Tag: partnership accounts (preliminary)

Quizzes (6) Questions (35)

Questions Related to partnership accounts (preliminary)

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

Interest on advance money provided by the Partner can be paid from ____________.

  1. profits

  2. out of capital

  3. both (a) and (b)

  4. from the money provided by Central Government
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Interest on a partner's loan is a charge against profits, meaning it must be paid even if the firm incurs a loss, and can be paid out of capital if necessary.

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

Which of the following statements is not true?

  1. It is not true that all partners can have limited liability in a limited partnership

  2. Capital contributions do not have to be equal from each partner

  3. A minor has a right to access and inspect books of accounts of partnership firm in which he is partner

  4. Interest on capital is a reward for the different amounts of work partners may perform
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Interest will be allowed to each partner on the capital contributed by him . Interest on capital of the partners is calculated for the relevant period for which the amount of capital has been used in the business. Capital introduced or withdrawn by a partner during the accounting year has to be taken for the purpose of calculation and definitely is not a reward for the partners.

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

In the absence of a Partnership deed or agreement, a partner is entitled to interest on loans or advances__________. 

  1. @ $6$% p.a.

  2. @ $9$% p.a.

  3. at the bank rate

  4. @ $12$% p.a.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In the absence of a partnership deed, a partner is entitled to 6% per annum interest on loans or advances to the firm. This is the default rate specified in the Partnership Act, 1932. Options B (9%), C (bank rate), and D (12%) are not the statutory default rates. Note: '$6$' and '$9$' in options should be '6%' and '9%'.

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

Is rent paid to a partner an appropriation of profits?

  1. Yes.

  2. No. 

  3. If partner's contribution as capital is maximum. 

  4. If partner is a working partner. 
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Partner's rent unless provided in the deed has to be treated as a charge against profit and so it is transferred to profit and loss a/c. Rent paid by a firm is such an expenditure which is incurred irrespective of any partner the rent paid is debited to P/L account instead of Appropriation account.'

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

At the time of dissolution which payment will be made in priority ?

  1. Capital to partners

  2. Loan provided by partner

  3. Fluctuating capital account

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

Payment of partner's loan is made before payment of capital because capitals are paid off only if any balance is left after payment of all the liabilities. loan provided by partner is a liability for the firm. A separate Partner's loan account is prepared for payment. Following entry is passed on payment :
Partner's loan A/c Dr.
   To Bank/Cash A/c 

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

One of the partner contributed Rs.30,000 in the firm-How much interest he will get on the capital contributed ________.

  1. Nill

  2. 6% of 30,000

  3. 5% of 30,000

  4. Income of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Partners usually introduce some amount time to time as the capital in firm and the only reaosn behind it is to expand the business.

Since the partner has introduced Rs30,000 as additonal capital and firms does not pays interest on such amounts. The only situation when interest has to be paid is the time when a loan has been taken by the firm from any of its partner.
 

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

A partner claim interest on capital _____________.

  1. even if there is loss

  2. if there is profit

  3. if there is profit and there is an agreement to pay it

  4. even if there loss and there is an agreement to pay it
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Interest on capital is the amount received by partners for their invested capitals and it not a charge against profit. It means that interest is depended upon the profit situation.

A partner can thus claim interest on capital only when it is mentioned in the agreement and firm ahs enough profits to provide the interest. If the intereest in not mentioned in agreement or there is no agreement, partner cannot claim for interest on capital.

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

Where a partner is entitled to interest on capital subscribed by him, such interest will be payable ___________. 

  1. only out of profit

  2. only out of capital

  3. out of profits or out of capital

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

Where a partner is entitled to interest on capital subscribed by him, such interest will be payable only out of profit. Interest on capital is an appropriation and hence will be provided only out of profits. 

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

Interest on capital will be paid to the partners if provided for in the agreement but only from __________. 

  1. profits

  2. reserves

  3. accumulated profits

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

Interest on capital will be paid to the partners if provided for in the agreement but only from profits. Interest on capital is an appropriation and not a charge against profit hence, is provided only to the extent of profits. 

Multiple choice book keeping and accountancy partnership accounts (preliminary) adjustment of distributable profits final accounts of partnership firms profit-loss appropriation account

When the Interest on drawings is charged to partners, Interest on Drawing Account is credited, and Partner's Capital Account is debited. It is called __________. 

  1. an opening entry

  2. a closing entry

  3. an adjusting entry

  4. an transfer entry
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When the Interest on drawings is charged to partners, Interest on Drawing Account is credited, and Partner's Capital Account is debited. It is called as an adjusting entry. Adjusting entries are usually done at the end of the year for incomes and expenses.