INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN

Mercantile Law (Partnership Act)

Test No 2
1. Public notice is NOT required to be given in case of:
(a) insolvency of a partner
(b) retirement of a partner
(c) expulsion of a partner
(d) dissolution of a registered firm.

2. X and Y formed a partnership firm to undertake construction of a shopping plaza.

Such a partnership is called:
(a) limited partnership
(b) particular partnership
(c) partnership at will
(d) implied partnership

3. The implied authority of a partner does NOT empower him to:

(a) submit a business dispute to arbitration
(b) withdraw a suit filed on behalf of the firm
(c) open a banking account on behalf of the firm
(d) all the above

4. A firm is liable to make good the loss of third party if:

(a) one of the partners acting within his apparent authority misapplies
the money or property received from a third party.
(b) one of the partners misapplies the money or property received from a third
party by the firm in the course of its business while it is in the custody of
the firm.
(c) by the wrongful act or omission of a partner acting in the ordinary course
of the business of a firm, loss or injury is caused to any third party.
(d) all of the above.

5. The conclusive evidence of a partnership is:

(a) mutual agency
(b) sharing of profit and loss
(c) mutual understanding
(d) capital contribution

6. Subject to contract between the partners, a change may be made in the nature of
business of the firm:
(a) with the consent of active partners managing the business.
(b) with the consent of majority of partners.
(c) with the consent of all the partners.
(d) with the consent of all the partners and Registrar of Firms.
INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN
Mercantile Law (Partnership Act)
Test No 2
7. In a ‘partnership at will’, a partner may retire:
(a) with the consent of all other partners.
(b) in accordance with an express agreement between the partners.
(c) by giving notice in writing to all the other partners, of his intention to
retire.
(d) in any one of the manners described above.

8. Emmad and Faraz are partners in cloth trading business. In the presence of Faraz,
his friend Ghalib boasted that he is also a partner in the business, in front of
Haroon, a customer. Haroon gave this information to Ismail and on this belief,
Ismail supplied cloth on credit to the firm. Can Ismail make Ghalib liable for the
unpaid amount in this transaction?
(a) No, as Ghalib did not present himself as a partner, in front of Ismail.
(b) Yes, as Ismail gave credit to the firm on the faith of Ghalib’s
representation.
(c) No, as Ghalib is not a partner in the firm.
(d) Yes, as Ghalib did it intentionally to deceive others.

9. Partnership is:
(a) the relationship between persons who have agreed to share the profits of
jointly owned property managed by all or any of them acting for all.
(b) the relationship created by an agreement between a banking company and
person(s) providing for sharing of profit and loss arising from the finance
provided to such person(s).
(c) both of the above.
(d) the relation between persons arising from a contract who have agreed to
share the profits of a business carried on by all or any of them acting for
all

10. Sohail, Talha, Umair & Co., a partnership concern is engaged in trading of cloth.
The firm bought a plot of land from Shining Star Limited. After some time Talha
and Umair on their own account bought three more plots of land in the same
locality and made good profits. Sohail on becoming aware of such profits sued
Talha and Umair for his share.
Under the provisions of Partnership Act 1932, explain whether Talha and Umair
are liable to share such profits with Sohail.
a) Yes, they are liable
b) No, they are not liable because this was not within the scope of partnership
c) Only loss can be shared with sohail
d) None of the above
INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN
Mercantile Law (Partnership Act)
Test No 2
11 A, B and C, partners of a firm, admitted D, a minor to the benefits of the firm. D
attained majority on 6th March 2007. He became aware of the fact that he has
been admitted to the benefits of the firm on 16th August 2007. Being undecided
about the situation he preferred to wait for some time before announcing his
decision about joining the firm.
On 27th February 2008, the firm suffered heavy losses due to an unforeseen
event. A, B and C informed D that on account of such losses, his capital in the
firm has been reduced by 40%. Can D is liable?
a) No, because he was minor
b) Yes, because he did not announce his decision within 6 month that he will
carry business as a partner or not
c) No, because he did not announce his decision within 6 months that he will
carry business as a partner or not
d) No, because minor is not responsible for any loss even after attaining majority

12 The Partnership Act, 1923 came into force on

a) October 1, 1932
b) October 1, 1931
c) October 10, 1932
d) November 1, 1932

13 The Partnership Act is one of the branches of

a) Companies Ordinance
e) Special Contract Law
f) Mercantile Law
g) Industrial Law

14 Partnership is
a) Body corporate of two or more individuals
b) Compulsory unincorporated association of two or more people
c) Voluntary association
d) Voluntary unincorporated association of individuals

15 Relation of Partnership
a) Arises by legal status of persons
b) Arises out of business dealings
c) Arises out of a contract between persons
d) Arises out of legal Implication

16 The firm will be dissolved if

a) Number of persons exceed maximum limit
b) Minimum number is reduced to 1
c) In case of Banking business, the maximum number exceeds 10
d) A and B both
INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN
Mercantile Law (Partnership Act)
Test No 2
17 The relation of partnership is an extension of
a) Partnership deed
b) Contract of utmost good faith
c) Law of agency
d) Relation of business amongst partners

