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

Share of A, B and C respectively, are ____________, if Rs. $5460$ is divided in $\displaystyle\frac{1}{2}:\frac{1}{3}:\frac{1}{4}$.

  1. Rs. $1680$, Rs. $2520$, Rs. $1260$
  2. Rs. $2520$, Rs. $1680$, Rs. $1260$
  3. Rs. $1260$, Rs. $2100$, Rs. $2520$
  4. Rs. $2520$, Rs. $1260$, Rs. $1680$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Let A's share $=Rs.\left(\displaystyle\frac{x}{2}\right)$
B's share $=Rs.\left(\displaystyle\frac{x}{3}\right)$
And C's share $=Rs.\left(\displaystyle\frac{x}{4}\right)$
According to equation,
$\displaystyle\frac{x}{2}+\frac{x}{3}+\frac{x}{4}=5460$
$\Rightarrow \displaystyle\frac{6x+4x+3x}{12}=5460$
$\Rightarrow 13x=5460\times 12\Rightarrow x=\displaystyle \frac{5460\times 12}{13}=5040$
$\therefore$ A's share $=Rs. \left(\displaystyle\frac{5040}{2}\right)=Rs. 2520$
B's share$=Rs.\left(\displaystyle\frac{5040}{3}\right)=Rs. 1680$
And C's share$=Rs. \left(\displaystyle\frac{5040}{4}\right)=Rs. 1260$.
Multiple choice book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

A and B were partners in a joint venture sharing profits and losses in the proportion of 4/5th and 1/5th respectively. A supplies goods to the value of  50,000 and incurs expenses amounting to 5,400. B supplies goods to the value of 14,000 and his expenses amount to 800, B sells goods at 87,400. B settles his account by bank draft. What will be the profit on venture?

  1. 17,200

  2. 17,000

  3. 18,000

  4. 18,200
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

                                       Joint Venture Account

 Particulars  Amount  Particulars  Amount
 To A's A/cGoods: 50000Expenses: 5400  55400  By B's A/c (sales)  87400
 To B's A/cGoods: 14000Expenses: 800  14800    
 To Profit A- 13760B- 3440  17200    
 Total  87400 Total   87400

                                                

Multiple choice book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

A partner gave a loan of Rs.20,000 to the firm. At the time of dissolution of the firm the net losses of the firm were 30,000. How much money will the partner get on dissolution?

  1. Nil

  2. 20,000

  3. 20,000 + 6% interest

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

In case of loss, two situations arise:
1. If partner's capital has a credit balance then his loan amount will be repaid. Following entry will be passed: 
Partner's loan A/c Dr.
   To Bank/Cash A/c
2. If a partner's capital has debit balance then loan amount will not be paid. loan amount is transferred to capital account of partner. Following entry will be passed:
Partner's loan A/c Dr. 
   To Partner's Capital A/c

Multiple choice book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

X, Y, Z are partners sharing profits and losses equally. They took a joint life policy of Rs 5,00,000 with a surrender value of Rs 3,00,000. The firm treats the insurance premium as an expense. Y retired and X and Z decided to share profits and losses in 2:1. The amount of Joint life policy will be transferred as:

  1. Credited to X, Y and Z's Capital accounts with Rs 1,00,000 each.

  2. Credited to X, Y and Z's capital accounts with Rs 166,667 each

  3. Credited to X, and Z capital accounts with Rs 2,50,000 each

  4. Credited to Ys capital account with Rs 3,00,000 each
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When the premium is treated as an expense, the surrender value of the policy is distributed among all partners in their old profit-sharing ratio upon the retirement of a partner.

Multiple choice book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

A, B, & C were partners sharing profits and losses in the ratio of 3:2:1 A Retired and firm received the joint life policy as 7,500 appearing in the balance sheet at 10,000 JLP is credited and cash debited 7,500 what will be the treatment for the balance in Joint Life Policy?

  1. Credited to partner's current account in profit sharing ratio.

  2. Debited to revaluation account.

  3. Debited to partner's capital account in profit sharing ratio.

  4. Either (B) or (C)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When the JLP amount received exceeds the book value, the difference is a gain. This gain is credited to the partners' capital accounts in the old profit-sharing ratio, or adjusted via the revaluation account.

Multiple choice book keeping and accountancy dissolution of firm accounting record at the time of dissolution procedure of settlement of accounts partnership account (dissolution of partnership)

A, B & C takes a joint life policy, after 5 years B retire from the firm. Old profit sharing ratio is 2:2:1. After retirement A and C decided to share profits equally. They had taken a joint life policy of 2,50,000 with the surrender value 50,000 What will be the treatment in the partner's capital account on receiving the JLP amount if joint life policy is maintained at the surrender value along with the reserve?

  1. 50,000 credited to all the partners in old ratio.

  2. 2,50,000 credited to all the partners in old ratio

  3. 2,00,000 credited to all the partners in old ratio.

