Questions for Chapter-Basic Concepts: Accounting for Partnership Firms 

MCQ-Based Questions for CUET Accountancy chapter-Basic Concepts: Accounting for Partnership Firms 

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Practice Questions for CUET Accountancy chapter-Basic Concepts: Accounting for Partnership Firms SET-1

Accounts - MCQ on Basic Concepts: Accounting for Partnership Firms

Class XII

Q.1. The purpose of preparing profit and loss appropriation account of a partnership firm, is

a. to find the balance in partner’s account.

b. to find out the profit or loss.

c. to show the distribution of profits among the partners.

d. to display the transactions of the business.

Answer:

(c)

Explanation: The purpose of preparing profit and loss appropriation account is to show the distribution of profits among the partners.

Q.2. One of the following, items, which appears on the debit side of the capital account of a partner, when capitals are fluctuating, is

a. share of loss.

b. share of profit.

c. salary to a partner.

d. commission to a partner.

Answer:

(a)

Explanation: When capitals are fluctuating, share of loss appears on the debit side of the capital account of a partner.

Q.3. Guarantee of profit to a partner means

a. that a partner shall get a certain minimum amount of profit.

b. old partners shall give extra profits to him.

c. maximum profit limit is defined for a partner.

d. there are excess profits to the firm.

Answer:

( a )

Explanation: The guarantee of profits to a partner is that a partner shall get a certain minimum amounts of profit.

Q.4.The fixed capital accounts of partners change, when

a. interest on capital is allowed.

b. there is permanent introduction of capital.

c. salary is allowed.

d. there are temporary drawings.

Answer:

b

Explanation: Fixed capital accounts of partners change, when there is permanent introduction or withdrawal of capital.

Q.5. The true fact about partnership deed is that it is

a. compulsory by law.

b. made to avoid future disputes among partners.

c. the oral agreement between the partners.

d. not required at all.

Answer:

(b)

Explanation: Partnership deed is not compulsory by law. It is made to avoid future disputes among partners.

Q.6. Interest on partner’s loan is credited in

a. his capital account.

his loan account.

profit and loss appropriation account.

his current account.

Answer:

(b)

Explanation: Interest on partner’s loan is credited to his loan account and not to the capital account.

Q.7. One of the following, which is true in respect to partnership, is that

a. a partnership agreement should be in writing.

even one partner can conduct the business of the partnership firm.

in the absence of any agreement to the contrary, the partners are entitled to interest on capital.

the liability of the partners is limited.

Answer:

(b)

Explanation: It is not necessary that each partner should take part in the partnership. Even one partner can conduct the business of the partnership firm.

Q.8. If, same amount is withdrawn at the end of each month, the number of months taken, is

a. 5.5.

b. 6.

c. 6.5.

d. 4.5.

Answer:

(a)

Explanation: If same amount is withdrawn at the end of each month we calculate interest for 5.5 months.

Q.9. The maximum limit of partners in case of business other than banking, is

a. 10.

2.

20.

50.

Answer:

c.

Explanation: Maximum limit of partners in case of business other than banking is 20.

Q.10. In the absence of partnership agreement, the interest on loan, is

a. 10% p.a.

b. 5% p.a.

c. 6% p.a.

d. 5 % p.a.

Answer:

c

Explanation: Interest on loan shall be provided at the rate of 6% p.a. in the absence of any agreement between the partners.

Q.11. The item that appears on the debit side of the profit and loss appropriation account, is

a. profit as per profit and loss account.

b. interest on drawings.

c. loss transferred to partner’s capital account.

d. loss as per profit and loss account.

Answer:

( d )

Explanation: Loss as per profit and loss account is shown on the debit side of the profit and loss account; others are shown on the credit side of the same account.

Q.12. Under fixed capital method, the capital accounts prepared by partners, is/are

a. partner’s capital account only.

b. partner’s current account only.

c. both capital and current accounts for each partner.

d. partner’s capital account or current account.

Answer:

c

Explanation: Under fixed capital method, the capital accounts prepared by partners, is/are both capital and current accounts for each partner.

Q.13. A and B are partners. They maintain their capital accounts under fixed capital method. B introduced of Rs. 5000 as additional capital to the firm. This addition to capital will be shown on the

a. debit side of B’s current account.

b. credit side of B’s current account.

c. debit side of B’s capital account.

d. credit side of B’s capital account

Answer:

( d )

Explanation: Under fixed capital method; any addition to capital will be shown in partner’s capital account.

Q.14. Debit side of partner’s current account will record

a. salary payable to partner.

b. share of profit.

c. interest on drawings.

d. fresh capital introduced by a partner.

Answer:

(c)

Explanation: Interest on drawings will be recorded on the debit side of partner’s current account, as they reduce the capital.

Q.15. Under fluctuating capital method, we prepare

a. partner’s capital account only.

b. partner’s current account only.

c. both capital and current accounts for each partner.

d. partner’s capital account or current account.

Answer:

(a)

Explanation: Partner’s capital account only, because we make all the entries in that account only.