18 Partnership contract to be legally valid

a) Must have lawful consideration
b) Needs no consideration
c) May have some consideration
d) A and C both

19 Partner is
a) An agent of firm
b) Principal to other partners
c) Agent as well as principal
d) None of these

20 In the absence of an agreement, the partners share profit and losses

a) In the relation of capital contributed by them
b) In equal ratio
c) In the ratio of time being devoted by them
d) A and C

21 The liability of a partner is

a) Unlimited
b) Limited
c) Limited to his share in profit and asset of the firm
d) Limited by guarantee given to him

22 Which of the following is the most essential factor for testing relation of
partnership
a) Participation in management of a business
b) Existence of a business
c) Profit sharing
d) Mutual agency

23 Partnership firm has

a) Separate legal entity from partners, if the firm is registered
b) Firm is not a separate legal entity
c) Separate legal entity
d) Separate legal entity district from the partner
INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN
Mercantile Law (Partnership Act)
Test No 2
24 In partnership, there is
a) Co-ownership
b) Mutual agency
c) Fiduciary relation
d) All of these

25 A partner can
a) Transfer his interest to an outsider
b) Cannot transfer his interest to an outsider
c) Transfer only with the consent of all other partners
d) A and C

26 Partnership at will comes to an end

a) When all partners agree
b) When one partner gives notice to this effect to other partners
c) When anyone partner leaves the firm
d) When one partner retires

27 Partners are liable for the debt of the firm

a) Jointly all partners
b) Jointly and severally
c) Severally
d) Individually

28 Partnership deed may be made

a) In writing
b) By the words of mouth
c) By conduct of the parties
d) Either A or B or C

29 Which one of the following is joint venture

a) Particular partnership
b) Partnership at will
c) General partnership
d) Partnership for a fixed period

30 The partner who take active part in the conduct of business is known as
a) Active partner
b) Actual partner
c) Ostensible partner
d) Either A or B or C
INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN
Mercantile Law (Partnership Act)
Test No 2
31 The partner, who does not take part in the conduct of business of partnership is
known as
a) Sleeping or dormant partner
b) Nominal partner
c) Sub-partner
d) Partner by holding out

32 The liability of a “partner in profit only” for the acts of the firm is
a) Limited
b) Unlimited like other partners
c) Limited upto his share of profits
d) A & C

33 Nominal partner is, one who,

a) Does not invest capital
b) Does not participate in the conduct of business
c) Does become liable for the act of the firm like other partners
d) Does get share in profit and loss

34 Sharing of profit is
a) A conclusive test of partnership
b) Merely strong evidence of partnership
c) Essence of partnership
d) Is not an essence of partnership

35 In a co-ownership
a) Maximum number of co-owner is 10
b) There is no limit of maximum number of co-owners
c) There is a limit of maximum number of co-owners
d) Maximum number of co-owner is 5

36 A minor
a) Can be a partner in the firm
b) Cannot become partner
c) Can be given share in the profit of partnership business
d) Can be admitted to the benefits of the firm with the consent of all partners

37 A minor is not having, which of the following rights

a) To inspect the books of the firm, which contains confidential matters
b) To inspect accounts of the firm
c) To copy accounts of the firm
d) To have an access to books of accounts
INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN
Mercantile Law (Partnership Act)
Test No 2
38 In case minor beneficiary becomes partner, he will be liable for the acts of the
firm from the date
a) When he becomes partner
b) When he was admitted to the benefits of the firm
c) When he declares to be the partner in the firm
d) When he joins as a partner

39 A minor admitted to the benefits of the firm, towards third party

a) He is personally liable
b) He is not personally liable
c) He is liable only up to his share in the firm
d) He has no liability at all

40 On being retired from the firm as partner, public notice to this effect must be
given by
a) Sleeping or dormant partner
b) An active partner
c) All types of partner
d) All retiring partner

41 What is required for becoming partner in the firm

a) Contractual capacity
b) Adequate capital
c) Sufficient time to devote
d) Capacity to bear losses of the firm

42 Registration of partnership is
a) Compulsory by law
b) Optional
c) Obligatory by the circumstances
d) Registration of the firm is necessary for the purpose of income tax

43 At what time the firm should get registered

a) At the time of creating partnership
b) After preparing partnership deed
c) As per the requirement of partnership act
d) At any time, during its life time

44 Legal effect of non registration is

a) Provisions of partnership act are not applicable on the firm
b) Unregistered firm can’t sue third party for rights arising out of a contract
c) Third party can’t sue unregistered firm
d) Unregistered firm is not required to maintain books of accounts
INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN
Mercantile Law (Partnership Act)
Test No 2

45 Non registration does not affect

a) Right to claim set off
b) Right to sue on third party
c) Rights, other than arising out of contract
d) Right to sue on partner

46 Rights and liabilities of the partners are generally determined by

a) Partnership agreement
b) Partnership act
c) Both A & B
d) Implied by their conduct

