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CS Professional · CSR and Social Governance · Contribution of Non-Corporate Entities in Social Governance

In a partnership firm, Kiran, a partner, spends firm money on a personal trip and records it as 'community outreach'. Another partner, Anita, discovers this from the ledger. Which governance principle has Kiran primarily breached?

Kiran has breached the duty of good faith and accountability for firm property. Partners must use firm funds only for the firm's business and record them truthfully. Misusing money and mislabelling it as outreach is both a fiduciary lapse and a transparency failure within the partnership.

  1. ALimited liability of partners
  2. BDuty of utmost good faith and accountability to the other partners for firm propertyCorrect
  3. CRight to a share in profits
  4. DRight to take part in the conduct of the business

Explanation

Partners owe each other a duty of good faith and must account for firm money and not use it for personal ends. Misrecording the expense is also a transparency failure. Profit sharing and participation in management are rights, not duties breached here, and limited liability does not apply to ordinary partners.

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