Students should practice Reconstitution and Dissolution of a Firm – CA Foundation Business Law MCQ Questions with Answers based on the latest syllabus.
Reconstitution and Dissolution of a Firm – Business Law MCQ Questions with Answers
1. A partner may not be expelled from the firm by any majority of partners unless:
(a) The terms of partnership agreement confer the power to expel a partner
(b) The expulsion is made by a majority of the partners of the firm
(c) The decision of expulsion is made by all the partners in good faith
(d) All the above
Answer:
(d) All the above
2. Agreement in restraint of trade is void. But if an outgoing partner agrees with the firm that he will not carry on any competing business, such an agreement will be valid if:
(a) Such restraint is in respect of carrying of any business similar to that of the firm
(b) Such agreement is made by the partners beforehand i.e. well in advance
(c) Such agreement is made without any specific reference to time period.
(d) Such agreement is made without reference to local limits.
Answer:
(a) Such restraint is in respect of carrying of any business similar to that of the firm
3. A notice in writing by one partner must be given to all the partners of the firm in case of:
(a) Dissolution on the happening of contingencies
(b) Dissolution of partnership at will
(c) Dissolution by court
(d) Compulsory dissolution
Answer:
(b) Dissolution of partnership at will
4. A firm is compulsorily dissolved __________.
(a) By adjudication of any partner of the firm as insolvent
(b) By the death of a partner
(c) By adjudication of all the partners or of all the partners but one is insolvent
(d) In any of the above circumstances
Answer:
(c) By adjudication of all the partners or of all the partners but one is insolvent
5. The partners authority to act for the firm and to bind their co-partners continues even after the dissolution of the firm:
(a) To wind up the affairs of the firm
(b) To complete the unfinished transactions
(c) Both of above
(d) None of the above.
Answer:
(c) Both of above
6. Retiring partner continues to remain liable to third parties for acts of the firm:
(a) Until public notice is given of the retirement.
(b) From the date of retirement
(c) Upto the close of the financial year in which he retires.
(d) So long as the firm uses his name.
Answer:
(a) Until public notice is given of the retirement.
7. A partner can be expelled from a firm:
(a) If power to expel is conferred by express agreement.
(b) If the power is exercised in good faith.
(c) By majority of partners after giving oppor¬tunity of explanation.
(d) All of the above.
Answer:
(d) All of the above.
8. A retired partner may be liable:
(a) For debts incurred before retirement.
(b) For debts incurred after retirement until public notice is given.
(c) Either (a) or (b)
(d) Both (a) and (b)
Answer:
(d) Both (a) and (b)
9. Which of the following conditions is not necessary for expulsion of a partner?
(a) The power of expulsion must be given in the partnership deed.
(b) Such power has been exercised by a majority of the partners.
(c) Such power has been exercised in good faith for the interest of the firm and not used as vengeance against a partner
(d) An FIR has been filed in the Police Station.
Answer:
(d) An FIR has been filed in the Police Station.
10. No public notice is required:
(a) On the death of a partner.
(b) On minor attaining majority.
(c) Retirement of partner.
(d) Dissolution of firm.
Answer:
(a) On the death of a partner.
11. An outgoing partner can carry on a competing business and also advertise such business. For this purpose, in the absence of contract to the contrary __________.
(a) He can use the firm’s name
(b) He cannot use the firm’s name
(c) He cannot represent himself as carrying on the business of the firm.
(d) Both (b) and (c).
Answer:
(d) Both (b) and (c).
12. If all partners, or all but one partner, of the firm are declared insolvent __________.
(a) Firm is automatically dissolved
(b) Firm becomes illegal association.
(c) Firm is also declared insolvent.
(d) Firm becomes illegal entity.
Answer:
(a) Firm is automatically dissolved
13. Dissolution of partnership between all the partners of a firm is called __________.
(a) Dissolution of partnership.
(b) Dissolution of partners.
(c) Dissolution of the firm.
(d) Reconstitution of firm.
Answer:
(c) Dissolution of the firm.
14. The accounting rule in respect of loss arising due to insolvency of a partner is dealt within __________.
(a) Derry v. Peek
(b) Carlill v. Carbolic Smoke Ball Co.
(c) Garner v. Murray
(d) Chinnaiah v. Ramaiya.
Answer:
(c) Garner v. Murray
15. While selling goodwill of the firm, the selling partners may agree with the buyer that they will not carry on similar business, within a specified period or within specified local limits. Such agreement in restraint of trade shall be :
(a) Valid, if the restrictions imposed are rea-sonable
(b) Valid (whether restrictions are reasonable or not)
(c) Void
(d) Voidable
Answer:
(a) Valid, if the restrictions imposed are rea-sonable
16. Public Notice under the Partnership Act, is given in the following manner:
(a) Serving a copy of the Notice to the Registrar of firms
(b) Publishing the Notice in the Official Gazette
(c) Publishing the Notice in one vernacular newspaper circulating in the district where the firm’s principal place of business is situated
(d) All of the above.
Answer:
(d) All of the above.
State Whether The Following are True or False:
- A partner who has purchased the goodwill of the firm on dissolution of partnership has a right to make use of the firm’s name for earning profits.
- All partners are not the joint owners of the property of the firm, unless otherwise provided in the agreement.
- The test of existence of partnership is the element of sharing of profits rather than mutual agency.
- Legal representatives are required to give public notice so as to avoid the liability of the deceased partner.
- Permanent incapacity of a partner is not a ground for dissolution of partnership firm.
- A firm can be held liable for all wrongful acts of a partner done in the ordinary course of partnership business.
- A firm signifies the abstract legal relation of the partners.
- Dissolution of firm automatically results in dissolution of partnership.
- Partnership will get dissolved if all the partnership except one are declared insolvent.
- Public notice is not necessary on a minor admitted to the benefits of partnership opting to become a partner in the firm.
- Losses including deficiencies of capital are to be paid by the partners in the portion in which they were entitled to share the profits.
- Losses including deficiencies of capital shall be first paid out of capital.
- In settling the accounts of a firm after dissolution, the assets are first utilized in paying the debts of the firm to the third parties.
- The term dissolution of partnership and dissolution of firm are synonymous.
- Indian Partnership act imposes penalty for non-registration of the firm.
- The assignee of a partner’s interest, will enjoy the right to receive the share of the profits of the assignor and receive the accounts of profits agreed to by other partners.
- When a partner of a firm becomes lunatic, the firm dissolves automatically.
Answer:
- True
- False
- False
- False
- False
- True
- False
- True
- True
- False
- True
- False
- True
- False
- False
- True
- False