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

As C is to be given a minimum of Rs.1,00,000, the profit being insufficient, so he will get Rs. 1,00,000 and the rest of Rs. 3,00,000 will be divided among A and B in 5 : 3. Thus, A's share = Rs.1,87,500 B's share = Rs. 1,12,500

Multiple choice

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

Total capital of new firm should be 1,00,000 * 3/1, i.e. Rs. 3,00,000 which should be shared by A, B and C according to their ratio. Thus, A should have capital of Rs. 1,20,000 and he should bring 1,20,000 - 50,000, i.e. Rs. 70,000.

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

A and B are co-venturers. A purchased goods worth Rs. 1,25,000 and spent Rs. 5,000 as commission and Rs. 30,000 as carriage. The goods are sent to B. B sells 4/5th of the goods and takes the remaining at direct cost. Find the value of goods taken by him.

  1. Rs. 32,000

  2. Rs. 26,000

  3. Rs. 31,000

  4. Rs. 7,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Direct cost of goods = 1/5th of (1, 25, 000 + 5, 000 + 30, 000) = Rs. 32, 000 If any of the above mentioned amounts is not taken, the answer will be other options.

Multiple choice

Directions: The question below consists of a question & three statements given below it. You have to decide whether the data provided in the statements are sufficient to answer the question.

How much did Sohil get as profit at the year-end in the business done by Animesh, Sohil & Akhilesh? (A) Akhilesh invested Rs.8000/- for nine months, his profit was 3/2 times that of Sohil's & his investment was 4 times that of Animesh. (B) Animesh & Sohil invested for one year & in the proportion 1:2 respectively. (C) The three together got Rs.1000/- as profit at the year end.

  1. Only A & B together are sufficient

  2. Only A & C together are sufficient

  3. A, B & C together are not sufficient

  4. A, B & C together are not necessary

  5. None of these
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

The profit of three gathered statement A & B will be in the ratio of Animesh  : Sohil        : Akhilesh 2x12=24 : 4x12=48  : 8x9=72      1       :      2         :   3 Profit = Rs.1000 Sohil's profit = Rs.1000 x 2 / 6 So all the three statements are needed.

Multiple choice

C is a new partner in a firm consisting of partners A and B. He adds Rs. 150,000 as his 1/4th share in profits. The capitals of other partners are to be adjusted on the basis of C's contribution and profit share. Find the amount to be added by A and B, if their initial capital amounts were Rs. 180,000 and Rs. 200,000, respectively.

  1. Rs. 25,000 and Rs. 45,000

  2. Rs. 45,000 and Rs. 25,000

  3. Rs. 20,000 and Nil

  4. Rs. 70,000 and Rs. 50,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

C's capital = Rs. 1,50,000 Thus, the capital of new firm = 1,50,000 x 4/1 = Rs. 6,00,000 divided in a new ratio in which A and B will contribute 6,00,000 - 1,50,000, i.e. Rs. 4,50,000 equally. Thus, they will contribute another Rs. 45,000 and Rs. 25,000, respectively. 

Multiple choice book keeping and accountancy admission of a new partner accounting treatment of admission of a partner partnership accounts: admission of a new partner reconstitution of partnership

General Reserve at the time of admission of a partner is transferred to ____________ .

  1. Revaluation Account

  2. Old Partner's Capital Account

  3. Capital Accounts of all partners, including new partner

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Sometimes a firm may have accumulated reserves not yet transferred to the partner's capitals accounts. These are in the form of general reserve, reserve fund etc. The new partner is not entitled to share in these reserves. Hence, at the time of admission, these reserves are transferred to the old partner's capital accounts in their profit sharing ratio. 
Multiple choice book keeping and accountancy admission of a new partner accounting treatment of admission of a partner partnership accounts: admission of a new partner reconstitution of partnership

In the absence of any agreement, it is presumed that the new partner acquires his share in profits from the old partners in the:

  1. New ratio

  2. Old ratio

  3. Sacrificing ratio

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

In the absence of a specific agreement, a new partner is assumed to acquire their share of profits from the existing partners in their old profit-sharing ratio.

Multiple choice book keeping and accountancy admission of a new partner accounting treatment of admission of a partner partnership accounts: admission of a new partner reconstitution of partnership

A and B are two partners sharing profit and loss equally. Their capital A/c stood at Rs.30,000 and Rs.25,000 respectively on 31st March, 2013. On 1st April C is admitted for 1/3rd share of profit for which he brings Rs.12,000 as his share of goodwill. On the date of his admission, stock was appreciated by Rs.11,000 and provisions for bad debts also increased by Rs.2,000. Old partners decided that C's capital should be in accordance with his share of profit sharing ratio, what adjustment will be done to make their capital in proportion to their profit sharing ratio?

