Tag: KS3

The Lucy Partnership comprises of six partners who share profits in the following ratio 6:5:4:3:2:1

They are considering incorporation as a limited company, Lucy Partners Ltd.

Only the six partners will become shareholders on incorporation.

In relation to Lucy Partners Ltd, which of the following statements is necessarily true?

Select ONE answer:

1. All partners will be equal shareholders in Lucy Partners Ltd
2. If Lucy Partners Ltd wishes to raise new share capital, the number of shareholders may be allowed to rise above six
3. All shareholders will become directors and will have the right to be equally involved in the management of the new Limited company
4. If one of the shareholders in Lucy Partners Ltd dies, the company will be dissolved

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Notcorrect
2. Correct  –> Shareholders do not have an  automatic right to be a director or to be involved in management (3).  The partners’ individual shareholdings will be determined by an agreement that is not necessarily related to the existing partnership agreement (1). The concept of perpetual succession means that the company will not dissolve upon the death of a shareholder (4).
3. Not correct
4. Not correct

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Alex is a sole trader who works alone, maintaining and repairing photocopier systems.

He works about 80 hours per week, 52 weeks per year with no holidays.

He wants to take on a major new maintenance and repair contract for a local hospital’s administration department that needs to print out patient records on special paper.

This will require at least 60 working hours each week to do it justice.

It will be extremely profitable if he can acquire the necessary equipment to do the work.

Which of the following statements about his sole trader status is true?

Select ONE answer:

1. It prevents him from employing staff to help with the contract
2. It gives him personal liability for any failure of his in relation to the hospital photocopier system
3. It prevents him from obtaining a loan to obtain the equipment
4. It allows him to issue shares in his business to friends and family

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Notcorrect
2. Correct  –> As a sole trader he does have the disadvantage of personal liability.
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Which of the following business structures necessarily has a legal identity separate from that of its owner(s)?

I A strategic alliance between a limited company and a limited liability partnership
II A limited liability partnership
III A registered company

Select ONE answer:

1. I and II only
2. II and III only
3. I and III only
4. I and II and III

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Notcorrect
2. Correct  –>  A strategic alliance = No separate legal identity + A limited liability partnership = Separate legal identity + A registered company = Separate legal identity
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

AMW is a partnership in which the profits are shared between, A M and W in the ratio 3:2:1.

The partners wish to incorporate by issuing shares in a new company to the partners and the new company is to take over the assets and liabilities of the partnership.

There will be no cash movements between the business and the partners, or between the partners.

No loan accounts will be created between the business and its shareholders or directors.

Which of the following statements must be true?

Select ONE answer:

1. Shares will be issued in the ratio 3:2:1 to A M and W
2. Shares will be issued to match the partners’ capital
3. Creditors of the business will be in a stronger position after incorporation
4. Dividends will be paid in the ratio 3:2:1 to A M and W

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Notcorrect
2. Correct  –>  Partners’ capital represents partners’ stakes, or ownership, of a business. So do shares. in the absence of cash changing hands, the shares must therefore match the partners’ capital amounts, which are unlikely to be in the profit-sharing ratio 3:2:1
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Alex is a sole trader who currently employs one person.

His business, Stafford Research, performs analysis for marketing and market research companies.

The workload is increasing rapidly, and Alex has realised that he now needs to employ three additional people.

This will mean that new office premises have to be found and new furniture and equipment purchased.

The business operates in a highly competitive sector within the Staffordshire business community.

Identify which TWO of the following factors are disadvantages of his current business structure of being a sole trader in this context:

A A floating charge cannot be uses to secure borrowing
B The Business’s liability is unlimited
C Alex’s liability is unlimited
D Financial statements do not have to be filed at Companies House
E The stringent legal rules that apply to the business’s constitution and the way it operates.

Select ONE answer:

1. AB
2. AC
3. AD
4. AE

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Notcorrect
2. Correct  –>  A floating charge (which gives lenders security for their loan) cannot be created over the business of a sole trader (A), but it can be over the assets of a limited company. This could hinder his ability to raise finance. Currently, Angela has unlimited liability (C) and with the increasing financial commitments of the business it might be better for him personally to seek limited liability, though the business will still have unlimited liability for its own debts (B) – as a sole trader, the business’s liability is not distinct from his own.
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.