Students get through the TN Board 11th Commerce Important Questions Chapter 5 Hindu Undivided Family and Partnership which is useful for their exam preparation.
TN State Board 11th Commerce Important Questions Chapter 5 Hindu Undivided Family and Partnership
Very short answer questions
Question 1.
For which of the following types of business do you think a Partnership firm of organization would be more suitable and why?
- Grocery store,
- Medical store,
- Legal consultancy,
- Craft center,
- Internet cafe,
- chartered accountancy firm.
Answer:
For legal consultancy and chartered accountancy firm, partnership firm, will be more suitable because it has:
- Easy of formation and closure.
- Balanced decision-making.
- More funds.
- Sharing of risks.
- Maintain secrecy.
- Division of work.
Question 2.
Compare the status of a minor in a Joint Hindu family Business with that in a partnership firm.
Answer:
A minor becomes a member of Joint Hindu family business by virtue of his birth on the other hand in partnership minor can be a partner only in profits.
Question 3.
Who is a sub-partner?
Answer:
When a person makes an arrangement with a partner to share his profit he is known as a sub-partner. Such a sub partner has no rights against the firm as he is not liable for the debts of the firm.
Question 4.
Who is a dormant partner?
Answer:
The partners who merely contribute capital and do not take active interest in the conduct of the firm are called sleeping or dormant or financing partners.
Question 5.
When is a firm compulsorily dissolved?
Answer:
A firm is compulsorily dissolved either by the agreement of all the partners or on the insolvency of all the partners except one. It may also be dissolved on the happening of an event which makes the object of the firm unlawful. Example the passing of prohibition Act. Declaration of war with another country.
Question 6.
How is a partnership dissolved under?
Answer:
A Partnership may be dissolved under section 42 on the happening of the following contingencies.
(i) Death of a Partner.
(ii) Expiry of the time if partnership us for a fixed period.
(iii) Completion of the venture for which the firm was formed.
(iv) Adjudication of a partner as an insolvent.
Question 7.
Write a short note on partners express authority?
Answer:
The authority to a partner is expressly conferred by an agreement it is called express authority the firm is liable for all the acts of such partners done within such authority.
Question 8.
Define partnership.
Answer:
The partnership is defined as “the relation between persons who have agreed to share the profit of a business carried on by all or any of them acting for all”.
Question 9.
Who is a minor? Can a minor become a partner?
Answer:
A minor is a person who has not completed 18 years of age, where a guardian is appointed by a court, his age of majority extends to 21 years. Legally, a minor cannot become a partner. He may, however, be admitted to the benefits of partnership with the consent of all partners.
Question 10.
Give Kimball and Kimball’s definition of partnership.
Answer:
In the words of Kimball and Kimball, “A partnership or firm as it is often called, is thus a group of men who have joined capital or services for the prosecuting of some business”.
Question 11.
Under what circumstances does Court can order the dissolution of partnership?
Answer:
- Partner’s Insanity.
- Permanent incapacity.
- Persistent breach of the agreement.
- Misconduct of a partner.
- Transfer of share.
- Continuous loss.
- Just and equitable grounds.
Question 12.
Write a note on dissolution by notice under Sec. 43.
Answer:
Dissolution by notice of partnership-at-will (Sec 43): Where the partnership is at will, the firm may be dissolved by any partner by giving a notice in writing to all the other partners of his intention to dissolve the firm.
Short answer questions
Question 1.
SA/hat is the relationship that exists among partners?
Answer:
The relation that exists between the partners in a partnership is said to be contractual. It is not natural relation arising out of mutual love and affection. According to Indian Partnership Act, “the relation of partnership arises from contract and not from status”. Only persons legally capable of making an agreement can become partners. Lunatics and insolvents cannot become partners.
Question 2.
What is limited partnership?
Answer:
If the liability of the partner is limited then it is called limited partnership. The Law does not permit the formation of a limited partnership in India. But in Europe and U.S.A. limited partnership is allowed. A limited partnership firm must have at least one partner whose liability is unlimited. The liability of remaining partners is limited. Thus limited partnership consists of two types of partners, general partner and limited partner.
Question 3.
What is a partnership deed?
Answer:
A partnership firm can be formed through an agreement among two or more persons.
In India, this agreement may be oral or in writing. But it is desirable to have it in writing to avoid any misunderstanding among the partners in future. All the terms and conditions of partnership are included in the agreement. The partnership agreement is also known as Partnership Deed or Articles of Partnership.
Question 4.
Define implied authority of a partner.
Answer:
An implied authority is a right vested with a partner to be used in emergency situations to protect the interest of the firm. Where there is no partnership agreement or where the agreement is silent, “the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm”. [Sec. 19(1)]. The authority of a partner to bind the firm is called “implied authority”.
