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

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.

Multiple choice

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

Profit ratio = 3, 00,000/10, 00,000 * 100 = 30% So, share will be 2, 00,000 * 30% * 3/6 = Rs. 30,000, i.e. correct answer.

Multiple choice

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

This is the correct treatment. A is sacrificing while B and C are gaining. So, A should be credited with gain from surrender value.

Multiple choice

Directions: Choose the correct option for the given question.

A and B are partners, sharing profits and losses in the ratio of 2:1. They decided to change their profit sharing ratio to 3:1. What is the loss of B?

  1. 1/9

  2. 1/7

  3. 1/8

  4. 1/12
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When profit sharing changes from 2:1 to 3:1, calculate each partner's loss/gain. Originally B had 1/3 share. New share for B is 1/4. Loss to B = 1/3 - 1/4 = 4/12 - 3/12 = 1/12. The difference represents what B surrenders to A, who gains from the change. Always compute using fractions and find the difference.

Multiple choice

In partnership between A, B and C, A's capital is Rs. 5000. If in a profit of Rs. 1000, A's share is Rs. 400 and C's share is Rs. 200, what is B's capital?

  1. Rs. 8000

  2. Rs. 2500

  3. Rs. 5000

  4. Rs. 10,000

  5. Rs. 6000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Let B's capital is x and C's capital is y Therefore, A's profit=5000*1000/(5000+x+y) 400=5000*1000/(5000+x+y) ---(i) C's profit=y*1000/(5000+x+y) 200=y*1000/(5000+x+y) -----(ii) (i) /(ii) gives 2=5000/y y=Rs2500 Therefore, x=5,000 It is the correct answer.

Multiple choice

A business is commenced by Mr Prakash with a capital of Rs. 40,000 on Ist April 2009. On 31st March 2010, his assets were worth Rs. 60,000 and liabilities were Rs. 10,000. Calculate his closing capital and profit earned during the year.

  1. Closing capital is Rs. 50,000. Profit earned during the year is Rs. 5,000

  2. Closing capital is Rs. 40,000. Profit earned during the year is Rs. 10,000

  3. Closing capital is Rs. 50,000 and profit earned during the year is Rs. 10,000

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

 It is correct. Closing capital is Rs. 50,000 and profit earned is Rs. 10,000.

Capital= Assets - Liablities 60,000 - 10,000 So, Capital = 50,000 Profit = Closing Capital - Opening Capital 50,000 - 40,000 = 10,000

Multiple choice

A partnership deed allows 10% p.a. interest on capital to the partners. A will get Rs. 12,000 and B will get Rs. 8,000. It was found that A could get only Rs. 7,200 and B could get only Rs. 4,800. What is the reason behind that?

  1. Because capital is fixed.

  2. Because capital is fluctuating.

  3. Some part of profit is kept as reserve.

  4. Appropriations are more than the profit.

  5. There was loss last year.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Yes, it is correct. When interest on capital is treated as an appropriation, in such a case partners can get appropriations only up to the profit. In this case profit is less and appropriations are more, or we can say that profit is insufficient.

Multiple choice

A, B and C promise to pay D jointly the sum of Rs. 6,000. C is compelled to pay as A is insolvent, but his assets are suficient to pay 1/2 of his debts. C is entitled to receive

  1. Rs. 1,000 from A and Rs. 2,000 from B

  2. Rs. 1,000 from A and Rs. 2,500 from B

  3. Rs. 500 from A and Rs. 2,500 from B

  4. none of these

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

 C is entitled to get Rs 1,000 from A and Rs 2,500 from B.  A , B and C are entitled to pay Rs 2,000 each to D. ( 1/3 X 6,000 )But A can pay only half of Rs 2,000 as he is insolvent - 1/2 X 2,000 =  1,000 Rs.  Amount left to be paid ( 6,000 - 1,000 = Rs 5,000 )B would bear half of Rs 5,000 ( 1/2 X 5,000 ) = Rs 2,500. B would pay it to C. As C has paid the whole amount he would get Rs 1,000 from A  ( insolvent )and Rs 2,500 from B. 

Multiple choice

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

Sacrifice made by A and gain to C is 3/10. Thus, gaining partner i.e. C will be debited and sacrificing partner i.e. A will be credited with 30000 x 3/10

Multiple choice

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

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

Since only A has made the sacrifice, so only his capital will be credited.

Multiple choice

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

Y's gain = 3/10 - 3/10, i.e.nil Z's gain = 7/10 - 3/1 = 4/10 The gaining partner is Z only and he will be debited with 20,000 x 4/10.