1
CPA REVIEW
BUSINESS LAW
1. When cash or property worth P3,000 or more is
contributed as capital, the Articles of Co-partnership
shall be in a public instrument and registered with
the Securities and Exchange Commission. If the said
requirements are not complied with: (Phil CPA, 89-
2)
a. It will be render the partnership void.
b. It will not affect the liability of the partnership
and the partners thereof to third parties.
c. It will not give a legal personality to the
partnership.
d. It will give the partnership a de facto existence.
2. Which of the following would not be considered an
advantage of forming a pship?
a. Skills and resources can be combined
b. A pship is easily formed
c. A p’hip has unlimited liability
d. A p’ship is relatively free from government
regulations and restrictions.
3. Which of the following statements is not correct?
(Phil CPA, 93-2)
a. A partnership contract is not covered by the
Statute of Fraud.
b. A limited partnership is one having at least one
general partner and one limited partner and the
limited partner shall not be liable for the
obligations of the partnership.
c. A limited partner who takes active part in the
management of the firm becomes liable as a
general partner.
d. The contract of partnership is void if it contains
a stipulation which excludes a partner from
sharing in the profits of the firm.
4. Joseph and Edward entered into a universal
partnership of all present property. At the time of
their agreement, Joseph had a four-door apartment
which he inherited from his father 3 years earlier.
Edward, on the other hand, had a fishpond which he
acquired by dacion en pago from Robert. During the
first year of the partnership, rentals collected on the
four-door apartment amounted to P480.000.00;
while fish harvested from the fishpond were sold for
P300.000.00. During the same period, Edward
received by way of donation a vacant lot from an
uncle. The partners had a stipulation that future
property shall belong to the partnership. Which of
the following does not belong to the common fund
of the partnership?
a. Fishpond.
b. Rental of P480,000.00
c. Apartment.
d. Vacant land.
5. Which of the following stipulations is valid?
a. A stipulation excluding a capitalist partner from
profits.
b. A stipulation exempting a capitalist partner
from losses.
c. A stipulation exempting an industrial partner
from losses.
d. A stipulation excluding an industrial partner
from profits.
6. Which of the following statements is false when no
one among the partners was appointed as manager?
a. Each partner will be considered as agent
of the partnership.
b. Any one may make an important alteration in
the immovable property of the partnership
without the consent of the others provided it is
useful to the partnership.
c. In case the act of one partner is opposed by
another, the decision of the majority of the
partners will prevail.
d. In case of a tie in the voting, the tie shall be
resolved b the vote of the partner owning the
controlling interest.
7. Three (3) of the following are rights of a partner.
Which one (1) is not? (Phil CPA, 90-1)
a. Right to associate another person to his share.
b. Right to admit another partner.
c. Right to inspect and copy partnership book.
d. Right to ask dissolution of the firm at the proper
time.
8. Bears the loss of property contributed to the
partnership. (Phil CPA, 89-1)
a. Capitalist partner
b. Limited partner
c. Partners contributing usufructuary rights.
d. None of the above.
9. A, B, and C are general partners in ABC Partnership.
D is a debtor to the partnership in the amount of
P15,000. A received from debtor D the sum of
P5,000 and issued a receipt identifying the amount
as his share. Then D become insolvent, B and C
cannot collect the P10,000. (Phil CPA, 88-1-M; 92-
1; 96-1-M)
a. A cannot be compelled to share the P5,000 with
B and C.
b. B and C can charge the capital of A with their
share of the P5,000.
c. A can be compelled to share B and C with the
P5,000.
d. B and C should automatically sue D to collect
the P10,000.
10. A is the managing partner in A & B Company. X is
indebted to A for P20,000 and to the partnership for
P60,000. When both debts mature, X pays A
P20,000 and the latter issued a receipt for his
personal credit. The payment for P20,000 shall be
applied: (Phil CPA, 95-1)
a. ¼ in favor of A and ¾ in favor of partnership.
b. To the whole debt owing to A.
c. ½ in favor of A and ½ in favor of the
partnership.
d. To the debt owing to the partnership.