Question 5.
What is joint and several liability?
Answer:
The liability of partners is joint and several. The creditors of partnership firm can claim their dues from the private assets of all the partners taken together or they can take action against the private properties of any one of the partners to get back their dues.
Long answer questions
Question 1.
Explain the position of minor in the partnership firm.
Answer:
The position of a minor partner may be studied under two heads.
Position before attaining majority:
- He has a right to share the property and profits of the firm as may have been agreed upon.
- He has a right to have access to and inspect and take a copy of the accounts of the firm.
- His liability is confined only to the extent . of his share in the profits and property of the firm. Over and above his capital, he is neither personally liable nor his private property is liable.
Position on attaining majority:
- On attaining the majority the minor partner has to decide within six months by giving notice whether he shall continue in the firm or not.
- If he decides to continue as partner, he becomes liable to the firm from the date, on which he was admitted as minor partner.
- If he decides not to continue as partner, he is not liable for the debts of the firm after the date of notice.
Question 2.
What are the drawbacks of non-registration of partnership firm?
Answer:
Drawbacks of non-registration ofpartnership: Registration of partnership is only optional in India. But if a firm is not registered, it has to face the following drawbacks.
- A partner of an unregistered firm cannot file any case against the firm or against any other partner, including an ex-partner for enforcing his contractual rights under the partnership agreement or under the Act.
- An un-registered firm cannot file any suit, against third parties in any civil court for recovering the money due.
- Any third party can take legal action against the business or the partners.
- The firm cannot take legal action against its partners.
- An unregistered firm cannot enforce its claims against third parties for recovering a sum exceeding rupees one hundred.
Question 3.
Describe the various kinds of partners.
Answer:
- Active partner: A partner who takes active part in the management of the partnership firm is known as active or working or managing or general partner. His liability is unlimited.
- Sleeping partner or Dormant partner: The partners who merely contribute capital and do not take active interest in the conduct of the business of the firm are called sleeping or dormant or financing partners.
- Nominal or Ostensible partner: jje is a partner who neither contributes capital nor takes any part in the management of the firm. He lends his name to be used as partner in the business to increase the reputation of the firm. They are not eligible for a share in the profit. They are also not liable to the creditors for the debts of the firm.
- Partners in profit only:Aperson who shares the profit of a firm but does not share the loss, is called “partner in profit only”. Usually he has no voice in the management of the firm. But his liability to third parties is unlimited.
- Partner by estoppel: A person may not be really a partner in the business. But by his behaviour he makes outsiders believe that he is a partner in the business. Then, he is liable to such outsiders who advance money to the firm or enter into a contract under such false belief. Such a person is known as “partner by estoppel”. He cannot later on deny that he is not a partner.
Question 4.
Explain the basic features of partnership.
Answer:
The main features of partnership firm are –
- Agreement: A partnership is created by an oral or written agreement. It is better to put it in writing to avoid misunderstanding in future.
- The multiplicity of person: Partnership is the relationship between two or more persons.
So, there must be more than one person. The maximum number of partners has been limited to 10 in the case of banking business and 20 in the case of other business. - Contractual relation: The relation that exists between the partners in a partnership is said to be contractual. It is not natural relation arising out of mutual love and affection. According to Indian Partnership Act, “the relation of partnership arises from contract and not from status”. Only persons legally capable of making an agreement can become partners. Lunatics and insolvents cannot become a partner.
- Lawful business: Partnership is formed to do a business. Business means any trade or occupation or profession. Eg: Partnership of chartered accountants, partnership of lawyers, general stores etc. The bv iiness must be legal. A partnership to smuggle goods from one country to another is illegal.
- Sharing of profits: The profit or loss of partnership is shared by the partners in the ratio as given in the agreement. Normally profit or loss is shared according to the capital contribution of partners. But sometimes the partners may agree that a particular partner need not share any loss. If there is no agreement regarding sharing of profit or loss, all the partners share equally.
Question 5.
What are the advantages and disadvantages of partnership firm?
Answer:
The advantages of partnership form of organisation are-
- Easy formation: A partnership firm is very easy to form. No formal document is required to be prepared as necessary in the case of joint stock company. A simple agreement among the partners is sufficient to start a partnership firm.
- Registration not compulsory: A partnership firm is exempt from registration because registration is not compulsory. It is left to the discretion of the partners.
- Larger financial resources: As a number of partners contribute to the capital of the firm, it is possible to collect larger financial resources than the sole proprietorship. Creditworthiness of the firm is also higher because every partner is personally and jointly liable for the debt of the business. Larger resource gives greater scope for the expansion of business.
