BCOM 1st Year Partnership Account Short Question Answer Notes
BCOM 1st Year Partnership Account Short Question Answer Notes :- BCOM 1st Year Study Material Notes Sample Model Papers Notes examination papers unit wise Chapter wise Syllabus of the content chapter wise notes. available in over site parultech.com
SHORT ANSWER QUESTIONS
Q.1. Define ‘Partnership’.(2016)
Ans. Partnership: The law of partnership is contained in the Indian Partnership Act, 1932 which came into force on 1st October 1932. except Section 69 (dealing with the effect of non-registrationof of firms), which came into force on 1st October, 1933. Since partnership for the purpose, the provision of the Indian Contract Act, except when they are inconsistent with the express provision of the Partnership
Act, continue to apply to partnership firm.
Section 4 of the Indian Partnership Act, 1932 defines partnership as, “The relationship between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.’ This definition contains five elements which constiture a partnership namely:
1. An association of two or more persons.
2. An agreement, whether oral or written, entered into by all its partners.
3. A lawful business with profit motive.
4. The business must be carried on by all or any of them acting for all..
5. Sharing of profits or losses of the business.
Q.2. What are the characteristics of partnership?
Ans. A partnership has the following characteristics:
1. Two or More Persons: To constitute partnership there must be two or more persons.
Section 464 of the Companies Act, 2013 has prescribed that the maximum number of partners shall not exceed one hundred.
2. Agreement: Partnership does not arise out of status or operation of law. An agreement (contract) between persons is essential.
3. Running of Business: The purpose of partnership should be running of business. If two persons join to purchase house for living, they are co-owners and not partners. But when object is to resell the house and share profit or loss arising out of the transaction, there is a partnership.
4. Sharing of Profits: The object of partnership should be to earn profit and share in an agreed ratio among the partners.
5. Unlimited Liability: The liability of partners is unlimited. Each partner payment of the liabilities of the firm to the extent of his personal assets.
Q.3. What is a partnership deed? What are its contents?
Ans. Partnership Deed: The document in which the respective rights and obligations of th. members of a partnership are set forth is called a ‘Partnership deed. It should be drafted with car and be signed by all the partners. It must be stamped in accordance with the Indian Stamp Act. Each partner should have a copy of the deed. The firm should be registered and a copy of the deed should be filed at the time of registration with the registrar of firms because in the absence of such registration partners cannot enforce the conditions laid down in the deed through a court of law.
Contents of Partnership Deed: The deed should cover the following points:
1. The name of the firm and the names and addresses of partners who compose it.
2. Nature of business and the town and place where it will be carried on.
3. Date of commencement of partnership.
4. The duration of partnership.
5. The amount of capital to be contributed by each partner and the methods of raising finance in future if so required.
6. The ratio of sharing profits and losses.
7. Interest on partners’ capital, partners’ loan and interest, if any, to be charged on drawings.
8. Salaries and commissions, etc. if any, payable to partners.
9. The method of preparing accounts and arrangement for audit and safe custody of cash, etc.
10. Division of task and responsibility, i.e. the duties, powers and obligations of all the partners.
11. Rules to be followed in case of retirement, death and admission of a partner.
12. Expulsion of partners in case of gross breach of duty or fraud.
13. Can a partner carry on a competing business or any other business whether competing or not.Section 11(2) clearly provides that the deed may provide that a partner shall not carry on any business other than that of the firm while he is a partner, not withstanding anything contained in Section 27 of the Indian Contract Act where agreements in restraint of trade are void.
14. The circumstances under which the partnership will stand dissolved.
15. Arbitration in case of dispute among the partners.
The terms laid down in the deed may be varied by consent of all the partners and such consent may be expressed or may be implied by a course of dealing [Sec. 11(1)].
Q.4. Discuss the various kinds of partners in a partnership firm.
Ans. Kinds of Partners: There may be various types of partners in a partnership firm which are as follows:
1. Active or Actual Partners: Partners who take an active part in the conduct of the partnership business are called ‘Actual’ or ‘Ostensible’ partners. They are full-fledged partners in the real sense of the term. Such a partner must give public notice of his retirement from the firm in order to free himself from liability for acts after retirement.
2. Sleeping or Dormant Partners: Sometimes, however, there are persons who merely put in apital (or even without capital they may become partners) and do not take active part in the cond on the partnership business. They are known as ‘Sleeping’ or ‘Dormant partners. They do and losses (usually less than proportionately), have a voice in management but tn relationship with the firm is not disclosed to the general public. They are all acts of the firm just like an undisclosed principal. They are, a
closed to the general public. They are liable to the third parties for notice of their retirement from the firm.
n undisclosed principal. They are, however, not required to give public 3. Silent Partners: Those who by agreement with other partners of the partnership business are called ‘Silent partners. They share profits and losses, are fully liable for the debts of the firm and may take active part in the conduct of the business.
4. Partner in Profits Only: A partner who has stipulated with other partners that he will be entitled to a certain share of profits without being liable for the losses is known as a ‘Partner in profits only. As a rule such a partner has no voice in the management of the business. However, his liability
vis third parties will be unlimited because in India we cannot have ‘Limited partnership.
5 Sub-partner: When a partner agrees to share his share of profits in a partnership firm with an outsider, such an outsider is called a sub-partner. Such a sub-partner has no rights against the firm nor he is liable for the debts of the firm.
6 Partner by Estoppel or Holding Out (Sec. 28): If a person represents to the outside words by words spoken or written or by his conduct or by lending his name that he is a partner in a certain partnership firm, he is then estopped from denying himself being a partner and is liable as partner such a person a person is not a partner in that firm – no agreement, no sharing in profits and losses, no say in the management, may not be knowing exact place of business but as they hold himself out to be a partner, he becomes responsible to outsiders as a partner on the principle of estoppel or holding out. It is for this reason that such a person is called as ‘Partner by estoppel’ or ‘partner by holding out.’ He may also be called s ‘Quasi partner’ for he is not a partner in the full implications of the term, only in the eyes of outside world, he is considered a partner. He may also be known as ‘Nominal partner’.
It is to be emphasised that in order to entitle a person to bring an action under the doctrine of holding out it must be shown that he acted on the faith of the represented while giving credit to the firm. It does not matter whether the person representing himself or represented to be a partner does or does not know that the representation has reached the other person so giving credit. But a person who knows nothing about the representation or who knows but does not believe it or who knows about it subsequently cannot take advantage of this doctrine and make the supposed partner liable as a partner.