Commerce Accountancy · Quantitative Aptitude

Partnership Accounting

170 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

X and Y are partners sharing profit and losses in the ratio 4 : 1, Z was manager who received a salary of Rs. 8, 000 p. m in addition to a commission of 5% on net profit after charging such commission. Profit for the year is Rs. 13, 56, 000 before charging salary. Find the total remuneration of Z.

  1. Rs. 1, 56, 000

  2. Rs. 1, 76, 000`

  3. Rs. 1, 74, 000

  4. Rs. 1, 52, 000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Salary = 8000 x 12 = 96,000. Commission: Let commission = C. Profit after salary = 13,56,000 - 96,000 = 12,60,000. Commission = 5% of (12,60,000 - C) = 0.05(12,60,000 - C). So C = 63,000 - 0.05C, 1.05C = 63,000, C = 60,000. Total = 96,000 + 60,000 = 1,56,000.

Multiple choice

A, B and C are partners sharing profit in the ratio of 3 : 2 : 1. D is admitted. The new profit sharing ratio among A, B, C and D will be 3 : 3 : 2 : 2. The gain or sacrifice will be

  1. A sacrificed 6/30th, B sacrificed 1/30th

  2. A sacrificed 1/30, B sacrificed 6/30

  3. C gained 1/30th and D gained 2/10th

  4. both (1) and (3)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Old ratio 3:2:1 = 15:10:5 (A=15/30, B=10/30, C=5/30). New ratio 3:3:2:2 (A=9/30, B=9/30, C=6/30, D=6/30). A sacrificed 15/30-9/30=6/30. B sacrificed 10/30-9/30=1/30. C gained 6/30-5/30=1/30. D gained 6/30-0=6/30=2/10. Option (1) correctly shows A and B's sacrifice. Option (3) correctly shows C and D's gain.

Multiple choice

X, Y and Z are partners sharing profit and losses in the ratio 5 : 3 : 2 decide to share the future profit in the ratio 2 : 3 : 5. What will be treatment for workmen compensation fund appearing in the balance sheet on the date if no information is available for the same?

  1. Distributed to the partners in old profit sharing ratio.

  2. Distributed to the partners in new profit sharing ratio.

  3. Distributed to the partners in capital ratio.

  4. Carried forward to new balance sheet without any adjustment.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When profit sharing ratio changes and no specific information is given about workmen compensation fund, it's distributed to partners in OLD profit sharing ratio. This is the standard accounting treatment - accumulated reserves and funds are distributed in the ratio in which they were built up.

Multiple choice

A and B are partners sharing profit and loss in the ratio 5 : 3. They admitted C and agreed to give him 3/10th of the profit. What is the new ratio after C's admission?

  1. 35 : 42 : 17

  2. 35 : 21 : 24

  3. 49 : 22 : 29

  4. 34 : 20 : 12
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

C's share is 3/10, so the remaining 7/10 is shared by A and B in their old ratio 5:3. A's new share = (5/8) × (7/10) = 35/80. B's new share = (3/8) × (7/10) = 21/80. C's share = 3/10 = 24/80. Converting to ratio: 35:21:24. The key is that old partners share the sacrifice in their original ratio.

Multiple choice

A and B are partners with capitals of Rs. 20, 000 and 40, 000 respectively and sharing profit equally. They admitted C as their third partner with one - fourth profit of the firm on the payment of Rs. 24, 000. The amount of hidden goodwill is

  1. Rs. 12, 000

  2. Rs. 2,000

  3. Rs. 16, 000

  4. none of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Hidden goodwill is the difference between what C pays and his proportionate share of the firm's capital. Total capital before C = 20,000 + 40,000 = 60,000. C is entitled to 1/4 share, so expected capital = 60,000 × 1/3 = 20,000. But C pays 24,000, so hidden goodwill = 24,000 - 20,000 = 4,000. Since C gets 1/4 profit, goodwill is shared by old partners in their sacrificing ratio (equal), so hidden goodwill = 4,000 × 3 = 12,000. Alternatively, based on total capital after admission = 84,000, C's 1/4 share = 21,000, so hidden goodwill = 24,000 - 21,000 = 3,000, which gets adjusted among old partners.