- Greater managerial talent: The partners may be assigned duties according to their tajent. Different functional departments may be managed and controlled by different partners. The talent and experience of partners will help to increase the efficiency Of the business resulting in more profit.
- More credit standing: The partners may have sufficient contacts in the market, They can offer more guarantees to the financial institutions to obtain loans. The liability of partners being unlimited, they will be able to raise more finance. Partnership concern has more credit worthiness than sole trading business.
The disadvantages of Partnership form of organisation are-
- Unlimited liability; Every partner is jointly and severally liable for the entire debts of the firm. A partner has to suffer not only for his mistakes but also for the lapses and dishonesty of other partners. Unlimited liability discourages many people from becoming a partner in the firm.
- Limited resources: The resources of the partnership firm is limited. The borrowing capacity of the partners is also limited. Therefore, a partnership form of business is not suitable for undertaking business involving a huge investment of capital.
- The danger of implied agency: The acts of partners legally bind the business and every other partner in the normal course of business. A dishonest or inefficient partner may bring loss to others by his actions. An innocent partner may be required to lose his personal assets for the mistake of other partners.
- Distrust: The distrust among partners is the main cause for the dissolution of partnership firms. It is difficult to maintain harmony among partners because they may have different opinions and may not agree unanimously on certain matters. Lack of confidence may lead to misunderstanding and quarrels and it will result in the dissolution of the firm.
- Limitation on transfer of share: No partner can transfer his share to a third party without the consent of the other partners. If a partner wants to withdraw his share, it is not possible without the consent of other partners. This makes investment in a partnership firm non-liquid, fixed, and less attractive.
Question 6.
Explain the rights and duties of partners.
Answer:
Partnership Act 1932 lays down the following rights and duties of a partner.
Rights of Partners:
- Every partner has a right to take part in the conduct and management of the business.
- Every partner has a right to express opinion on any matter related to the firm.
- Every partner has a right to be consulted before taking important decisions.
- Every partner has a right to inspect and take copy of books of account and records of the firm.
- Every partner has the right to an equal share in the profits of the firm unless otherwise agreed by the partners.
Duties of Partners: The duties of partners can be classified into – (i) Absolute duties and
(ii) Qualified duties.
- Absolute duties: Absolute duties are fixed by law which cannot be violated by partners agreement. These duties are applicable to all partnership.
(a) Every partner must act diligently and honestly in the discharge of his duties to the maximum advantage of all partners.
(b) Every partner must act in a loyal and faithful manner towards each other.
(c) Every partner must act within the scope of the authority entrusted to him.
(d) Every partner is bound to share the losses of the firm equally unless otherwise agreed.
(e) Every partner must indemnify the firm against loss sustained due to his willful negligence in the ordinary course of business. - Qualified duties: Qualified duties given in the Act can be modified by an agreement of partners entered into.
Question 7.
Differences between Partnership and Sole Trader.
Answer:
Multiple choice questions
1.Name the form of business organization found only in India:
(a) sole-proprietorship
(b) partnership
(c) joint hindu family
(d) co-operatives
Answer:
(c) joint hindu family
2. Name the person who governs Joint Hindu Family Business:
(a) manager
(b) minor
(c) members
(d) karta
Answer:
(d) karta
3. Name the law which governs Joint Hindu family Business:
(a) partnership act
(b) hindu law
(c) companies act 1956
(d) contract act
Answer:
(b) hindu law
4. Which of the following has unlimited liability in business?
(a) Sole proprietor
(b) Karta
(c) Partners
(d) All of the above
Answer:
