PARTNERSHIP- MERITS AND DEMERITS

MAY 4,2020

DAY 1 

THANK YOU FOR LOGGING IN! 

GOOD MORNING BOYS!

ANSWERS TO THE CASE STUDIES OF CHAPTER 1:

Ans 1- a) ARUN-EMPLOYMENT, TARUN-PROFESSION, VARUN- BUSINESS
            b) BASIS CAN BE RETURN, RISK AND NATURE OF WORK.
Ans 2- 1 a) COMMUNICATION- "Besides, he also needs communication__________one another."
b) BANKING-"He is planning________for his business."
c) INSURANCE- "Considering the fact that___________other risks."
d) ADVERTISEMENT-"Furthermore, he needs _____________promote his business."
2. a) Communication- knowlege utility.
b) Banking- finance utility
c) Insurance- Risk utility
d) Advertisement- information utility.

LEARNING OUTCOME: At the end of the topic, students will be able to:
a) Explain the merits of partnership firm.
b) Discuss the demerits of partnership business.

PLEASE NOTE- THERE IS A GOOGLE MEET FOR 11 A STUDENTS AT 1 PM TODAY.  THE LINK IS GIVEN BELOW:

fex-kkqt-pzz

WATCH A SMALL VIDEO FOR THE MERITS AND DEMERITS OF PARTNERSHIP:

NOW TAKE DOWN THE NOTES:


Q.10 Explain the advantages of a partnership business. (5)
Ans- 1. Ease of formation and closure-
a) A partnershio business is very easy to form. It can be started with just an agreement between the partners and registration of the firm is not compulsory.
b) Closure of the firm is also as easy as its formation. Business can be closed with mutual agreement between all partners.
2. Balanced decision making-
a) Individuals with specialised skills join together to achieve the common objective of the firm .
b) It allows division of work on the basis of each partner's area of expertise, thus reducing the  burden of work and facilitates balanced and efficient decision making.
3. More capital investment:
a) Capital investment in business is also more in partnership as compared to sole proprietorship .
b) It is easy to raise larger amount of funds and there is more scope for increasing business scale of operations and implementing expansion plans of the firm.
4.Sharing of risks-
a)  Partnership business allows sharing of the business risks in the same ratio in which they share the profits of the firm.
b) This reduces the anxiety, burden and stress on individual partners related to  the running of the business.
5. Secrecy:
a) Partnership business is not required to submit or publish their financial results .
b) All important decisions and activities are carried by the partners only. Hence,  they are able to maintain confidentiality of information related to its operations.

Q.11 Explain the demerits or limitations of partnership . (5)
Ans- 1. Unlimited liability- 
a) Liability of each partner is unlimited. In case the business assets are insufficient then the partners need to repay the business debts from their personal assets .
b) The liability of each partner is both joint and several - this means though they are liable to pay off the liabilities but sometimes the partners have to pay from their personal assets to pay off the debts of the firm.
2. Limited Resources-
a) Restricted number of partners actually limits the availability of finance.
b) Limited investment cannot support large scale operations . Thus it is mostly suitable for medium sized business like law firms, chartered accountancy firms, etc.
3. Possibility of conflicts-
a) Partnership is run by a group of individuals from different backgrounds which specialised expertise .
b) Though this helps to share the responsibilities but it also give reasons for difference of opinions leading to disputes amongst the partners. sometimes this may result in termination of partnership business.
4. Lack of continuity-
a) Partnership business has restriction on transfer of ownership. Business may lack continuity as the death, retirement, insolvency, etc of any partner may bring the business to an end .
b) However, if the remaining partners want to continue the business  then they may do so with the help of a new agreement 
5. Public confidence-
a) Though a partnership business can maintain secrecy by not publishing its financial results but this may result in lesser confidence of outsiders in the partnership business .

b) Thus raising funds or getting bigger business contracts may become difficult for partnership business.

GOD BLESS YOU ALL!