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

A, B and C are partners in the firm sharing profits and loss in 5 : 3 : 2 ratio. The firm's balance sheet as on 31.3.2006 shows the reserve balance of Rs. 25,000, profit of the last year Rs. 50,000, Joint Life policy of Rs.10,00,000, fixed assets of Rs. 12,00,000. On 1st June, C died and on the same date assets were revalued. The executor of the deceased partner will get along with the capital of C

  1. share in the reserves account the firm.

  2. proportionate share of profit upto the date of death.

  3. share in joint life policy.

  4. all of these.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When a partner dies, their executor is entitled to multiple payments: (1) The deceased partner's capital account balance, (2) Their proportionate share in accumulated reserves and profits (since these belong to all partners), (3) Their share in the joint life policy (which benefits partners), and (4) Their share of revaluation profits/losses. All of these amounts are calculated as of the date of death and paid to the executor.

Multiple choice

Ansh and Vansh enter into a joint venture to sell a consignment of biscuits sharing profits and losses equally. Ansh provides biscuits from stock amounting to Rs. 10,000. He pays expenses amounting to Rs. 1,000. Vansh incurs further expenses on carriage Rs. 1,000. He receives cash for sales Rs. 15,000. He also takes over goods to the value of Rs. 2,000. Profit on venture will be

  1. Rs. 3,000

  2. Rs. 5,000

  3. Rs. 6,000

  4. Rs. 3,500
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Total investment: Ansh's goods (Rs. 10,000) + Ansh's expenses (Rs. 1,000) + Vansh's expenses (Rs. 1,000) = Rs. 12,000. Total proceeds: Cash sales (Rs. 15,000) + goods taken by Vansh (Rs. 2,000) = Rs. 17,000. Profit = Rs. 17,000 - Rs. 12,000 = Rs. 5,000. Since profits are shared equally, each partner gets Rs. 2,500, but the question asks for total profit on venture.

Multiple choice

X and Y share profits and losses in the ratio of 2 : 1. They take Z as a partner and the new profit sharing ratio becomes 3 : 2 : 1. Z brings Rs. 4,500 as premium for goodwill. The full value of goodwill will be

  1. Rs. 4,500

  2. Rs. 18,000

  3. Rs. 27,000

  4. Rs. 24,000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Z brings Rs. 4,500 as premium for goodwill. Z's share in new profits = 1/6 (ratio is 3:2:1). If Rs. 4,500 represents 1/6 of goodwill, then total goodwill = Rs. 4,500 × 6 = Rs. 27,000. This is based on the premium brought by the incoming partner representing their share of total goodwill.

Multiple choice

Anny and Bunny enter into a joint venture sharing profit and losses in the ratio 1 : 1. Anny purchased goods costing Rs. 20,000. Bunny sold the goods for Rs. 25,000. Anny is entitled to get 1% commission on purchase and Bunny is entitled to get 5% commission on sales. The profit on venture will be

  1. Rs. 3,550

  2. Rs. 3,600

  3. Rs. 3,400

  4. Rs. 3,800
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Sales = Rs. 25,000. Cost of goods = Rs. 20,000. Anny's commission on purchase = 1% of Rs. 20,000 = Rs. 200. Bunny's commission on sales = 5% of Rs. 25,000 = Rs. 1,250. Total commissions = Rs. 1,450. Profit = Rs. 25,000 - Rs. 20,000 - Rs. 1,450 = Rs. 3,550. Profit is shared equally, but the question asks for total profit on venture.

Multiple choice

Hum and Tum are partners sharing profits and losses in the ratio 5 : 3. On admission, Woh brings Rs. 70,000 cash and Rs. 48,000 against goodwill. New profit sharing ratio between Hum, Tum and Woh are 7 : 5 : 4. The sacrificing ratio between Hum : Tum will be

  1. 3 : 1

  2. 4 : 7

  3. 5 : 4

  4. 2 : 1
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Old ratio (Hum:Tum) = 5:3. New ratio (Hum:Tum:Woh) = 7:5:4. Hum's sacrifice = Old share (5/8) - New share (7/16) = 10/16 - 7/16 = 3/16. Tum's sacrifice = Old share (3/8) - New share (5/16) = 6/16 - 5/16 = 1/16. Sacrificing ratio (Hum:Tum) = 3/16 : 1/16 = 3:1. This ratio is used to distribute Woh's goodwill of Rs. 48,000.

