MCQ on Indian Partnership Act 1932

Here are multiple-choice questions on the Indian Partnership Act, 1932 in a continuous flow, without dividing them into parts. Each question is accompanied by the correct answer and explanation for clarity.

1. The Indian Partnership Act, 1932 came into force on:
   a) 1st January 1933
   b) 1st October 1932
   c) 1st March 1932
   d) 1st July 1932
   Answer: b) 1st October 1932
   Explanation: The Act came into effect on 1st October 1932, replacing certain provisions of the Indian Contract Act, 1872.
2. A partnership is governed by:
   a) Indian Contract Act, 1872
   b) Indian Partnership Act, 1932
   c) Companies Act, 2013
   d) Indian Trusts Act, 1882
   Answer: b) Indian Partnership Act, 1932
   Explanation: The Indian Partnership Act governs partnerships in India.
3. The minimum number of partners required to form a partnership is:
   a) 1
   b) 2
   c) 5
   d) 7
   Answer: b) 2
   Explanation: A partnership requires at least two persons to agree to form the partnership.
4. The maximum number of partners in a firm is:
   a) 10 for all firms
   b) 20 for all firms
   c) 50 for all firms
   d) 10 for banking and 20 for other firms
   Answer: d) 10 for banking and 20 for other firms
   Explanation: As per the Companies Act, 2013, a partnership cannot have more than 10 partners in banking and 20 in other businesses.
5. A partnership is created by:
   a) Law
   b) Agreement
   c) Court order
   d) Custom
   Answer: b) Agreement
   Explanation: As per Section 4 of the Act, a partnership arises only from an agreement.
6. The liability of partners in a partnership firm is:
   a) Limited to their capital contribution
   b) Unlimited
   c) Limited for some partners
   d) Determined by the partnership deed
   Answer: b) Unlimited
   Explanation: Partners in a traditional partnership have unlimited liability for the firm’s debts.
7. Which of the following is NOT essential to constitute a partnership?
   a) Agreement
   b) Sharing of profits
   c) Carrying on a business
   d) Limited liability
   Answer: d) Limited liability
   Explanation: Limited liability is not a feature of traditional partnerships; it applies to LLPs.
8. A partnership formed for a single venture is called:
   a) General partnership
   b) Particular partnership
   c) Joint venture
   d) Limited partnership
   Answer: b) Particular partnership
   Explanation: A partnership formed for a specific purpose or venture is called a particular partnership.
9. The sharing of profits in a partnership implies:
   a) Existence of partnership
   b) Business relationship
   c) Mutual agency
   d) Either a partnership or another relationship
   Answer: d) Either a partnership or another relationship
   Explanation: Sharing of profits is essential but does not necessarily indicate the existence of a partnership.
10. A partner who does not actively participate in the business is called a:
    a) Nominal partner
    b) Sleeping partner
    c) Minor partner
    d) Secret partner
    Answer: b) Sleeping partner
    Explanation: A sleeping partner contributes to capital and profits but does not engage in daily business activities.
11. The relationship between partners is governed by:
    a) Trust
    b) Partnership deed
    c) Companies Act
    d) Indian Contract Act
    Answer: b) Partnership deed
    Explanation: The partnership deed outlines the rights and duties of the partners.
12. In the absence of a partnership deed, profits are shared:
    a) Proportionate to capital contribution
    b) Equally
    c) Based on seniority
    d) As decided by mutual consent
    Answer: b) Equally
    Explanation: Section 13(b) specifies equal sharing of profits and losses unless agreed otherwise.
13. Which of the following can be considered as “partnership property”?
    a) Property purchased with firm funds
    b) Partner’s personal property
    c) Property held by a partner in their name
    d) Property leased for personal use
    Answer: a) Property purchased with firm funds
    Explanation: Property purchased with firm funds is considered partnership property.
14. The fiduciary duty of partners means:
    a) Acting for personal gain
    b) Acting in good faith for the firm’s benefit
    c) Avoiding liability
    d) Resigning from the firm
    Answer: b) Acting in good faith for the firm’s benefit
    Explanation: Fiduciary duty requires partners to act in the firm’s best interest.
15. When the duration of a partnership is not fixed, it is called:
    a) Fixed partnership
    b) Partnership at will
    c) Particular partnership
    d) Implied partnership
    Answer: b) Partnership at will
    Explanation: A partnership with no fixed term is a partnership at will.