Commercial Applications
Statement I: The proprietor is personally liable for all the debts of the firm.
Statement II: The life of sole proprietorship is uncertain.
- Only I is correct
- Only II is correct
- Both I and II are correct
- Both I and II are wrong
Answer
Both I and II are correct
Reason — Statement I is correct because the proprietor has unlimited liability — they are personally liable for all debts of the firm, and in case the business assets are insufficient, their personal property can be used to pay creditors. Statement II is correct because sole proprietorship suffers from lack of continuity — illness, insolvency or death of the proprietor may lead to termination of the business.
Related Questions
The ownership where individual supplies the total capital from his own wealth or from borrowed funds is
- Sole Proprietorship
- Joint Hindu Family Business
- General Partnership
- None of these
Statement I: The sole proprietorship is completely free to take decisions and to implement them.
Statement II: Sole proprietor doesn't enjoy complete freedom of action.
- Only I is correct
- Only II is correct
- Both I and II are correct
- Both I and II are wrong
In a joint Hindu family business, the karta passes away unexpectedly. However, the business operations continue without interruption as the eldest son takes over the role of karta. Which feature of joint Hindu family business does this demonstrate?
- Perpetual succession
- Limited liability
- Hasty decisions
- Ease of formation
Statement I: All the male members of a Joint Hindu family business are known as coparceners.
Statement II: The oldest member is known as Karta.
- Only I is correct
- Both I and II are correct
- Only II is correct
- Both I and II are wrong