Class 9 Commercial Studies —Chapter 6 : PARTNERSHIP (Chapter-wise Questions Answers and MCQs)
Class 9 Commercial Studies —Chapter 6 : PARTNERSHIP
PARTNERSHIP
Chapter-wise Questions Answers and MCQs1. Partnership can be formed by
A. One person
B. Two or more persons
C. Only five persons
D. Only ten persons
Answer: B
2. Partnership is created through
A. Law
B. Birth
C. Agreement
D. Inheritance
Answer: C
3. The main objective of partnership is
A. Charity
B. Social service
C. Sharing profits
D. Government welfare
Answer: C
4. Which of the following is NOT a feature of partnership?
A. Mutual agency
B. Sharing of profit
C. Perpetual succession
D. Agreement
Answer: C
5. Every partner acts as
A. Employee
B. Customer
C. Agent of the firm
D. Auditor
Answer: C
6. Partnership business must be
A. Religious
B. Charitable
C. Lawful
D. Political
Answer: C
7. Unlimited liability means
A. Liability is limited to capital
B. Personal assets may be used to pay debts
C. Government pays debts
D. Creditors cannot recover money
Answer: B
8. A partner can transfer his interest only
A. Freely
B. With Registrar's permission
C. With consent of all partners
D. With bank approval
Answer: C
9. Mutual agency means
A. Every partner is an employee
B. Every partner can bind the firm
C. Every partner is a creditor
D. Every partner is a shareholder
Answer: B
10. Partnership is based on
A. Competition
B. Trust
C. Advertisement
D. Monopoly
Answer: B
11. Rohan starts a business alone. After one year he adds Amit through an agreement. The business now becomes
A. Company
B. Partnership
C. Cooperative
D. HUF
Answer: B
12. Three friends jointly purchase a house but do not conduct any business. This is
A. Partnership
B. LLP
C. Joint ownership
D. Company
Answer: C
13. Two people agree to sell illegal drugs and share profits. Their relation is
A. Partnership
B. LLP
C. Invalid partnership
D. Joint stock company
Answer: C
14. Raj enters into partnership without any agreement. Is it valid?
A. Yes, if all essentials exist
B. No
C. Only after registration
D. Only after court approval
Answer: A
15. One partner signs a contract with a supplier on behalf of the firm. The other partners are
A. Not responsible
B. Responsible due to mutual agency
C. Responsible only after approval
D. Responsible only if registered
Answer: B
16. Which feature distinguishes partnership from joint ownership?
A. Capital
B. Agreement
C. Building
D. Furniture
Answer: B
17. Why is utmost good faith essential?
A. To reduce taxes
B. Because partners depend upon mutual trust
C. To increase profit automatically
D. To attract customers
Answer: B
18. Why is unlimited liability considered a disadvantage?
A. More partners join
B. Personal property is at risk
C. Less capital is needed
D. Business expands faster
Answer: B
19. Why can partners take quick decisions?
A. Government permission is required
B. Partners meet frequently
C. Courts decide
D. Shareholders vote
Answer: B
20. Which feature helps creditors recover their dues?
A. Secrecy
B. Unlimited liability
C. Flexibility
D. Agreement
Answer: B
21. Which is NOT a merit?
A. Flexibility
B. Secrecy
C. Unlimited liability
D. Close supervision
Answer: C
22. Which is a demerit?
A. Combined abilities
B. Direct motivation
C. Blocking of capital
D. Scope for expansion
Answer: C
23. Partnership is suitable for
A. Very small business only
B. Medium-sized business
C. Government departments
D. International organisations only
Answer: B
24. Secrecy is possible because
A. Annual reports are not published
B. Government owns the business
C. Partners are absent
D. Registration is compulsory
Answer: A
25. Scope for expansion exists because
A. New partners can be admitted
B. Government gives grants
C. Taxes are lower
D. Public buys shares
Answer: A
26. Partnership Deed is
A. Oral promise
B. Written agreement
C. Government certificate
D. Court order
Answer: B
27. Partnership Deed generally contains
A. Profit-sharing ratio
B. Capital contribution
C. Rights and duties
D. All of these
Answer: D
28. Which is NOT generally included in a Partnership Deed?
A. Goodwill valuation
B. Salary of partners
C. Election schedule
D. Arbitration clause
Answer: C
29. Registration of partnership is
A. Compulsory
B. Optional
C. Illegal
D. Automatic
Answer: B
30. Registration is done with
A. RBI
B. Registrar of Firms
