CBSE Class 12 Accountancy Accounting For Partnership Firms Worksheet Set B

MCQ Questions for NCERT Class 12 Accountancy Accounting For Partnership Firms

Question. Seeta and Geeta are partners sharing profits and losses in the ratio 4 : 1. Meeta was manager who received the salary of ₹4,000 p.m. in addition to a commission of 5% on net profits after charging such commission. Profit for the year is ₹6,78,000 before charging salary. Find the total remuneration of Meeta.
(a) ₹78,000
(b) ₹88,000
(c) ₹87,000
(d) ₹76,000

Answer: A

Question. If the Partners’ Capital Accounts are fixed ‘salary payable to partner’ will be recorded :
(a) On the debit side of Partners’ Current Account
(b) On the debit side of Partners’ Capital Account
(c) On the credit side of Partners’ Current Account
(d) None of the above

Answer: C

Question. For the firm interest on drawings is
(a) Capital Payment
(b) Expenses
(c) Capital Receipt
(d) Income

Answer: D

Question. Interest on Partner’s drawings will be debited to :
(a) Profit and Loss Account
(b) Profit and Loss Appropriation Account
(c) Partner’s Current Account
(d) Interest Account

Answer: C

Question. If a fixed amount is withdrawn by a partner in each quarter, interest on the total amount is charged for ……………….. months
(a) 3
(b) 6
(c) 4.5
(d) 7.5

Answer: B

Question. A and B contribute ₹1,00,000 and RS₹60,000 respectively in a partnership firm by way of capital on which they agree to allow interest @ 8% p.a. Their profit or loss sharing ratio is 3 : 2. The profit at the end of the year was ₹2,800 before allowing interest on capital. If there is a clear agreement that interest on capital will be paid even in case of loss, then S’s share will be:
(a) Profit ₹6,000
(b) Profit ₹4,000
(c) Loss ₹6,000
(d) Loss ₹4,000

Answer: D

Question. Which of the following statement is true
(a) Fixed capital account will always have a credit balance
(b) Current account can have a positive or a negative balance
(c) Fluctuating capital account can have a positive or a negative balance
(d) All of the above

Answer: D

Question. When partners’ capital accounts are fixed, which one of the following items will be written in the partner’s capital account :
(a) Partner’s Drawings
(b) Additional capital introduced by the partner in the firm
(c) Loan taken by partner from the firm
(d) Loan Advanced by partner to the firm

Answer: B

Question. A, B and C are partners. A’s capital is ₹3,00,000 and B’s capital is ₹1,00,000. C has not invested any amount as capital but he alone manages the whole business. C wants RS30,000 p.a. as salary. Firm earned a profit of ₹1,50,000. How much will be each partner’s share of profit:
(a) A ₹60,000; B ₹60,000; C ₹Nil
(b) A ₹90,000; B ₹30,000; C ₹Nil
(c) A ₹40,000; B ₹40,000 and C ₹40,000
(d) A ₹50,000; B ₹50,000 and C ₹50,000.

Answer: D

Question. It the Partner’s Capital Accounts are fixed, interest on capital will be recorded:
(a) On the credit side of Current Account
(b) On the credit side of Capital Account
(c) On the debit side of Current Account
(d) On the debit side of Capital Account

Answer: A

Question. If a fixed amount is withdrawn by a partner in the middle of every month, interest on the total amount is charged for …………… months
(a) 6
(b) 6 1/2
(c) 5 1/2
(d) 12

Answer: A

Question. Sushil is a partner in a firm. He withdrew ₹4,000 per month in the middle of every month during the year ended 31st March, 2019. If interest on drawings is charged @ 8% p.a. the interest charged will be :
(a) ₹2,080
(b) ₹1,760
(c) ₹3,840
(d) ₹1,920

Answer: D

Question. On 1st April 2018, 2fs Capital was ₹2,00,000. On 1st October 2018, he introduces additional capital of ₹1,00,000. Interest on capital @ 6% p.a. on 31st March, 2019 will be :
(a) ₹9,000
(b) ₹18,000
(c) ₹10,500
(d) ₹15,000