11. In the partnership of A, B and C, A was appointed in
the Article of Co-partnership as managing partner.
As such manager and acting in good faith: (Phil CPA,
90-2)
a. His power is revocable even without his consent.
b. His power can be revocable at any time even
without just cause provided that it is approved
by the partners owning the controlling interest.
c. He may execute all acts of administration
despite the opposition of B and C.
d. He can be removed for valid cause without the
vote of the partners owning the controlling
interest.
12. Three of the following will cause the automatic
dissolution of a general partnership. Which one will
not?
a. When any event makes it unlawful for the
business of the partnership to be carried on or
for the members to carry it on in partnership.
b. Expulsion of any partner from the business bona
fide in accordance with such a power
conferred by the agreement between the
partners.

c. A partner becomes in any way incapable of
performing his part of the partnership contract.
d. The insolvency of a partner or of the
partnership.
13. X, Y and Z were partners. X is an industrial partner.
During the first year of operation, the firm realized
a profit of P60.000. During the second year, the firm
sustained a loss of P30.000. So, the net profit for
the two years of operation was only P30.000. In the
Article of Partnership, it was agreed that X, the
industrial partner would get 1/3 of the profit but
would not share in the losses, How much will X, the
industrial partner get?
a. X will get only P20,000 which is 1/3 of the
profit of the 1ST year of operation.
b. X will get only P 10,000 which is 1/3 of the net
profit.
c. X will get only P20,000 in the first year and
none in the second year.
d. X will share in the loss in the second year.
14. All partners are liable solidarily with the partnership
for the purpose of making good the loss:
a. Where one partner acting within the scope of
his apparent authority receives money or
property of a third person and misapplies it.
b. Where the partnership in the course of its
business receives money or property of a third
person and the same is misappropriated by any
partner while it is in the custody of the
partnership.
c. Where by any wrongful act or omission of any
partner acting in the ordinary course of the
business of the partnership or with the consent
of his copartners loss or injury is caused to any
person who is not a partner in the partnership.
d. All of the above
15. Which of the following act requires the consent of all
partners?
A. Dispose the goodwill of the business
B. Confess a judgment
C. Renounce a claim of the partnership
D. Submit a partnership claim to arbitration
E. Enter into a compromise agreement concerning
a partnership claim
a. Only A, B, C and D c. Only A, B and C
b. Only A, B, C and E d. All of them
16. A, B and C were partners. While acting within the
scope of the firm’s business, A committed torts
against X, a third person. Is the firm liable?
a. No because only A was only at fault
b. Yes. Moreover A, B and C as well as the firm
itself, are liable in solidum
c. Yes. Moreover A, B and C as well as the firm
itself, are liable pro rata.
d. No. X remedy is to go after only the property of
A who committed the torts.
17. C, a partner in "C" partnership, assigns his interest
in "Y" partnership to X, who is not made a partner.
After assignment X asserts the right to
1. Participate in the management of "Y"
partnership.
2. C's share in the surplus profit
3. May compel the other partners that he (x)
becomes a partner.
X is correct as to which of these rights?
a. 1 and 3 c. 2 only
b. 3 only d. 2 and 3
18. A, B, C and D are partners. Their contributions are
as follows: A, P50.000; B, P30.000; C, P20.000; D,
services. The partnership incurred obligations to
third persons which the firm was unable to pay.
After exhausting the assets of the partnership, there
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still is unpaid balance of P10,000. Who are liable for
the payment of the unpaid balance of P10,000? How
much each?
a. A, P5,000; B, P3.000; C, P2.000; D, nothing
b. A, P2.500; B, P2.500; C, P2.500; D, P2.500
c. A, P4,000; B, P3,000; C, P2.000; D, P 1,000
d. A, P4.000; B, P4.000; C, P2,000; D, nothing
19. A partnership is automatically dissolved, except:
a. By the death of any partner
b. By the insolvency of any partner or of the
partnership
c. By the civil interdiction of any partner
d. By the insanity of any partner
20. Which of the following is a false statement?
a. If a limited partnership will be created,
registration is a condition precedent for the
creation of the limited partnership
b. If one of the partners in a general partnership
contributed a building to the partnership, there
must be a public instrument and an inventory
as a requirement, otherwise the partnership is
void
c. If a limited partnership will be created,
registration is a condition subsequent for the
creation of the limited partnership.
d. If a limited partnership is not registered, a
general partnership is created.
