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 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 Care the partners sharing profits and losses in the ratio $2:1:1$. Firm has a joint life policy of $Rs.1,20,000$ and in the balance sheet it is appearing at the surrender value i. e. $Rs.20,000$. On the the death of A, how this JLP will be shared among the partners? 

  1. $50,000 : 25,000 : 25,000$
  2. $60,000 :30,000 : 30,000$
  3. $40,000 :35,000 :25,000$
  4. Whole of $Rs.1,20,000$ will be paid to A
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

If Joint Life Policy appears in the Balance Sheet at surrender value, then the firm will gain on the death of a partner and partners will get

 policy amount - Surrender value i.e., in their profit sharing ratio
Rs. 120000 - Rs. 20000 = Rs. 100000
Distribution of JLP among the partners is : 
A = 100000 * (2/4) = 50000
B = 100000 * (1/4) = 25000
C = 100000 * (1/4) = 25000

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

X & Y are partners sharing profit in the ratio of 3:2. Z was admitted on the following terms:New profit sharing ratio will be 5:3:2 Machinery would be depreciated by $8\%$ (book value Rs. 1,80,000)Building would be appreciated by $15\%$ (book value Rs. 1,50,000)To create provision for bad debts $5\%$ on Debtors of Rs.25,000 Unrecorded debtors of Rs.1,250 would be brought into books Creditors amounting to Rs.2,750 died and need not to pay anything. Find the distribution of profit/loss on revalution between X & Y.    

  1. Profit 3,210 & 2,140

  2. Profit 6,510 & 4,340

  3. Profit 1,710 & 1,140

  4. Profit 1,140 & 1,710
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Revaluation: Machinery (-14,400), Building (+22,500), Provision for Bad Debts (-1,250), Unrecorded Debtors (+1,250), Creditors (-2,750). Net profit = 22,500 - 14,400 - 1,250 + 1,250 + 2,750 = 10,850. Distributed in 3:2 ratio: X gets 6,510 and Y gets 4,340.

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 $7:5:4$. D died on $30$th June, $2015$. It was decided to value the goodwill on the basis of $3$ year's purchase of last 5 years average profits. It 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 goodwill?

  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 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

If three partners A, B & C are sharing profits as $5:3:2$, then on the death of a partner A, how much B & C will pay to A's execute on account of goodwill if Goodwill is to be calculated from $2$ years purchase of the last three years average profits. Profits for three years are: $Rs.6,58,000$; $Rs. 6,92,000$ and $Rs.8,10,000$. 

  1. $Rs.4,32,000$ & $Rs.2,84,000$
  2. $Rs.4,88,000$ & $Rs.4,32,000$
  3. $Rs.7,20,000$ & $Rs.7,20,000$
  4. $Rs.4,32,000$ & $Rs.2,88,000$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Profit sharing ratio of A, B and C is 5 : 3 : 2

A's share of goodwill = (5/10) * 1440000 = 720000           (working note)
Contribution for A's share of goodwill by:-
B = 720000 * (3/15) = 432000                                             (Note)
C = 720000 * (2/5) = 288000                                              (Note)
Working note:-
Calculation of goodwill :-
1. Average profit =  (658000 + 692000 + 810000) / 3
                            = 2160000/3 
                            = 720000
2. Goodwill = Average profit * No. of year's purchase
                    =  720000 * 2
                    = 1440000
Note : In the absence of information gaining ratio and new ratio will be same as old 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

Balance of A,B & C sharing profits & losses in proportion to their capitals, stood as :
A = 2,00,000
B = 3,00,000
C = 2,00,000
Joint Life Policy Reserve A/c 80,000 and Joint Life Policy A/c is shown in the balance sheet 80,000 A desired to retire from the firm and the remaining, partners decided to carry on in equal ratio, joint life policy of the partners surrendered and cash obtained 80,000 What will be the treatment for  joint Life Policy Reserve A/c?

  1. Cash received credited to Revaluation A/c

  2. JLP Reserve balance credited to Partner's Capital A/c in old profit sharing ratio.

  3. JLP Reserve balance credited to Partner's Capital A/c in new profit sharing ratio.

  4. Cash received credited to Partners' Capital A/c in old profit sharing ratio.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A Joint Life Policy Reserve represents accumulated profits. Upon the retirement of a partner or surrender of the policy, this reserve is distributed among all partners 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 A, B & C sharing profits & losses in proportion to their capitals, stood as:
A = $Rs.2,00,000$
B = $Rs.3,00,000$
C = $Rs.2,00,000$
Joint Life Policy Reserve A/c $Rs.80,000$ and Joint Life Policy A/c is shown in the balance sheet $Rs.80,000$. A desired to retire from the firm and the remaining partners decided to carry on in equal ratio, joint life policy of the partners surrendered and cash obtained $Rs.80,000$. What will be the treatment for Joint Life Policy Reserve A/c?

