Ch:3 Partnership

Question 1

Q1 Why the need of partnership business was felt.

Answer 1

This type of business organization was introduced due to the following
deficiencies of soletradership:
(i) Shortage of capital
(ii) More burden of loss
(iii) Failure of managing business affairs

Question 2

Q2. Define partnership.

Answer 2

The relation between persons who have agreed to share the profits of a business
carried on by all or any one of them acting for all.
(Partnership Act 1932)

Question 3

Q3. Narrate any three important points from the definition of partnership.

Answer 3

i) Partnership shows a business relationship between persons.
(ii) The main object of the business is profit.
(iii) Business may be carried by all or any one of them acting for all.

Question 4

Q4 State any five properties of the partnership business.

Answer 4

There are following properties of the partnership business:
(i) Un-limited liability
(iii) Mutual cooperation
(ii) No separate legal entity
(iv) Partner as agent
v) division of profit and loss

Question 5

Q5 State any five advantages of partnership.

Answer 5

There are following advantages of the partnership:
(i) Larger capital
(ii) Mutual consultation
(iii) Division of work
(iv) Credit facility
(v) Services of experts

Question 6

Q6 State any five disadvantages of partnership.

Answer 6

There are following disadvantages of the partnership:
(i) Unlimited liability
(iii). Delay in decisions.
(ii) Uncertainty
(iv) Personal disputes
v) Lack of secrecy

Question 7

Q7. List out the types of partnership.

Answer 7

There are following four kinds of partnership:
(i)Partnership for fixed period
(ii) Partnership at will
(iii) Limited partnership
(iv) Particular partnership

Question 8

Q8 What is meant by partnership at will.

Answer 8

When no provision is made in partnership agreement for the duration of partnership then the partnership is called partnership-at-will. This partnership may continue till the mutual consent and trust prevail among the partners.

Question 9

Q9. What is meant by limited partnership.

Answer 9

In Pakistan, limited partnership is formed under Limited Liability Partnership Act 2017, which consists of 55 sections, 13 parts and 3 schedules. The registration of limited partnership is compulsory by law. The name of limited liability partnership shall appear in legible letters on its seal, all business letters and statements of account etc.

Question 10

Q10. Write down the forms of partnership under Islamic laws.

Answer 10

i)Shirkat-ul-Mufavda
(iii) Shirkat-ul-Wajooh
(ii) Shirkat-ul-Anan
(iv) Shirkat-ul-Taqabal

Question 11

Q11 Shirkat-ul-Anan.

Answer 11

1)The share of partners in capital may be different.
2)The profit or loss of business shall be distributed according to the capital
contributed by the partners.
3)The partners are allowed to contribute capital inform of cash only.

Question 12

Q12. What is meant by Shirkat-ul-Wajooh.

Answer 12

(i) In this partnership, no partner brings capital.
(ii) This partnership may be started by taking loan or purchasing goods on
credit.
(iii) Profit or loss of the business is distributed among the partner on the basis of
their loans taken for the business.

Question 13

Q13. Define partnership deed.

Answer 13

Partnership deed is a document, which contains all necessary rules and regulations
required to run the partnership business.

Question 14

Q14.
Which one is the best option/form of partnership agreement.

Answer 14

The best form of partnership deed is that it must be written registered and signed by the all partners, so that partners can know their rights and duties.

Question 15

Q15. List down the main points of partnership deed.

Answer 15

There are following main points of the deed:
(i)Name of firm
(ii)Nature of business
(iii) Duration
(iv)Capital
(v) Division of profit and loss
(vi) Rights and duties of partner
(vii) Name of the partners
(viii) Division of work

Question 16

Q16.
Who is minor partner.

Answer 16

Minor partner means a partner whose age is less than 18 years. A minor partner may become a partner of the business with the consent of all the other partners.

Question 17

Q17. Define senior partner.

Answer 17

Senior partner means a partner who has invested large capital and is playing
important role in the management according to his ability and experience. His ratio of profit or loss is also more than other partners.

Question 18

Q18.Who is a junior partner.

Answer 18

Junior partner means a partner who has invested small capital and has a limited.
experience of business. His ratio of profit and loss is also less as compared to other partners.

Question 19

Q19. Define Sleeping Partner.

Answer 19

If any person invests his capital in the business and responsible for profit & loss but does not participate in the working of the business, he is called non-active or sleeping or dormant partner.

Question 20

Q20. What is a meant by nominal partner.

Answer 20

Nominal partner is a partner who neither invests capital nor shares the profit or loss of the firm. He also does not participate in the management of a firm. A firm only uses the name and good reputation of this partner.

Question 21

Q21. State the duties of partners.

Answer 21

i) Sincere and faithful
(ii) Work for common advantage
(iii) To abide by the decision of majority
(iv) To abide by the agreement
(v) To keep secrecy.
(vi) Maintenance of true account

Question 22

Q22-State the rights of the partners.

Answer 22

(i) Right of profit
()Right of exercising powers
(iii) Right of management
(iv)Right of inspection
(v) Right of opinion
(vi)Right of retirement

Question 23

Q23.
State the liabilities of partners.

Answer 23

i) Joint liability
(ii)Liability of a new partner
(iii) Liability of retired partner
(iv)Liability of deceased partner
(v) Liability of insolvent partner

Question 24

Q24
Define the registration of partnership.

Answer 24

Registration means a proof of existence of partnership business or firm. The
process of recording the name of firm with the registrar of firm is called the
registration of firm.

Question 25

Q#26 Explain the dissolution of partnership business or firm.

Answer 25

According to section 39 of Partnership Act 1932, “The dissolution of partnership
among all the partners of firm is called dissolution of firm”.

Question 26

Q27 List down the methods of dissolution of firm.

Answer 26

i)Dissolution by agreement
ii). By notice
(iii) Breach of partnership act
(iv) Contingent dissolution
v) By court

Question 27

Q28.
How does the distribution of assets take place after the dissolution of
partnership.

Answer 27

When the legal entity of partnership business comes to an end then all assets
(including goodwill) of the firm are sold and realized amount is divided according
to following method:
(i) Firstly the debts of the outsiders are paid.
(ii) After this, the invested capital of the partners is paid.
(iii) After this if any amount remains intact then it is distributed among the
partners according to their profit sharing ratio.

Question 28

Q25.
State the advantages of registration of firm.

Answer 28

There are following advantages of registration of firm:
(i) Credit facilities.
(ii) Legal protection
(iii) Government facilities
(iv) Public confidence
v)Business reputation
(vi) Protection to creditors