21. Without the written consent or ratification of the
specific act by all the limited partners, a general
partner or all of the general partners have no
authority to:
a. Do any act in contravention of the certificate.
b. Do any act that would make it impossible to
carry on the ordinary business of the
partnership.
c. Confess a judgment against the partnership.
d. All of the above.
22. A partner whose liability for partnership debts is
limited to his capital contribution is called:
a. General partner
b. Limited partner
c. General-limited partner
d. Secret partner
23. As regards a limited partner, which statement is
correct?
a. He cannot be allowed to transact business
directly with the partnership of which he is a
member as this would result into conflict of
interest;
b. He is automatically the agent of the partnership
with general authority to bind the partnership to
contracts with third persons;
c. He can only contribute money and property but
not services;
d. He has no liability to partnership creditors even
if he takes part in the management of the
partnership.
24. A substituted limited partner is:
a. a person admitted as a partner by the other
partners.
b. a buyer of right of the deceased partner.
c. An assignee admitted to all the rights of a
limited partner.
d. All of the above.
25. In a limited partnership where there are 4 partners:
a. All the partners must be limited partners.
b. The number of limited partners must be equal
to the number of general partner, that is, 2:2.
c. The number of limited partners must be greater
than the number of general partners, that is,
3:1.

d. It is enough that there is one limited partner;
the rest may all be general partners.
26. The certificate shall be cancelled when:
a. There is change in the name of the partnership
b. Additional limited partner is admitted
c. All limited partner cease to be such.
d. There is a false or erroneous statement in the
certificate.
27. A partner can engage in business for himself without
the consent of his co-partners if he is:
a. a capitalist partner whether or not the business
he will engage in is of the same kind as or
different from the partnership business.
b. an industrial partner whether or not the
business he will engage in is of the same kind
as or different from the partnership business.
c. a capitalist partner and the business he will
engage in is of a kind different from the
partnership business.
d. an industrial partner and the business he will
engage in is of a kind different from the
partnership-business.
28. Which of the following right cannot be exercise by
an assignee of interest:
A. To get whatever profits the assignor partner
would have obtained
B. To avail himself of the usual remedies in case of
fraud in the management.
C. To demand information, accounting and
inspection of the partnership books
D. The right to participate in the management
a. All of the above c. B, C and D
b. Only C d. C and D
29. A and B are equal partners in AB and Company. Y
presented himself as a partner in AB and Company
to Z who relying on such representation, extended
a P50,000 credit to AB and Company. Of the two (2)
partners only B knew and consented to the
representation of Y. Who should held liable to Z?
(Phil CPA, 88-2)
a. Only Y, who presented himself as partner is
liable.
b. Since the credit was extended to AB and
Company, a partnership liability was created, so
the two (2) partners and Y are liable.
c. Partners A and B who benefited from the credit
extended to the partnership AB and Company
shall be liable to Z.
d. B and Y are partner by estoppel and, thus, are
liable to Z.
30. A as partner contributed P30,000; B as partner,
P15,000; and C, as industrial partner, his services
in the partnership. After payment of all liabilities and
expenses, only P18,000 remain as partnership
assets. The dissolution of the P18,000 cash shall be:
(Phil CPA, 86-2-M; 88-1-M; 90-1; 90-2; 93-2-M;
96-2-M)
a. A, P12,000; B, P6,000; C, None
b. A, P6,000; B, P6,000; C, P6,000
c. A, P9,000; B, P9,000; C, None
d. A, P8,000; B, P4,000; C, P6,000
31. The rule is that the designation of the share of the
partners in the profits and losses cannot be
entrusted to only one of the partners but to all.
