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 adjustment of partners capital and death of a partner retirement/ death of a partner elements of accounts

$A, B$ and $C$ are partners sharing profits in the ratio of $2 : 2 : 1$. $C$ retired. The new profit-sharing ratio between $A$ and $B$ will be :

  1. $2:1$
  2. $1:1$
  3. $3:1$
  4. $8:1$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

C’s share of profit = 1/5, to be taken by A and B equally.

A gains = 1/5 X 1/2 = 1/10

B gains = 1/5 X 1/2 = 1/10

New share of A = 2/5 + 1/10 = 4/10 + 1/10 = 5/10 = 1/2

New share of B = 2/5 + 1/10 = 4/10 + 1/10 = 5/10 = 1/2

New profit sharing ratio of A and B = 1:1

Multiple choice organization of commerce and management joint hindu family business and cooperative society cooperative organisation features, organisation, advantages and disadvantages of cooperative organisation introduction to huf

The head of Joint Hindu Family firm is Karta.

  1. True

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

The head of the joint hindu family business is known as Karta. Karta is usually the senior most male member of the joint family and he has the power to control the whole business.

Multiple choice book keeping and accountancy adjustments drawing account of partners interest on drawings interest on partner's drawings and capital

A and B entered into a joint venture contract. They opened a joint bank account by contributing Rs. 1,00,000 each. The expenses incurred on contract were Rs. 1,00,000. Contract money received by cheque was Rs. 2,00.000 and in shares Rs. 50,000. The shares are sold for Rs. 40,000. What will be the profit on venture ?

  1. Rs. 1,50,000

  2. Rs. 1,40,000

  3. Rs. 2,40,000

  4. Rs. 2,00,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Multiple choice book keeping and accountancy adjustments drawing account of partners interest on drawings interest on partner's drawings and capital

A and B enter into a joint venture sharing profit and losses in the ratio 2:3. Goods were purchased by A for Rs. 55,000. Expenses incurred by A Rs. 3,500 and by B Rs. 5.200. B sold the goods for Rs. 80,000. Remaining stock was taken over by B at Rs. 12,200. What will be the final remittance to be made by B to A?

  1. Rs. 69,900

  2. Rs. 92 200

  3. Rs. 28,500

  4. None
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Total cost incurred by A is 55,000 + 3,500 = 58,500. Total cost incurred by B is 5,200. Total cost of the venture is 63,700. Total revenue is 80,000 (sales) + 12,200 (stock) = 92,200. Profit is 92,200 - 63,700 = 28,500. A's share (2/5) is 11,400 and B's share (3/5) is 17,100. A should receive 58,500 + 11,400 = 69,900 from B.

Multiple choice book keeping and accountancy adjustments drawing account of partners interest on drawings interest on partner's drawings and capital

Ajay and Vijay are partners in a firm. They share profits in the ratio of 3:2. As per their partnership agreement, interest on drawings is to be charged @ 10% p.a. Their drawings during 2017 were Rs 24,000 and Rs 16,000, respectively. Calculate interest on drawings based on the assumption that the amounts were withdrawn evenly, throughout the year.

  1. Rs 1,200 and Rs 800

  2. Rs 1,500 and Rs 900

  3. Rs 1,800 and Rs 1,200

  4. Rs 1,000 and Rs 600
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
Interest on Drawings = Amount withdrawn x rate of interest x 6/12 (evenly)
AJAY:-
= 24,000 x 10/100 x 6/12
= RS-1,200.

VIJAY:-
= 16,000 x 10/100 x 6/12
= RS-800.
Multiple choice commercial studies sources of business finance - 2 equity shares share and stock equity and preference shares

The ending balance of owner's equity is Rs.21,000. During the year, the owner contributed Rs.6,000 and withdrew Rs.4000. If the firm had Rs.8,000 net income for the year what was the owner's equity at the beginning?

  1. Rs.23,000

  2. Rs.21,000

  3. Rs.19,000

  4. Rs.11,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Owner's equity at the beginning= ending balance of owner's equity - net income + withdrawal amount - contributed amount = 21000-800+4000-6000 = 11000.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

A, B, and C are partners sharing profits in the ratio of $ 5:3:2.$ They decide to share the future profits in the ratio of 2:3:5 with effect from $1st$ April, 2018. What will be accounting treatment of Workmen Compensation Reserve appearing in the Balance Sheet on that date when no information is available for the same?