(d) All of the above
5. Which of the following has a separate legal entity?
(a) Joint stock company
(b) Co-operative society
(c) Both of the above
(d) None of the above
Answer:
(c) Both of the above
6. Minor can be Full-fledged member of:
(a) co-operative society
(b) joint stock company
(c) joint hindu family
(d) partnership
Answer:
(c) joint hindu family
7. The Karta in Joint Hindu Family business has:
(a) limited liability
(b) unlimited liability
(c) no liability for debts
(d) joint liability
Answer:
(b) unlimited liability
8. The maximum number of partners allowed in the banking business are:
(a) twenty
(b) ten
(c) no limit
(d) two
Answer:
(b) ten
9. The head of the Hindu family business is called:
(a) proprietor
(b) director
(c) karta
(d) manager
Answer:
(c) karta
10. Provision of residential accommodation to the members at reasonable rates is the objective of:
(a) producer’s co-operative
(b) consumer’s objective
(c) housing co-operative
(d) credit co-operative
Answer:
(c) housing co-operative
11. A partner whose association with the firm is unknown to the general public is called:
(a) active partner
(b) sleeping partner
(c) nominal partner
(d) secret partner
Answer:
(d) secret partner
12. Partnership may come into existence:
(a) by the operation of law
(b) by an express agreement
(c) by an express or implied agreement
(d) by inheritance of property
Answer:
(b) by an express agreement
13. The agreement of partnership:
(a) must be oral
(b) must be in writing
(c) must be in writing in the stamp paper
(d) can be either oral or in writing
Answer:
(c) must be in writing in the stamp paper
14. In a partnership the partners share:
(a) only profit
(b) only losses
(c) profit, losses and liabilities
(d) only liabilities
Answer:
(c) profit, losses and liabilities
15. Effective organisation promotes:
(a) specialisation
(b) economic development
(c) efficiency in production
(d) harmony of employers and employees
Answer:
(a) specialisation
16. A partnership firm may be registered under:
(a) 1949 Act
(b) 1956 Act
(c) 1932 Act
(d) 1942 Act
Answer:
(c) 1932 Act
17. The relationship between the partners is:
(a) debtors and creditors
(b) principal and agent
(c) seller and buyer
(d) employer and employee
Answer:
(b) principal and agent
18. Every partner has the right to receive interest on loans and advances at the rate of per annum:
(a) 6%
(b) 10%
(c) 12%
(d) No interest
Answer:
(a) 6%
19. The basis of partnership is:
(a) utmost good faith
(b) money available for investment
(c) desire to work together
(d) risk sharing
Answer:
(a) utmost good faith
20. The maximum number of partners in the case by banking business is:
(a) 2
(b) 10
(c) 20
(d) 30
Answer:
(b) 10
21. Sleeping partner may also be called as:
(a) active partner
(b) dormant partner
(c) nominal partner
(d) partner by estoppal
Answer:
(b) dormant partner
22. A minor is a person who has not completed years of age:
(a) 15
(b) 16
(c) 17
(d) 18
Answer:
(d) 18
23. A partner who does not take part in the working of the firm is called:
(a) active partner
(b) sleeping partner
(c) nominal partner
(d) partner in profits only
Answer:
(b) sleeping partner
24. The partnership organisation was started with the enactment of English partnership act in 1907 in:
(a) India
(b) Germany
(c) England
(d) Italy
Answer:
(c) England
25. A temporary partnership which is formed to complete a specific venture or job during a specified period is called:
(a) joint venture
(b) partnership at will
(c) general partnership
(d) sub partner
Answer:
(a) joint venture
26. A partnership is formed by:
(a) agreement
(b) relationship among persons
(c) the direction of government
Answer:
(a) agreement
27. Registration of partnership is:
(a) compulsory
(b) optional
(c) not necessary
Answer:
(b) optional
28. In the partnership there exists a relationship of:
(a) principal and agent
(b) owner and servant
(c) employer and employee
Answer:
(a) principal and agent
29. A partnership is created by:
(a) mutual love and affection
(b) family relationship
(c) agreement
Answer:
(c) agreement
30. A partnership cannot engage in:
(a) large scale production
(b) foreign trade
(c) smuggling goods
Answer:
(c) smuggling goods
31. A collective name of partners is known as:
(a) company
(b) family
(c) firm
(d) co-operative
Answer:
(c) firm
32. The liability of partners is:
(a) joint and several
(b) limited
Answer:
(a) joint and several
33. ……… is described as an extension of the principle of agency.
(a) Partnership
(b) Sole trading concern
(c) Joint stock company
(d) Co-operative society
Answer:
(a) Partnership
34. A partner who contributes capital and takes active part in the management of the partnership firm is:
(a) sleeping partner
(b) nominal partner
(c) managing partner
(d) partner in profits only
Answer:
(c) managing partner
35. Persons who enter into partnership are individually called:
(a) partners
(b) shareholders
(c) sole trader
Answer:
(a) partners
36. Where the authority to.a partner is expressly conferred by an agreement, it is called:
(a) Implied Authority
(b) Express Authority
(c) None of these
Answer:
(b) Express Authority
37. In India registration of partnership is:
(a) compulsory
(b) not compulsory
(c) discretional
Answer:
(b) not compulsory
38. The main cause for dissolution of partnership firm is:
(a) lack of capital
(b) loss in business
(c) distrust among partners
Answer:
(c) distrust among partners
39. In India the agreement among the partners may be in:
(a) oral
(b) writing
(c) oral or writing
Answer:
(b) writing
40. The profit or loss of a partnership firm is shared in the among the partners.
(a) equal ratio
(b) agreed ratio.
(c) capital ratio
Answer:
(b) agreed ratio.
41. An ostensible partner is one who:
(a) contributes a larger part of the capital
(b) takes active part in the management
(c) lends his name to be used to increase the reputation of the firm
Answer:
(c) lends his name to be used to increase the reputation of the firm