Multiple choice

A, B and C are equal partners. They wanted to change the profit sharing ratio into 4 : 3 : 2. They raised the goodwill Rs. 90,000 but they want to immediately write it off. The effected accounts will be

  1. C's capital account debit and A's capital account credit with Rs. 10,000.

  2. B's capital account debit and A's capital account credit with Rs. 10,000.

  3. C's capital account debit and B's capital account credit with Rs. 10,000.

  4. A's capital account debit and C's capital account credit with Rs. 10,000.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Old ratio: A = 1/3, B = 1/3, C = 1/3. New ratio: A = 4/9, B = 3/9, C = 2/9. Goodwill raised = Rs. 90,000 (written off immediately). A's gain = 4/9 - 1/3 = 4/9 - 3/9 = 1/9. C's loss = 1/3 - 2/9 = 3/9 - 2/9 = 1/9. Net adjustment: A debited Rs. 10,000 (1/9 of Rs. 90,000), C credited Rs. 10,000. B has no gain or loss (3/9 - 1/3 = 0).

Multiple choice

Raj, Jai and Hari are the partners sharing profits in the ratio 7 : 5 : 4. Hari died on 30th June 2006 and profits for the accounting year 2005-2006 were Rs.24,000. How much share in profits for the period 1st April 2006 to 30th June 2006 will be credited to Hari's account.

  1. Rs. 6,000

  2. Rs. 1,500

  3. Rs. 2,000

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

Hari's profit share = 4/16 × Rs. 24,000 = Rs. 6,000 annually. Period 1st April to 30th June = 3 months. Hari's share = Rs. 6,000 × 3/12 = Rs. 1,500. Deceased partners receive profit proportionally until death date.

Multiple choice

The surplus of Rs. 90,000 on dissolution after paying off the liabilities and debts of the partnership firm the remaining amount is distributed among partners in their profit sharing ratio.

  1. True

  2. False

  3. Partly true

  4. Cannot say
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Under partnership law, any surplus remaining after paying all liabilities and debts on dissolution is distributed among partners in their profit-sharing ratio. This is the standard procedure - partners share in gains just as they share in losses.

Multiple choice

X, Y and Z are three partners sharing profits and losses in the ratio, 10 : 6 : 2. A was admitted for 1/10th share. The new profit sharing ratio will be:

  1. 10 : 6 : 2 : 1

  2. 5 : 3 : 2 : 1

  3. 5 : 3 : 1 : 1

  4. 10 : 6 : 2 : 4
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When a new partner A is admitted for 1/10th share, the remaining 9/10 is distributed among the original partners X, Y, Z in their old ratio 10:6:2. The new ratio becomes 5:3:2:1 where A gets 1 part and the original partners sacrifice proportionally from their shares.

Multiple choice

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.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

This is the correct answer. The profits are insufficient. Thus, the profit should be divided between them to the extent of Rs. 18,000 in their capital ratio (2 : 3), which becomes Rs. 7,200 and Rs. 10,800 respectively.

Multiple choice

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
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

It is the correct answer. Divesh's share as per profit ratio = 1/6 * 3,00,000 = Rs. 50,000 But he will be given a minimum of Rs. 60,000 as per guarantee. The excess, i.e. Rs. 10,000 given to him will be borne by the other partners in their profit ratio, i.e. 3 : 2. Thus, they will get profit (3/6 * 3,00,000 - 3/5 * 10,000) and (2/6 * 3,00,000 - 2/5 * 10,000) respectively.

Multiple choice

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
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This is the correct answer. Capital contribution on monthly basis of Manu = 1,00,000 * 12 = 12, 00,000 while that of Hanu (50,000 * 8 + 1,00,000 * 4) = 8, 00,000. Thus, profit ratio will be 12, 00,000 : 8, 00,000, i.e. 3 : 2.

Multiple choice

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
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

B's gain = 3/10 - 4/10 = - 1/10, i.e. 1/10 sacrifice and C's gain = 7/10 - 1/10 = 6/10 Gaining partner will debit and vice versa. Thus, this is the correct answer.