Q.1 What is the primary characteristic of a partnership under the Partnership Act?
A single owner manages the business
Two or more persons share profits
It is a government-owned entity
It is a charitable organization
Explanation - A partnership is formed when two or more persons agree to share profits of a business carried on by all or any of them acting for all.
Correct answer is: Two or more persons share profits
Q.2 Which of the following is NOT a type of partnership?
General Partnership
Limited Partnership
Partnership at Will
Sole Proprietorship
Explanation - Sole proprietorship is a business owned by a single individual, not a partnership.
Correct answer is: Sole Proprietorship
Q.3 In a partnership, what is the liability of a general partner?
Limited to their capital contribution
Unlimited personal liability
Liable only for their own mistakes
No liability at all
Explanation - General partners have unlimited liability, meaning their personal assets can be used to settle business debts.
Correct answer is: Unlimited personal liability
Q.4 Which of the following documents governs the relationship among partners?
Partnership Deed
Memorandum of Association
Articles of Association
Business License
Explanation - A partnership deed is the legal document detailing rights, duties, and obligations of partners.
Correct answer is: Partnership Deed
Q.5 A 'Partnership at Will' can be dissolved:
After 5 years automatically
At the end of the financial year
By notice of any partner
Only by court order
Explanation - In a partnership at will, any partner can dissolve the partnership by giving notice to the other partners.
Correct answer is: By notice of any partner
Q.6 Which section of the Indian Partnership Act, 1932 defines 'partner'?
Section 4
Section 2(d)
Section 10
Section 25
Explanation - Section 2(d) defines a partner as a person who is a member of a partnership.
Correct answer is: Section 2(d)
Q.7 What is the maximum number of partners allowed in a partnership carrying a business of banking?
10
20
50
100
Explanation - Banking partnerships are limited to a maximum of 10 partners as per the law to ensure proper management.
Correct answer is: 10
Q.8 Which of the following rights does a partner NOT typically have?
To participate in management
To inspect books
To share profits
To unilaterally sell partnership property
Explanation - No single partner can sell partnership property without consent of other partners unless explicitly authorized.
Correct answer is: To unilaterally sell partnership property
Q.9 When a partner dies, what generally happens to the partnership?
It continues automatically
It dissolves unless otherwise agreed
It becomes a corporation
It transfers to the government
Explanation - Death of a partner generally dissolves the partnership unless there is an agreement for continuation.
Correct answer is: It dissolves unless otherwise agreed
Q.10 Which type of partner invests capital but does not participate in management?
Active Partner
Sleeping Partner
Nominal Partner
Junior Partner
Explanation - A sleeping or dormant partner contributes capital but does not engage in daily management.
Correct answer is: Sleeping Partner
Q.11 Which of the following duties is NOT typically expected from a partner?
Act in good faith
Avoid competition with the partnership
Share profits honestly
Invest in other competing businesses secretly
Explanation - Partners are expected to avoid conflicts of interest and act in good faith toward the partnership.
Correct answer is: Invest in other competing businesses secretly
Q.12 Which type of partner lends their name to the firm but does not invest capital or participate in management?
Nominal Partner
Sleeping Partner
Junior Partner
Active Partner
Explanation - A nominal partner allows the use of their name for business reputation but does not invest capital or manage the firm.
Correct answer is: Nominal Partner
Q.13 A firm is considered dissolved if:
All partners agree to continue
One partner retires and the deed has no provision for continuation
The firm earns profit
The firm hires new employees
Explanation - Partnership dissolves if a partner retires and the partnership deed does not provide for continuation.
Correct answer is: One partner retires and the deed has no provision for continuation
Q.14 Which of the following is true regarding profit sharing in a partnership?
Profits are shared according to law if not agreed otherwise
Each partner must get equal share by default
Only active partners share profit
Profits are shared after 10 years only
Explanation - If not specified in the partnership deed, profits are shared equally among partners as per the Partnership Act.
Correct answer is: Profits are shared according to law if not agreed otherwise
Q.15 Which of the following can bind the partnership in a contract?
Any partner acting in ordinary business
Only the senior partner
Only with government approval
No partner can bind the firm
Explanation - Any partner can bind the firm in transactions related to the ordinary course of partnership business.
Correct answer is: Any partner acting in ordinary business
Q.16 Who can be held personally liable for partnership debts?
Only the managing partner
All partners jointly and severally
Only new partners
No partner is personally liable
Explanation - Partners share joint and several liability, meaning creditors can claim the whole debt from any or all partners.
Correct answer is: All partners jointly and severally
Q.17 Which of the following is considered an implied authority of a partner?
Borrowing money for partnership purposes
Selling personal assets without consent
Starting a new unrelated business
Changing the partnership deed alone
Explanation - Partners have implied authority to do acts necessary for carrying on the partnership business.
Correct answer is: Borrowing money for partnership purposes
Q.18 If a partner commits a fraud in the name of the partnership, who is liable?
Only the fraudulent partner
All partners
Government only
No one
Explanation - Partners are liable for acts of any partner done in the ordinary course of business, including fraud in business dealings.
Correct answer is: All partners
Q.19 Which of the following is NOT a consequence of partnership dissolution?
Distribution of assets
Settlement of debts
Continuation of profit sharing as before
Realization of partnership property
Explanation - Profit sharing ceases upon dissolution; assets are realized and debts settled.
Correct answer is: Continuation of profit sharing as before
Q.20 In case of insolvency of a partner, what happens to their share in the partnership?
It is automatically transferred to other partners
It is payable to creditors of the insolvent partner
It is doubled
It is forfeited to the government
Explanation - The insolvent partner’s share of profits and assets can be claimed by their creditors.
Correct answer is: It is payable to creditors of the insolvent partner
Q.21 Which of the following requires consent of all partners?
Admission of a new partner
Ordinary day-to-day purchases
Hiring temporary staff
Paying utility bills
Explanation - Adding a new partner changes the structure of the partnership and requires unanimous consent.
Correct answer is: Admission of a new partner
Q.22 Which type of partner contributes skill or expertise but not capital?
Capital Partner
Nominal Partner
Partner by Estoppel
Partner by Skill/Active Partner
Explanation - Such partners contribute professional skill or labor to the partnership in exchange for profit share.
Correct answer is: Partner by Skill/Active Partner
Q.23 Which section of the Indian Partnership Act deals with minor being admitted to the benefits of partnership?
Section 10
Section 30
Section 25
Section 5
Explanation - Section 30 allows a minor to be admitted to the benefits of partnership with the consent of all partners.
Correct answer is: Section 30
Q.24 Who has the right to dissolve a partnership at will?
Only senior partner
Any partner
Only government
Judicial authority
Explanation - In a partnership at will, any partner can dissolve it by giving notice to other partners.
Correct answer is: Any partner