C. SEBI
D. Income Tax Department
Answer: B
31. An unregistered firm cannot
A. Carry on business
B. Enforce claims in court
C. Earn profit
D. Admit partners
Answer: B
32. Which is an advantage of registration?
A. Better legal protection
B. Unlimited partners
C. No agreement needed
D. No liabilities
Answer: A
33. LLP stands for
A. Limited Legal Partnership
B. Limited Liability Partnership
C. Legal Liability Partnership
D. Limited Liability Person
Answer: B
34. In LLP, partners have
A. Unlimited liability
B. Limited liability
C. No liability
D. Criminal liability only
Answer: B
35. LLP has
A. No legal entity
B. Separate legal entity
C. Temporary existence
D. No registration
Answer: B
36. Which statement is TRUE?
A. LLP need not be registered.
B. LLP has perpetual succession.
C. LLP partners have unlimited liability.
D. LLP has maximum 20 partners.
Answer: B
37. Partnership at Will continues
A. For fixed time
B. Until the partners decide otherwise
C. Only one year
D. Six months
Answer: B
38. Particular Partnership is formed
A. Forever
B. For a specific purpose
C. Without agreement
D. Only by government
Answer: B
39. Which partner actively manages the business?
A. Sleeping partner
B. Active partner
C. Sub-partner
D. Nominal partner
Answer: B
40. Which partner contributes capital but does not participate in management?
A. Active partner
B. Sleeping partner
C. Nominal partner
D. Minor partner
Answer: B
41. A nominal partner
A. Shares profits
B. Manages business
C. Lends his name only
D. Contributes capital
Answer: C
42. A minor can
A. Become full partner by contract
B. Be admitted to benefits of partnership
C. Manage the business
D. Enter into partnership alone
Answer: B
43. A sub-partner
A. Is partner of the firm
B. Shares another partner's profits
C. Has management rights
D. Has unlimited liability
Answer: B
44. Which partner is known to outsiders?
A. Secret partner
B. Active partner
C. Sleeping partner
D. Sub-partner
Answer: B
45.
Assertion (A): Partnership is based on mutual trust.
Reason (R): Every partner must act with utmost good faith.
A. Both A and R are true and R is the correct explanation.
B. Both are true but R is not the correct explanation.
C. A is true but R is false.
D. A is false but R is true.
Answer: A
46.
Assertion (A): Registration of partnership is compulsory.
Reason (R): The Partnership Act makes registration mandatory.
A. Both true
B. A true, R false
C. A false, R false
D. A false, R true
Answer: C
47.
Assertion (A): Every partner is liable for firm debts.
Reason (R): Liability of partners is unlimited.
A. Both true and R explains A
B. Both true but unrelated
C. A true, R false
D. A false, R true
Answer: A
48. Aman, Bharat and Charan start a garment business. Bharat signs a purchase contract without informing the others. The firm must pay because of
A. Goodwill
B. Mutual agency
C. Registration
D. Arbitration
Answer: B
49. A partnership firm closes because one partner dies. This is due to
A. Unlimited liability
B. Uncertain life
C. Registration
D. Secrecy
Answer: B
50. A partner wants to sell his share to an outsider without informing others.
What is correct?
A. Allowed freely
B. Allowed with court order
C. Allowed only with consent of other partners
D. Always prohibited
Answer: C
Partnership – Complete Exam-Based Short Questions with Answers
1. What is Partnership?
Answer: Partnership is a voluntary association of two or more persons who agree to carry on a lawful business together and share its profits and losses according to an agreement.
2. Define Partnership according to the Indian Partnership Act, 1932.
Answer: "Partnership is 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."
3. Who is a Partner?
Answer: A person who enters into a partnership agreement is called a partner.
4. What is a Firm?
Answer: The collective name of all the partners carrying on business together is called a firm.
5. What is a Firm Name?
Answer: The name under which the partners carry on business is called the firm name.
6. What is a Mutual Agency?
Answer: Mutual agency means every partner is an agent of the firm and can bind the firm and other partners by his acts.
7. What is Unlimited Liability?
Answer: Unlimited liability means partners are personally liable for the firm's debts if the firm's assets are insufficient.
