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Basics of Partnerships Test - 1

Description: Chapter : Basics of Partnership Class : XII
Number of Questions: 20
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Tags: accountancy Partnership Accounts
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According to the Partnership Act 1932, what is the maximum limit of partners?

  1. It is 10 in case of General Business.

  2. It is 20 in case of Banking Business.

  3. It is 10 in case of Banking and 20 in case of General Business.

  4. No Maximum Limit is Fixed by Partnership Act 1932.

  5. Maximum Number can be 50.

Show answer
Correct Option: D
Explanation:

The maximum limit is fixed by the Companies Act 1956, and not by the Partnership Act 1932.

Partnership comes into existence by

  1. an agreement

  2. status of partners

  3. process of Law

  4. without any agreement

  5. lawful business

Show answer
Correct Option: A
Explanation:

An Agreement is required (written or implied) to form a partnership. Partnership comes into existence by an agreement.

Commission paid to a partner is shown in Profit and Loss Appropriation Account, but commission paid to manager is shown in Profit and Loss Account. What is the reason behind it?

  1. It is an Appropriation.

  2. Commission to manager is not compulsory.

  3. It is paid after the appropriations.

  4. It is a charge against the Profit.

  5. It is a Capital expenditure.

Show answer
Correct Option: D
Explanation:
  1. Commission payable to manager is a charge against the profit. It means commission will be paid whether there is profit or loss.
    1. In case of loss no commission (appropriation) will be given to partners.
       

How much interest will be paid on a bank loan in the absence of a partnership deed?

  1. 6%

  2. 6% Per Annum

  3. 10.75%

  4. 12%

  5. As per the rate fixed by bank

Show answer
Correct Option: E
Explanation:

Partners cannot fix bank interest.

The current account of a partner __________________.

  1. will always show a debit balance

  2. will never show a debit balance

  3. will show a credit balance

  4. will never show a credit balance

  5. may have a debit or a credit balance

Show answer
Correct Option: E
Explanation:

Current account can show a debit or a credit balance. Debit balance is shown on the assets side and credit balance is shown on the liabilities side of the balance sheet.

A partnership firm may open apartner's current accounts when capitals are

  1. fixed

  2. fluctuating

  3. capitals are equal

  4. capitals are unequal

  5. capitals are fixed and fluctuating both

Show answer
Correct Option: A
Explanation:

Yes, it is correct. A partner's current accounts are opened only when capital accounts are fixed.

Ashok drew Rs. 2,000 at the end of every month for 6 months (ending 31st March 2014) @ 10% p.a. What is the interest on drawings?

  1. 250

  2. 200

  3. 100

  4. 417

  5. 150

Show answer
Correct Option: A
Explanation:

Total drawings 12,000 Interest = 12,000 x 10/100 x 2.5/12 = 250

What will be paid to the partners in the absence of partnership deed?

  1. Interest on Capital

  2. Salary to Partners

  3. Interest on Loan

  4. Commission to Partners

  5. Profit in ratio of their capitals

Show answer
Correct Option: C
Explanation:

Interest on loan is a charge against profit. Interest on loan will be paid @ 6% p.a. to the partner.

Where will a person record share of loss, when partners capital accounts are fixed?

  1. Debit side of partners capital account.

  2. Credit side of partners capital account.

  3. Debit side of partners current account.

  4. Credit side of partners current account.

  5. The Balance Sheet.

Show answer
Correct Option: C
Explanation:

Share of Loss debit side and Share of profit credit side in partners current account.

Which of the following is not a provision of partnership that is not followed in the absence of a partnership deed?

  1. Interest on Partner's Loan is paid @ 6%.

  2. Interest on Partner's Loan is paid @ 6% Per Annum.

  3. No Interest on capital to any partner.

  4. No salary or commission to any partner.

  5. No Interest on drawings.

Show answer
Correct Option: A
Explanation:

It is the correct answer, as the term 'Per Annum' is missing.

Which of the following options can change the fixed capital of partners?

