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 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.

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

C, D and E are partners sharing profits and losses in the proportion of 3 :2 :1. D retired and the new profit sharing ratio between C and E is 3 :2 and the Reserve of Rs. 24,000 will be divided among the partners.

  1. 4,000, 8,000 12,0000

  2. 10,000, 10,000 4,000

  3. 8,000 12,000 4,000

  4. 12,000 8,000 4,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Reserves are distributed in the old profit sharing ratio (3:2:1). Total reserve = 24,000. C: 24,000 * 3/6 = 12,000; D: 24,000 * 2/6 = 8,000; E: 24,000 * 1/6 = 4,000.

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

P and Q are two partners sharing profit and loss equally. P draws Rs. 2,000 at the end of each month for 6 months whereas Q draws Rs. 1,000 at the beginning of each month for six months. Assuming that interest on drawing is to be charged at 6% p.a. Interest on drawing of Q will be.

  1. Rs.105

  2. Rs.100

  3. Rs.110

  4. Rs.101
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Q draws 1,000 at the beginning of each month for 6 months. Total drawings = 6,000. Average period = (6 + 1) / 2 = 3.5 months. Interest = 6,000 * 6% * 3.5 / 12 = 105.

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

P and Q are two partners sharing profit and loss equally. P draws Rs. 2000 at the end of each month for 6 months whereas Q draws Rs. 1,000 at the beginning of each month for six months. Assuming that interest on drawing is to be charged at 6% p.a. Interest on drawing of P will be __________.

  1. Rs. 150

  2. Rs. 80

  3. Rs. 86

  4. Rs. 90
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

P draws 2,000 at the end of each month for 6 months. Total drawings = 12,000. Average period = (5 + 0) / 2 = 2.5 months. Interest = 12,000 * 6% * 2.5 / 12 = 150.

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

Bill and Monica 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 $9\%$ p.a. interest on capital before distributing the profits. During the year firm earned Rs. $7,800$ before allowing any interest on capital. Profits apportioned among Bill and Monica is?

  1. $4,680$ and $3,120$
  2. $4,800$ and $3,000$
  3. $5,000$ and $2,800$

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

Total interest on capital = 9% of (80,000 + 50,000) = 11,700. Profit available = 7,800. Since profit is insufficient, interest is paid in the capital ratio (8:5). Bill: 7,800 * 8/13 = 4,800; Monica: 7,800 * 5/13 = 3,000.

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 and Y are partners sharing profit and loss at the ratio of 1/3 and 2/3 respectively. The net income for this accounting period is Rs 10,000 while salary of X = Rs 2,000, interest on Y's drawings = Rs 3,000 and interest on X's capital = Rs 2,000. What is the X's share of profit or loss after the adjustment for partner's salary, interest on capital and interest on drawings?

  1. 3,000

  2. 6,000

  3. 9,000

  4. 2,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation


X and Y share profit & loss in a 1:2 ratio. Salary of X is Rs2,000 along with interest on his capital of Rs2,000. Y has to pay interest on drawings of Rs3,000 and firm earned Rs10,000 ass profits.

                                     Profit & Loss Appropriation a/c

 Particulars (Dr.)  Amount  Particulars (Cr.)  Amount
To Interest on capital a/c (X)To salary a/c (X)To profit on appropriationX's capital a/c      3,000Y's capital a/c      6,000  2,0002,0009,000  By p/l a/cBy interest on drawings a/c (Y) 10,0003,000

Thus, X's share of profit after all appropriations is $Rs3,000$


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 sharing profits & losses in the ratio of 5:3:2. They decide to share future profits & losses in the ratio of 2:3:5 with effect from 1st April. They also decide to record the effect of following revaluations without affecting the book values of the assets & liabilities, by passing a single adjusting entry:

Book Figure Revalued Figure
Land & Building Rs 60,000 Rs 90,000
Plant & Machinery Rs 90,000 Rs 84,000
Trade Creditors Rs 30,000 Rs 27,000
Outstanding Expenses Rs 27,000 Rs 36,000

The necessary single adjusting entry will involve:

  1. Debit Z and Credit X with Rs 5,400

  2. Debit X and Credit Z with Rs 5,400

  3. Debit Y and Credit X with Rs 5,400

  4. Debit X and Credit Y with Rs 5,400
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In this question,revaluation account has to be prepared to calculate any profit or loss due to revaluation of assets or liabilities.

A revaluation account is prepared on the basis that reduction in assets or increased liability are debited but reduced liability or increased assets are credited.
Revaluation profit or loss$=Rs30,000(credited)-Rs6,000(debited)+Rs3000(credited)-Rs9000(debited)\quad =Rs18,000$
The next step is to calculate sacrifising ratio of X, Y and Z
X's sacrifising ratio$=\frac { 5 }{ 10 } -\frac { 2 }{ 10 } \quad =\frac { 3 }{ 10 } $
Y's sacrifising ratio$=\frac { 3 }{ 10 } -\frac { 3 }{ 10 } \quad =\frac { 0 }{ 10 } $
Z's sacrifising ratio$=\frac { 2 }{ 10 } -\frac { 5 }{ 10 } \quad =\frac { -3 }{ 10 } $
It is clear from above that X has sacrifised whereas Z has gained and Y is out of it.
X's sacrificed amount$=\frac { 3 }{ 10 } \times Rs18,000\quad =Rs5,400$
Z's gained amount$=\frac { 3 }{ 10 } \times Rs18,000\quad =Rs5,400$
Since, journal entry for chnage in ratio is 
$Gain\ \quad To\quad Sacrifise$
Hence, X is credited with $Rs5,400$ and Z has to be debited with $Rs5,400$

