. (III) (IV) and (VII) only
3. All of the above
4. None

A partner is not entitled to receive remuneration for taking part in the conduct of the business.

1. True
2. False

Where a partner competes in business with the partnership, without the consent of the other partners:

1. He can retain all the profits derived
2. He is liable to account to the partnership for all the profits
3. He disqualifies as a partner
4. None

Rights of partner include:

1. 1. Right to take part in the conduct of the business
  2. Right to be consulted
  3. Right to have access to the books
  4. Right to share the profits
  5. Right to interest on capital
  6. Right to indemnity

1. All of the above
2. (I) (III) and (VI) only
3. (I) (IV) and (V) only
4. None

In the absence of a contract to the contrary every partner has a right to share profits ___________ earned by the firm.

1. In proportion to their capital
2. Equally
3. Both A&B
4. None

No partner is allowed to receive any interest on capital as a general rule because a partner is not a creditor of the firm. Interest on capital is allowed only when agreed among the partners.

1. The above statement is incorrect
2. The above statement is correct

Where a partner makes for the purpose of the business, any payment or advance beyond the amount of capital he has agreed to subscribe, he is entitled to interest on it at the rate of __________ or as agreed upon.

1. 6% semi-annually
2. 6% per annum
3. 6% quarterly
4. None

Every partner has a right to claim indemnity from the firm in respect of payments made or liabilities incurred by him:

1. In the ordinary and proper conduct of the business.
2. In doing such act, in an emergency, for the purpose of protecting the firm from loss
3. Both A&B
4. None

A partner has a right to retire:

1. With the consent of all the partners
2. In accordance with an express agreement between the parties
3. Where the partnership is at will, by giving notice in writing to all the other partners of his intention to retire.
4. All of the above

The legal representative of the deceased partner or the outgoing partner, is entitled at his option to:

1. Such share of the profits as in proportionate to his share in the property of the firm
2. Interest at the rate of 6% on the amount of his share in the property of the firm.
3. Both A&B
4. None

Mutual Rights and Liabilities of partners include:

1. 1. Duty to work without remuneration
  2. Rights to share profits and losses equally
  3. Right to interest on capital
  4. Rights to interest on subsequent advance
  5. Right to indemnity
  6. Duty to indemnify for willful neglect

1. All of the above
2. (II) (III) and (V) only
3. (I) (II) and (VI) only
4. None

The property of the firm includes:

1. All property originally brought into the common stock of the firm
2. All rights or interest in the property originally so brought
3. All property acquired, by purchase or otherwise, by or for the firm and all rights and interest in any property so acquired
4. Goodwill of the business of the firm
5. All of the above

Any property purchased with partnership money without other partners consent will be deemed to be partnership property.

1. True
2. False

A partner is the agent of the firm for the purpose of the business of the firm. He has the capacity to bind the firm by his act. The authority of a partner may be:

1. Actual
2. Implied
3. Both A or B
4. None

Implied authority – The act of a partner done by him:

1. As an agent of the firm
2. In the course of business of the firm
3. In the name of the firm, or in any other manner expressing an intention to bind the firm.
4. All of the above

Actual authority – The authority of each partner to take decisions for the business, and enter into transactions with other parties, as specified in the partnership agreement.

1. False
2. True

A partner within the scope of his implied authority may bind the firm by:

1. Buying and selling good, on behalf of the firm and giving valid receipts for them
2. Receiving payments of the debts due to the firm and giving valid receipts or discharge for them
3. Contracting debts and paying debts on behalf of the firm
4. Settling accounts with persons dealing with the firm
5. All of the above

Which of the following acts are not included in the implied authority of a partner:

1. 1. Submit a dispute relating to the business of the firm to arbitration
  2. Compromise or relinquish any claim or portion of a claim by the firm
  3. Withdraw a suit or proceeding filed on behalf of the firm
  4. Admit any liability in a suit or proceeding against the firm
  5. Acquire immovable property on behalf of the firm
  6. Transfer immovable property belonging to the firm

1. All of the above
2. (I) (III) and (V) only
3. (I) (V) and (IV) only
4. None

A partner’s capacity to bind the firm by his act may be restricted by:

1. Restrictions on the implied authority of a partner
2. Statutory restrictions
3. Restrictions by partnership deed
4. All of the above

Ratification – When a partner exceeds his authority, that is act outside his actual authority, the other partners may approve such unauthorized act with retrospective effect.

