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Partnership MCQs

A partnership firm is a proper game plan by at least two gatherings to oversee and work a business and offer its benefits. There are a few sorts of association courses of action. Specifically, in association business, all accomplices share liabilities and benefits similarly, while in others, accomplices might have restricted risk.

Partnership MCQs: This section contains multiple-choice questions and answers on Partnership. It will help the students to prepare well for their exams.

List of Partnership MCQs

1. What is the minimum partner requirement to start a partnership firm?

  1. 10
  2. 5
  3. 2
  4. 20

Answer: C) 2

Explanation:

At least two people are needed for the enrollment of the partnership firm.

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2. Agreement in which form is required in a partnership firm?

  1. Written
  2. Oral
  3. A or B
  4. None of the above.

Answer: C) A or B

Explanation:

A partnership deed is an understanding between the accomplices of a firm that traces the agreements of organization among the accomplices. An association firm is one of the well-known sorts of associations for beginning another business.

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3. What is the liability of partners in a partnership firm?

  1. Limited
  2. Unlimited
  3. Limited to the capital of business
  4. No Liability

Answer: B) Unlimited

Explanation:

In a partnership firm, every one of the accomplices of the business has a limitless obligation. Every one of the obligations and liabilities is taken by any of the accomplices should be reimbursed by every one of the accomplices. It is everybody's liability in an overall organization with limitless risk.

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4. When is the Debit to partner's capital a/c entry passed in accounts?

  1. Drawings are made
  2. Investment is done
  3. Interest on Drawings is charged
  4. Capital is withdrawn

Answer: C) Interest on Drawings is charged

Explanation:

At the point when the Interest on drawings is charged to accomplices, Interest on Drawing Account is credited, and the Partner's Capital Account is charged. It is called a changing section. Changing sections are normally done toward the year's end for wages and costs.

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5. Partnership Firm Agreement is known as?

  1. Partnership Contract
  2. Partnership Deed
  3. Partnership Act
  4. Agreement

Answer: B) Partnership Deed

Explanation:

A partnership deed is an understanding between the accomplices of a firm that traces the agreements of association among the accomplices. It indicates the different terms like benefit/misfortune sharing, pay, interest on capital, drawings, affirmation of another accomplice.

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6. How will the profits be divided among partners in the absence of a partnership deed?

  1. Depending on the capital invested.
  2. Depending on the work experience.
  3. Unequal
  4. Equal

Answer: D) Equal

Explanation:

As per the arrangements of the partnership deed, the benefits and misfortunes made by the firm are circulated among the accomplices. Notwithstanding, sharing of benefits and misfortunes is equivalent among the accomplices, assuming the partnership deed is quiet.

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7. Which among the following is not a characteristic of a partnership firm?

  1. Easy Formation
  2. Equal Profits
  3. Limited Liability
  4. Mutual Consent

Answer: C) Limited Liability

Explanation:

Limited liability is not a characteristic of a partnership firm as the partners involved have unlimited liability.

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8. What is Partnership at Will?

  1. Form of business partnership where there is no fixed term agreed for the duration of the partnership.
  2. Partnership in which some or all partners can exhibit elements of partnerships and corporations.
  3. Form of partnership under common law.
  4. A partnership formed for a single transaction.

Answer: A) Form of business partnership where there is no fixed term agreed for the duration of the partnership

Explanation:

A Partnership at Will is a type of business association where there is no decent term concurred for the span of the organization. At the end of the day, it is open-finished. This contrasts from a standard business organization via arrangement as this sort reaches a conclusion whenever when an accomplice serves a notification to disintegrate the association on the other accomplice or accomplices giving the organization understanding gives to this.

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9. What is a limited liability partnership?

  1. Form of business partnership where there is no fixed term agreed for the duration of the partnership.
  2. Partnership in which some or all partners can exhibit elements of partnerships and corporations.
  3. Form of partnership under common law.
  4. A partnership was formed for a single transaction.