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 & losses in the ratio of 5:3:2. From 1st April they decide to share profits and losses in the ratio of 2:5:3. The Partnership deed provides that in the event of any change in profit sharing ratio, the goodwill should be valued at two years' purchase of the average profits of the preceding 5 years. The profits and losses of the preceding years are:
i. Profit Rs 39,000,
ii. Profit Rs 57,000,
iii. Profit Rs 24,000,
iv. Profit Rs 27,000,
v. Loss Rs 12,000.
The necessary single adjusting entry will involve:

  1. Debit Y by Rs 10,800 and Z by Rs 5,400 and Credit X by Rs 16,200.

  2. Debit Z by Rs 10,800 and Y by Rs 5,400 and Credit X by Rs 16,200.

  3. Debit X by Rs 10,800 and Z by Rs 5,400 and Credit Y by Rs 16,200.

  4. Debit Z by Rs 10,800 and X by Rs 5,400 and Credit Y by Rs 16,200.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Goodwill for two-year purchase of average profit can be calculated using the formula given below:

$Goodwill=\quad Average\quad profit\times No.\quad of\quad purchase\quad year$
Substitute values in the above equation
$Goodwill=\quad \frac { Rs39,000+Rs57,000+Rs24,000+Rs27,000-Rs12,000 }{ 5 } \times 2years\quad =\frac { Rs1,35,000 }{ 5 } \times 2\quad =Rs54,000$
Now, sacrifising ratio of X, Y and Z has to be calculated using the formula given below
$Sacrifising\quad ratio=\quad Old\quad ratio-New\quad ratio$
X's sacrifising ratio$=\quad \frac { 5 }{ 10 } -\frac { 2 }{ 10 } \quad =\frac { 3 }{ 10 } $
Y's sacrifising ratio$=\quad \frac { 3 }{ 10 } -\frac { 5 }{ 10 } \quad =\frac { -2 }{ 10 } $
Z's sacrifising ratio$=\quad \frac { 2 }{ 10 } -\frac { 3 }{ 10 } \quad =\frac { -1 }{ 10 } $
As we see that Y and Z are gaining due to change in ratios but X has sacrifised
Y's gain$=Rs54,000\times \frac { 2 }{ 10 } \quad =Rs10,800$
Z's gain$=Rs54,000\times \frac { 1 }{ 10 } \quad =Rs5,400$
X's sacrifise$=Rs54,000\times \frac { 3 }{ 10 } \quad =Rs16,200$
Journal entry for adjustement 
$Gain\ \quad To\quad Sacrifise$
Substitute values in above equation
$Y's\quad capital\quad a/c\quad Dr\quad Rs10,800\ Z's\quad capital\quad a/c\quad Dr\quad Rs5,400\ \quad \quad To\quad X's\quad capital\quad a/c\quad Rs16,200$
Hence, Y is debited with $Rs10,800$ along with Z as $Rs5,400$ but X is credited with $Rs16,200$

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 in the ratio of 3:2 with capitals of Rs. 50,000 and Rs. 30,000 respectively. Interest on capital is agreed @ 6% p.a. B is to be allowed an annual salary of Rs. 2,500. During 2016, the profits of the year prior to calculation of interest on capital but after charging B's salary amounted to Rs. 12,500. Calculate the amount of profits to be distributed to A and B after the above effect.

  1. A's Profit Rs. 4,389; B's Profit Rs. 2,926

  2. A's Profit Rs. 4,620; B's Profit Rs. 3,080

  3. A's Profit Rs. 4,000; B's Profit Rs. 3,000

  4. A's Profit Rs. 4,300; B's Profit Rs. 2,900
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation


A and B share profits in ratio 3:2

                              Profit & Loss Appropriation A/c

 Particulars (Dr.)  Amount  Particulars (Cr.) Amount 
 To interest on capitalA's capital       3,000B's capital       1,800To salary a/c (B)To profit on appropriationA's capital         4,620B's capital         3,080 4,8002,5007,700  By P&l a/c    12,500 + B's salary  2,500  15,000

Hence, A's share of proit is $Rs4,620$ whereas B's share is $Rs3,080$

Multiple choice maths direct proportion and inverse proportion rule of three types of proportions direct proportion

A sum is divided among four persons in the ratio $3\,\colon\,4\,\colon\,5\,\colon\,8$. If the second largest share is  Rs$\,2500$, what is the total sum?

  1. Rs $10000$
  2. Rs $15000$
  3. Rs $1000$
  4. Rs $1500$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The share is divided in the ratio $3:4:5:8$

$\therefore$ the second largest share is $5$.
Second largest share$\,=\displaystyle\frac{5}{(3+4+5+8)} \times$ Total share 
 $=\displaystyle\frac{5}{20}\times $ Total sum $=\displaystyle\frac{1}{4}\times $  Total sum

Given, second largest share $=Rs.2500$ 
 $\therefore \displaystyle\frac{1}{4}\times$ Total sum $Rs.2500$
 $\Rightarrow$ Total sum $=Rs.10,000$.