Review Questions on Partnership
--- Answer Key ---
True/False
1. One of the characteristics of the contract of partnership is commutative in which it requires
each partner that aspires to enter into an agreement of partnership to contribute money,
property, or industry.
Answer: False
Explanation: Commutative is one of the characteristics of the contract of partnership but when we
speak of commutative, it is the undertaking of each of the partners which is considered as the
equivalent of that of the partners. In simple way, the contribution of each partner whether it be
money, property or labor, is presumed or considered as equivalent to the contributions made by the
other partners.
Onerous characteristic of partnership contract is the one which requires each partner that aspires to
enter into an agreement of partnership to contribute money, property, or industry.
2. Industrial partners are not allowed to engage in any form of businesses or even establish his
own.
Correct Answer: True
Explanation: It is under the partnership law that requires the industrial partner to solely offer his/her
expertise and skills to the partnership alone except if he/she will be allowed by the other partners or
the other partners permit him to do so.
3. under article 1776 of the partnership law, two or more persons binds themselves to
contribute money, property, or industry to a common fund, with intention of dividing the
profits among themselves.
Answer: False
Explanation: It is not under article 1776 but under 1767. And this article stipulates the definition of the
term Contract of Partnership or Partnership.
4. Accounting for partnership is basically the same as that of the sole proprietorship.
Answer: true
Explanation: They are basically accounted the same. They only differ on accounting procedures on
areas of formation/ establishment of the partnership, profit distribution, dissolution and liquidation.
5. Under admission by investment, the money or property contributed by the new partner
becomes part of the specific partnership assets.
Answer: True
Explanation: Whatever contributions agreed upon by the new partner and the existing partners
whether it be money or non cash assets will be part of the properties of the partnership as a whole.
The ownership goes to the partnership, and all the partners has equal rights to use such properties
provided that it must be use for Partnership dealings or operation purposes only.
6. The sale of a partner’s interest in an existing partnership is a transaction between the
partnership and the new partner.
Answer: False
Explanation: Sales of partner’s interest to other parties is actually a personal transaction between the
partner and the new partner. That is why in the book of the partnership, we only record the
admission of the new partner by debiting the capital account of the partner who sells his interest and
crediting a new capital account.
7. Industrial partners have no share in the losses incurred by the partnership.
Answer: False
Explanation: The general rule indicates that when it was stipulated in the contract of partnership or
when there is an agreement between the capitalist partner and the industrial partner as to the
sharing of losses incurred by the partnership then, the industrial partner will also have his share to
that loss. But in the absence of any agreement then, the statement above is correct.
8. Admission of a new partner dissolves an existing partnership but a new partnership may be
formed.
Answer: True
Explanation: Upon admission of a new partner, the existing partnership will be dissolve and a new
Articles of Co-partnership will be drawn by all the partners. There are two ways of admitting new
partners, first is by purchase of interest and second is by investment.
9. A general partner is liable only to the extent of his contribution while a limited partner is
liable beyond his contribution.
Answer: False
Explanation: General partner can be held liable beyond their contribution. When partnership’s asset
becomes exhausted then, creditors may claim settlement of liabilities on the partner’s personal
assets. On the other hand, limited partner is only liable to the extent of his contribution.
10. Asset revaluation should be done before the admission of the new partner into the
partnership.
Answer: True
Explanation: Before admitting the new partner, all asset must be presently accounted or recognized at
fair value. Whenever there are changes in the amount, we must adjust or revalue it to its correct
amount so that we can measure the proper amount of contribution the existing partners has.
MC Theories
1. It means that it is a contract that is perfected by mere consent because all partners had a
meeting of the minds to enter into a contract of partnership.
a. Consensual c. Preparatory
b. Principal d. Commutative
Answer: A. Consensual
2. A type of partnership in which the birth and life of a partnership is predicted on the mutual
desire and consent of the partners.
a. Partnership at will c. Partnership with a fixed term
b. Partnership for a particular undertaking d. None of these
Answer: A. Partnership at will
3. Those who contribute money or property or both money or property to a common good.
a. Industrial Partners c. Capitalist Partners
b. General Partners d. Limited Partner
Answer: C. Capitalist Partners
4. Those that take active part in the management and are known in the public as partner in
the partnership.
a. Secret Partner c. Dormant Partner
b. Ostensible Partner d. Liquidating Partner
Answer: B. Ostensible Partner
5. When admitting a new partner into an existing partnership, allocation of any increase or
decrease in the value of assets to the old partners is based on—
a. the fair value of asset contributed by c. equal distribution
each partner in the partnership
d. relative capital balances of the partners
b. profit or loss ratio
Answer: B. Profit or loss ratio
6. Which of the following conditions constitute a legal dissolution of a partnership?
a. Retirement of a partner c. Incapacity of a partner
b. Death of a partner d. all of these
Answer: D. All of these
7. When a partner retires and receives cash which is less than his capital balance or interest,
how should the difference is treated?
a. The difference should be credited to all partners in their profit and loss ratio
b. The difference should be debited to the remaining partners in their remaining profit or loss
ratio
c. the difference should be credited to the remaining partners in their remaining profit or loss
ratio
d. the difference should be debited to all the partners in their profit or loss ratio
Answer: C. The difference will be credited to the remaining partners in their profit or loss
ratio
8. Suppose instead of profit, the partnership suffered loss amounting to 120,000, the share of
the capitalist partners in the loss incurred shall be:
a. in proportion to their capital contribution
b. In accordance with their loss sharing agreement
c. equally divided among them
d. In accordance to their profit sharing agreement
Answer: b. in accordance with their loss sharing agreement
9. The change in the relation of the parties caused by any partner ceasing to be associated in
the carrying on of the business.
a. Dissolution b. Liquidation
c. Termination d. Winding up
Answer: Dissolution
10. It is one where persons, by word spoken or written or by conduct represents themselves,
or consents to another representing them to anyone, as partners in the existing partnership.
a. Partnership by estoppels c. Particular Partnership
b. Ordinary Partnership d. Close Partnership
Answer: A. Partnership by estoppels