Answer: B) Partnership in which some or all partners can exhibit elements of partnerships and corporations

Explanation:

Limited Liability Partnership is an adaptable legitimate and assessment element that permits accomplices to profit from economies of scale by cooperating while likewise decreasing their responsibility for the activities of different accomplices. Similarly, as with any lawful substance, you really must take a look at the laws in your country (and your state) before becoming excessively energized. So, check with a legal advisor first. The odds are great that they have first-hand involvement in a Limited Liability Partnership.

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10. What is a General Partnership?

  1. Form of business partnership where there is no fixed term agreed for the duration of the partnership.
  2. Partnership in which some or all partners can exhibit elements of partnerships and corporations.
  3. Form of partnership under common law.
  4. A partnership was formed for a single transaction.

Answer: C) Form of partnership under common law

Explanation:

A general partnership is a business course of action by which at least two people consent to partake in all resources, benefits, and monetary and legitimate liabilities of a mutually possessed business. In an overall association, accomplices consent to limitless obligation, which means liabilities are not covered and can be paid through the capture of a proprietor's resources. Besides, any accomplice might be sued for the business' obligations.

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11. What is Particular Partnership?

  1. Form of business partnership where there is no fixed term agreed for the duration of the partnership.
  2. Partnership in which some or all partners can exhibit elements of partnerships and corporations.
  3. Form of partnership under common law.
  4. A partnership was formed for a single transaction.

Answer: D) A partnership was formed for a single transaction

Explanation:

A partnership can be shaped for carrying on persistent business, or it tends to be framed for one specific endeavour or undertaking. If the association is framed uniquely to do one undertaking or to finish one endeavour such an organization is known as a specific association.

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12. In which sort of partnership does one accomplice has limitless risk and another accomplice have a restricted obligation?

  1. Partnership At will
  2. Particular Partnership
  3. General Partnership
  4. Limited Liability Partnership

Answer: D) Limited Liability Partnership

Explanation:

In a Limited Liability Partnership firm, somewhere around one accomplice has limitless risk—the general partner(s). Different accomplices (restricted accomplices) have restricted risk, which means their own resources normally can't be utilized to fulfil business obligations and liabilities. How much their obligation is restricted to their interest in the LP.

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13. The agreement for the duration of partnership is absent in what kind of partnership?

  1. Partnership At will
  2. Particular Partnership
  3. General Partnership
  4. Limited Liability Partnership

Answer: A) Partnership At will

Explanation:

Partnership at will is an association that is framed to carry on business without determining any timeframe and the organization proceeds as long as the accomplices will proceed. It isn't chosen concerning when and how the firm will reach a conclusion.

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14. Which among the following are the features of a partnership firm?

  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 tor all as an agent.
  4. All of the above.

Answer: D) All of the above.

Explanation:

The Indian Partnership Act, 1932 administers association types of business in India. Area 4 of this Act characterizes an association as the connection between accomplices who have consented to share the association's benefits carried on by all or any of them representing all.

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15. What is an Active Partner?

  1. An invested person who is involved in the daily operations of the partnership.
  2. A person who provides some of the capital for a business but who does not take an active part in managing the business.
  3. A person who holds himself out as a partner or permits a partner to hold him out.
  4. A person who gives an impression to others that he/she is a partner of the firm.

Answer: A) An invested person who is involved in the daily operations of the partnership

Explanation:

An active partner is a put individual who is associated with the day-by-day activities of the organization. A functioning accomplice helps maintain the business to upgrade their profits and is along these lines thought about a material member. This individual commonly shares more danger and return versus a restricted or quiet accomplice.

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16. What is a Sleeping Partner?

  1. An invested person who is involved in the daily operations of the partnership.
  2. A person who provides some of the capital for a business but who does not take an active part in managing the business.
  3. A person who holds himself out as a partner or permits a partner to hold him out.
  4. A person who gives an impression to others that he/she is a partner of the firm.

Answer: B) A person who provides some of the capital for a business but who does not take an active part in managing the business.

Explanation:

Silent Partners are essentially financial backers in the business. Their situation as a quiet accomplice agrees on them the option to survey the organization's financial reports and to have a voice in choices that influence changes to the nature or presence of the association.

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17. What is a Nominal Partner?