8. What is Utmost Good Faith?
Answer: It means every partner must act honestly, faithfully and in the best interest of the firm.
9. What is a Lawful Business?
Answer: A partnership can be formed only for carrying on a business that is legal.
10. What is meant by Sharing of Profits?
Answer: Partners agree to divide the profits (and usually losses) in an agreed ratio.
11. State any two features of partnership.
Answer:
1. Two or more persons.
2. Agreement between partners.
12. State any four features of partnership.
13. How many persons are required to form a partnership?
Answer: Minimum – 2 persons
Maximum – 50 persons.
14. Can a partnership exist without an agreement?
Answer: No. Agreement is essential for a partnership.
15. Can a partnership be formed for illegal business?
Answer: No. Partnership can be formed only for lawful business.
16. Mention any two merits of partnership.
Answer:
1. Ease of formation.
2. Larger financial resources.
17. State any four merits of partnership.
18. Why is partnership easy to form?
Answer: Because only an agreement is required and legal formalities are minimal.
19. Why does partnership enjoy larger financial resources?
Answer: Because several partners contribute capital.
20. Why are decisions taken quickly in partnership?
Answer: Partners frequently meet and can take prompt decisions.
21. Why is secrecy maintained in partnership?
Answer: Because publication of accounts is not compulsory.
22. Mention any two demerits of partnership.
Answer:
1. Unlimited liability.
2. Uncertain life.
23. State any four demerits of partnership.
Answer:
1. Limited resources.
2. Unlimited liability.
3. Conflicts.
4. Risk of implied agency.
24. Why is unlimited liability a disadvantage?
Answer: Because partners' personal assets can be used to pay business debts.
25. Why does partnership have an uncertain life?
Answer: Because death, insolvency or retirement of a partner may dissolve the firm.
26. Why may conflicts arise among partners?
Answer: Due to differences in opinions and management decisions.
27. What is a Partnership Deed?
Answer: A written agreement containing the terms and conditions of partnership is called a Partnership Deed.
28. Why is a Partnership Deed important?
Answer: It prevents misunderstandings and helps settle disputes among partners.
29. Mention any four contents of a Partnership Deed.
Answer:
1. Name of the firm.
2. Nature of business.
3. Capital contribution.
4. Profit-sharing ratio.
30. Is a Partnership Deed a public document?
Answer: No.
Registration of Partnership
31. Is registration of partnership compulsory?
Answer: No. Registration is optional but desirable.
32. Who registers a partnership firm?
Answer: The Registrar of Firms.
33. Mention any two advantages of registration.
Answer:
1. The firm can enforce legal rights.
2. Partners can sue each other.
34. Mention any two consequences of non-registration.
Answer:
1. The firm cannot sue third parties.
2. Partners cannot sue the firm.
35. Why should a partnership firm be registered?
Answer: To obtain legal protection and enforce its rights in court.
36. What is General Partnership?
Answer: A partnership in which every partner has unlimited liability.
37. What is Limited Liability Partnership (LLP)?
Answer: A partnership where partners have limited liability and the firm has a separate legal entity.
38. What is Partnership at Will?
Answer: A partnership with no fixed period or specific purpose.
39. What is Particular Partnership?
Answer: A partnership formed for a specific purpose or fixed period.
40. Mention any two advantages of LLP.
Answer:
1. Limited liability.
2. Separate legal entity.
41. Mention any two disadvantages of LLP.
Answer:
1. Registration is compulsory.
2. Less secrecy.
42. Give one difference between LLP and General Partnership.
Answer: LLP has limited liability, whereas general partnership has unlimited liability.
43. Who is an Active Partner?
Answer: A partner who contributes capital and actively manages the business.
44. Who is a Sleeping Partner?
Answer: A partner who contributes capital but does not participate in management.
45. Who is a Secret Partner?
Answer: A partner who participates in management but whose identity is not known to the public.
46. Who is a Limited Partner?
Answer: A partner whose liability is limited to his capital contribution.
47. Who is a Partner in Profits Only?
Answer: A partner who shares only profits but not losses.
48. Who is a Nominal (Ostensible) Partner?
Answer: A person who lends his name to the firm but neither contributes capital nor manages the business.
