MGT211 Assignment#1 Idea Solution Spring Fall 2011

Question no 1 (04 Marks)
Keeping in view three forms of business, you are required to identify what was
the form of business when it was initially run by Mr. Bilal? Support your answer
With logical reasons.
Answer:
This Business was Sole proprietorship when it was initially run by Mr. Bilal.
Reasons:
1. As we know that Sole proprietorship is a business that is owned and run by a single person and that business was run by the single person Mr.Bilal so it was Sole proprietorship.
2. Being the only single owner of the business Mr.Bilal was able to take any kind of decision regarding his business.
4. He was All in all doing his Business.
All these things shows that The business of Mr.Bilal was Sole proprietorship.

Question no 2 (10 Marks)
What was the form of business when Mr. Yasir joined the business with Mr. Ali?
Which benefits can be obtained from this type of ownership?
Answer:
When Mr.Yasir joined business with Mr.Ali, it became partnership.
Partnership means a business shared and owned by two or more persons being staying in law and rules.
Benefits of This Types of Ownership are as follows:
1. Partnerships bring the benefit of "economy of scale" with the sharing
of both responsibility and funding requirements. In this type of business business can get more and more funds and more money which can make the business run successfully.
2. In partnership profits and loss are equally shared in an agreed ratio. If this business goes in loss then the loss will also be equally shared among the partners.
3. This type of business has a flexibility component. Because the owners of a partnership are usually its managers, especially in the case of a small business, the company is fairly easy to manage, and decisions can be made quickly without a lot of bureaucracy. This is not the case with corporations, which must have shareholders, directors, and officers, all of whom have some degree of responsibility for making major decisions.
4. Partnership provides more support and will allow for more creative brainstorming.
5. With partners to share the responsibilities and lighten the workload, members of a partnership often find that they have more time for the other activities in their lives.

6. Partnership can enhance the communication skills of persons that are indulged in this business. As they all need to communicate with one another so their communication skills will improve day by day.
7. Other Benefits
• Transfer of Rights
• Management
• Easy Formation
• Easy dissolution


Question no 3 (06 Marks)
Suppose the business has total assets worth Rs. 450,000/- and total liabilities of
Rs.800,000/-. Mr. Ali has the personal property of Rs. 200,000/- and Mr. Yasir hasthe personal property of Rs. 125,000/-. In case the business is liquidated and
declared as bankrupt, up to what extent Mr. Ali & Mr. Yasir will pay from their personal property to satisfy the creditors’ claim? You are also required to discuss
the possible treatments if any of them is unable to pay from personal property.
Answer:
In general partnership, each partner is personally liable for 100% of
the partnership debts, means if there are not enough business assets to pay
those debts then your personal assets are used to pay all of the business debts
not just your pro rate share. So here Mr. Ali and Mr. Yasir Personal Assets Can are use fully to business pay
debts if business assets are not enough.
If One partner is unable to pay their share, then other partner is then
responsible for paying all of it.