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Dissolution of Partnership Firm MCQ
- Voluntary Dissolution occurs when
(a) All the Partners die or become insolvent
(b) All the Partners by a mutual agreement agree to bring an end to the Partnership
(c) Where the business of the firm becomes unlawful
(d) Where all the partners except one die or become insolvent.
According to s.40, a firm may be dissolved in accordance with a contract between all the partners, called Voluntary Dissolution. Hence, option (b) is the correct answer.
- Firm may not be compulsorily dissolved when :
(a) The partnership has several adventures & one such adventure becomes illegal
(b) All the businesses or adventures of a partnership become unlawful
(c) A partner becomes permanently incapable of performing his duties
(d) All partners of a firm are declared insolvent.
If some out of several businesses or adventures of a partnership become unlawful, the illegality of one or more of the businesses or adventures will not of itself cause the dissolution of the firm in respect of its lawful businesses or adventures. Hence, option (a) is the correct answer
- When all or all but one of the partner of the firm are declared insolvent then :
(a) Firm is automatically dissolved
(b) Firm is also declared insolvent
(c) Solvent partners have to bear the debts of the insolvent partner in the ratio of their capitals.
(d) The firm becomes liable for any act of the insolvent partner after the order of adjudication.
When all partners or all but one partner of the firm are declared insolvent, then the firm is automatically dissolved on the date of insolvency of partners. Hence, option (a) is the correct answer.
- A firm may be dissolved by court on the ground of :
(a) Insanity of a partner
(b) Misconduct of a partner
(c) Perpetual losses in business
(d) All of these.
According to s.44, a firm may be dissolved by court on the ground of insanity or misconduct of a partner and perpetual losses in business. Hence, option (d) is the correct answer.
- Suit for dissolution of a firm on the ground of permanent incapacity of a Partner can be filed by:
(a) Any partner
(b) Any partner other than who is permanently incapacitated
(c) Registrar of the firm
(d) Any sub-partner of the firm.
Application for dissolution of a firm on the ground of permanent incapacity of a partner can be made by any partner other than who is permanently incapacitated. Hence, option (b) is the correct answer.
- A transferee of a partner’s share in a firm can claim share in the property of the firm:
(a) On the date stated in the transfer agreement
(b) Immediately after the transfer
(c) After dissolution of the firm
(d) Immediately when the partner becomes insolvent.
On dissolution of the firm, a transferee of partner’s share has a right to claim agreed share of property of the firm. Hence, option (c) is the correct answer.
- P and Q become partners for 20 years. P pays Q a premium of Rs.10,000. At the end of 10 years, there is dispute between P and Q and the partnership dissolved. Hence,
(a) P can get back the entire amount of the premium paid by him to Q
(b) P can get back a reasonable part of the premium
(c) P can get back only Rs.7,000 from Q
(d) P cannot get back any amount of premium paid by him.
As per s.51, in case a partner has paid premium at the time of admission in the partnership for a fixed term and the firm is dissolved before the expiry of such term otherwise than by the death of a partner, such partner is entitled to repayment of premium paid or such amount as may be reasonable. In this case, as P pays Rs.10,000 as premium to Q for a fixed term and the firm dissolves before the expiry of such term, P can get back a reasonable part of the premium. Hence, option (b) is the correct answer.
- At the time of dissolution of firm, if there is any surplus in the firm’s asset left after settlement of the debts and liabilities of the firm, shall be:
(a) Distributed among the partners in the ratio of the capital invested by them
(b) Credited to the Capital Redemption Reserve
(c) Used in settlement of partners individual debts
(d) Distributed among the partners according to their rights.
At the time of dissolution of firm, the surplus left after settlement of the debts and liabilities of the firm shall be divided among the partners in the proportion in which they were entitled to share profits. Hence, option (d) is the correct answer.
- Loss arising out of partner’s insolvency can be recouped from:
(a) Solvent partners
(b) The firm itself
(c) The nominal partner
(d) The partners by estoppel.
The deficiency of capital of the insolvent partner gets distributed among the solvent partners in the ratio of their capitals. So, loss arising out of partner’s insolvency can be recouped from solvent partners. Hence, option (a) is the correct answer.
- Under the decision of Garner vs. Murray case, the loss arising due to the deficiency of capital of insolvent partners gets distribution among the solvent partners in :
(a) Ratio of their agreed capitals
(b) Capital gearing ratio
(c) Sacrificing ratio
(d) Debt-equity ratio.
Under the decision of Garner v. Murray case, the loss arising due to the deficiency of capital of insolvent partner gets distributed among the solvent partners in the ratio of their capitals. Hence, option (a) is the correct answer.
- On dissolution, the partners remain liable until
(a) Public notice is given
(b) The registrar strikes off the name
(c) Partners share the profits of the firm among them
(d) All the debts of the third parties are settled.
According to s.72, a public notice has to be given on the dissolution of a registered firm. Otherwise, the partners shall continue to be liable to third persons for any act done by any of them which would have been an act of the firm, if done before the dissolution (s.45). Hence, option (a) is the correct answer.
- Public notice is not required when :
(a) There is admission of new partner
(b) There is retirement of any partner
(c) There is expulsion of any partner
(d) The minor admitted to benefits of partnership, elects or does not elect to become a partner in the firm.
In case of admission of new partner, public notice is not required. But in case of retirement of partner, expulsion of partner and dissolution of the firm, public notice is required. Hence, option (a) is the correct answer.