  1. Cash received credited to Revaluation A/c.

  2. JLP Reserve balance credited to Partner's Capital A/c in old profit sharing ratio.

  3. JLP Reserve balance credited to Partner's Capital A/c in new profit sharing ratio.

  4. Cash received credited to Partners' Capital A/c in old profit sharing ratio.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Creation of Joint Life Policy Reserve Account - Under this method, premium paid is debited to policy account and credited to bank A/c. At the end of the year, amount equal to premium is transferred from profit and loss appropriation A/c to policy reserve A/c. After this, policy A/c is brought down to its surrender value by debiting the life policy reserve A/c with amount which exceeds the surrender value of policy. Thus, in this method, policy account appears on the assets side and policy reserve account appears on the liabilities side of the balance sheet until it is realised. Both these accounts appear in the balance sheet at the surrender value of policy. 

On death or retirement of a partner Joint Life Policy Reserve Account is transferred to Joint Life Policy Account and then the balance is transferred to Partner's Capital Account in old profit sharing ratio.

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

B, C, D are partners sharing profits in the ratio $7:5:4$. D died on $30$th June $2006$ and profits for the years $2005-2006$ was $Rs.12,000$. How many shares in profits for the period $1$st April $2006$ to $30$th June $2006$ will be credited to D's accounts?

  1. $Rs.3,000$
  2. $Rs.750$
  3. $Rs.1570$
  4. $Rs 1,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

On death of partner,  representative of deceased partner is entitled to the partner's share of profit from the beginning of the year to the date of the death.

D's share of profit on 30th June, 2006 = Total profit till date * D's share
D's share of profit on 30th June, 2006 =  Rs. 12000 * (3/12) * (4/16)
D's share of profit on 30th June, 2006 = Rs. 750

Multiple choice maths part number dividing fractions division of a fractions division of a fraction

If $Rs.510$ be divided among $A,B,C$ in such a way that $A$ gets $\dfrac{2}{3}$ of what $B$ gets and $B$ gets $\dfrac{1}{4}$ of what $C$ gets, then their shares are respectively:

  1. $Rs.120, Rs.240, Rs.150$
  2. $Rs.60, Rs.90, Rs.360$
  3. $Rs.150, Rs.300, Rs.60$
  4. $None\ of\ these$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
$A=\dfrac{2}{3}B$

$B=\dfrac{1}{4}C$

$\Rightarrow C=4B$

$A+B+C=510$                                            

$=2B/3+B+4B=510$
                               
$=2B+3B+12B=510\times 3$                      

$=17B=510\times 3$ 
                                             
$B=30\times 3=90$

$A=\dfrac{2\times 90}{3}$

$=60$

 $C=4\times 90$

$=360$.

Multiple choice maths part number dividing fractions division of a fractions division of a fraction

Sunny was given $\displaystyle \frac{1}{3}$ of a sum of money and Ankur was given $\displaystyle \frac{1}{3}$ of what was left. What is Ankur's share as a fraction of Sunny's Share?

  1. $\displaystyle \frac{2}{9}$
  2. $\displaystyle \frac{1}{3}$
  3. $\displaystyle \frac{2}{3}$
  4. $\displaystyle \frac{1}{9}$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
Sunny gives $\dfrac { 1 }{ 3 }$ of his money
Left amount will be $ 1-\dfrac { 1 }{ 3 } = \dfrac { 2 }{ 3 }$ 
Amount received by Ankur is $\dfrac { 1 }{ 3 }$ of left amount $(\frac { 2 }{ 3 }$  of total amount $)$ 
Amount received by Ankur will be $\dfrac { 1 }{ 3 } \times \dfrac { 2 }{ 3 }$ of total amount $= \dfrac { 2 }{ 9 }$ of total amount
Ankur's share as a fraction of Sunny's share is $\dfrac{\frac{2}{9}}{\frac{1}{3}}=\dfrac{2}{3}$
So Correct answer will be option C
Multiple choice maths ratio, proportion and unitary method more on proportion terms related to proportion proportion

Mark the correct alternative of the following.
If A, B, C divide Rs. $1200$ in the ratio $2 : 3 : 5$, then B's share is?

  1. Rs. $240$
  2. Rs. $600$
  3. Rs. $380$
  4. Rs. $360$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Since they divide Rs. $1200$ in the ratio $2:3:5$ then let shares of them will be $2x,3x$ and $5x$.

Then according to the problem we get,
$2x+3x+5x=1200$
or, $x=120$.
So share of B is Rs. $120\times 3=360$.

Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

X, Y and Z are partners in a firm.At the time of division of profit for the year there was dispute between the partners.Profits before interest on partner's capital was Rs.15,000 and Y demands interest at 24%p.a. on his loan of Rs.80,000. There was no agreement on this point.Calculate the amount payable to X, Y and Z respectively.

