Question 2
Victor and Samba have been partners for two years. They have had disagreements throughout the period and Sambo requested for dissolution of the partnership so that he could start a sole proprietorship.
(a) State five problems Sambo could face as a sole trader.
(b) State five benefits Samba could enjoy if he remained in the partnership.
Observation
This is an applied question. Many candidates did not situate their answers in the context of the question. They did not understand that the question require them to state the problem associated to sole proprietorship and advantages of partnership in (a) and (b) respectively.
The expected responses are.
(a) Problems Samba would face as a sole trader
- Inadequate capital for continuous operation and expansion.
- His death or incapacitation might lead to the end of the business.
- The presence of bigger businesses could result in the closure of his business due to competition.
- The risk of unlimited liability would increase.
- The ideas his partner was bringing would no longer be available.
- Sale of goods on credit to customers could lead to closure of the business because of bad debts.
- Inability to separate business funds from personal funds.
(b) Benefits Samba would enjoy if he remained in the business
- There is the advantage of division of labour as both partners would concentrate on the part of the business they know better.
- More funds would be available to the business.
- The partners would bring in their individual expertise into the business.
- Joint decision making makes partnership better.
- Samba will continue to share business risks if he remains in the partnership.
- The goodwill already developed for the business would be enjoyed.