Mutual Agency Implies That Each Partner in a Partnership Is

question 48

Multiple Choice

Mutual agency implies that each partner in a partnership is a fully authorized agent of the partnership. Which of the following statements is correct regarding the authority of a partner to bind the partnership in dealings with third parties?

• A) The partner's authority must be derived from the partnership agreement.
• B) The partner's authority may be effectively limited by a formal resolution of the other partners, even if third parties are not aware of that limitation.
• C) Only a partner with a majority interest in a partnership has the authority to represent the partnership to third parties.
• D) A partner has authority to deal with third parties on the behalf of the other partners only if he has written permission to do so.
• E) A partner may be able to legally bind the partnership to actions even if the other partners are unaware of his actions.

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Definitions:

Bankrupt

A legal status of a person or entity that cannot repay the debts it owes to creditors.

Allowance for Doubtful Accounts

A contra-asset account that represents the amount of accounts receivable that is expected to be uncollectible.

Debit Balance

An excess of debits over credits in a ledger account, typically indicating an increase in assets or expenses.

Posting Error

A mistake made during the process of entering or recording financial transactions in the accounting records.