  1. Distributed among the partners in their in their capital ratio.

  2. Distributed among the partners in their new profit-sharing ratio.

  3. Distributed among the partners in their old profit-sharing ratio.

  4. Carried forward to new Balance Sheet.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

One of the popular form of business now a days is partnership firms. Its defined as the"relation between two or more person who have agreed to share the profits of a business carried on by them."  Here the question is about the treatment of workmen compensation reserve appearing in the balance sheet. 


As there is a change in the constitution of partnership, the workmen compensation reserve that is appearing in the balance sheet should be distributed among the partners in their old profit sharing ratio. As no more information is available regarding the reserve and there is a change in the constitution of the firm by way of change in profit sharing ratio, so the reserve which relates to balance sheet before change in profit ratio should be distributed in the old ratio among the partners.

Whenever the question is silent on the treatment of workmen compensation reserve and no further information is available it is advisable to distribute it in old profit sharing ratio among the partners. So, the whole amount appearing in the balance sheet should be distributed

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

X, Y and Z are partners sharing profits in the ratio of $ 5:3:2.$ They decide to share future profits in the ratio of $2:3:5$ with effect from $1^{st}$ April, $2018$ . They also decide to record the effect of following revaluation without affecting the book values of assets and liabilities, by passing single adjusting entry :

Book Value (Rs.) Revised Value (Rs.)
Land and Building  3,00,000 4,50,000
Plant and Machinery 4,50,000 4,20,000
Trade Creditors 1,50,000 1,35,000
Outstanding Rent  1,35,000 1,80,000

The necessary single adjustment entry will be:

  1. Dr. Z and Cr. X by Rs. 27,000.

  2. Dr. X and Cr. Z by Rs. 27,000.

  3. Dr. Y and Cr. X by Rs. 27,000.

  4. Dr. X and Cr. X by Rs. 27,000.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

To get the adjustment entry done, first need to find out the profit /loss on revaluation. Since books of account are not to be affected due to revaluation, hence an adjustment entry need to be passed:


Revaluation difference can be calculated as: 

Particulars                          Book Value         Revised Value        Gain/Loss

Land & Building                 300000                450000                  150000
Plant & Machinery             450000                420000                  - 30000
Trade Creditors                  150000                 135000                     15000
Outstanding Rent               135000                 180000                   -45000
                                                                                                       ------------------
   Net Gain on Revaluation                                                              90000
                                                                                                       -------------------

Share on revaluation:                   X                       Y                        Z
As per old Ratio                      45000                27000               18000
As per New Ratio                    18000                27000               45000
                                               --------------           --------------           --------------
Sacrifice/Gain                         27000                 NIL                   -27000
                                                -------------           ---------------         ---------------
Hence below adjustment entry will be passed:

Z's A/c                                      Dr. 27000
        To X's A/c                                                  27000

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

A and B enter into a joint venture sharing profits and losses equally. A purchased 5000 kg of rice @ Rs. 25/kg. B purchased 1000 kg of wheat @Rs. 30/kg. A sold 1000 kg of wheat @ Rs. 35/kg and B sold 5000 kg of rice @ Rs. 30/kg. The profit on venture will be :

  1. Rs. 55,000

  2. Rs. 50,000

  3. Rs. 60,000

  4. Rs. 30,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Total cost: (5000 kg * 25) + (1000 kg * 30) = 125,000 + 30,000 = 155,000. Total revenue: (1000 kg * 35) + (5000 kg * 30) = 35,000 + 150,000 = 185,000. Profit = 185,000 - 155,000 = 30,000.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

X, Y and Z are partners in a firm.At the time of division of profit for the year there was dispute among the partners.Profits before interest on partner's capital was Rs.10,000 and X wanted interest on capital at 20% as his capital contribution was Rs.1,00,000 as compared to that of Y and Z which was Rs.75,000 and Rs.50,000 respectively. Find the solution ______________________________.

