Commerce Accountancy · Quantitative Aptitude

Partnership Accounting

181 Questions

Partnership accounting involves calculating profit and loss sharing ratios among business partners. It covers topics like interest on capital, joint life policies, and capital balances. These questions are a staple in commerce exams and test core accountancy principles.

Profit sharing ratiosInterest on capitalJoint venture accountingCapital balance calculationsPartner retirement policies

Partnership Accounting Questions

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

 Amount realization from the sale of private estate of partners is used first to pay off ___________________.

  1. Debts of the firm

  2. Private debts of the partner

  3. Wife's loan

  4. Bank loan of the firm
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

  • Assets of the firm and the capital contributed by the partners to set-off losses of the firm will be applied in the following order–
  1. Third party debts will be paid first
  2. Next, loan amount taken by firm from any partner will be repaid to that partner
  3. Capital contributed by each partner will be repaid to him in the capital contribution ratio
  4. Balance amount will be shared among the partners in their profit sharing ratios.

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

X and Y are two partners sharing profit and loss in the ratio 2:1. They decided to share profit and loss in future in the ratio of 3:2 If the goodwill of the firm is valued Rs. 60,000, how the adjustment in profit sharing ratio will be affected?

  1. Y pay X Rs. 4,000

  2. X pay Y Rs. 4,000

  3. X pay Y Rs. 6,000

  4. Y pay X Rs. 6,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Earlier goodwill was distributed in ratio 2:1 between X and Y

i.e. 60000  as  40000 - X & 20000 - Y.
Now , X = 60000 * 3/5 = 36000 ; Y = 60000 * 2/5 = 24000.
hence, X will pay 4000 to Y.

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

Rent paid to a partner is charged to ______.

  1. profit and loss adjustment A/c

  2. revaluation A/c

  3. profit and loss appropriation A/c

  4. profit and loss A/c
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

 Rent paid by a firm is such an expenditure which is incurred irrespective of any partner. It is not directly related to the partner. As rent is an expenditure the same is debited to profit and loss account. 

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

Interest on advance money provided by the Partner can be paid from ____________.

  1. profits

  2. out of capital

  3. both (a) and (b)

  4. from the money provided by Central Government
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Interest on a partner's loan is a charge against profits, meaning it must be paid even if the firm incurs a loss, and can be paid out of capital if necessary.

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

At the time of dissolution which payment will be made in priority ?

  1. Capital to partners

  2. Loan provided by partner

  3. Fluctuating capital account

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Payment of partner's loan is made before payment of capital because capitals are paid off only if any balance is left after payment of all the liabilities. loan provided by partner is a liability for the firm. A separate Partner's loan account is prepared for payment. Following entry is passed on payment :
Partner's loan A/c Dr.
   To Bank/Cash A/c 

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

One of the partner contributed Rs.30,000 in the firm-How much interest he will get on the capital contributed ________.

  1. Nill

  2. 6% of 30,000

  3. 5% of 30,000

  4. Income of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Partners usually introduce some amount time to time as the capital in firm and the only reaosn behind it is to expand the business.

Since the partner has introduced Rs30,000 as additonal capital and firms does not pays interest on such amounts. The only situation when interest has to be paid is the time when a loan has been taken by the firm from any of its partner.
 

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

A and B are partners A's capital is Rs. 10,000 and B's capital is Rs. 6,000. Interest on capital is payable @ 6% p.a. B is entitled to a salary of Rs. 300 per month. Profit to the year before interest and salary to B is Rs. 8,000. Profits between A and B will be divided:

  1. Rs. 1,720 to A and Rs.1,720 to B

  2. Rs. 2000 to A and Rs.1440 to B

  3. Rs. 1440 to A and Rs.2000 to B

  4. None
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
Profit after interest and remuneration :-
= Profit before interest and remuneration - Interest - remuneration
= Rs-8,000 - (600 + 360) - (3,600)
= Rs-3,440.

Distributing profit is equal ratio among partners = Rs-3,440 / 2
                                                                                = Rs-1,720 to each partner. 
Working notes:-
Interest on capital = Capital x rate of interest 
A:-
= 10,000 x 6/100
= Rs-600
B:-
= 6,000 x 6/100
= Rs-360. 
B's remuneration = Rs-300 x 12
                             = Rs-3,600

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

X and Y are partners with the capital of Rs. 50,000 and Rs. 30,000 respectively. Interest payable on capital is 10% p.a. Find the interest on capital for both the partners when the profits earned by the firm is Rs. 4,800?

