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Which of the following is not an essential element of a partnership firm?
- a)At least two persons
- b)There is an agreement between all partners
- c)The partnership agreement is for some business
- d)Equal sharing of profits and losses
Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
Which of the following is not an essential element of a partnership fi...
The correct answer is d) Equal sharing of profits and losses, as it is not an essential element of a partnership firm. While sharing of profits is a key feature of partnership, equal sharing is not mandatory; the ratio can vary depending on the terms of the partnership agreement. If there is no specific agreement, only then are profits and losses assumed to be shared equally. However, other elements like minimum two persons, a mutual agreement, and carrying on a lawful business are essential as per the Indian Partnership Act, 1932.
Community Answer
Which of the following is not an essential element of a partnership fi...
Essential Elements of Partnership Firm
1. At least Two Persons:
A partnership firm must have a minimum of two persons to carry out its business operations. The maximum number of partners in a firm varies depending on the type of partnership.
2. Agreement between all Partners:
The partnership firm must have a valid written agreement, also known as partnership deed, which defines the terms and conditions of the partnership including profit sharing, responsibilities, and decision making.
3. Partnership Agreement for some Business:
Partnership agreement should be for carrying out some business activity. The partners can choose any business activity, except those that are illegal or immoral.
4. Sharing of Profits and Losses:
All partners must agree to share the profits and losses of the firm in a predetermined ratio as mentioned in the partnership deed.
5. Mutual Agency:
The partnership firm is based on the concept of mutual agency, which means that each partner has the authority to act on behalf of the firm and bind the firm with their actions.
6. Joint Liability:
The partners have joint and several liability for the debts and obligations of the firm, which means that each partner is liable for the entire debt of the firm.
Exception to Essential Elements
The correct answer to the question is option C, which states that equal sharing of profits and losses is not an essential element of a partnership firm. The partners can agree to share the profits and losses in any ratio as mentioned in the partnership deed. However, the sharing ratio must be agreed upon by all the partners and must be mentioned in the partnership deed.
1. At least Two Persons:
A partnership firm must have a minimum of two persons to carry out its business operations. The maximum number of partners in a firm varies depending on the type of partnership.
2. Agreement between all Partners:
The partnership firm must have a valid written agreement, also known as partnership deed, which defines the terms and conditions of the partnership including profit sharing, responsibilities, and decision making.
3. Partnership Agreement for some Business:
Partnership agreement should be for carrying out some business activity. The partners can choose any business activity, except those that are illegal or immoral.
4. Sharing of Profits and Losses:
All partners must agree to share the profits and losses of the firm in a predetermined ratio as mentioned in the partnership deed.
5. Mutual Agency:
The partnership firm is based on the concept of mutual agency, which means that each partner has the authority to act on behalf of the firm and bind the firm with their actions.
6. Joint Liability:
The partners have joint and several liability for the debts and obligations of the firm, which means that each partner is liable for the entire debt of the firm.
Exception to Essential Elements
The correct answer to the question is option C, which states that equal sharing of profits and losses is not an essential element of a partnership firm. The partners can agree to share the profits and losses in any ratio as mentioned in the partnership deed. However, the sharing ratio must be agreed upon by all the partners and must be mentioned in the partnership deed.
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Which of the following is not an essential element of a partnership firm?a)At least two personsb)There is an agreement between all partnersc)The partnership agreement is for some businessd)Equal sharing of profits and lossesCorrect answer is option 'D'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Which of the following is not an essential element of a partnership firm?a)At least two personsb)There is an agreement between all partnersc)The partnership agreement is for some businessd)Equal sharing of profits and lossesCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following is not an essential element of a partnership firm?a)At least two personsb)There is an agreement between all partnersc)The partnership agreement is for some businessd)Equal sharing of profits and lossesCorrect answer is option 'D'. Can you explain this answer?.
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