Q.16. Interest on capital is

a. charged against profits.

b. appropriation of profits.

c. shown in profit and loss account.

d. income to the firm.

Answer:

(b)

Explanation: Interest on capital may be treated as appropriation.

Q.17. The deficiency is borne by guaranteeing partners in

a. old ratio.

b. agreed ratio.

c. equal proportion.

d. sacrificing ratio.

Answer:

b

Explanation: In case of guarantee of minimum profits to a partner, the deficiency is borne by guaranteeing partners in agreed ratio.

Q.18. Mohan became a new partner with the capital of Rs. 1,00,000 on 1^st January and he further introduced Rs. 60,000 on 1^st October. Calculate his interest on capital at the rate of 10% p.a. for the year ending 31^st December.

a. Rs. 11,500.

b. Rs. 16,000.

c. Rs. 13,000.

d. Rs. 23,000.

Answer:

(a)

Explanation: Interest on capital will be computed on Rs. 1,00,000 for one full year, while interest on capital is calculated on Rs. 60,000 for 3 months @ 10% p.a.

Q.19. If, same amount is withdrawn at the beginning of each month, the time to be taken into consideration, will be

a. 5.5 months.

b. 6 months.

c. 6.5 months.

d. 4.5 months.

Answer:

(c)

Explanation: If, the same amount is withdrawn at the beginning of each month we will calculate interest for 6.5 months.

Q.20 The partner’s drawings is to be debited to

a. partner’s capital account.

b. Profit and loss account.

c. interest on drawings account.

d. profit and loss appropriation account

Answer:

b

Explanation: Partners drawings is debited to capital account.

Q.21 When different amounts are withdrawn at different intervals (dates). Interest on capital will be calculated with the help of

a. average period method.

b. average rate of interest method.

c. monthly drawings method.

d. product method.

Answer:

(d)

Explanation: When different amounts are withdrawn at different intervals (dates), the interest is calculated with the help of product method.

Q.22. Sometimes students are required to adjust the capital accounts of partners, which have already been closed, it is called

a. guarantee of profits.

b. past adjustment.

c. partnership deed.

d. alteration of previous books.

Answer:

b

Explanation: Sometimes students are required to adjust the capital accounts of partners, which have already been closed; it is called as past adjustment.

Q.23. Interest on capital is provided on the basis of

a. capital calculated at the end of the period.

b. half of the average capital.

c. time period, for which the capital has been used in the business.

d. profit sharing ratio.

Answer:

c

Explanation: Interest on capital is given on the basis of time period, for which the capital has been used in the business.

Q.24. If, nothing is mentioned about the profit sharing ratio, the profits and losses will be shared in

(a) capital ratio.

(b) equal proportion.

(c) as per work done.

(d) gaining ratio.

Answer:

b

Explanation: In case nothing is mentioned about the profit sharing ratio, the profits and losses will be shared in equal proportion.

Q.25. Profit and loss appropriation account is prepared like

a. partner’s capital account.

b. partner’s current account.

c. balance sheet.

d. profit and loss account.

Answer:

( d )

Explanation: Profit and loss appropriation account is prepared like profit and loss account.

Q.26. The item to be recorded on debit side of partner’s capital account is

a. closing debit balance.

share of profit.

withdrawal of capital.

interest on capital.

Answer:

c

Explanation: Withdrawal of capital is recorded on the debit side of partner’s capital account.

Q.27. X, Y and Z are partners in a firm. There was a dispute among the partners at the time of division of profits for the year. The amount of profits before interest on partners’ capital was Rs. 6,000. Y computed interest @ 24% p.a. on his loan of Rs. 80,000. There was no agreement on this point. The amount payable to X, Y and Z is

a. Rs. 2,000 to each partner.

b. Loss of Rs. 4,400 for X, and Z and Y will take home Rs. 14,800.

c. Rs. 4,00 for X, Rs. 5,200 for Y and Rs. 4,00 for Z.

d. Rs. 2,400 to each partner.

Answer:

c

Explanation: Interest on loan will be given to Y @ 6% p.a. and the rest of the profits will be divided among the partners equally.

Q.28. Drawings against capital is

a. debited in capital account.

b. credited in capital account.

c. credited in P & L appropriation account.

d. debited in P & L appropriation account.

Answer:

( a )

Explanation: Drawings against capital is debited to capital account. They result in reduction of capital.

Q.29. If, a partner withdraws a lump-sum amount during the year, then time period taken, will be

a. average.

b. beginning.

c. end.

d. irrespective of the time.

Answer:

(a)

Explanation: When a lump sum amount is withdrawn by a partner during the year,the time period taken is as an average of the accounting period.

Q.30. A and B contribute Rs. 50,000 and Rs. 30,000 respectively as capital on which they agree to allow interest at 6% p.a. Their profit sharing ratio is 3:2 and the profit for the year is Rs. 4,000 before allowing interest on capitals. Interest on capital payable to each partner shall be

a. Rs. 2,500 and Rs. 1,500 respectively.

b. Rs. 5,000 and Rs. 3,000 respectively.

c. Rs. 3,000 and Rs. 1,800 respectively.

d. Rs. 1,500 and Rs. 9,00 respectively.