  4. Distribute JLP Reserve A/c in old profit sharing ratio.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

If the JLP is maintained at surrender value with a corresponding reserve, the reserve is distributed among all partners in the old profit-sharing ratio upon retirement.

Multiple choice maths mixture types of ratios ratios in proportion mathematical logic

$A, B$ and $C$ enter into partnership by making investments in the ratio $3:5:7$. After a year, $C $ invests another Rs. $337600$ while $A$ withdraws Rs. $45600$. The ratio of investments then changes to $24:59:167$. How much did $A$ invest initially?

  1. Rs. $45600$
  2. Rs. $96000$
  3. Rs. $141600$

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

Let initial investments by $A, B$ and $C$ are $3x, 5x, 7x$

After a year:
$A$'s investment $=3x-45600$
$C$'s investment $=7x +337600$
$(3x-45600):5x : (7x+337600) = 24 : 59 : 167$
Solving this we will get $x=47200$
So, A's initial investment was $=3x = 3\times47200 = 141600$

Multiple choice book keeping and accountancy accounting for retirement and death of partner reconstitution of partnership (retirement of partner) accounting of sum payable to a partner on retirement or death accounting treatment in case of retirement of a partner

R, J & D are the partners sharing profits in the ratio $7 : 5 : 5$. D died on $30$th June $2015$. Profit for the accounting year $2014-2015$ was $Rs.24,000$. How much share in profits for the period $1st$ April, $2015$ to $30$th June, $2015$ will be credited to D's A/c?

  1. $Rs.6,000$
  2. $Rs.1,500$
  3. $Rs.4,500$
  4. $Rs.2,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Profit of the accounting year 2014 - 2015 = Rs. 24000

Profit till 30th june = Rs.24000 * (3/12) = 6000
Distribution of profit among partners on the date of the death of D
R = 6000 * (7/16) = 2625
J = 6000 * (5/16) = 1875
D = 6000 * (4/16) = 1500

Multiple choice book keeping and accountancy reconstitution of partnership (retirement of partner) accounting for retirement and death of partner accounting of sum payable to a partner on retirement or death accounting treatment in case of retirement of a partner

A,B and C ate three partners in a partnership firm sharing profit and loss equally. C retires from the firm on 31st March.His share of profit is purchased by A and B in the ratio of 2:1,If  at the time of retirement of the value of the goodwill of the firm is valued at Rs.54,000, and the partners decides to pay goodwill to the retiring partner, what will be accounting treatment? 

  1. None of the above

  2. A A/c Dr by Rs.30,000, B A/c Dr by Rs.24,000,C's A/c credit by Rs.54,000

  3. A A/c Dr by Rs.9,000, B A/c Dr by Rs.9,000,C's A/c credit by Rs.18,000

  4. A A/c Dr by Rs.18,000, B A/c Dr by Rs.24,000,C's A/c credit by Rs.34,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

gaining ratio = new ratio-old ratio 

                       A =2/3 -1/3=1/3
                        B =1/3-1/3 =0
                   A partner is gaining partner 
goodwill of firm =54000
B's share of goodwill=54000*1/3=18000           

Multiple choice book keeping and accountancy accounting for retirement and death of partner reconstitution of partnership (retirement of partner) accounting of sum payable to a partner on retirement or death accounting treatment in case of retirement of a partner

R, J & D are the partners sharing profits in the ratio $7 : 5 : 5$ D died on $30$th June $2015$. It was decided to value the good will on the basis of $3$ year's purchase of last $5$ years average profits. If the profits are $Rs.29,600$; $Rs.28,700$; $Rs.28,900$; $Rs.24,000$ & $Rs.26,800$. What will be D's share of good will?

  1. $Rs.20,700$.
  2. $Rs.27,600$.
  3. $Rs.82,800$.
  4. $Rs.27,000$.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Old ratio (R, J and D) = 7 : 5 : 4

Calculation of goodwill :
1. Average profit = (29600 + 28700 + 28900 + 24000 + 26800) /5
                            = 138000/5
                            = 27600
2. Goodwill = Average profit * No. of year's purchase
                    = 27600 * 3
                    = 82800
D's share of goodwill = Total goodwill * D's share
                                    = 82800 * (4/16) 
                                    = 20700

Multiple choice book keeping and accountancy reconstitution of partnership (retirement of partner) accounting for retirement and death of partner accounting of sum payable to a partner on retirement or death accounting treatment in case of retirement of a partner

A, B & C takes a joint life policy, after 5 years, B retires from the firm. Old profit sharing ratio is 2:2:1. After retirement A & C decides to share profits equally. They had taken a joint life policy of Rs. 2,50,000 with the surrender value Rs. 50,000. What will be the treatment in the partners' capital account on receiving the JLP amount if joint life policy is maintained at the surrender value? 

