Q.1 What is a partnership according to the Indian Partnership Act, 1932?
A contract between two or more persons to carry on a business together with a view to profit
An agreement to share personal property
A business owned by a single person
A charitable organization
Explanation - Section 4 of the Indian Partnership Act defines partnership as a relationship between persons who agree to share profits of a business carried on by all or any of them acting for all.
Correct answer is: A contract between two or more persons to carry on a business together with a view to profit
Q.2 Which of the following is NOT a characteristic of a partnership?
Agreement between partners
Profit motive
Separate legal entity
Mutual agency
Explanation - Partnerships do not have separate legal entity status under Indian law; partners are personally liable.
Correct answer is: Separate legal entity
Q.3 In a partnership, who can bind the firm in business transactions?
Only the senior partner
Any partner acting within the scope of the business
Only partners who own more than 50% share
None of the partners
Explanation - Each partner is an agent of the firm and can bind the firm by acts done in the normal course of business.
Correct answer is: Any partner acting within the scope of the business
Q.4 Which section of the Indian Partnership Act, 1932 deals with the relation of partners to one another?
Section 4
Section 6
Section 9
Section 10
Explanation - Section 9 outlines the mutual rights and duties of partners inter se, including sharing profits and losses.
Correct answer is: Section 9
Q.5 A minor can be admitted to a partnership:
As a full partner
With the consent of all partners, as an agent
Without consent of partners
Only if he reaches 18 years
Explanation - A minor cannot be a full partner but can be admitted to the benefits of partnership with the consent of all partners as per Section 30.
Correct answer is: With the consent of all partners, as an agent
Q.6 Which type of liability does a partner have towards the debts of the firm?
Limited liability
Joint and several liability
No liability
Liability only for his capital contribution
Explanation - Partners are jointly and severally liable for the obligations of the firm, meaning creditors can claim from any or all partners.
Correct answer is: Joint and several liability
Q.7 Which of the following terminates a partnership?
Mutual agreement
Expiry of term
Death or insolvency of a partner
All of the above
Explanation - Partnership can be dissolved by mutual consent, expiry of partnership term, death, or insolvency of a partner, as per the Act.
Correct answer is: All of the above
Q.8 Which is true regarding a 'partnership at will'?
It exists for a fixed term
It can be dissolved by any partner giving notice
It cannot be dissolved until all partners agree
It is only for professional services
Explanation - A partnership at will has no fixed term and can be dissolved by any partner at any time by giving notice to others.
Correct answer is: It can be dissolved by any partner giving notice
Q.9 Which of the following statements is correct about profit-sharing ratios?
Profit must always be shared equally
Profit-sharing ratio is determined by agreement
Profit is shared based on age
Profit is shared only by senior partners
Explanation - Partners may agree to share profits in any proportion; if no agreement exists, profits are shared equally.
Correct answer is: Profit-sharing ratio is determined by agreement
Q.10 What is implied by 'mutual agency' in partnership?
Partners act as agents of the firm
Partners cannot bind the firm
Partners must act individually
Partners are not responsible for firm debts
Explanation - Mutual agency means each partner can act on behalf of the firm and bind it in business transactions.
Correct answer is: Partners act as agents of the firm
Q.11 Which document governs the relationship among partners?
Partnership Deed
Memorandum of Association
Articles of Association
Certificate of Incorporation
Explanation - The partnership deed contains terms and conditions governing mutual rights, duties, and obligations among partners.
Correct answer is: Partnership Deed
Q.12 A partner cannot withdraw his share of capital without:
Consent of all partners
Intimation to the firm
Government approval
Court permission
Explanation - Capital introduced by a partner is part of the firm’s funds and cannot be withdrawn without consent of all partners.
Correct answer is: Consent of all partners
Q.13 Which section of the Indian Partnership Act deals with dissolution by the court?
Section 44
Section 50
Section 45
Section 54
Explanation - Section 44 allows the court to dissolve a partnership on certain grounds like misconduct of a partner or persistent losses.
