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Partnership Accounts

The test covers the basic aspects of partnership as well as accounting aspects for admission, retirement and death of partner

23 Questions Published
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Questions

Question 1 Multiple Choice (Single Answer)

Which of the following statements is definitely not true when there is no partnership deed?

  1. The working partners are not entitled to any salary, commission etc.
  2. The partners will get profit in their capital ratio.
  3. The partners will get interest on advances @ 6% p.a.
  4. No interest will be allowed/charged on capital and drawings of partners.
Question 2 Multiple Choice (Single Answer)

Calculate interest on drawings of partner Madhav, if he draws Rs. 4500 at the begining of each quarter and the rate of interest on drawings is equal to the rate of interest on loan. Rate of interest on loan is the same, which should be allowed in the absence of partnership deed.

  1. Rs. 675
  2. Rs. 1350
  3. Rs. 540
  4. Rs. 168.75
Question 3 Multiple Choice (Single Answer)

If there is insufficient profit, what should be the treatment of interest on capital?

  1. It should be totally disallowed.
  2. It should be totally allowed irrespective of the insufficiency of profits.
  3. It should be allowed to the extent of profits in their profit sharing ratio.
  4. It should be allowed to the extent of profits in their capital ratio.
Question 4 Multiple Choice (Single Answer)

The rent payable to the partner for the use of his building should be

  1. debited to profit and loss appropriation account
  2. credited to profit and loss appropriation account
  3. debited to profit and loss account
  4. credited to profit and loss account
Question 5 Multiple Choice (Single Answer)

In the absence of clear agreement, the excess amount of profit given to the partner for guaranteed profit will be borne by

  1. any one partner
  2. all other partners in equal ratio
  3. all other partners in their profit sharing ratio
  4. no other partner
Question 6 Multiple Choice (Single Answer)

Which of the following items should not appear in partner's capital account?

  1. Salary to partner
  2. Interest on loan
  3. Interest on capital
  4. Interest on drawings
Question 7 Multiple Choice (Single Answer)

What is the nature of goodwill account?

  1. It is a revenue expenditure.
  2. It is a current asset.
  3. It is a liability.
  4. It is a fixed asset.
Question 8 Multiple Choice (Single Answer)

Shivam and Rytham are partners with their capital amounts Rs. 2,00,000 and Rs. 3,00,000 respectively. As per partnership deed, they are allowed interest on capital @ 6% p.a. The firm earned a profit of Rs. 18,000 at the end of year. What should be the interest on capital amounts of Shivam and Rytham?

  1. Rs. 9,000 each
  2. Rs. 12,000 and Rs. 18,000 respectively
  3. Rs. 7,200 and Rs. 10,800 respectively
  4. No interest on capital should be given as the profits are insufficient.
Question 9 Multiple Choice (Single Answer)

Somya, Rytham and Divesh are partners sharing profits in the ratio 3 : 2 : 1. Divesh is given the guarantee of his share of profit to be not less than Rs. 60,000 per year. The profit for the year is Rs. 3,00,000. How will the profit be divided among them?

  1. Rs. 1, 00,000 each
  2. Rs. 1, 50,000, Rs. 1, 00,000 and Rs. 50,000 respectively
  3. Rs. 1, 50,000, Rs. 1, 00,000 and Rs. 60,000 respectively
  4. Rs. 1, 44,000, Rs. 96,000 and Rs. 60,000 respectively
Question 10 Multiple Choice (Single Answer)

Which of the following can be used to calculate net capital employed for calculation of goodwill?

  1. Fixed assets plus current assets only
  2. Fixed assets plus current assets minus current liabilities only
  3. Partner's capital plus free reserves only
  4. Both (2) and (3)
Question 11 Multiple Choice (Single Answer)

Which of the following is not a method of calculating goodwill?

  1. Net assets method
  2. Annuity method
  3. Capitalisation method
  4. Super profit method
Question 12 Multiple Choice (Single Answer)

Manu and Hanu are partners. Manu contributed Rs. 1,00,000 on April 1 while Hanu contributed Rs. 50,000 on August 1 and Rs. 1, 00,000 on December 1. The profits on March 31 are to be divided in their capital contribution ratio. Calculate profit sharing ratio.

  1. 3 : 2
  2. 2 : 3
  3. 1 : 1
  4. 2 : 1
Question 13 Multiple Choice (Single Answer)

Which of the following items should be subtracted from the net profit to arrive at the figure of normal profits for the calculation of goodwill?

  1. Loss on sale of assets
  2. Winning from lottery
  3. Sale of goods not recorded earlier
  4. Voluntary compensation paid
Question 14 Multiple Choice (Single Answer)

What should be the treatment of debit balance of profit and loss account appearing in the balance sheet at the time of admission of new partner?