  1. Cash withdrawn for personal use

  2. Goods taken for personal use

  3. Asset taken for personal use

  4. Additional capital introduced

  5. Interest on capital provided to the partners

Show answer
Correct Option: D
Explanation:

There are only two options that can change the fixed capital of the partners, i.e., additional capital introduced or capital withdrawn permanently.

Debit balance of Current Account is shown in which of the following sheets?

  1. Liabilities side of Balance Sheet

  2. Assets side of Balance Sheet

  3. Debit side of Partners Capital A/c

  4. Credit side of Partners Capital A/c

  5. Profit and Loss Adjustment A/c

Show answer
Correct Option: B
Explanation:

Debit balance of Current Account is shown in the assets side.

When interest on capital is treated as a charge against profit, it will be given in which of the following conditions?

  1. Whether there is a profit or loss

  2. When there is profit only

  3. In Capital Ratio

  4. Equally

  5. To the extent of profit

Show answer
Correct Option: A
Explanation:

Charge means interest will be paid whether there is profit or loss.

What journal entry will take place when interest on a partner's loan is closed?

  1. Profit and Loss A/c Dr. To Interest on Partner's Loan A/c

  2. Interest on Partner's Loan A/c Dr. To Profit and Loss A/c

  3. Interest on Partner's Loan A/c Dr. To Partner's Loan A/c

  4. Partner's Loan A/c Dr. To Interest on Partner's Loan A/c

  5. Profit and Loss A/c Dr. To Partner's Loan A/c

Show answer
Correct Option: A
Explanation:

Yes, it is correct. When interest on partner's loan is closed, the journal entry will be - Profit and Loss A/c Dr. To Interest on Partner's Loan A/c.

A partnership deed allows 10% p.a. interest on capital to the partners. A will get Rs. 12,000 and B will get Rs. 8,000. It was found that A could get only Rs. 7,200 and B could get only Rs. 4,800. What is the reason behind that?

  1. Because capital is fixed.

  2. Because capital is fluctuating.

  3. Some part of profit is kept as reserve.

  4. Appropriations are more than the profit.

  5. There was loss last year.

Show answer
Correct Option: D
Explanation:

Yes, it is correct. When interest on capital is treated as an appropriation, in such a case partners can get appropriations only up to the profit. In this case profit is less and appropriations are more, or we can say that profit is insufficient.

In the absence of a partnership deed, partners will share profits in which of the following manner?

  1. Capital Ratio

  2. Equally

  3. Partners are not entitled to profit

  4. In 5 : 3 : 2 Ratio

  5. In 3 : 2 : 1 Ratio

Show answer
Correct Option: B
Explanation:

When a ratio is not given or there is no partnership deed, profits will be shared equally.

Rent paid to a partner will be charged against which of the following?

  1. Profit and loss account

  2. Profit and loss appropriation account

  3. Profit and loss adjustment account

  4. Realisation account

  5. The balance sheet

Show answer
Correct Option: A
Explanation:

Rent is a change against profit.

Which of the following is not shown in Profit and Loss Appropriation Account?

  1. Transfer to Reserve

  2. Commission to Partner

  3. Interest on Partner's Loan

  4. Salary to Partner

  5. Interest on capital

Show answer
Correct Option: C
Explanation:

It is a charge against the profit. It will take place in Profit and Loss Account.

What type of closing balance is shown by the partner's current account?

  1. It never shows a debit balance.

  2. It never shows a credit balance.

  3. It may have a debit or credit balance.

  4. It always shows debit balance.

  5. It always shows credit balance.

Show answer
Correct Option: C
Explanation:

A current Account can show any balance, i.e., debit or credit balance.

In which of the following ways the interest on a partner's capital will be shown, if the capital of the partner isfixed?

  1. Partners Capital Account

  2. Partners Current Account

  3. Profit and Loss Account

  4. Profit and Loss Adjustment Account

  5. In Interest on Capital A/c only

Show answer
Correct Option: B
Explanation:

Except capital (including additional capital or capital withdrawn permanently), everything will take place in the partner's current account.

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