Correct answer is: Section 44
Q.14 A dormant partner:
Is actively involved in management
Shares profits but not known to the public as a partner
Has no share in profits
Is legally not a partner
Explanation - A dormant partner contributes capital and shares profits but does not participate in management and is not publicly known.
Correct answer is: Shares profits but not known to the public as a partner
Q.15 Which of the following can a partner NOT do without consent of other partners?
Bind the firm in usual business
Dispose of goodwill of the firm
Purchase goods for the firm
Hire employees for the firm
Explanation - A partner cannot sell or dispose of the firm’s goodwill without consent of all partners as it affects the partnership identity.
Correct answer is: Dispose of goodwill of the firm
Q.16 Which is TRUE regarding the retirement of a partner?
The firm dissolves automatically
The partner can retire at any time if the deed allows
Retirement requires government approval
The retiring partner is not entitled to any settlement
Explanation - Section 32 allows a partner to retire according to the terms of the partnership deed, with settlement of dues to the retiring partner.
Correct answer is: The partner can retire at any time if the deed allows
Q.17 Which type of partnership is generally formed for professional services?
Trading partnership
Limited partnership
Professional partnership
Public partnership
Explanation - Professional partnerships are common in fields like law, accounting, and medicine, where partners provide specialized services.
Correct answer is: Professional partnership
Q.18 In the absence of a partnership agreement, profits are shared:
Equally among partners
Based on capital contribution
Based on seniority
Based on age
Explanation - Section 13(1) of the Partnership Act specifies that in absence of agreement, profits (and losses) are shared equally.
Correct answer is: Equally among partners
Q.19 Which is correct regarding a 'limited liability partnership'?
All partners have unlimited liability
Partners have liability limited to capital contribution
It is not recognized under Indian law
It can be formed without registration
Explanation - A Limited Liability Partnership (LLP) provides limited liability to partners as per the LLP Act, 2008, unlike traditional partnership.
Correct answer is: Partners have liability limited to capital contribution
Q.20 Which is NOT a mode of dissolution of partnership?
Mutual agreement
Expiry of term
Retirement of a partner without consent
Compulsory conversion to company
Explanation - Partnerships are dissolved by agreement, expiry, death, insolvency, or court order, but there is no compulsory conversion to a company.
Correct answer is: Compulsory conversion to company
Q.21 A partner's misconduct affecting the firm may lead to:
Increase in capital
Dissolution by the court
Automatic promotion
Retirement of other partners
Explanation - Section 44(a) allows the court to dissolve a partnership if a partner engages in conduct prejudicial to the business.
Correct answer is: Dissolution by the court
Q.22 Which is correct about a 'secret partner'?
Publicly known and active in management
Not known to the public but shares profits
Has no right to profits
Is not legally a partner
Explanation - A secret partner is involved in profits but not publicly known, similar to a dormant partner but may participate internally.
Correct answer is: Not known to the public but shares profits
Q.23 The maximum number of partners allowed in a partnership firm for a banking business under Indian law is:
10
20
50
100
Explanation - Under the Indian Companies Act and RBI guidelines, banking partnerships cannot exceed 10 partners.
Correct answer is: 10
Q.24 Which is TRUE about admission of a new partner?
No existing partner consent is needed
Requires consent of all existing partners
New partner automatically inherits debts
New partner cannot share profits
Explanation - A new partner can only be admitted with consent of all existing partners and usually by reconstituting the partnership.
Correct answer is: Requires consent of all existing partners
Q.25 A partner's share in the firm on dissolution is:
Returned as capital only
Calculated after settling debts and liabilities
Always equal to initial contribution
Not given to the partner
Explanation - On dissolution, the firm’s assets are used to pay liabilities first, and remaining balance is distributed among partners according to profit-sharing ratio.
Correct answer is: Calculated after settling debts and liabilities