1. The above statement is correct
2. The above statement is incorrect

In case of fraud, _____________ is liable to the third party for loss caused to the third party by fraud committed by a partner but as between partners same must be borne by the ___________ committing the fraud and cannot be shared among all the partners.

1. The partner, firm
2. The firm, partner
3. All partners, firm
4. None

Any admission or representation made by a partner is evidence against the firm if:

1. Such admission or representation must relate to the affairs of the firm
2. Such admission or representation must be made in the ordinary course of business
3. Both A&B
4. None

Any notice to a partner operates as a notice to the firm if:

1. Such notice must relate to the affairs of the firm
2. Such notice must be given to a working partner and not to a sleeping partner
3. There must not be any fraud committed by the partner receiving the notice
4. All of the above

The principle of “Holding out” applies where a person:

1. Represents himself
2. Allows partners to represents him
3. Both A&B
4. None

In order to render a person liable as a partner on the ground of estoppel or holding out:

1. He must have by words spoken or written or by his conduct represented himself to be a partner
2. He must have knowingly permitted himself to be represented as a partner to the other person
3. The third party must have acted on the faith of such representation and gives credit to the firm
4. All of the above

Where a retiring partner does not give a public notice of his retirement and the continuing partners still use his name as a partner, he will be personally liable on the ground of holding out to third parties.

1. The above is correct
2. The above is incorrect

A partner may transfer his interest in the firm by:

1. Sale
2. Mortgage
3. Charge fully or partially
4. All of the above

Rights of transferee of a partner’s interest includes:

1. He is entitled to receive the share of the profits of the transferring partner
2. The share of the assets of the firm to which the transferring partner is entitled
3. An account from the date of the dissolution for the purpose of ascertaining the share
4. All of the above

Disabilities of transferee of a partner’s interest includes:

1. 1. No status of a partner.
  2. Disability to interfere in the conduct of the business during the continuance of the firm
  3. Disability to require accounts.
  4. Disability to inspect the books of the firm.
  5. Disability to challenge the accounts of profits agreed to by the partners.
  6. Disability to sue for dissolution of the firm.

1. All of the above
2. (I) (II) and (VI) only
3. (II) (V) and (VI) only
4. None

Since a minor is not capable of entering into a contract, a contract by or with a minor is void abinitio i.e. from the beginning. Since partnership is formed by a contract, a minor cannot enter into a partnership agreement but with the consent of all the partners for the time being a minor may be admitted to the benefits of partnership.

1. The above statement is correct
2. The above statement is incorrect

Rights of a minor before attaining majority include:

1. Right to share property and profits of the firm as agreed by the partners
2. Right to have access to accounts of the firm ONLY and not to the secret books
3. Right not to be adjudged insolvent
4. All of the above

Liabilities and Disabilities of a minor before attaining majority include:

1. Personally not liable i.e. limited liability
2. His share is liable for the acts of the firm
3. No suit against partners for profit and property except after disconnecting his relation with the firm
4. All of the above

On attaining majority, the minor partner has to decide within six months whether he shall continue in the firm or leave it.

1. True
2. False

Which of the following is correct where a minor on attaining majority elects not to become a partner?

1. The status of a minor up to the date of public notice
2. His share not liable for any act of the firm after the date of public notice
3. Right to sue partners for share of the property and profits
4. All of the above

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Partnership Act 1932 MCQs

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Partnership Act 1932 MCQs