Accountingfor Partnership: Basic Concepts

I. State which of the following is correct:

Question 1.
Partnership deed may be _______
(a) oral
(b) written
(c) duplicate
(d) either written or oral

Answer

Answer: (d) either written or oral

Question 2.
If no agreement is made by partners then interest on loan will be given @ _________
(a) 5% p.a.
(b) 6% p.a.
(c) no interest
(d) 7% p.a
Answer

Answer: (b) 6% p.a.

Question 3.
Profit will be divided in ________ in the absence of partnership deed.
(a) 1 : 1
(b) 2 : 1
(c) 1 : 2
(d) equal ratio

Answer

Answer: (d) equal ratio

Question 4.
In a partnership, liability of all partners is _________
(a) unlimited
(b) limited
(c) according to capital
(d) decided by company act

Answer

Answer: (a) unlimited

Question 5.
Maximum number of partners in a partnership firm can be ________
(a) 50
(b) 20
(c) 100
(d) no limit

Answer

Answer: (d) no limit

Question 6.
When there is no partnership deed then provisions of partnership act ________ willbe applicable.
(a) 1956
(b) 1912
(c) 1932
(d) 1949

Answer

Answer: (c) 1932

Question 7.
Liability of a partner in LLP is ________
(a) limited
(b) unlimited
(c) not defined in the law
(d) limited to the capital only

Answer

Answer: (a) limited

Question 8.
Provisions of Table _______ are applicable in the absence of partnership deed.
(a) A
(b) B
(c) C
(d) D

Answer

Answer: (a) A

Question 9.
In the absence of any provision interest on capital will be calculated for _________
(a) 6 months
(b) 1 year
(c) 1 month
(d) no interest

Answer

Answer: (d) no interest

Question 10.
Minimum number of partners in a partnership are ________
(a) 5
(b) 7
(c) 2
(d) 10

Answer

Answer: (c) 2

Question 11.
Maximum number of partners in a normal partnership are ________
(a) 5
(b) 7
(c) 2
(d) 20

Answer

Answer: (d) 20

Question 12.
Maximum number of partners in a banking partnership are _________
(a) 5
(b) 7
(c) 2
(d) 10

Answer

Answer: (d) 10

Question 13.
Current accounts are opened if capital is __________
(a) fixed
(b) fluctuating
(c) not contributed
(d) fixed or fluctuating

Answer

Answer: (a) fixed

Question 14.
Balance of capital (fix) accounts may be _________
(a) Dr.
(b) Cr.
(c) Dr. or Cr.
(d) Cr. and Dr.

Answer

Answer: (b) Cr.

Question 15.
Salary to partners will be shown in _________
(a) Profit and loss account
(b) Profit and loss adjustment account
(c) Trading account
(d) Manufacturing account

Answer
Answer: (b) Profit and loss adjustment account

Question 16.
Interest on capital will be shown in ________
(a) Capital account
(b) Profit and loss adjustment account
(c) Trading account
(d) Both of capital account and profit and loss adjustment account

Answer

Answer: (d) Both of capital account and profit and loss adjustment account

Question 17.
Drawings of partners will be shown in ________
(a) Capital account
(b) Profit and loss adjustment account
(c) Profit and loss account
(d) Trading account

Answer

Answer: (a) Capital account

Question 18.
In the absence of partnership deed partners are entitled to receive __________
(a) Interest on Capital
(b) Interest on Loan
(c) Salary
(d) Commission

Answer

Answer: (b) Interest on Loan

Question 19.
When question is silent about the date of withdrawal of drawing then Interest will becalculated for
________
(a) 6 months
(b) 1 month
(c) 6½ months
(d) 1 year

Answer

Answer: (a) 6 months

Question 20.
If partnership deed mention that interest will be given 6% p.a. interest will be given _________
(a) out of profits only
(b) definitely
(c) out of losses
(d) with the permission of all partners

Answer

Answer: (a) out of profits only

Question 21.
Partners Current Account have _________
(a) debit balance
(b) credit balance
(c) debit or credit
(d) debit and credit

Answer

Answer: (c) debit or credit

Question 22.
In the absence of partnership deed how much interest will be given on capital?
(a) 5% p.a.
(b) 6% p.a.
(c) 7% p.a.
(d) No interest

Answer

Answer: (d) No interest

II. Fill in the blanks with correct word.

Question 23.
In the absence of deed, ______ salary will be given to partners.

Answer

Answer: No

Question 24.
In the absence of deed, profit will be shared in _______ ratio.

Answer

Answer: equal
Question 25.
________ accounts are opened, while capital is fixed.

Answer

Answer: current

Question 26.
________ accounts is opened, while capital is fluctuating.

Answer

Answer: capital

Question 27.
Liability of partners is ________ in a general partnership firm.

Answer

Answer: Unlimited

Question 28.
Liability of partners is ________ in LLP.