  1. Debited to revaluation account
  2. Credited to revaluation account
  3. Credited to capital account
  4. Debited to capital account
Question 15 Multiple Choice (Single Answer)

The annual accounts have shown the following:
Profit for 2010 = Rs. 50,000 (after charging loss on sale of machinery of Rs. 90,000)
Loss for 2011 = Rs. 30,000 (after charging loss by fire of Rs. 1, 10,000)
Profit for 2012 = Rs. 50,000 (after crediting profit on sale of investment of Rs. 30,000)
Calculate the goodwill, which is valued at 4 years purchase of average 3 years' profits:

  1. Rs. 4, 00, 000
  2. Nil
  3. Rs. 3, 20,000
  4. Rs. 1,80,000
Question 16 Multiple Choice (Single Answer)

If the premium paid on joint life policy is considered as expense, it should be

  1. debited to profit and loss appropriation account
  2. credited to profit and loss appropriation account
  3. debited to profit and loss account
  4. credited to profit and loss account
Question 17 Multiple Choice (Single Answer)

If a partner dies, the amount on realisation of joint life policy will be

  1. credited to all partners in their profit sharing ratio
  2. credited to deceased partner only
  3. debited to all partners in their profit sharing ratio
  4. debited to deceased partner only
Question 18 Multiple Choice (Single Answer)

The book value of investment is Rs. 1, 20,000 and investment fluctuation fund is appearing at Rs. 15,000. The realisable value of investment is Rs. 1, 00,000. How to show this adjustment in revaluation account?

  1. Rs. 20000 will be debited ro revaluation account.
  2. Rs. 5,000 will be debited ro revaluation account.
  3. Rs. 20,000 will be credited to revaluation account.
  4. Rs. 5,000 will be credited to revaluation account.
Question 19 Multiple Choice (Single Answer)

The debtors and provision for doubtful debts are appearing in the balance sheet at Rs. 2, 00,000 and Rs. 18,000 respectively. The firm decided to maintain provision in the books at 5% of debtors. How can it be shown in revaluation account?

  1. Rs. 8,000 will be credited to revaluation account.
  2. Rs. 8,000 will be debited to revaluation account.
  3. Rs. 10,000 will be debited to revaluation account.
  4. Rs. 10,000 will be credited.
Question 20 Multiple Choice (Single Answer)

Stock is appearing in the books at Rs. 36,000 and it is undervalued by 20%. How to treat it in the revaluation account?

  1. Credit revaluation account by Rs. 9,000
  2. Debit revaluation account by Rs. 9,000
  3. Rs. 6,000 to be debited to revaluation account
  4. Credit revaluation by Rs. 6,000
Question 21 Multiple Choice (Single Answer)

A, B and C were partners sharing profits in the ratio 5 : 4 : 1. 'A' retired and new ratio was decided as 3 : 7. Goodwill of the firm was valued at Rs. 1, 20,000. What should be the journal entry?

  1. C's capital a/c ___ Dr. 72,000
    To A's capital a/c 60,000
    To B's capital a/c 12,000
  2. C's capital a/c ___ Dr. 12,000
    B's capital a/c ___ Dr. 48,000
    To A's capital a/c 60,000
  3. A's capital a/c __ Dr. 60,000
    B's capital a/c __ Dr. 12,000
    To C's capital a/c 72,000
  4. C's capital a/c ___ Dr. 36,000
    To A's capital a/c 30,000
    To B's capital a/c 6,000
Question 22 Multiple Choice (Single Answer)

A, B and C were partners sharing profits in the ratio 3 : 2 : 1. According to partnership deed, the share of profit on the death of partner is to be calcualated on the basis of sales and profit of previous year. A died after 3 months in the current year and sales till date was Rs. 2, 00,000. The sales and profit of previous year were Rs. 10, 00,000 and Rs. 3, 00,000 respectively. Calculate A's share in profit.

  1. Rs. 20,000
  2. Rs. 10,000
  3. Rs. 30,000
  4. Rs. 7,500
Question 23 Multiple Choice (Single Answer)

If the joint life policy is not appearing in the books and the firm decides not to show it in the books, what should be the treatment when A is retiring from the firm where A, B and C were partners sharing profits in the ratio 2 : 1 : 3. The policy is of Rs. 3, 00,000 and surrender value is Rs. 30,000?

  1. B and C will be debited with Rs. 1, 00,000 and Rs. 50,000, and A will be credited with Rs. 1, 50,000.
  2. B and C will be credited with Rs. 10,000 and Rs. 5,000, and A will be debited with Rs. 15,000.
  3. B and C will be debited with Rs. 1, 00,000 and Rs.1, 50,000, and A will be credited with Rs. 50,000.
  4. B and C will be debited with Rs. 10,000 and Rs. 5,000, and A will be credited with Rs. 15,000.
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