  1. A to bring Rs.2500, B to be refunded Rs.2500

  2. A to be refunded Rs.2500, B to bring Rs.2500

  3. A to bring Rs.5500, B to be refunded Rs.5500

  4. A to be refunded Rs.5500, B to bring Rs.5500
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

After adjusting for revaluation (stock +11,000, provision -2,000, net +9,000) and goodwill, the new capital balances are calculated. To make capitals proportional to the new 1:1:1 ratio, adjustments are made between partners.

Multiple choice book keeping and accountancy admission of a new partner accounting treatment of admission of a partner partnership accounts: admission of a new partner reconstitution of partnership

X and Y are partners sharing profit in the ratio of 1: 1. They admit Z for 1/5th share who contributed 25,000 for his share of goodwill. The total value of the goodwill of the firm will be:

  1. 25,000

  2. 50,000

  3. 1,00,000

  4. 1,25,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

If Z brings 25,000 for a 1/5th share of goodwill, the total value of the firm's goodwill is calculated as 25,000 / (1/5) = 125,000.

Multiple choice book keeping and accountancy admission of a new partner accounting treatment of admission of a partner partnership accounts: admission of a new partner reconstitution of partnership

R admitted as a new partner for one-fourth share of future profits, fails to bring in cash of 5,000 towards goodwill but the existing (old) partners S and T, sharing profits in the ratio of 3 : 2, raise the goodwill account at its full value. Therefore the partners will be credited for goodwill as:

  1. S - 3000, T - 2000, R - Nil

  2. S - 9000, T - 6000, R - 5000

  3. S - 12000, T - 8000, R - Nil

  4. S - 2250, T - 1500, R - 1250
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When goodwill is raised at full value, the total goodwill is calculated based on the new partner's share. If R's 1/4 share is 5,000, total goodwill is 20,000. This is credited to old partners in their profit-sharing ratio (3:2). 3/5 of 20,000 = 12,000 and 2/5 of 20,000 = 8,000.

Multiple choice book keeping and accountancy admission of a new partner accounting treatment of admission of a partner partnership accounts: admission of a new partner reconstitution of partnership

A and B are partners sharing the profit in the ratio $3:2$. They take C as the new partner, who is supposed to bring Rs. $25,000$ against capital and Rs. $10,000$ against goodwill. New profit sharing ratio is $1:1:1$. C is able to bring Rs. $30,000$ only. How this will be treated in the books of the firm?

  1. A and B will share goodwill bought by C as $4,000:1,000$.
  2. Goodwill will be raised to Rs. $15,000$ in old profit sharing ratio.

  3. Both a and b.

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

When a new partner brings goodwill, it is shared by old partners in their sacrificing ratio. If the goodwill is not fully brought in cash, the remaining amount is adjusted through the new partner's current account, and the goodwill can be raised in the books if required by the partnership agreement.

Multiple choice book keeping and accountancy admission of a new partner accounting treatment of admission of a partner partnership accounts: admission of a new partner reconstitution of partnership

Capital accounts of partner A & B are Rs.$30,000$ & Rs.$16,000$. They admitted C on the following conditions.
 -That C brings in Rs.$10,000$ as his capital for $1/4$th share in profits.
 -That a goodwill account be raised in the books of the firm at Rs.$15,000$
 -Profit on revaluation of assets & liabilities was Rs.$2,100$.
 -That the capital accounts of the partners be readjusted on the basis of their profit sharing ratio and any additional amount be debited or credited to their current accounts.
 -General reserve appearing in balance sheet at the time of admission of C was Rs.$6,000$.
To give effect to above current account of A & B  will be ________________.

  1. Debited by Rs.$25,400$ & Rs.$13,700$
  2. Credited by Rs.$20,500$ & Rs.$10,300$
  3. Credited by Rs.$26,550$ & Rs.$12,550$
  4. Debited by Rs.$20,500$ & Rs.$10,300$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

After adjusting for revaluation profit, general reserve, and the raised goodwill, the total capital of the new firm is determined. The partners' capital accounts are then adjusted to the new profit sharing ratio, and the difference is transferred to their current accounts.