Multiple choice

A and B are partners sharing profit and loss in the ratio of 3 : 2 (A's capital is Rs. 60, 000 and B's capital is Rs. 30, 000). They admit C and agreed to give 1/5th share of profit to him. How much should C bring in towards his capital?

  1. Rs. 18, 000

  2. Rs. 24,000

  3. Rs. 29, 000

  4. Rs. 22, 500
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Total capital of A and B = 60,000 + 30,000 = 90,000. C gets 1/5 share, so the remaining 4/5 belongs to A and B. The total firm capital based on C's proportionate share would be 90,000 ÷ (4/5) = 1,12,500. Therefore, C's capital = 1,12,500 × 1/5 = 22,500. Alternatively, C should bring capital in the same ratio as his profit share relative to the old partners' combined capital.

Multiple choice

A and B enter into a joint venture sharing profit and loss in ratio 3 : 2. A purchased goods costing Rs. 2, 00, 000. B sold 95% goods for Rs. 2, 50, 000. A is entitled to get 1% commission on purchase and B is entitled to get 5% commission on sales. Remaining goods are stolen. A's share of profit is

  1. Rs. 15,300

  2. Rs. 21,300

  3. Rs. 18, 900

  4. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Profit for the Joint Venture = Rs{(2,50,000 + 10,000)-(2,00,000+2000+12500+10,000)}                                                 = Rs 25500 A's Share of profit                 = (3/5)*25,500                                                  = Rs 15,300 

Rs 10,000 being the amount of goods stolen.

Multiple choice

A and B enter into a joint venture sharing profit and loss in ratio 3 : 2. A purchased goods costing Rs. 2, 00, 000. B sold 95% goods for Rs. 2, 50, 000. A is entitled to get 1% commission on purchase and B is entitled to get 5% commission on sales. A drew a bill on B for an amount equivalent to 80% of original cost of goods. A got it discounted at Rs. 1, 50, 000. A's share of profit is

  1. Rs. 15, 300

  2. Rs. 27300

  3. Rs. 21300

  4. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

 Profit of the Joint Venture = Rs (250,000 + 10,000 - 200,000 - 2000 - 12,500)                                            = Rs 45,500 Rs 2,000 being A's commission on purchase and Rs 12,500 being B's commission on sale

A's share of profit = 3/5*45500 = Rs 27,300

Multiple choice

(i) X and Y enter into a joint venture sharing profit & loss in the ratio of 3 : 2. (ii) X is entitled to get 1% commission on purchase and Y is entitled to get 5% commission on sales. (iii) X purchased goods for Rs. 4, 00, 000 and sent the same to Y. Supplier allowed a cash discount of 5%. (iv) X drew a bill on Y for an amount equivalent to 80% of the original cost of goods. X got it discounted at Rs. 3, 00, 000. (v) Y sold 50% goods for Rs. 5, 00, 000 and paid Rs. 4, 000 towards selling & administration expenses and insurance and Rs. 1, 000 still outstanding. Y allowed a cash discount of 5% to a customer to whom goods were sold for Rs. 2, 00, 000. Bad debts amounted to Rs. 16, 000. (vi) 50% of balance goods are taken over by Y at 60% of cost. (vii) Remaining goods were destroyed by fire and insurance claim was received by Y to the extent of 60%.

The profit in the joint venture is

  1. Rs. 1, 80, 000

  2. Rs. 1, 60, 000

  3. Rs. 1, 40, 000

  4. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Profit = (5,00,000+60,000+60,000)-(4,00,000+4,000+25,000+4,000+1,000+10,000+16,000)           = Rs 160,000

Multiple choice

(i) X and Y enter into a joint venture sharing profit & loss in the ratio of 3 : 2. (ii) X is entitled to get 1% commission on purchase and Y is entitled to get 5% commission on sales. (iii) X purchased goods for Rs. 4, 00, 000 and sent the same to Y. Supplier allowed a cash discount of 5%. (iv) X drew a bill on Y for an amount equivalent to 80% of the original cost of goods. X got it discounted at Rs. 3, 00, 000. (v) Y sold 50% goods for Rs. 5, 00, 000 and paid Rs. 4, 000 towards selling & administration expenses and insurance and Rs. 1, 000 still outstanding. Y allowed a cash discount of 5% to a customer to whom goods were sold for Rs. 2, 00, 000. Bad debts amounted to Rs. 16, 000. (vi) 50% of balance goods are taken over by Y at 60% of cost. (vii) Remaining goods were destroyed by fire and insurance claim was received by Y to the extent of 60%.

