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Partnership Accounts

Complete study material for Partnership Accounts including interest on capital and drawings, profit and loss appropriation, goodwill valuation, revaluation accounts, admission and retirement of partners, change in profit sharing ratio, and capital adjustments.

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Questions

Question 1 Multiple Choice (Single Answer)

In absence of partnership deed, the partners are entitled to_____% interest for the advances made by them to the firm.

  1. 12
  2. 6
  3. 0
  4. 9
Question 2 Multiple Choice (Single Answer)

If capital accounts are fixed, which of the following entries can be recorded in these accounts?

  1. Interest on capital
  2. Interest on drawings
  3. Drawings on permanent basis
  4. All of these
Question 3 Multiple Choice (Single Answer)

When drawings are made by a partner on the last day of every month, interest should be charged from him for ____ months.

  1. 5.5
  2. 6
  3. 6.5
  4. 12
Question 4 Multiple Choice (Single Answer)

A, B and C decide to change their profit sharing ratio from 5 : 3 : 2 to 2 : 3 : 5. Goodwill of the firm is valued at Rs. 30000. What will be the entry?

  1. Debit C's capital and credit A's capital by Rs. 9000.
  2. Debit A's capital and credit C's capital by Rs. 9000.
  3. Debit B's capital and credit A's capital by Rs. 9000.
  4. Debit C's capital and credit B's capital by Rs. 9000.
Question 5 Multiple Choice (Single Answer)

If the revaluation reveals the overvaluation of a liability existing in the books, the entry will be to

  1. credit the liability and debit the revaluation account
  2. debit the liability and credit the revaluation account
  3. credit the liability and debit the partner capital account
  4. credit the liability and debit the profit and loss account
Question 6 Multiple Choice (Single Answer)

The debit balance of profit and loss account should be

  1. debited to old and new partners in the profit sharing ratio
  2. debited to new partner only
  3. credited to old partners in old profit sharing ratio
  4. debited to old partners in the old profit sharing ratio
Question 7 Multiple Choice (Single Answer)

Accumulated profits should be

  1. debited to old and new partners in the profit sharing ratio
  2. debited to new partner only
  3. debited to old partners in old profit sharing ratio
  4. credited to old partners in the old profit sharing ratio
Question 8 Multiple Choice (Single Answer)

A and B, who are carrying a business and sharing 3 : 2 ratio, decided to admit C as partner for 1/10th share. C brings Rs. 10,000 as his share of premium and the new ratio becomes 5 : 4 : 1. The entry for dividing premium will be to

  1. debit premium account and credit A's capital by Rs. 10,000
  2. debit premium account and credit B's capital by Rs. 10,000
  3. debit C and credit B's capital by Rs. 10,000
  4. debit C and credit A's capital by Rs. 10,000
Question 9 Multiple Choice (Single Answer)

X, Y and Z are partners sharing in the ratio 4 : 3 : 3. X retires and the new profit ratio is 3 : 7. Goodwill of the firm is valued at Rs. 20,000. What will be the journal entry?

  1. Debit Z and credit X's capital by Rs. 20,000.
  2. Debit Z and credit X's capital by Rs. 8,000.
  3. Debit Z and credit Y's capital by Rs. 20,000.
  4. Debit Z and credit Y's capital by Rs. 8,000.
Question 10 Multiple Choice (Single Answer)

A and B admitted C as a partner by giving him assurance for his profits not to be less than Rs. 1,00,000 in any year. The profit ratio was decided as 5 : 3 : 2. The profits for the year amounted to Rs. 4,00,000. What will be the share of B?

  1. Rs. 1,12,500
  2. Rs. 1,87,500
  3. Rs. 2,00,000
  4. Rs. 1,10,000
Question 11 Multiple Choice (Single Answer)

A and B are partners sharing in 3 : 2 having capital of Rs. 50,000 each. C is a new partner who is required to bring his share of capital of Rs. 1,00,000. If the capital of old partners is to be adjusted according to the contribution of C, what amount should be brought by A?

  1. Rs. 30,000
  2. Rs. 50,000
  3. Rs. 3,00,000
  4. Rs. 70,000
Question 12 Multiple Choice (Single Answer)

The net profits of a business are Rs. 1,50,000, Rs. 1,75,000 and Rs. 2,75,000 in the last 3 years. These include an investment income @ 20% p.a. of Rs. 20,000 every year, but exclude the annual insurance premium payable Rs. 10,000. Goodwill is to be valued at 1½ year purchase of average profits of 3 years. Calculate the value of goodwill.

  1. Rs. 2,85,000
  2. Rs. 3,15,000
  3. Rs. 2,55,000
  4. Rs. 3,45,000
Question 13 Multiple Choice (Single Answer)

The account which records the entries relating to partner's salary, commission etc. is

  1. trading account
  2. profit and loss account
  3. manufacturing account
  4. profit and loss appropriation account
Question 14 Multiple Choice (Single Answer)

If the revaluation reveals the overvaluation of a liability existing in the books, the entry will be to

  1. credit the liability and debit the revaluation account
  2. debit the liability and credit the revaluation account
  3. credit the liability and debit the partner capital account
  4. credit the liability and debit the profit and loss account
Question 15 Multiple Choice (Single Answer)

A and B, who are carrying a business and sharing 3 : 2 ratio, decided to admit C as partner for 1/10th share. C brings Rs. 10,000 as his share of premium and the new ratio becomes 5 : 4 : 1. The entry for dividing premium will be to

  1. debit premium account and credit A's capital by Rs. 10,000
  2. debit premium account and credit B's capital by Rs. 10,000
  3. debit C and credit B's capital by Rs. 10,000
  4. debit C and credit A's capital by Rs. 10,000
Question 16 Multiple Choice (Single Answer)

If the partnership deed is silent about particular point, provisions of the ___________ will apply.

  1. Companies Act
  2. Partnership Act
  3. Sales of Goods Act
  4. Consumer Protection Act
Question 17 Multiple Choice (Single Answer)

If the profits are insufficient to pay interest on capital as per deed,

  1. interest should be given @ 12% p.a.
  2. partners should divide profits equally.
  3. profits should be divided in profit sharing ratio.
  4. profits should be divided in capital ratio.
Question 18 Multiple Choice (Single Answer)

It is given that total assets including investment of Rs. 1,00,000 are Rs. 500000 and current liabilities are Rs. 100000. If 25% p.a. on net capital employed is considered as fair return, find goodwill by 2 years purchase of super profit method.

  1. Rs. 90,000
  2. Rs. 1,90,000
  3. Rs. 40,000
  4. Rs. 1,80,000
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