  1. Rs. 5,000 and Rs. 3,000.

  2. Rs. 3,000 and Rs. 1,800.

  3. No interest will be paid to the partners.

  4. None of the above.

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Interest on capital = capital x rate
X :-
= 50,000 x 10/100
= RS-5,000. 
Y:-
= 30,000 x 10/100
= RS-3,000.

Apportioned in the ratio of interest to be allowed to the extent of profits available:-
X:-
= 5,000
-------------- x 4,800
 8,000
= RS-3,000.
Y:-
= 3,000 
------------- x 4,800
  8,000
= RS-1,800.
Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

M and N are partners in a firm. M has given a loan of Rs. 8,000 to the firm on 1st July, 2017. The partnership deed is silent upon the question of provision of interest on partner's loan. Compute the amount of interest payable on the loan advanced by M to the firm, assuming the books are closed on 31st March each year.

  1. Rs. 460

  2. Rs. 360

  3. Rs. 560

  4. Rs. 480
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Amount of loan given by M to the firm (on 1st July, 2017) = Rs. 8,000
Period (from 1st July, 2017 to 31st March, 2018) = 9 months
Interest rate = 6% p.a.
Interest on M's loan = 8,000 x 6/100 x 9/12 = 360

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

A and B are partners having capital of Rs. 5,000 and Rs. 6,000 respectively. Interest on capital is given @ 5% p. a. Profits for the year before the appropriation is Rs. 4.600 provide interest on capital out of profits. Interest allocated to partners is:

  1. Rs. 3,000 and Rs. 2,500

  2. Rs. 2,090 and Rs. 2,509

  3. Rs. 2,500 and Rs. 2,091

  4. Rs. 600 and Rs. 300
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Interest on capital = capital x rate
A :-
= 50,000 x 5/100
= RS-2,500.
B:-
= 60,000 x 5/100
= RS-3,000.

Apportioned in the ratio of interest to be allowed to the extent of profits available:-
A:-
= 2,500
-------------- x 4,600
   5,500
= RS-2,090.
B:-
= 3,000 
------------- x 4,600
  5,500
= RS-2,509.
Multiple choice

What is the tax treatment of a partnership's gain or loss on the sale of property?

  1. The partnership's gain or loss on the sale of property is taxed as ordinary income or loss.

  2. The partnership's gain or loss on the sale of property is taxed as capital gain or loss.

  3. The partnership's gain or loss on the sale of property is taxed as a combination of ordinary income or loss and capital gain or loss.

  4. The partnership's gain or loss on the sale of property is not taxable.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The tax treatment of a partnership's gain or loss on the sale of property depends on the character of the assets sold. If the assets sold are inventory or other ordinary income assets, the gain or loss is taxed as ordinary income or loss. If the assets sold are capital assets, the gain or loss is taxed as capital gain or loss.

Multiple choice

What are some of the challenges associated with joint ventures in real estate?

  1. Potential disagreements among joint venture partners

  2. Difficulty in reaching consensus on investment decisions

  3. Limited liability protection for joint venture partners

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Joint ventures in real estate may involve potential disagreements among partners, difficulty in reaching consensus, and limited liability protection, presenting challenges for the success of the venture.

Multiple choice

What are the disadvantages of forming an LLP?

  1. Higher compliance requirements

  2. More complex tax structure

  3. Less flexibility in decision-making

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The disadvantages of forming an LLP include higher compliance requirements, a more complex tax structure, and less flexibility in decision-making.

Multiple choice

Which tax form is used to report partnership income and expenses?

  1. Form 1065

  2. Form 1065-EZ

  3. Form 1065-K

  4. Form 1065-T
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Form 1065 is used by partnerships to report their annual income and expenses, and to calculate their tax liability.

Multiple choice

In the context of Indian mathematical applications in commerce, what is the significance of the concept of 'panchayati'?

  1. It is used for calculating taxes and duties.

  2. It is applied in determining the share of profits among partners.

  3. It helps in resolving disputes related to property and inheritance.

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The concept of 'panchayati' encompasses a wide range of commercial applications, including calculating taxes and duties, determining the share of profits among partners, and resolving disputes related to property and inheritance.