The final remittance is

  1. Rs. 1, 90, 000 by X to Y

  2. Rs. 1, 90, 000 by Y to X

  3. Rs. 1, 80, 000 by Y to X

  4. Rs. 1, 80, 000 by X to Y
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

This is a complex joint venture problem. X's effective cost: 4,00,000 - 20,000 (5% discount) + 4,000 (1% commission) = 3,84,000. Y receives: 5,00,000 (50% sales) - 25,000 (5% discount) - 4,000 (expenses paid) - 1,000 (expenses outstanding) - 16,000 (bad debts) - 25,000 (5% commission on sales) = 4,29,000. Y takes over 50% balance at 60% cost: 1,92,000 - 72,000 (40% discount) = 1,20,000. Fire loss on remaining 50%: 1,92,000 × 40% uninsured = 76,800. Final settlement: Y owes X the difference after all adjustments, resulting in Rs. 1,80,000 by Y to X.

Multiple choice

A, B and C are partners sharing profits in the ratio 2 : 2 : 1. On retirement of B, goodwill was valued as Rs. 30000. What is the contribution of A and C to compensate B?

  1. Rs. 20000 and Rs. 10000

  2. Rs. 8000 and Rs. 4000

  3. Rs. 800 and Rs. 4000

  4. Rs. 15000 and Rs. 15000

  5. No contribution <o:p> </o:p>
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Amount of B's share of the goodwill of the firm = 30000*2/5 = Rs. 12000

A's contribution = 12000*2/3 = Rs. 8000 B's contribution = Rs. 12000*1/3 = Rs. 4000| | | | | | | | | | | | | | | | | | | | | | |

Multiple choice

A and B purchased a piece of land for Rs. 20, 000 and sold it for Rs. 60, 000 in 2005. Originally, A had contributed Rs. 12, 000 and B Rs. 8000. What will be the profit on venture?

  1. Rs. 40, 000

  2. Rs. 20, 000

  3. Rs. 60, 000

  4. Nil
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

 Purchase Consideration of land for Joint Venture = Rs20,000 Sale Consideration                                                       = Rs 60,000

Profit                                                                                =Rs (60000-20000)                                                                                          =Rs 40,000

Multiple choice

A and B enter into joint venture sharing profit and losses equally. A purchased 100 kg of rice @ Rs. 20 per kg. Brokerage paid Rs. 200, carriage paid Rs. 300. B sold 90 kg of rice @ Rs. 22 per kg. Balance rice were taken over by B at cost. The value of rice taken over to be recorded in joint venture will be

  1. Rs. 200

  2. Rs. 250

  3. Rs. 230

  4. Rs. 220
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Purchase price of 100 kg rice              =Rs 2,000

  • Brokerage paid                                   =Rs 200 +Carriage Paid                                       =Rs 300 Total Cost of 100 kg rice                       =Rs 2500 Cost of 1kg Rice                                     =Rs 25 Rice taken over by B                              = 10 kgs thus,Cost of rice taken over by B                 =Rs (25*10)                                                                   = Rs 250 
Multiple choice

A & B were partners for 16 years. A pays B a premium of Rs.5, 000/-. At the end of 8 years there is dispute between A & B and they declare dissolution.

  1. A can get back entire amount of the premium paid by him to B.

  2. A can get back a reasonable part of the premium.

  3. A can get back Rs.2,500/- from B.

  4. A cannot get back any amount of the premium paid by him.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When partners dissolve their partnership before the agreed term, the partner who paid premium for a longer term can recover a reasonable proportion of it. A paid for 16 years but dissolved after 8 years, so he deserves a reasonable refund of the premium. Section 51(2) of the Indian Partnership Act provides for adjustment of advance payments on dissolution.