However, the rule allows the designation of the
share of the partners to be entrusted to a third
which can be questioned or impugned by the
partners if such designation is manifestly
inequitable. Within what time should the action or
question be brought?
a. Within one (1) month from the time he had
knowledge.
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b. Within two (2) months from the time he had
knowledge.
c. Within three (3) months from the time he had
knowledge.
d. Within six (6) months from the time he had
knowledge.
e. Within one (1) year from the time he had
knowledge.
32. Which of the following is not correct? In a limited
partnership composed of A, B and C, the
contribution may be as follows: (Phil CPA, 97-2; 98-
1)
a. A - cash (limited partner); B - cash (general
partner); C - services (general partner).
b. A - property (limited partner); B - services
(general partner); C - cash (general partner).
c. A - services (limited partner); B - cash (general
partner):
d. A - cash (limited partner); B - property (general
partner); C - services (general partner).
33. A limited partnership was orally agreed upon by A ,
B and C as general partners and D, E and F as
limited partners. Which of these is a correct
statement?
a. A valid limited partnership is nevertheless
formed.
b. The oral agreement is void under the law and no
partnership whether limited or general will
exist.
c. No valid limited partnership is created and there
will exist a general partnership where only A, B
and C will be regarded as general partners.
d. No valid limited partnership is created but there
will exist a general partnership where all of A,
B, C, D, E and F will be regarded as general
partners.
34. Three (3) of the following are attributes of a
corporation. Which is the exception? (Phil CPA, 89-
1)
a. An artificial being
b. Has the right of succession
c. Has power, attributes and properties expressly
authorized by law or incident to its existence.
d. Created by agreement of the corporation.
35. These do not form part of the outstanding capital
stock: (Phil CPA, 92-2; 96-1)
a. Bonus Shares c. Founder’s Shares
b. Treasury Shares d. Redeemable Shares
36. The articles of incorporation differ from the by-laws
in that the articles of incorporation are:
a. the rules of action adopted by a corporation for
its internal government.
b. adopted before or after incorporation.
c. a condition precedent in the acquisition by a
corporation of a juridical personality.
d. approved by the stockholders if adopted
after incorporation.
37. Choose the minimum requirement of the
Corporation Law to Corporate formation: (Phil CPA,
87-1;-M; 87-2-M; 88-1; 88-2-M; 89-1-M; 89-2-M;
90-1-M; 90-2-M; 92-1-M; 94-1-M)
Authorized Subscribed Paid in
Capital
a. P100,000 P20,000 Capital
P5,000
b. P100,000 P20,000 P4,000
c. P100,000 P25,000 P5,000
d. P100,000 P25,000 P6,250

38. Corporations organized by private persons
performing public function and for profits to private
person are: (Phil CPA, 89-2)
a. Public Corporations
b. Government Controlled Corporations
c. Quasi-Public Corporations
d. Private Corporation
39. 1st Statement: A majority of the directors or
trustees of all corporations organized in the Phil.
must be citizens of the Phil.
2nd Statement: Any two (2) or more positions may
be held concurrently by the same person, except
that no one shall act as president and secretary or
as secretary and treasurer at the same time. (Phil
CPA, 97-2)
a. Both statements are not true
b. Only 1st statement is true
c. Only 2nd statement is true
d. Both statements are true
40. In the amendment of the Articles of Incorporation of
a stock corporation, the following is necessary: (Phil
CPA, 86-2)
a. Amendment by the majority vote of the Board
of Directors plus a vote or written assent of the
stockholders representing at least 2/3 of the
outstanding capital stock.
b. Amendment by a vote of 2/3 of the
stockholders.
c. Amendment by a majority vote of the Board of
Directors.
d. None of the three.