  1. An invested person who is involved in the daily operations of the partnership.
  2. A person who provides some of the capital for a business but who does not take an active part in managing the business.
  3. A person who holds himself out as a partner or permits a partner to hold him out.
  4. A person who gives an impression to others that he/she is a partner of the firm.

Answer: C) A person who holds himself out as a partner or permits a partner to hold him out

Explanation:

This is a partner that doesn't have any genuine or huge interest in the organization. In this way, he is just loaning his name to the organization. He won't make any capital commitments to the firm, thus he won't have an offer in the benefits by the same token. In any case, the ostensible accomplice will be at risk to untouchables and outsiders for acts done by some other accomplices.

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18. What is partner by estoppel?

  1. An invested person who is involved in the daily operations of the partnership.
  2. A person who provides some of the capital for a business but who does not take an active part in managing the business.
  3. A person who holds himself out as a partner or permits a partner to hold him out.
  4. A person who gives an impression to others that he/she is a partner of the firm.

Answer: D) A person who gives an impression to others that he/she is a partner of the firm

Explanation:

Assuming an individual holds out to another that he is an accomplice of the firm, either by his words, activities or direct then such an accomplice can't reject that he isn't an accomplice. This fundamentally implies that despite the fact that such an individual isn't an accomplice he has addressed himself accordingly, thus he becomes accomplice by estoppel or accomplice by waiting.

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19. What is a partner in profits only?

  1. An invested person who is involved in the daily operations of the partnership.
  2. A person who provides some of the capital for a business but who does not take an active part in managing the business.
  3. A partner who gets into an agreement to share only the profits of the partnership firm and not the losses.
  4. A Partner who is under the age of 18.

Answer: C) A partner who gets into an agreement to share only the profits of the partnership firm and not the losses

Explanation:

This partner will just share the benefits of the firm, he won't be obligated for any liabilities. In any event, when managing outsiders, he will be responsible for all demonstrations of benefit just, he will share none of the liabilities.

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20. What is a minor partner?

  1. An invested person who is involved in the daily operations of the partnership.
  2. A person who provides some of the capital for a business but who does not take an active part in managing the business.
  3. A partner who gets into an agreement to share only the profits of the partnership firm and not the losses.
  4. A Partner who is under the age of 18.

Answer: D) A Partner who is under the age of 18

Explanation:

A minor can't be an accomplice of a firm as per the Contract Act. Be that as it may, an accomplice can be conceded to the advantages of an organization assuming all accomplice gives their assent for something similar. He will share the benefits of the firm however his responsibility for the misfortunes will be restricted to his portion in the firm.

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21. What will be the extent of liability if Prince, Rijule and Krishan are partners in a firm sharing profits and losses in an equal ratio. Their capital balance as of 31st March 2022 is ₹ 80,000, ₹ 60,000 and ₹ 40,000 respectively. Their assets are worth ₹ 20,000, ₹ 15,000, ₹ 10,000.

  1. Prince - ₹ 80,000 : Rijule - ₹ 60,000 : Krishan - ₹ 40,000
  2. Prince - ₹ 1,00,000 : Rijule - ₹ 50,000 : Krishan - ₹ 30,000
  3. Prince - ₹ 1,00,000 : Rijule - ₹ 40,000 : Krishan - ₹ 10,000
  4. Prince - ₹ 20,000 : Rijule - ₹ 15,000 : Krishan - ₹ 10,000

Answer: D) Prince - ₹ 20,000 : Rijule - ₹ 15,000 : Krishan - ₹ 10,000

Explanation:

The extent of liability of Prince, Rijule and Krishan in the partnership firm would be as follows:

Prince - ₹ 20,000 : Rijule - ₹ 15,000 : Krishan - ₹ 10,000

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22. In a partnership firm, every partner is bound to fulfil his/her ___ in the business?

  1. Meetings
  2. Partnership Deed
  3. Duties
  4. Rights

Answer: C) Duties

Explanation:

Every partner is bound to fulfil his/her duties towards the firm in the business.

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23. In a Partnership Firm forming a partnership deed is ____?