Answer:

( a )

Explanation: The profits are inadequate to cover interest on capitals. Hence, the available profits are divided among partners in proportion to capitals.

Q.31. Manager’s commission is treated as

a. appropriation of profits.

b. charge against profits.

c. may be treated as charge or appropriation of profits.

d. addition to profits.

Answer:

b

Explanation: Manager’s commission is charged against profits. It is expense for the partnership firm.

Q.32. If, same amount is withdrawn at the middle of each month, then the time period taken, would be

a. 5.5 months.

b. 6 months.

c. 6.5 months.

d. 4.5 months.

Answer:

b

Explanation: When same amount is withdrawn at the middle of each month, we will calculate interest on drawings for 6 months.

Q.33. A partnership firm should have

a. one partner.

b. twenty one partners.

c. twenty two partners.

d. two partners

Answer:

(d)

Explanation: A partnership firm should have at east two partners.

Q.34. A partner acts for firm in the capacity of

a. an agent.

b. third party.

c. an employee.

d. personal bindings.

Answer:

(a)

Explanation: A partner acts as an agent for the firm. His acts are binding on all the partners as well as the firm.

Q.35. In the absence of partnership agreement, a partner is entitled to

a. salary.

b. commission.

c. interest on loan.

d. profit share in capital ratio.

Answer:

c

Explanation: In the absence of an agreement, the partners are entitled to interest on loan and advances made to the firm.

Q.36. Interest on capital will be paid to the partners only from

a. profits.

reserves.

accumulated profits.

goodwill.

Answer:

(a)

Explanation: Interest on capital is paid out of the profits of the firm.

Q.37. Amount withdrawn by a partner for personal use reduces

a. profits.

b. drawings.

c. capital.

d. interest on drawings

Answer:

(c)

Explanation: Amount withdrawn by a partner for personal use reduces the existing capital of the partner.

Q.38. Interest on drawings will be recorded on

a. debit side of profit and loss appropriation account.

credit side of profit and loss appropriation account.

credit side of profit and loss account.

credit side of capital account.

Answer:

(b)

Explanation: Interest on drawings is recorded on the credit side of profit and loss appropriation account, as it is income from the firm’s point of view.

Q.39. When partner’s capitals are shown under fixed capital method, Capital accounts normally have

a. negative balance.

positive balance.

less balance.

zero balance.

Answer:

b

Explanation: It shows positive balance as drawings and other charges are recorded in other account.

Q.40. If, a partner brings additional capital during the year, interest is calculated

a. for the whole year.

b. for average of the year.

c. from the date of introduction of additional capital to the last date of the financial year.

d. for full period divided by two.

Answer:

c

Explanation: If, a partner brings additional capital during the year, interest is calculated from the date of introduction of additional capital to the last date of the financial year.

Q.41. The debit side of profit and loss appropriation account shows

a. loss as per profit and loss account.

b. interest on drawings.

c. drawings.

d. profit as per profit and loss account.

Answer:

( a )

Explanation: Loss as per profit and loss account is shown on the debit side of profit and loss account.

Q.42. One of the following, which can never show a negative balance, is

a. current account of the partner.

b. capital account of the partner.

c. capital account of the partner under fixed capital method.

d. capital account of the partner under fluctuating capital method.

Answer:

c

Explanation: Capital account of the partner under fixed capital method can never show negative balance because fluctuations in the capital like drawings, etc. are recorded through the current account. In other cases, the capital or current account of the partner may show negative balance.

Q.43. The advantage of having partnership deed is

a. it makes the partnership valid.

b. it is helpful in case of disputes.

c. it makes the partnership legal.

d. it avails of various exemptions.

Answer:

b

Explanation- The advantage of having partnership deed is that it is helpful in case of disputes. A partnership is legal and valid even if there is no partnership deed.

Q.44. Interest on partner’s loan is

a. appropriation of profits.

b. charge against profits.

c. income for the firm.

d. shown in the profit and loss appropriation a/c.

Answer:

b

Explanation: Interest on loan is treated as charge against profits, that’s why it is not recorded in the profit and loss appropriation account.

Q.45. If, same amount is withdrawn at the beginning of each quarter, then the time to be taken into consideration will be

a. 7.5 months.

b. 6 months.

c. 3 months.

d. 7 months.

Answer:

( a )

Explanation: 7.5 months will be taken into consideration, if same amount is withdrawn at the beginning of each quarter.

Q.46. Relationship between persons, who have agreed to share the profits of a business carried on by all or any one of them acting for all is called

a. partnership.

b. company.

c. association of persons.

d. body of individuals.

Answer:

(a)

Explanation: Relationship between persons, who have agreed to share the profits of a business carried on by all or any one of them acting for all is called partnership.

Q.47. One example of gain to the partnership firm, is

a. interest on capital.

b. interest on drawings.

c. salary to a partner.

d. commission to the partner.

Answer:

b

Explanation: Interest on drawings is the gain from the firm’s point of view and it is shown in the credit side of profit and loss appropriation account.