41. Which of the following will not qualify as
incorporator of a corporation? (Phil CPA, 86-2-M;
90-2-M; 91-2; 92-2-M)
a. A minor who is emancipated by voluntary
concession or marriage.
b. A married woman without the consent of her
husband where the property involved in the act
of incorporation is paraphernal.
c. A corporation.
d. Answer not given
42. An officer of a corporation may hold two or more
positions in the corporation but not as: (Phil CPA,
90-1-M; 92-1; 92-2-M; 94-2-M; 97-2-M; )
a. Chairman of the Board and President.
b. President and Treasurer
c. Secretary and Treasurer
d. Vice President and Secretary
43. A Chinese national is not allowed to become:
a. Treasurer c. Director
b. Secretary d. President
44. Which of the following qualifications is necessary in
order that one may be elected president of the
corporation?
a. He must be a citizen and a resident of the
Philippines.
b. He must not be a stockholder or director of a
competitor corporation.
c. He must not be a president of any other
corporation.
d. He must be a director of the corporation.
45. Corporation is not entitled to this kind of damages?
a. Actual damages c. Moral damages
b. Exemplary damages d. Liquidated damages
46. This corporation has for its basic purpose charity or
charitable works?
a. Religious or ecclesiastical corporations
b. Eleemosynary corporation
c. Public corporations
d. Close corporations
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47. Which of the following instance wherein non-voting
shares is not allowed to vote:
a. Issuance of additional Capital Stock
b. Payment of Bonded indebtedness.
c. Mortgaging substantially all of the corporate
property.
d. Investment of corporate fund in another
corporation not for primary purpose of the
corporation.
48. Corporation X has a statement of capital stock in its
articles of incorporation but it was stated in the
same articles that dividends are not supposed to be
declared, that is, there is no distribution of retained
earnings. Corporation X is:
a. Stock corporation
b. Corporation by estoppel
c. Non stock corporation
d. Corporation by prescription
49. Based on the provisions of the Corporation Code of
the Philippines, the following will qualify to
corporate formation and registration with the
Securities and Exchange Commission.
Authorized Subscribed Paid in
Capital Capital Capital
a. P500,000 P100,000 P25,000
b. P1,000,000 P250,000 P50,000
c. P78,000 P19,500 P4,875
d. P200,000 P100,000 P50,000
50. Which of the following qualifications is necessary in
order that one may be elected secretary of the
corporation?
a. He must be a citizen and a resident of the
Philippines.
b. He must be a director of the corporation.
c. He must be a stockholder of the corporation.
d. He must not be a secretary of any other
corporation.
51. All of the close corporation's issued shares shall be
held of record by not more than
a. 10 persons c. 20 persons
b. 15 persons d. None of the above
52. Foreign corporation
a. Are organized under the laws of countries other
than the Philippines.
b. Are not permitted to transact business in the
Philippines until after they have obtained a
license for the purpose from SEC.
c. If found to be engaged in business without any
license, they are not permitted to sue in any
court or administrative agency of the
Philippines but may be sued.
d. All of the above
53. The by-laws of a corporation may create an
executive committee, composed of not less than 3
members of the board of directors to be appointed
by the board. The executive committee may act, by
majority vote of all its members on such specific
matters within the competence of the board, as may
be delegated to it in the bylaws or on majority vote
of the board, EXCEPT:
a. Approval of any action for which shareholders'
approval is also required.
b. Amendment or repeal of by laws or adoption of
new by laws.
c. Filling of vacancies in the Board,
d. All of the above
54. The following, except one are qualifications of
corporate directors: (Phil CPA, 89-1-M; 94-2; 86-2)

a. Must continuously own at least one share during
their term as directors.
b. Must own at least one share of stock.
c. Ownership of shares must be recorded in the
books of corporation.
d. Majority are citizens of the Philippines.
55. The following are some of the requisites of a de facto
corporation. Choose the exception: (Phil CPA, 86-2;
87-2-M)
a. Valid law under which it is incorporated.
b. Attempt to incorporate
c. Assumption of corporate power
d. None of the above
56. In the amendment of the Articles of Incorporation of
a stock corporation, the following is necessary: (Phil
CPA, 86-2; 96-2-M)
a. Amendment by the majority vote of the Board
of Directors plus a vote or written assent of the
stockholders representing at least 2/3 of the
outstanding capital stock.
b. Amendment by a vote of 2/3 of the
stockholders.
c. Amendment by a majority vote of the Board of
Directors.
d. None of the three.
