MCQ on Indian Partnership Act 1932

Here is the continuation of the 100 multiple-choice questions on the Indian Partnership Act, 1932:

36. A partner who shares profits but does not share losses is a:
    a) Sleeping partner
    b) Active partner
    c) Minor partner
    d) Nominal partner
    Answer: c) Minor partner
    Explanation: A minor partner is admitted only to share profits, not losses.
37. The “firm” and “partners” are collectively referred to as:
    a) An association
    b) A body corporate
    c) The firm name
    d) None of the above
    Answer: c) The firm name
    Explanation: The term “firm name” is used to describe the collective identity of the partners and their business.
38. In the absence of an agreement, the partners are entitled to:
    a) Salaries
    b) Interest on drawings
    c) Equal share of profits
    d) Unequal share of losses
    Answer: c) Equal share of profits
    Explanation: Section 13(b) specifies equal sharing of profits and losses unless agreed otherwise.
39. Which of the following is not a ground for dissolution by court?
    a) Insanity of a partner
    b) Death of a partner
    c) Breach of agreement
    d) Misconduct of a partner
    Answer: b) Death of a partner
    Explanation: Death of a partner leads to dissolution automatically, not by court order.
40. When a partnership is dissolved by agreement, it is called:
    a) Compulsory dissolution
    b) Voluntary dissolution
    c) Technical dissolution
    d) Judicial dissolution
    Answer: b) Voluntary dissolution
    Explanation: Dissolution by agreement is referred to as voluntary dissolution.
41. An unregistered firm cannot:
    a) Enter into contracts
    b) File a suit against third parties
    c) Pay debts
    d) Hire employees
    Answer: b) File a suit against third parties
    Explanation: Section 69 prohibits unregistered firms from suing third parties.
42. A partner is said to retire from the firm when:
    a) He ceases to take part in the business
    b) He transfers his shares
    c) He is declared insolvent
    d) He ceases to be a partner with the consent of other partners
    Answer: d) He ceases to be a partner with the consent of other partners
    Explanation: Retirement occurs as per mutual agreement among the partners.
43. Which section of the Act governs the relation of partners to third parties?
    a) Section 6
    b) Section 9
    c) Section 18
    d) Section 19
    Answer: d) Section 19
    Explanation: Section 19 deals with the implied authority of partners in relation to third parties.
44. Which of the following terminates the implied authority of a partner?
    a) Insolvency of the partner
    b) Dissolution of the firm
    c) Restriction in the partnership deed
    d) All of the above
    Answer: d) All of the above
    Explanation: These conditions terminate the implied authority of a partner.
45. The goodwill of a firm upon dissolution is:
    a) Distributed equally among partners
    b) Transferred to the court
    c) Sold and proceeds distributed among partners
    d) Written off as a loss
    Answer: c) Sold and proceeds distributed among partners
    Explanation: Goodwill is treated as an asset and sold during dissolution.
46. In case of a partner’s death, the firm is:
    a) Automatically dissolved
    b) Compulsorily reconstituted
    c) Continued by remaining partners unless agreed otherwise
    d) Declared void
    Answer: c) Continued by remaining partners unless agreed otherwise
    Explanation: The partnership deed may allow the firm to continue in such cases.
47. The term “partnership at will” implies that:
    a) Partners can dissolve the firm at any time
    b) Partnership is for a specific term
    c) Partners can transfer their shares freely
    d) Partnership has unlimited liability
    Answer: a) Partners can dissolve the firm at any time
    Explanation: In a partnership at will, any partner can seek dissolution without prior notice.
48. A partner who allows his name to be used but does not share in profits or management is called a:
    a) Sleeping partner
    b) Nominal partner
    c) Active partner
    d) Limited partner
    Answer: b) Nominal partner
    Explanation: A nominal partner has no financial or managerial interest but lends their name to the firm.
49. In the absence of a clause in the deed, a new partner can be admitted with:
    a) The consent of the managing partner
    b) Majority vote of partners
    c) Unanimous consent of all partners
    d) Approval of a court
    Answer: c) Unanimous consent of all partners
    Explanation: Admission of a new partner requires the consent of all existing partners.
50. Retirement of a partner results in:
    a) Dissolution of the firm
    b) Reconstitution of the firm
    c) Conversion of the firm into LLP
    d) Expulsion of all partners
    Answer: b) Reconstitution of the firm
    Explanation: Retirement leads to the reconstitution of the partnership firm.
51. A minor admitted to the benefits of a firm:
    a) Can be a full partner
    b) Can inspect books of accounts
    c) Is liable for losses
    d) Can dissolve the firm
    Answer: b) Can inspect books of accounts
    Explanation: A minor has the right to inspect books of accounts under the Act.
52. The principle of mutual agency states that:
    a) Partners are agents of the firm only
    b) Partners are agents of the firm and other partners
    c) Partners are not bound by each other’s acts
    d) Agency applies only to managing partners
    Answer: b) Partners are agents of the firm and other partners
    Explanation: Mutual agency binds all partners for acts done by any partner on behalf of the firm.
53. Dissolution by court occurs when:
    a) A partner is declared insolvent
    b) A partner becomes permanently incapable of performing duties
    c) The firm completes its objectives
    d) Partners mutually agree
    Answer: b) A partner becomes permanently incapable of performing duties
    Explanation: Dissolution by court may occur in case of incapacity, as per Section 44.