MCQ on Indian Partnership Act 1932

Here’s an additional set of multiple-choice questions on the Indian Partnership Act, 1932 to further expand your understanding.

Part 1: Introduction to the Act

36. The Indian Partnership Act, 1932 came into force on:
    a) 1st January 1933
    b) 1st October 1932
    c) 1st March 1932
    d) 1st July 1932
    Answer: b) 1st October 1932
    Explanation: The Indian Partnership Act, 1932 came into effect on 1st October 1932, replacing certain sections of the Indian Contract Act, 1872.
37. The term “partner” is defined in the Indian Partnership Act as:
    a) A co-owner of the firm
    b) A person who shares profits only
    c) A person who agrees to share profits and liabilities of the business
    d) None of the above
    Answer: c) A person who agrees to share profits and liabilities of the business
    Explanation: As per Section 4, a partner is someone who agrees to share the profits and liabilities of the business.
38. The business in a partnership is conducted:
    a) By any one of the partners
    b) By all the partners together
    c) By all or any of the partners acting for all
    d) By a third party
    Answer: c) By all or any of the partners acting for all
    Explanation: The principle of mutual agency means that any partner can act on behalf of the firm and bind the other partners.

Part 2: Formation of Partnership

39. A partnership agreement may be called:
    a) Partnership deed
    b) Partnership act
    c) Mutual agreement
    d) Partnership firm
    Answer: a) Partnership deed
    Explanation: A partnership deed is the legal document that outlines the rights, duties, and obligations of partners.
40. A partnership firm must have at least:
    a) One partner
    b) Two partners
    c) Three partners
    d) No minimum limit
    Answer: b) Two partners
    Explanation: A partnership requires a minimum of two partners as per Section 4.
41. Which of the following can be included in the partnership agreement?
    a) Capital contribution by partners
    b) Profit-sharing ratio
    c) Duties and responsibilities of partners
    d) All of the above
    Answer: d) All of the above
    Explanation: A partnership deed typically includes these key details.
42. If there is no agreement regarding the duration of the partnership, it is called:
    a) Particular partnership
    b) Partnership at will
    c) General partnership
    d) Unlimited partnership
    Answer: b) Partnership at will
    Explanation: A partnership at will exists when there is no fixed duration or specific purpose mentioned in the agreement.

Part 3: Duties and Rights of Partners

43. Which section of the Indian Partnership Act provides for the rights of partners?
    a) Section 12
    b) Section 13
    c) Section 14
    d) Section 15
    Answer: b) Section 13
    Explanation: Section 13 specifies the rights and obligations of partners under the Act.
44. Which of the following is a duty of a partner?
    a) To act diligently in the conduct of business
    b) To contribute equal capital
    c) To ensure all partners get equal salaries
    d) To share losses unequally
    Answer: a) To act diligently in the conduct of business
    Explanation: Partners have a duty to act with care and diligence while conducting the business of the firm.
45. If a partner uses firm property for personal purposes, he must:
    a) Be rewarded
    b) Be penalized
    c) Compensate the firm for such use
    d) Inform the registrar
    Answer: c) Compensate the firm for such use
    Explanation: As per Section 15, firm property must be used exclusively for the firm’s business, and personal use requires compensation.
46. A partner is not liable for:
    a) His personal acts outside the scope of the firm
    b) Losses due to firm decisions
    c) Contracts made by other partners
    d) His own negligence in managing the firm
    Answer: a) His personal acts outside the scope of the firm
    Explanation: A partner is liable for acts done on behalf of the firm but not for personal acts outside its scope.
47. In the absence of an agreement, partners are entitled to:
    a) Remuneration for their work
    b) Equal share in profits and losses
    c) Interest on their capital
    d) Commission on sales
    Answer: b) Equal share in profits and losses
    Explanation: Section 13(b) specifies that partners share profits and losses equally unless otherwise agreed.

Part 4: Registration of Firms

48. What is the effect of non-registration of a firm?
    a) The firm becomes illegal
    b) The firm cannot enforce contracts in a court of law
    c) The firm is dissolved automatically
    d) The firm cannot operate its bank account
    Answer: b) The firm cannot enforce contracts in a court of law
    Explanation: Section 69 of the Act restricts unregistered firms from enforcing contracts in court.
49. Which document is required for the registration of a partnership firm?
    a) Certificate of Incorporation
    b) Partnership deed
    c) Memorandum of Association
    d) Articles of Association
    Answer: b) Partnership deed
    Explanation: The partnership deed is the main document for registering a firm.
50. The registration of a partnership firm provides:
    a) A separate legal entity
    b) Immunity from tax
    c) Legal protection for the firm
    d) No advantage
    Answer: c) Legal protection for the firm
    Explanation: Registration provides legal protection and the ability to sue third parties.

Part 5: Dissolution of Partnership

51. When a firm is dissolved due to all partners becoming insolvent, it is called:
    a) Voluntary dissolution
    b) Compulsory dissolution
    c) Dissolution by agreement
    d) Dissolution by court
    Answer: b) Compulsory dissolution
    Explanation: A firm is compulsorily dissolved if all partners, except one, become insolvent.
52. What happens to the goodwill of a firm upon dissolution?
    a) It is written off as a loss
    b) It is distributed among the partners
    c) It is transferred to the court
    d) It is auctioned publicly
    Answer: b) It is distributed among the partners
    Explanation: Goodwill is considered an asset and is distributed among the partners.

Part 6: Miscellaneous

53. The doctrine of “holding out” means:
    a) A partner is personally liable for the firm’s debt
    b) A person who represents himself as a partner is liable to third parties
    c) The firm is responsible for the partner’s personal acts
    d) None of the above
    Answer: b) A person who represents himself as a partner is liable to third parties
    Explanation: As per Section 28, the doctrine of holding out makes such a person liable for obligations incurred by third parties.
54. The Indian Partnership Act, 1932 applies to:
    a) Hindu Undivided Families
    b) Companies
    c) Partnership firms
    d) All of the above
    Answer: c) Partnership firms
    Explanation: The Act is specifically applicable to partnership firms.