49. Who is a Partner by Estoppel?
Answer: A person who represents himself as a partner and becomes liable to outsiders.
50. Who is a Partner by Holding Out?
Answer: A person who knowingly allows himself to be represented as a partner and becomes liable to outsiders.
51. Who is a Minor Partner?
Answer: A minor admitted only to the benefits of partnership with the consent of all partners.
52. Who is a Sub-partner?
Answer: A person who shares the profits of a partner but is not a partner of the firm.
53. Can one person form a partnership?
Answer: No. At least two persons are required.
54. Can a minor become a full partner?
Answer: No. A minor can only be admitted to the benefits of partnership.
55. Can a partner transfer his share without others' consent?
Answer: No. Consent of the other partners is necessary.
56. Why are partners called agents of each other?
Answer: Because each partner can legally bind the firm through his actions.
57. Why is partnership suitable for medium-sized businesses?
Answer: Because it combines adequate capital, management skills, and flexibility.
58. Can an unregistered firm sue a third party?
Answer: No.
59. Can a third party sue an unregistered firm?
Answer: Yes.
60. Why is trust essential in partnership?
Answer: Because partners manage the business jointly and depend on one another's honesty.
Partnership – Long Answer Questions with Detailed Answers
1. Define Partnership. Explain its essential features.
Answer:
Definition: Partnership is a voluntary association of two or more persons who agree to carry on a lawful business and share its profits and losses.
According to the Partnership Act: "Partnership is 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."
Features of Partnership:
a. Two or More Persons
At least two persons are required.
Maximum number is generally 50 (as per the Companies Rules).
b. Agreement
Partnership arises from an agreement, not by birth or status.
The agreement may be oral or written.
c. Lawful Business
The business must be legal.
Illegal activities cannot form a partnership.
d. Sharing of Profits
Partners agree to share profits and losses in an agreed ratio.
e. Mutual Agency
Every partner is both a principal and an agent.
One partner's acts bind the entire firm.
f. Utmost Good Faith
Partners must be honest and transparent with one another.
g. Unlimited Liability
If business assets are insufficient, partners' personal assets may be used to pay debts.
h. Restriction on Transfer of Interest
A partner cannot transfer his share without the consent of other partners.
These features make partnership suitable for small and medium-sized businesses requiring joint ownership and management.
2. Explain the merits (advantages) of Partnership.
Answer:
Partnership has many advantages.
i. Ease of Formation
Simple to start.
Few legal formalities.
Registration is not compulsory.
ii. Larger Financial Resources
More partners contribute more capital.
Easy to raise additional funds.
iii. Combined Abilities and Judgement
Different partners contribute different skills.
Better decision-making.
iv. Direct Motivation
Owners and managers are the same.
Partners work hard for business success.
v. Close Supervision
Partners personally supervise business.
Better control over employees.
vi. Flexibility
Policies and decisions can be changed quickly.
Business adapts easily to changing conditions.
vii. Secrecy
Accounts need not be published.
Business secrets remain confidential.
viii. Protection of Minority Interest
Important decisions require mutual consent.
Every partner gets an opportunity to express opinions.
ix. Cooperation
Partners work together.
Trust and teamwork improve efficiency.
x. Scope for Expansion
More capital and managerial skills help business growth.
Partnership combines financial strength, managerial ability and flexibility, making it suitable for medium-sized businesses.
3. Explain the demerits (limitations) of Partnership.
Answer:
i. Limited Resources
Maximum number of partners is limited.
Large capital cannot always be raised.
ii. Unlimited Liability
Personal property of partners may be used to pay business debts.
iii. Uncertain Life
Death, insolvency or retirement of a partner may dissolve the firm.
iv. Conflicts
Differences of opinion may delay decisions.
v. Risk of Implied Agency
One dishonest partner can create losses for the entire firm.
vi. Lack of Public Confidence
Partnership firms publish fewer financial details.
Public confidence may be lower.
vii. Blocking of Capital
A partner cannot withdraw or transfer capital without others' consent.
Although partnership has several advantages, unlimited liability and conflicts make it unsuitable for very large businesses.
4. What is a Partnership Deed? Explain its contents.
Answer:
Meaning:
A Partnership Deed is a written agreement between partners containing the terms and conditions of the partnership.
Importance:
Prevents misunderstandings.
Defines rights and duties.
Helps settle disputes.
