Features of Partnership Class 12 Accountancy CBSE Board

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Here we would discuss the Essential Features of a Partnership

Essential Features/Characteristics/Elements of Partnership (Class 12 Accounts)

The following are the Essential Features of Partnership. Without them, Partnership is not possible.

  1. Persons of Unsound Mind:- Person with mental instability is not eligible to be a partner.
  2. Minor:- The person below 18 is not eligible to enter into a partnership agreement.
  3. Persons disqualified by law:- The person who is disqualified by law can not enter into a partnership agreement.

The Partnership should have an agreement, written or oral.

  1. Trade
  2. Vocation
  3. Profession
  1. A clinic setup as charitable
  2. Joint ownership in property not for sale
  3. Charitable old age house, School, Hospital

For example:-

  1. selling illegal things
  2. Smuggling

It means that each partner can participate in the conduct of business and each partner is bound by the acts of other partners with respect to the business of the firm.

Each partner is an agent as well as a principal of the firm.

An agent, because he can bind the other partners by his acts, and a principal because he himself can be bound by the acts of the other partners.

The liability of partners is unlimited, i.e., the firm’s liabilities can be paid from their personal assets.

It means that partners are liable for the firm’s debts individually and jointly with other partners.

Net Private Assets of a partner (i.e., Private Assets – Private Debts) can be used to pay a firm’s debts if the firm’s assets are less than the firm’s debts.

A partnership firm has no separate existence from its members.

It means that all agreements entered with the firm will be enforceable against each partner separately and jointly.

The following are essential elements of a partnership firm, except:

A) At least two persons

B) There is an agreement between all partners

C) Equal share of profits and losses

D) Partnership agreement is for some business

Ans:- c)
The equal share in the profit and losses is not an essential elements of a partnership firm.

In the case of a partnership, the act of any partner is:

a) Binding on all partners

b) Binding on that partner only

c) Binding on all partners except that particular partner

d) None of the above

Ans:- a)
The partners has principal and agent relationship in the partnership firm.

Which of the following statement is true?

A) a minor can not be admitted as a partner

B) a minor can be admitted as a partner, only into the benefits of the partnership

C) a minor can be admitted as a partner but his rights and liabilities are the same as of an adult partner

D) None of the above

Ans:- b)
A minor can be admitted as a partner but he is only allowed to share the profits of the firm.

The relation of the partner with the firm is that of:

a) An Owner

b) An Agent

c) An Owner and an Agent

d) Manager

Ans:- c)
The partners in the firm are principla and an agent as well.

What should be the minimum number of persons to form a Partnership:

a) 2

b) 7

c) 10

d) 20

Ans:- a)
At least two persons are required to form a partnrship.

The number of partners in a partnership Firm may be:

a) Maximum Two

b) Maximum Ten

c) Maximum One Hundred

d) Maximum Fifty

Ans:- d)
The maximum 50 partners are allowed in a partnership firm as per rule 10 companies (minscellenous) rules 2014.

A, B, C and D are partners in a firm. They want to expand their business for which additional capital and more managerial experts are required. For this they want to admit more members in their firm. What is the maximum number of additional members that can be admitted by them in the firm:

a) 02

b) 50

c) 20

d) 46

Ans:- d)
The maximum 50 partners are allowed in a partnership firm as per rule 10 companies (minscellenous) rules 2014. Thus further 46 partners can be admitted.

Liability of partner is:

A) Limited

B) Unlimited

C) Determined by Court

D) Determined by Partnership Act

Ans:- b)
The liability of partners are unlimited as in the case of loss, partners net private assets can be used to pay off the debts.

X, Y, and Z are partners sharing profits and losses equally. Their capital balances on March 31, 2021, are ₹ 80,000, ₹ 60,000 and ₹ 40,000 respectively. Their personal assets are worth as follows: X – ₹ 20,000, Y – ₹ 15,000, and Z – ₹ 10,000. The extent of their liability in the firm would be:

a) X – ₹ 80,000 : Y – ₹ 60,000 : and Z – ₹ 40,000

b) X – ₹ 20,000 : Y – ₹ 15,000 : and Z – ₹ 10,000

c) X – ₹ 20,000 : Y – ₹ 75,000 : and Z – ₹ 50,000

d) Equal

Ans:- b)
The extent of the partners liability is limited to the net private assets of the partners.