57. Which of the following meeting may be held outside
the Philippines?
I. Board of Directors meetings
II. Members meetings of a non stock corporation
III. Stockholders meeting of a corporation going
public
a. I only c. I and III
b. I and II d. I, II and III
58. A corporation created in strict or substantial
conformity with the statutory requirements for
incorporation and whose right to exist as a
corporation cannot be successfully attacked even in
a direct proceeding for that purpose by the State is
known as: (Phil CPA, 91-2)
a. De jure corporation
b. De facto corporation
c. Corporation by estoppel
d. Answer not given
59. Which of the following is not a requisite for the
existence of a de facto corporation? (Phil CPA, 87-
2)
a. The existence of a valid statute under which a
corporation, with some of the purposes in
question can be formed.
b. An attempt in good faith to form a corporation
according to the requirements of law.
c. A user of corporate powers. There must be a
transaction of business in some ways as if it
were a corporation.
d. The organization is not registered in the
Securities and Exchange Commission
60. In which of the following corporations will those
composing the corporation be liable as general
partners?
a. Corporation by prescription.
b. De facto corporation.
c. Corporation by estoppel.
d. Dejure corporation.
61. In the following cases, the preemptive right of the
stockholders can be denied - choose the exception.
a. If it is denied in the articles of incorporation.
b. If the increase in authorized capital stock is to
enable the corporation to comply with a law
requiring subscription by the public.
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c. by a vote of 2/3 of the outstanding shares where
the increase in authorized capital stock is to be
exchanged with a property needed for a
corporate purpose.
d. By a vote of a majority of the outstanding
shares where the increase in authorized capital
stock is to be used for the payment of corporate
debts still to be contracted
62. Which of these purposes can be combined in just
one corporation?
a. Bank and trust purposes
b. Educational and insurance purposes
c. Railroad and bank purposes
d. Insurance and railroad purposes
e. All of the above
63. A, B, C, D, E, F, G, H and I are directors of Strong
Cement Corporation whose articles of
incorporation provide for 9 directors. In the
meeting of March 2003, directors A, B, C, D and E
were present to approve a contract for the purchase
of cement bags from E who deals in the said
product. The contract was deliberated upon
exhaustively by the said directors in the meeting
including E. When the voting took place however,
only A, B, C and D who found the contract fair and
reasonable under the circumstances, voted for its
approval. The contract between the corporation and
E is:
a. Valid and enforceable.
b. Voidable at the option of the corporation.
c. Unenforceable against the corporation.
d. Void because a corporation must not enter
into a contract with any of its directors
since a director occupies a position of trust.
64. This is an authority to vote in a corporation
stockholders meeting: (Phil CPA, 88-1; 88-2-M)
a. Proxy c. Certificate of stock
b. By-laws d. Shares of stock
65. The following are methods of dissolving a
corporation: (Phil CPA, 86-2; 91-2-M)
a. Expiration of the term
b. Failure to organize and commence business
within two (2) years from date of issuance of
certificate of incorporation.
c. Shortening of the corporate term
d. All of the above
66. A stock that is issued without consideration or below
par value or the issued price is known as:
a. watered stock. c. redeemable stock.
b. delinquent stock. d. preferred stock.
67. A non-voting stock may vote in the following
corporate acts, except in case of:
a. approval of the compensation of directors.
b. merger or consolidation.
c. increase or decrease in capital stock.
d. sale, lease, exchange, mortgage, pledge
or other disposition of all or substantially all of
corporate property.
68. Which of the following statements is false
concerning treasury shares?
a. They are entitled to dividends.
b. They have no voting right.
c. They may be disposed of for a price lower than
the par value provided such price is reasonable.
d. They are not outstanding shares.
===========end========