  1. Verbal
  2. Not Necessary
  3. Necessary
  4. Necessary in Writing

Answer: B) Not Necessary

Explanation:

Forming a partnership deed in the partnership firm is not necessary according to Partnership Act, 1932.

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24. What is the other name for Partnership Deed?

  1. Articles of Association
  2. Prospectus
  3. Principles of Partnership
  4. Articles of Partnership

Answer: D) Articles of Partnership

Explanation:

A partnership Deed is a written agreement between the partners of a firm to share the profits and losses of a firm. Partnership Deed is also known ad Articles of Partnership.

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25. Partnership Act 1932 does not comprise of which of the following?

  1. No interest is allowed on capital invested
  2. All loans provided are to be allowed on a fixed interest rate
  3. Profit and Losses are to be shared equally
  4. Interest has to be charged on all drawings

Answer: D) Interest has to be charged on all drawings

Explanation:

Partnership Act 1932 does not comprise of the term that Interest has to be charged on all drawings.

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26. When does the Partnership Act come into action in a firm?

  1. When there is a conflict of interest and opinions in a firm.
  2. When the capital invested is unequal
  3. In the absence of Partnership Deed
  4. When interest is charged on drawings

Answer: C) In the absence of Partnership Deed

Explanation:

The Partnership Act 1932 comes into action when there is the absence of a partnership deed in the firm.

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27. At what per cent the interest is levied on partners' capital in the absence of partnership deed?

  1. 14 % Per annum
  2. 12 % Per annum
  3. No interest is levied
  4. 6 % Per annum

Answer: C) No interest is levied

Explanation:

In the absence of a partnership deed in a partnership firm, no interest is levied on the partner's capital.

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28. What is the accepted rate of interest on a partner's loan account in the absence of a partnership deed in a partnership firm?

  1. 10 % Compound Interest Per annum
  2. 6 % Simple Interest Per annum
  3. 11 % Compound Interest Per annum
  4. 12 % Simple Interest Per annum

Answer: B) 6 % Simple Interest Per annum

Explanation:

The accepted rate of interest on a partner's loan account in the absence of a partnership deed in a partnership firm is 6 % Simple Interest Per Annum.

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29. Tapan and Mirza are partners in a partnership firm without any agreement. Tapan has given a loan of Rs. 50000 to the firm. At the end of the year, the loss was incurred in the firm. What percentage of interest shall be paid to Tapan by the firm?

  1. 12 % Per Annum
  2. 14 % Per Annum
  3. Due to loss incurred in the business, interest cannot be paid
  4. 6 % Per Annum

Answer: D) 6 % Per Annum

Explanation:

The business firm is liable to pay Tapan an interest of 6% Per Annum, irrespective of profits and losses that occurred.

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30. Krishan and Saif are partners in a partnership firm without any agreement. Krishan has withdrawn Rs. 60000 out of his capital as drawings. What is the percentage of interest on drawings that may be charged from Krishan by the firm?

  1. No interest can be charged
  2. 10 % Per Annum
  3. 12 % Per Month
  4. 6 % Per Annum

Answer: A) No interest can be charged

Explanation:

Since Krishan has withdrawn Rs. 60000 out of his capital as drawings therefore no interest shall be charged from Krishan by the partnership firm.

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31. Simran and Aditi are partners in a partnership firm in the absence of any written agreement. Simran devotes more time to the firm as compared to Aditi. So, Simran will receive what percentage of commission in addition to the profit in the firm's profit?

  1. 10 % of Profit
  2. 8 % of Profit
  3. 6 % of Profit
  4. None of the above

Answer: D) None of the above

Explanation:

Due to the absence of a partnership firm agreement Simran will not get any commission in the firm's profit.

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32. Which of the following rule applies to the partnership firm in the absence of a partnership deed?

  1. Equal profit sharing ratio
  2. Profit based salary to the partners
  3. No interest shall be charged on capital
  4. 6 % Interest on Drawings

Answer: C) No interest shall be charged on capital

Explanation:

Due to the absence of a partnership deed in the firm no interest will be charged on the capital in the partnership firm.

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33. Partners of a partnership firm are not entitled to which of the following in the absence of partnership deed?

