Observation

Comments

Many candidates attempted this question and their response to the question was quite satisfactory as required by the examiner.

Some of the suggested answers are:
(2a)      A partnership business can be defined as the relationship which subsists between two or more persons carrying on a business in common with the aim of making profit.
OR
A partnership business is a business organization in which two or more persons agreed legally to set up and manage a business with the aim of making profit.

(2b)     Types of partners

• General partner/Unlimited partner:   This is a partner whose liability is unlimited in case of business liquidation and is liable to the full extent of his estate for the partnership debt.
• Sleeping/Dormant Partner:    This partner only contributes capital into the partnership business but does not take active part in the management of the firm.
• Quasi Partner:  This is a partner who leaves his contribution in the firm after retirement in form of loan with interest and is considered as an external creditor to the business.

(iv)Nominal Partner:    This is a partner that only contributes his name to the formation of the business due to his personality in the society.

OR
This is a partner who neither contributes capital nor takes part in the management of the business.

• Limited Partner:   This is a partner whose liability to the business is limited to the capital contributed.
• Active Partner:   This is a partner that partakes in the day-to-day running of the affairs of the business.

(2c)      Provisions Applicable to Partnership Business in the Absence of Formal Agreement are:

• Profits and losses shall be shared equally;
• No partner shall be remunerated for acting in the firm’s business;
• No new partner shall be admitted without the consent of all the existing partners;
• Interest of 5% shall be allowed on any advance or loan made by a partner in excess of agreed amount contributed;
• Partner shall be compensated for any personal expenses or liabilities incurred on behalf of the business;
• There shall be no interest on capital;
• There shall be no drawings hence no interest on drawings;
• Partners shall contribute equal capital.
• The books and accounts of the firm shall be kept at the principal place of the business.