Answer

Answer: limtied

Question 29.
The business of the firm can be conducted even by ________ partner.

Answer

Answer: One

Question 30.
There must be atleast two ________ partners in LLP.

Answer

Answer: designated

Question 31.
A partnership can be formed only for a _________ business.

Answer

Answer: legal
Question 32.
Partners are mutual _______ of each other in a partnership firm/business.

Answer

Answer: agents

Question 33.
Money advanced to the firm in addition to the capital is called __________

Answer

Answer: loan

Question 34.
Partnership is the result of an between _________ two or more person.

Answer

Answer: Agreement

Question 35.
General Partnership is governed by Partnership Act ________ where LLP is govern by LLP Act _______

Answer

Answer: 1932, 2008

Question 36.
In order to form partnership there should be atleast _______ persons.

Answer

Answer: two

Question 37.
The business of _________ concern may be carried on by all the partners or any of them acting for all.

Answer

Answer: partnership

Question 38.
________ interest is to be charged on the drawings made by the partners, if there is nothing mentioned in
the deed.

Answer
Answer: No

Question 39.
Maximum number of partners in a partnership firm can be ________

Answer

Answer: 50

Question 40.
Interest on partners _________ to the firm shall be paid even if there are losses.

Answer

Answer: loan

III. State whether the following statements are True or False.

Question 41.
Minimum number of partners in a partnership firms are two.

Answer

Answer: True

Question 42.
In the absence of partnership deed, no interest will be charged on drawings.

Answer

Answer: True

Question 43.
In the absence of partnership deed, profit will be distributed equally between all partners.

Answer

Answer: True

Question 44.
If majority of partners decide to close the LLP business, they can do so by giving notice in writing.

Answer

Answer: False
Question 45.
In the absence of partnership deed, interest @ 6% p.a. will be allowed on partner’s Loan.

Answer

Answer: True

Question 46.
In the absence of partnership deed, interest on capital will be given @ 6% p.a.

Answer

Answer: False

Question 47.
In case of LLP business in partnership, maximum number of partners are limited.

Answer

Answer: False

Question 48.
Partnership deed must be in written form.

Answer

Answer: False

Question 49.
A minor can never become a partner in a partnership firm.

Answer

Answer: False

Question 50.
Liability of partners in general partnership is unlimited.

Answer

Answer: True

Question 51.
If partnership deed is silent then remuneration can be given to partners.

Answer

Answer: False
Question 52.
If any partner remain absent from the business, share of profit will automatically reduce.

Answer

Answer: False

Question 53.
If time of drawings is not given then interest will be calculated for half of the time period.

Answer

Answer: True

Question 54.
In case of fixed capital accounts, balance of capital always fluctuate.

Answer

Answer: False

Question 55.
Partners Current Account always have credit balance.

Answer

Answer: False

Question 56.
Every partner is an agent of the firm.

Answer

Answer: True

Question 57.
Expenses as charge in nature are shown in profit and loss appropriation account whereas expenses as
appropriation in nature are shown in profit and loss account.

Answer

Answer: False

Question 58.
A partnership Act 1932 does not differentiate kind of businesses whereas LLP Act 2008 permits only
legal business to run.
 Answer

Answer: False

Question 59.
Under fixed capital, any provision of salary, interest etc., are shown incurrentaccount.

Answer

Answer: True

Question 60.
LLP business is similar to company form of business.

Answer

Answer: True

IV. One word Questions

Question 61.
Chhavi and Neha were partners in a firm sharing profits and losses equally. Chhavi withdrew a fixed
amount at the beginning of each quarter. Interest on drawings is charged @ 6% p.a. At the end of the year,
interest on Chhavi’s drawings amounted to ₹ 900. Pass necessary journal entry for charging interest on
drawings.

Answer

Answer:

Question 62.
Dev withdrew ₹ 10,000 on 15th day of every month. Interest on drawings was to be charged @ 12% per
annum. Calculate interest on Dev’s drawings.

Answer

Answer: Interest On Drawings = 1,20,000 × 12/100 × 6 × 12 = 7,200

Question 63.
Amit, a partner in a partnership firm withdrew ₹ 7,000 at the beginning of each quarter. For how many
months would interest on drawings be charged?
 Answer

Answer: 7½ months

Question 64.
Raj and Seema started a partnership firm on 1st July 2018. They agreed that Seema was entitled to a
commission of 10% of the net profit after charging Raj’s salary of ₹ 2,500 per quarter and Seema’s
commission. The net profit before charging Raj’s salary and Seema’s commission for the year ended 31st
March 2019 was ₹ 2,27,500. Calculate Seema’s commission.