  1. Equal share in profits
  2. 10 % Commission
  3. No salary or commission
  4. Interest on Drawings

Answer: C) No salary or commission

Explanation:

Since there is no written agreement between the partners in the partnership firm therefore any of the partners are not entitled to salary or commission.

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34. Partners in a firm will get Interest on Capital if provided in the partnership deed but only out of which account?

  1. Reserves
  2. Goodwill
  3. Assets
  4. Profits

Answer: D) Profits

Explanation:

If provided in the partnership deed the partners of a firm will get Interest on Capital only from the Profit Account.

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35. Rent Paid to Partners cannot be recorded in which of the following accounts in the partnership firm?

  1. Salary Account
  2. Depreciation Account
  3. Profit & Loss Account
  4. Expenses Account

Answer: C) Profit & Loss Account

Explanation:

Rent paid to partners cannot be recorded in the Profit & Loss Account in a partnership firm.

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36. Balance of loan account should be transferred to which account if any loan or advance is provided by a partner?

  1. Balance Sheet Assets Side
  2. Partners' Capital Account
  3. Balance Sheet Liability Side
  4. Partner's Liability Account

Answer: C) Balance Sheet Liability Side

Explanation:

If any loan or advance is provided by the partner then the balance of it will be transferred to Balance Sheet Liability Side.

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37. Divakshi, Palak and Unnati were partners in a firm with capitals of Rs. 50,000 ; Rs. 40,000 and Rs. 30,000 respectively carrying on business in the partnership firm. Their firm’s reported profit for the year was Rs. 80,000. As per the provision in the Indian Partnership Act, 1932. Find out the share of each partner in the profit after taking into account that no interest has been provided on an advance by Divakshi of Rs. 20,000 in addition to her capital contribution.

  1. 26,667 to each partner
  2. 26,647 for Palak and Unnati and Rs. 27,466 for Divakshi
  3. 33,333 for Divakshi ; Rs. 26,667 for Palak and Rs. 20,000 for Unnati
  4. 30,000 for each partner

Answer: B) 26,647 for Palak and Unnati and Rs. 27,466 for Divakshi

Explanation:

Since Divakshi has provided Rs.20,000 in addition to her capital contribution the profit-sharing in the firm according to the Indian Partnership Act, 1932 would be Rs. 26,647 for Palak and Unnati and Rs. 27,466 for Divakshi.

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38. Nandini, Shreya and Ujjwal are partners in a firm. At the time of the division of profit for the year, there was a dispute between the partners. Profit before interest on partner’s capital was Rs. 6,000 and Shreya determined interest @24% Per Annum on her loan of Rs. 80,000. There was no agreement on this point. Calculate the amount payable to Nandini, Shreya and Ujjwal respectively.

  1. 400 for Nandini; Rs. 5,200 for Shreya and Rs. 400 for Ujjwal
  2. 2000 to each partner
  3. Loss of Rs. 4,400 for Nandini and Ujjwal; Shreya will take Rs. 14,800
  4. None of the above

Answer: A) 400 for Nandini; Rs. 5,200 for Shreya and Rs. 400 for Ujjwal

Explanation:

Since Shreya has determined interest @24% Per Annum on her loan of Rs. 80,000, although there is no written agreement on it still the amount payable would be Rs. 400 for Nandini; Rs. 5,200 for Shreya and Rs. 400 for Ujjwal.

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39. Pratibha, Divyanka and Ananya are partners in a firm. At the time of the division of profit for the year, there was a dispute between the partners. Profit before interest in partner’s capital was Rs. 6,00,000 and Ananya demanded a minimum profit of Rs. 5,00,000 as her financial position was not good. However, there was no written agreement on this point.

  1. Pratibha and Divyanka will pay Ananya the minimum profit and will share the losses equally.
  2. Pratibha and Divyanka will pay Ananya the minimum profit and will share the loss in capital ratio.
  3. 2,00,000 to each of the partners
  4. Pratibha and Divyanka will take Rs. 50,000 each and Ananya will take Rs. 5,00,000

Answer: C) 2,00,000 to each of the partners

Explanation:

Since there was no written agreement to the profit-sharing there all the partners will take equal profits.

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