47 Partner has a right

a) To claim interest on capital
b) He can claim interest if is provided partnership agreement
c) He can’t claim interest on capital
d) He can claim it, if it is provided in the agreement, but only out of profit

48 The right of indemnity is available to a partner for,

a) All expenses incurred by him in ordinary and proper conduct of business
b) Liabilities incurred by him in a proper and ordinary conduct of business
c) Payment made by him in emergency for protecting firm from losses
d) All A, B & C

49 Outgoing partner has a right

a) To claim share in the profit of the firm
b) To claim interest @ 6% p.a on his share in the property till his account is
finally settled
c) Both A and B
d) Either A and B

50 Partner has no right to retire from the firm

a) As per the terms of partnership
b) In case of partnership at will, by giving notice to other partners
c) As per the provisions of the partnership act
d) By the consent of all other partners

51 Partner giving advances to the firm is entitled

a) To claim reasonable rate of interest on that amount
b) To claim interest @ 6% p.a
c) To claim interest at the rate as agreed by all partners
d) Not to claim any interest on that amount
INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN
Mercantile Law (Partnership Act)
Test No 2

52 The partner has a right to share profit and losses

a) In the ratio of capital contributed
b) As per the provisions of this act
c) In equal ratio
d) As per the agreement made by them

53 Every partner is subject to the duties

a) Mandatory duties
b) Duties subject to agreement
c) Duties under the provision of this act
d) A & B

54 Every partner has a duty to act

a) For his personal benefit
b) For mutual benefit
c) For both personal as well as mutual benefit
d) For the benefit of individual partner

55 The property of the firm must be used

a) For mutual benefit of the partner
b) For personal benefit of the partner
c) For the purpose of business of the firm
d) A & B

56 Every partner is liable for the acts of the firm

a) Jointly with other partners
b) Severally at personal level
c) Jointly and severally
d) Individually to unlimited extent

57 Implied authority of partner is derived from

a) Conduct of parties
b) Law
c) Business usage
d) All A, B and C

58 Under implied authority of the partner may do

a) Selling the goods of the firm
b) Transferring immovable property of the firm
c) Purchasing goods on behalf of the firm
d) A and C
INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN
Mercantile Law (Partnership Act)
Test No 2

59 Restriction on implied authority of a partner is binding on third party provided

a) Such restrictions are valid
b) Are according to the provisions of the partnership act
c) Such restriction are in the knowledge of a third party
d) Such restrictions have been imposed by mutual agreement

60 A and B are partners in a trading firm. Authority of a partner to purchase goods

on credit has been limited to the extent of Rs. 1000 only C, who is dealing with
the firm sold goods worth Rs 1500 on credit to A. is he entitled
a) To recover only Rs. 1000
b) To recover Rs. 1500
c) To recover Rs. 1000 if he knew the restriction
d) To recover Rs. 1500 if he did not know the restriction

61 A, B and C are partner in the trading of oranges. A, who is in Lahore sends a

consignment to his partner B at Karachi for sending it to C at Quetta who will
finally sell of the oranges. But when the consignment reached at Karachi B found
that oranges are perishing rapidly. He thinks it fit to sell off the consignment at
best obtainable prices at Karachi, beyond his authority
a) This act is not binding on the firm
b) This act is binding on the firm
c) This act is not binding, because he has not obtained consent of A & C his
partner
d) This act is binding on him

62 Reconstitution of the firm takes place when

a) Partner is declared insolvent
b) When a partner dies
c) When minor is admitted to the benefits of the firm
d) Only in case of A and B

63 Incoming partner will be liable for the debts of the firm

a) From the date when he joins the firm
b) From the date, when partners agree to admit him
c) For all past acts and debts of the firm
d) None of these

64 Retiring partner will remain liable for all the acts of the firm
a) Before retirement
b) Pending at the time of his retirement
c) After his retirement
d) A and B
INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN
Mercantile Law (Partnership Act)
Test No 2
65 Public notice of retirement may be given
a) By retiring partner
b) By any other partner
c) Either by retiring partner or by any other partner
d) By the partnership firm

66 Retiring partner has a right to

a) Start business competing with that of a firm
b) Advertise such business
c) Solicit the customer, who were dealing with the firm before his retirement
d) A and B

67 In case of insolvency of a partner

a) It is necessary to dissolve the firm
b) It is not necessary to dissolve the firm
c) It depends upon the agreement between partners
d) None of these

68 In case of transfer of partner’s interest, the transferee has a right

a) To participate in the conduct of the business
b) To inspect, books of accounts of the firm
c) To claim his share in the profits of the firm
d) A and B

69 Dissolution of partnership includes

a) Change in the relation of partners
b) Complete breakdown of relationship among all the partners
c) Reconstitution of the firm
d) B and C

70 Dissolution of Partnership firm includes

a) Dissolution of partnership
b) Breaking up of relationship which subsisted between all partners
c) Closing down of business of the firm
d) A, B and C