  1. Profits of Rs.10,000 will be distributed equally.

  2. X will get the interest of Rs.20,000 and the loss of Rs.10,000 will be shared equally

  3. All the partners will get interest on their capital and the loss will be shared equally.

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

According to the Indian Partnership Act, in the absence of an agreement, interest on capital is not allowed, and profits are shared equally.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

A and B are partners sharing profits and losses in the ratio of 3 : 2 having the capital of Rs.80,000 and Rs.50,000 respectively. They are entitled to 10% p.a interest on capital before distributing the profits.During the year firm earned Rs.17,800 before allowing any interest on capital.Profits appointed among them excluding interest will be ____________________.

  1. Rs.2,880 and 1,920

  2. Rs.8,800 and 8,800

  3. Rs. 8,000 and 5,000

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

Total interest on capital = 10% of (80,000 + 50,000) = 13,000. Available profit is 17,800. Since profit exceeds interest, interest is paid fully. Remaining profit = 17,800 - 13,000 = 4,800. Distributed in 3:2 ratio: A gets 4,800 * 3/5 = 2,880; B gets 4,800 * 2/5 = 1,920.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

A and B are partners with the capital of Rs.20,000 and Rs.10,000 respectively. Interest payable of capital out of profit is 10% p.a. Find the interest on capital for both the partners when the profits earned by the firm is Rs.2,400.

  1. Rs.2,000 and Rs.1,000

  2. Rs.1,600 and Rs. 800

  3. No interest will be paid to the partners

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

Total interest on capital = 10% of (20,000 + 10,000) = 3,000. Since the profit (2,400) is less than the interest (3,000), interest is restricted to the available profit in the ratio of capitals (2:1). A gets 2,400 * 2/3 = 1,600; B gets 2,400 * 1/3 = 800.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

A and B are partners sharing profits and losses in the ratio 4 : 1. C was manager who received the salary of Rs.2,000 p.m. in addition to a commission of 5% on net profits after charging such commission.Profit for the year is Rs.3,39,000 before charging salary. Find the total remuneration of C.

  1. Rs.39,000

  2. Rs.44,000

  3. Rs.43,500

  4. Rs.38,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Salary = 2,000 * 12 = 24,000. Net profit before commission = 3,39,000 - 24,000 = 3,15,000. Commission = 3,15,000 * 5 / 105 = 15,000. Total remuneration = 24,000 + 15,000 = 39,000.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

A, B and C were partners in a firm sharing profits and losses in theratio of 2 : 2 : 1 respectively with the capital balance of 50,000 for A and B, for C 25,000. B declared to retire from the firm and balance in reserve on the date was 15,000 if goodwill of the firm was valued as 30,000 and profit on revaluation was 7,050, then what amount will be transferred to the loan account of B?

  1. 70,820

  2. 50,820

  3. 25,820

  4. 58,820
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

B's amount = Capital Rs.50,000 + Reserve (Rs.15,000 × 2/5) Rs.6,000 + Goodwill (Rs.30,000 × 2/5) Rs.12,000 + Revaluation profit (Rs.7,050 × 2/5) Rs.2,820 = Rs.70,820 transferred to loan account on retirement.

Multiple choice book keeping and accountancy accounting for partnership preparation of profit and loss appropriation account profit and loss appropriation account profit and loss appropriation account and distribution of profits among partners

A, B and C were partners in a firm sharing profits and losses in the ratio of 2 :2 :1 respectively with the capital balance of Rs. 50,000 for A, Rs. 70,000 for B,for C Rs. 35,000. B declared to retire from the firm and balance in reserve on the date was Rs. 25,000. If goodwill of the firm was valued as Rs. 30,000 and profit on revaluation was Rs. 7,500, then what amount will be payable to B?

  1. Rs. 70,820

  2. Rs. 76,000

  3. Rs. 75,000

  4. Rs. 95,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

B's capital = 70,000. Reserve share = 25,000 * 2/5 = 10,000. Goodwill share = 30,000 * 2/5 = 12,000. Revaluation profit share = 7,500 * 2/5 = 3,000. Total = 70,000 + 10,000 + 12,000 + 3,000 = 95,000.