Provides legal evidence.
Contents of Partnership Deed
i. Name of the firm
ii. Nature of business
iii. Principal place of business
iv. Duration of partnership
v. Names and addresses of partners
vi. Capital contributed by each partner
vii. Amount of drawings
viii. Profit-sharing ratio
ix. Interest on capital and drawings
x. Salary or commission of partners
xi. Rights and duties of partners
xii. Valuation of goodwill
xiii. Admission, retirement and death of partners
xiv. Maintenance and audit of accounts
xv. Dissolution procedure
xvi. Arbitration clause
xvii. Loans and interest payable
A Partnership Deed ensures smooth functioning of the partnership and reduces disputes.
5. Explain the procedure for registration of a Partnership Firm.
Answer:
Registration is optional under the Partnership Act, 1932, but it is advisable.
Procedure:
Step 1 : Submit an application to the Registrar of Firms.
Step 2 : Pay the prescribed registration fee.
Step 3 : The application should contain:
Name of firm
Principal place of business
Other business places
Date each partner joined
Names and addresses of partners
Duration of partnership
Step 4 The application must be signed by all partners.
Step 5 The Registrar verifies the application.
Step 6 The firm's name is entered into the Register of Firms.
Step 7 Certificate of Registration is issued.
Registration gives legal recognition and protects the rights of partners.
6. Explain the consequences of non-registration of a Partnership Firm.
Answer:
Disabilities
i. Cannot sue outsiders.
ii. Cannot sue partners.
iii. Partners cannot sue the firm.
iv. Partners cannot sue each other.
v. Cannot claim set-off above ₹100.
Rights Not Affected
i. Outsiders can sue the firm.
ii. Dissolution suits are allowed.
iii. Official receiver can recover property.
iv. Patent rights can still be protected.
Advantages of Registration:
Can sue outsiders.
Partners can sue each other.
New partners can verify firm records.
Retired partners can avoid future liability.
Outsiders can obtain information.
Registration provides important legal rights and avoids many restrictions.
7. Explain the different types of Partnership.
Answer:
i. General Partnership
Unlimited liability.
Partners actively manage the business.
ii. Limited Liability Partnership (LLP)
Liability limited to agreed contribution.
Separate legal entity.
Perpetual succession.
Registration is compulsory.
Advantages of LLP
Limited liability
Separate legal existence
Perpetual succession
Easy expansion
Disadvantages of LLP
Compulsory registration
Less secrecy
Lower credit standing
iii. Partnership at Will
No fixed duration.
Can be dissolved by notice.
iv. Particular Partnership
Formed for a specific purpose or period.
Ends after completion of the objective.
Different forms of partnership suit different business needs.
8. Explain the different types of Partners.
Answer:
i. Active (Working) Partner
Contributes capital.
Takes part in management.
Unlimited liability.
ii. Sleeping (Dormant) Partner
Contributes capital.
Does not manage business.
Shares profits and losses.
iii. Secret Partner
Participates in management.
Identity not disclosed to outsiders.
iv. Limited Partner
Liability limited.
Does not participate in management.
v. Partner in Profits Only
Shares only profits.
Does not share losses.
Does not manage business.
vi. Nominal (Ostensible) Partner
Lends name to the firm.
Does not invest capital.
Liable to outsiders.
(a) Partner by Estoppel
Represents himself as a partner.
Liable to third parties.
(b) Partner by Holding Out
Allows others to represent him as a partner.
Liable if he does not deny it.
vii. Minor Partner
Cannot become a full partner.
Can be admitted to benefits.
Liability limited.
viii. Sub-Partner
Shares profits with a partner.
Not liable for firm's debts.
Each type of partner has different rights, responsibilities and liabilities.
9. Distinguish between Sole Proprietorship and Partnership.
Basis Sole Proprietorship Partnership
Owners One Two or more
Agreement Not required Essential
Profit Sole owner Shared
Management One owner Shared
Liability Unlimited Unlimited
Continuity Depends on owner More stable
Coordination Not required Required
10. Distinguish between General Partnership and Limited Liability Partnership (LLP).
General Partnership LLP
Unlimited liability Limited liability
No separate legal entity Separate legal entity
May not be registered Registration compulsory
Dissolved on death of partner Perpetual succession
Number of partners restricted No maximum limit
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