  1. Rs. 5,000 to each partner

  2. Loss of Rs. 4,200 for X and Z & Y will take home Rs.15,000

  3. Rs.3,400 for X, Rs. 8,200 for Y and Rs. 3,400 for Z

  4. Rs. 5,000 to each partner.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In the absence of partnership deed, Interest on loan at 6% will be calculated and also profit will be shared equally.

Interest on loan = 80000*6/100 = 4800. 
Profit available for distribution = 15000 - 4800 = 10200 
Profit distributed = 10200/ 3 = 3400.
Share of X = 3400.
Share of Y = 3400+4800 = 8200
share of Z = 3400. 

Multiple choice elements of accounts ratio analysis liquidity ratios accounting ratio's accounting ratios

If the current ratio is $2 : 1$ and working capital is $Rs. 60,000$, what is the value of the current assets?

  1. $Rs. 60,000$
  2. $Rs. 1,00,000$
  3. $Rs. 1,20,000$
  4. $Rs. 1,80,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Current Ratio = Current Assets (C.A)/ Current Liabilities (C.L)  = $2/1$

So, CA= $2$ CL

Now, Working Capital = Current Assets(C.A) minus Current Liabilities (C.L) = $Rs.60000$
So, C.A - C.L = $60000$
       $2$ C.L-CL = $60000$
        C.L = $Rs. 60000$

Now, C.A = $2$ x $60000$ = $Rs. 120000$

Multiple choice elements of accounts ratio analysis liquidity ratios accounting ratio's accounting ratios

Given current ratio = $2.5$
Quick ratio = $1.5$
Net working capital = Rs $30,000$
What is the amount of stock?

  1. $Rs 20,000$
  2. $Rs 30,000$
  3. $Rs 50,000$
  4. $Rs 60,000$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
Net working capital = Current assets - Current liabilities
$Rs. 30000$ = Current assets - Current liabilities
Therefore, Current assets = Current liabilities + $Rs. 30000$
Current ratio = Current assets/ Current liabilities
$2.5$ = [Current liabilities + $Rs. 30000$] / Current liabilities
 $2.5$ Current liabilities  = Current liabilities + $Rs. 30000$
Current liabilities = $Rs. 30000/ 1.5$
Therefore, Current liabilities = $Rs. 20000$
Now,
Current assets = Current liabilities + $Rs. 30000$
                          = $Rs.20000 + Rs. 30000$
                          =$Rs. 50000$
Now, Quick Ratio = Quick Assets/ Current liabilities
                     $1.5$   = Quick Assets/ $20000$
Therefore,
                  Quick Assets = $Rs. 30000$
Quick Ratio = Quick Assets/ Current liabilities
Quick Ratio = [Current Assets - Stock ]/ Current liabilities
            $1.5$ = [$50000$ - Stock] / $20000$
Stock = $50000 - 30000$
          = $Rs. 20000$
Multiple choice elements of accounts accounts from incomplete records - single entry system stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs
Particulars Rs.
Opening capital $16,000$
Investment by proprietor Nil
Drawings $3,000$
Capital at the end $13,500$
Net Profit/(Loss) ?

If in the given information, Net Loss is Rs. $1,000$, then the investment made by the proprietor during the year will be _______________.

  1. Rs. $1,500$
  2. Rs. $2,000$
  3. Rs. $1,200$
  4. Rs. $1,700$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Solution to the given problem can be presented as:


Opening Capital+Profit+Invested by proprietor-Drawings $=$ Closing Capital
Rs.16000+(-1000) +Invested by proprietor -Rs.3000=Rs.13500 
$Rs.12000+Investment =Rs.13500$
Investment $= Rs.13500-12000$
Investment made by proprietor  $ = Rs.1500$

Multiple choice book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

Use the following information .

  1. X and Y enter into a joint venture sharing profits & losses in the ratio of 3:2.
  2. X is entitled to get 1% commission on purchase and Y is entitled to get 5% commission on sales.
  3. X purchased goods for 4,00,000 and sent the same to Y. Supplier allowed a cash discount of 5%.
  4. X drew a bill on Y for an amount equivalent to 80% of the original cost of goods. X got it discounted at 3,00,000.
  5. Y sold 50% goods for 5,00,000 and paid 4,000 towards selling & administration expenses and insurance and 1,000 still outstanding. Y allowed a cash discount of 5% to a customer to whom goods were sold for 2,00,000. Bad Debts amounted to 16,000.
  6. 50% of balance goods are taken over by Y at 60% of Cost.
  7. Remaining Goods were destroyed by fire and insurance claim was received by Y to the extent of 60%.
The profit on Joint Venture is:

  1. 1,80,000.

  2. 1,60,000.

  3. 1,40,000.

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

The profit calculation involves accounting for purchases, discounts, commissions, sales, and losses (bad debts, fire). Following the joint venture accounting steps leads to 1,60,000.