Assertion (A): A Partnership firm is a separate and distinct entity from partners from the viewpoint of accounting.

Reason (R): As per the Business Entity Concept, business transactions are recorded from the viewpoint of the firm. Hence, it is a separate and distinct entity from partners from the viewpoint of accounting.

In the context of the above two statements, which of the following is correct?

a) Assertion (A) and Reason (R) are correct and Reason Correctly explains Assertion

b) Both Assertion and Reason (R) are correct but Reason (R) does not correctly explain (A)

c) Both Assertion (A) and Reason (R) are incorrect.

d) Assertion (A) is correct but Reason (R) is incorrect.

Ans:- a)
As per the business entity concept. All transactions are recorded with business point of view not the partners point of view. Thus partner and firm are two seperate entity.

Assertion (A): A partnership firm can have maximum 50 partners.

Reason (R): Maximum limit of partners is prescribed in the Partnership Act, of 1932.

In the context of the above two statements, which of the following is correct?

a) Both (A) and (R) are correct and (R) is the correct explanation of (A)

b) Both (A) and (R) are correct but (R) is not the correct explanation of (A)

c) Only (A) is correct

d) Both (A) and (R) are wrong.

Ans:- c)
The maximum 50 partners are allowed in a partnership firm as per rule 10 companies (minscellenous) rules 2014.

Assertion (A): Partners are principals but not the agents of other partners.

Reason (R): Partners are principals as well as agents of other partners.

In the context of the above two statements, which of the following is correct:

a) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).

b) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

c) Both Assertion (A) and Reason (R) are false

d) Assertion (A) is false, but Reason (R) is true.

Ans:- d)
Partners are principals as well as agents of other partners.

Assertion (A): A minor can not be admitted in a firm as a partner.

Reason (R): A minor can participate in the profits of a firm.

In the context of the above two statements, which of the following is correct?

a) Assertion (A) is correct, but Reason (R) is wrong.

b) Both Assertion (A) and Reason (R) are correct.

c) Assertion (A) is wrong, but Reason (R) is correct.

d) Both Assertion (A) and Reason (R) are wrong.

Ans:- b)
However a minor can not be admitted as a partner in the firm. but he can participate only in the profits of the firm if its beneficial for the business.

S.NTopics
1.Definition of Partnership
2.Features of Partnership
3.What are the Rights of Partners
4.What is Partnership Deed, Meaning, content
5.What are the Rules in the absence of a Partnership Deed
6.What are the Rules in the absence of Partnership Deed
7.What are the Liabilities of Partners
8.Profit and Loss Appropriation Account format, features
9.Journal Entries of Profit and Loss Appropriation A/c
10.Difference between Profit and Loss A/c and Profit and Loss Appropriation A/c
S.NTopics
11.Difference between charge against profit and appropriation of Profit
12.Treatment of Interest on loan by the firm to the partner
13.Treatment of Interest on loan by the Partner to the firm
14.Treatment of Rent paid to partner in partnership firm
15. Accounting Treatment of Managers commission in partnership
16.Items not shown in Profit and Loss Appropriation A/c
17.Methods of Maintaining Partners Capital A/c
18.Accounting Treatment When Appropriation is more than the Available Profit
19.Difference Between Fixed Capital A/c and Fluctuating Capital A/c
20.Difference Between Capital and Current A/c
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Anurag Pathak
Anurag Pathak

Anurag Pathak is an academic teacher. He has been teaching Accountancy and Economics for CBSE students for the last 18 years. In his guidance, thousands of students have secured good marks in their board exams and legacy is still going on. You can subscribe his Youtube channel for free lectures

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