  1. Rs. 50,000 credited to all the partners in old ratio.

  2. Rs. 2,50,000 credited to all the partners in old ratio.

  3. Rs. 2,00,000 credited to all the partners in old ratio.

  4. No treatment is required.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

If the Joint Life Policy is maintained at surrender value, the policy is already recorded as an asset. Upon receiving the full maturity value, the difference between the maturity value and the surrender value is treated as a gain and distributed.

Multiple choice book keeping and accountancy reconstitution of partnership (retirement of partner) accounting for retirement and death of partner accounting of sum payable to a partner on retirement or death accounting treatment in case of retirement of a partner

A, B & C takes a joint life policy, after five years B retires from the firm. Old profit sharing ratio is 2:2:1. After retirement A & C decides to share profits equally. They had taken a joint life policy of Rs. 2,50,000 with the surrender value Rs. 50,000. What will be the treatment in the partner's capital account on receiving the JLP amount if joint life policy is maintained at surrender value along with the reserve?

  1. Rs. 50,000 credited to all the partners in old ratio.

  2. Rs. 2,50,000 credited to all the partners in old ratio.

  3. Rs. 2,00,000 credited to all the partners in old ratio.

  4. Distribute JLP Reserve A/c in old profit sharing ratio.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When a JLP Reserve exists alongside the JLP asset, the reserve is typically closed by transferring it to the partners' capital accounts in their old profit-sharing ratio.

Multiple choice book keeping and accountancy reconstitution of partnership (retirement of partner) accounting for retirement and death of partner accounting of sum payable to a partner on retirement or death accounting treatment in case of retirement of a partner

Balances of R,H & M sharing profits & losses in the ratio 2:3:2 stood as Rs. 10,00,000; H - Rs. 15,00,000; M - Rs. 10,00,000; Joint Life Policy Rs. 3,50,000. H desired to retire from the firm and the remaining partners decided to carry on with the future profit sharing ratio of 3:2. Joint life policy of the partners surrendered and cash obtained Rs. 3,50,000. What would be the treatment for JLP A/c?

  1. Rs. 3,50,000 credited to partner's capital account in new ratio.

  2. Rs. 3,50,000 credited to partner's capital account in old ratio.

  3. Rs. 3,50,000 credited to partner's capital account in capital ratio.

  4. Rs. 3,50,000 credited to JLP account.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When a Joint Life Policy (JLP) is surrendered, the cash received is credited to the JLP account to close it. The balance remaining in the JLP account is then transferred to the partners' capital accounts in their old profit-sharing ratio.

Multiple choice book keeping and accountancy reconstitution of partnership (retirement of partner) accounting for retirement and death of partner accounting of sum payable to a partner on retirement or death accounting treatment in case of retirement of a partner

A, B & C were partners sharing profits and losses in the ratio of 3:2:1. A retired and firm received the joint life policy as Rs. 7,500 appearing in the balance sheet at Rs. 10,000. JLP is credited and cash debited with Rs. 7,500, what will be the treatment for the balance in Joint Life Policy?

  1. Credited to partner's current account in profit sharing ratio.

  2. Debited to revaluation account.

  3. Debited to partner's capital account in profit sharing ratio.

  4. Either (B) or (C).
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The JLP appears in the balance sheet at 10,000 but only 7,500 is received. The loss of 2,500 must be borne by the partners in their profit-sharing ratio, which can be debited to the Revaluation account or directly to the capital accounts.

Multiple choice book keeping and accountancy reconstitution of partnership (retirement of partner) accounting for retirement and death of partner accounting of sum payable to a partner on retirement or death accounting treatment in case of retirement of a partner

Balances of $R _{1}, R _{2}$ & $R _{3}$ sharing profits & losses in proportion to their capitals, stood as:
$R _{1} = Rs. 3,00,000$
$R _{2} = Rs. 2,00,000$
$R _{3} = Rs. 1,00,000$
$R _{1}$ desired to retire from the firm and the remaining partners decided to carry on, joint life policy of the partners surrendered and cash obtained Rs. 60,000. What will be the treatment for Joint Life Policy A/c? 

  1. $Rs.60,000$ credited to Revaluation A/c.
  2. $Rs.60,000$ credited to Joint Life Policy A/c.
  3. $Rs.30,000$ debited to Ram's Capital A/c.

  4. Either (A) or (B).
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Readjustments takes place in case of retirement of a partner. Whenever the partner retires, the continuing partners makes gain in terms of profit sharing ratio. Therefore, the remaining partners arrange for the amount to be paid to discharge the claims of the retiring partners. Assets and liabilities are revalued, value of goodwill is raised and surrender value of joint life policy, if any, is taken into account. Revaluation profit and reserve are transferred to capital or current accounts of partners. Lastly, final amount due to retiring partner is determined and discharged.

From the above provision, it can be concluded that At the the time of retirement of partner the surrender value of joint life policy is taken into account. 
Therefore, in the given question Rs.60000 is credited to joint life policy A/c.