Answer

Answer: Net profit before salary and commission = ₹ 2,27,500

Net Raj’s salary ₹ 2,500 × 3 = ₹ 7,500
Net profit after Raj’s salary but before Seema’s commission = ₹ 2,20,000
Seema’s commission = 10/110 of ₹ 2,20,000 = ₹ 20,000

Question 65.
A and B are partners in firm sharing profits and losses in the ratio of 7 : 3. Their fixed capitals were: A ₹
9,00,000 and B ₹ 4,00,000. The partnership deed provided the following:
(i) Interest on capital @ 10% p.a.
(ii) A’s salary ₹ 50,000 per year and B’s salary ₹ 3,000 per month.
Profit for the year ended 31st March 2019 ₹ 2,78,000 was distributed without providing for interest on
capital and partner’s salary. Showing your work clearly, pass the necessary adjustment entry for the above
omissions.

Answer

Answer:
Journal:

Table showing Past Adjustments:

Question 66.
Partners of ABC Corporation have agreed that D, a minor, should be admitted as a partner in the firm.
What will be the liability of D?

Answer

Answer: Limited

Question 67.
X, Y, and Z are partners in a firm. The firm had adopted the fixed capital method. Mention the account in
which the interest on capital will be recorded:

Answer

Answer: Capital Account

Question 68.
A partnership deed provides for the payment of interest on capital but there was a loss instead of profits
during the year 2010-11. Will the interest on capital be allowed?

Answer

Answer: No

Question 69.
Where is interest on a partner’s loan debited to Profit and Loss Account or Profit and Loss Appropriation
Account?

Answer

Answer: Profit and loss Account

Question 70.
Is interest on a partner’s loan is payable even in case of loss to the firm?

Answer

Answer: Yes

Question 71.
Net profit of a firm is ₹ 30,000, partners’ salary is ₹ 12,000, and interest on capital is ₹ 20,000. Mention
the amount of partners’ salary and interest on capital which should be debited to the Profit and Loss
Appropriation Account if both items are treated as appropriation.

Answer

Answer: Partners’ salary ₹ 11,250, Interest on capital ₹ 18,750.

Note: In the ratio of salary and interest on capital i.e. 12,000 : 20,000 = 3 : 5.
Question 72.
Ram and Shyam are partners sharing profits/losses equally. Ram withdrew ₹ 1,000 p.m. regularly on the
first day of every month during the year 2013-14 for personal expenses. If interest on drawings is charged
@ 5% p.a. Calculate interest on the drawings of Ram.

Answer

Answer: Interest on Drawings = 12, 000 × 5

100
×
6.5

12
= ₹ 325

Question 73.
Verma and Kaul are partners in a firm. The partnership agreement provides that interest on drawings
should be charged @ 6% p.a. Verma withdraws ₹ 2,000 per month starting from April 01, 2013 to March
31, 2014. Kaul withdraw ₹ 3,000 per quarter, starting from April 01, 2013. Calculate interest on partner’s
drawings.

Answer

Answer: Interest on Verma’s Drawings = 24, 000 × ×

6

100
6.5

12
= ₹ 780
Interest on Kaul’s Drawings = 12, 000 × = ₹ 450
6 7.5
×
100 12

Question 74.
Himanshu withdraws ₹ 2,500 at the end of each month. The partnership deed provides for charging the
interest on drawings @ 12% p.a. Calculate interest on Himanshu’s drawings for the year ending 31st
December 2013.

Answer

Answer: Interest on Drawings = 30, 000 × 12

100
×
5.5

12
= ₹ 1650

Question 75.
Bharam is a partner in a firm. He withdraws ₹ 3,000 at the starting of each month for 12 months. The
books . of the firm closes on March 31 every year. Calculate interest on drawings if the rate of interest is
10% p.a.

Answer

Answer: Bharam withdraws ₹ 3,000 at the starting of each month.

Therefore, Drawings = ₹ 3,000 × 12 = 36,000
Interest on Drawings = 36, 000 × 10
×
100
= ₹ 1,950
6.5

12

Question 76.
Amit and Bhola 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 2013 were ₹ 24,000
and ₹ 16,000, respectively. Calculate interest on drawings based on the assumption that the amounts were
withdrawn evenly, throughout the year.

Answer
Answer: Amit’s Drawings = ₹ 24,000
Interest on Drawings @ 10% p.a = 24, 000 × 10
×
100
= ₹ 1,200
6

12

Bhola’s Drawings = ₹ 16,000

Interest on Bhola’s Drawings = 16, 000 × 10

100
× = ₹ 800
6

12

Note: In the absence of the date of drawings, it is assumed drawings have been made in the middle of
each month/period.

Question 77.
A, B, and C were partners in a firm sharing profits in the ratio of 3 : 2 : 1. B was guaranteed a profit of ₹
2,00,000. During the year the firm earned a profit of ₹ 84,000. Calculate the net amount of Profit/Loss
transferred to the capital accounts of A and C.

Answer

Answer: Net Amount of Loss transferred to:

A’s Capital Account: ₹ 87,000
C’s Capital Account: ₹ 29,000