Tag: elements of business

Questions Related to elements of business

The private property of a partner should be used to ________.

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. Pay his private debts first and if there is any surplus it can be used to pay firms liabilities

  2. Pay firms liabilities first and if there is any surplus it can be used to pay private debts

  3. (A) and (B)

  4. (A) or (B)

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Correct Option: C

Which of the following is not a form of organisation?

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. Partnership

  2. Company

  3. Partners

  4. Sole Proprietorship

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Correct Option: C
Explanation:

Partners are the members who come together to form partnership. They are not the form of organisation, They are just the members of the organisation.

Which of the following statement is incorrect?

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. The partnership comes into existence only by an agreement

  2. A person who received the profits is always partner

  3. The true test of partnership is the mutual agency i.e., agency relationship among partners

  4. A person who receives the profits is not necessarily a partner

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Correct Option: B

Which of the following people cannot be called partners?

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. Minors

  2. Insolvents

  3. Co-owners without the agreement to carry on the business

  4. All of the above

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Correct Option: D
Explanation:

Indian partnership Act , provides that though a minor cannot be a partner in a firm , but with the consent of all the partners for the time but, he may be admitted to the benefits of partnership by an agreement executed through his guardian with the other partners.

Insolvency means a person who is not able to pay it's debts . So he cannot be a partner of a partnership firm. No member can be partner without the agreement between a co-owners.

Partners are ____________ of the firm.

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. owners

  2. employers

  3. agents

  4. none of the above

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Correct Option: C
Explanation:

Partner is a representative of a partnership business. As a representative of a partnership firm, the partners should conduct business based on the the powers given to them. Partners are agents who may act on behalf of the firm.

A ____________ partner is like an undisclosed principal.

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. sleeping

  2. active

  3. nominal

  4. sub-partner

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Correct Option: A
Explanation:

A sleeping or dormant partner is one who is a partner but whose name does not appear in any way as a partner and who is not known to the outside world as a partner. He has no duties to perform but has the right of access to the books of accounts which he can examine.

The members of partnership firm are individually called as ________.

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. director

  2. investor

  3. partner

  4. manager

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Correct Option: C
Explanation:

Persons who have entered into partnership with one another to carry on a business are individually called "partners". But the liability of partners with regard to its business is just like a proprietorship, is not limited to their share in business but also personal properties of the partners are at stake.

For a minor to be admitted to a partnership firm _________.

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. all the partners should agree

  2. there should be $2$ major partners and than a minor can be admitted

  3. minor can not be admitted in a partnership firm

  4. both a and b

Show answer
Correct Option: D
Explanation:

Indian Partnership Act, provides that though a minor cannot be a partner in a firm,but with the consent of all the partners for the time being, he may be admitted to the benefits of partnership by an agreement executed through his guardian with the other partners . 

       A minor can only be admitted to the benefits of a partnership if there are already 2 major partners, as a contract cannot take place between 2 minors. In simple words, there should be a partnership between 2 major partners before a minor can be admitted to its benefits.

A sub-partner is a person __________.

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. who is sharing the profits of some partner

  2. who does not invest and shares the profits

  3. who invests but does not work

  4. a partner who only gives his name for partnership

Show answer
Correct Option: A
Explanation:

When a partner enters into a contract with a third party to share his profit, the third party is called a sub partner. " The right to receive profits and bear losses becomes the asset of the sub partnership. A sub partnership which is in the receipt of the share of profit of a partner is the main partnership, has to be deemed to be a partner in the main partnership for the limited purpose of section 10(2-A) of the Income Tax act ".

XYZ partnership firm is a partnership firm between A and B. C posed that he is a partner in XYZ and earned profits form the market. C will be regarded as ______.

elements of business partnership 2 - organisation, classification, rights, duties and liabilities of partners types of partners types of partners and partnership firms types, rights and duties of partners

  1. holding out partner

  2. dormant partner

  3. nominal partner

  4. none of the above

Show answer
Correct Option: D
Explanation:

C will be regarded as partner in profit . A partner in profit is a partner who shares in the profit only without being liable of the losses. He contributes capital to the firm but does not take part in the management of the business . He is liable to the third parties like other partners . Such a partner is generally inactive but associated with his money and goodwill.