Answer: D

Question. X and Y are partners in the ratio of 3 : 2. Their capitals are RS2,00,000 and ₹1,00,000 respectively. Interest on capitals is allowed @ 8% p.a. Firm earned a profit of RS60,000 for the year ended 31st March 2019. Interest on Capital will be :
(a) X ₹16,000; Y ₹8,000
(b) V ₹8.000; Y ₹4,000
(c) X ₹14,400; Y ₹9,600
(d) No Interest will be allowed

Answer: A

Question. X and Y are partners in the ratio of 3:2. Their capitals are ₹2,00,000 and ₹1,00,000 respectively. Interest on capitals is allowed @ 8% p.a. Firm earned a profit of ₹15,000 for the year ended 31st March 2019. As per partnership agreement, interest on capital is treated a charge on profits. Interest on Capital will be :
(a) X ₹16,000; Y ₹8,000
(b) X ₹9,000; Y ₹6,000
(c) X ₹10,000; Y ₹5,000
(d) No Interest will be allowed

Answer: A

Question. Bipasa is a partner in a firm. She withdrew ₹6,000 at the end of each quarter during the year ended 31st March, 2019. Interest on her drawings @ 10% p.a. will be :
(a) ₹900
(b) ₹600
(c) ₹1,500
(d) ₹1,200

Answer: A

Question. Partners are suppose to pay interest on drawing only when by the
(a) Provided, Agreement
(b) Permitted, Investors
(c) Agreed, Partners
(d) ‘A’ & ‘C’ above

Answer: D

Question. Where will you record interest on drawings :
(a) Debit Side of Profit & Loss Appropriation Account
(b) Credit Side of Profit & Loss Appropriation Account
(c) Credit Side of Profit & Loss Account
(d) Debit Side of Capital/Current Account only

Answer: B

Question. Vikas is a partner in a firm. His drawings during the year ended 31st March, 2019 were RS72,000. If interest on drawings is charged @ 9% p.a. the interest charged will be :
(a) ₹324
(b) ₹6,480
(c) ₹3,240
(d) ₹648

Answer: C

Question. X and Y are partners in the ratio of 3:2. Their capitals are RS2,00,000 and ₹1,00,000 respectively. Interest on capitals is allowed @ 8% p.a. Firm incurred a loss of ₹60,000 for the year ended 31st March 2019. Interest on Capital will be :
(a) X ₹16,000; Y ₹8,000
(b) A ₹8,000; Y ₹4,000
(c) X ₹14,400; Y ₹9,600
(d) No Interest will be allowed

Answer: D

Question. If a fixed amount is withdrawn by a partner on the last day of every month, interest on the total amount is charged for …………… months :
(a) 12
(b) 6 1/2
(c) 5 1/2
(d) 6

Answer: C

Question. X and Y are partners in the ratio of 3:2. Their capitals are ₹2,00,000 and ₹1,00,000 respectively. Interest on capitals is allowed @ 8% p.a. Firm earned a profit of ₹15,000 for the year ended 31st March 2019. Interest on Capital will be :
(a) X ₹16,000; Y ₹8,000
(b) X ₹9,000; Y ₹6,000
(c) X ₹10,000; Y ₹5,000
(d) No Interest will be allowed

Answer: C

Question. In a partnership firm, a partner withdrew ₹5,000 per month on the first day of every month during the year for personal expenses. If interest on drawings is charged @ 6% p.a. the interest charged will be : 
(a) ₹3,600
(b) ₹1,950
(c) ₹1,800
(d) ₹1,650

Answer: B

Question. If fixed amount is withdrawn by a partner on the first day of each quarter, interest on the total amount is charged for …………….. months
(a) 4.5
(b) 6
(c) 7.5
(d) 3

Answer: C

Question. If a fixed amount is withdrawn by a partner on the last day of each quarter, interest on the total amount is charged for ……………… months
(a) 6
(b) 4.5
(c) 7.5
(d) 3

Answer: B

Short Answer questions :

Question. In the absence of Partnership deed, how are mutual relations of partners governed?
Answer: In the absence of |Partnership deed, mutual relations are governed by The Indian partnership Act 1932.

Question. A and B are partners in a firm sharing profit in the ratio of 3:2. They had advanced to the firm a sum of Rs. 30,000 as a loan in their profits sharing ratio on 1st Oct. 2014. The partnership deed is silent on the question of interest on loan for partners. Compute the interest payable by the firm to the partners, assuming the firm closes its books on 31st March.
Answer: A- Rs.540 B- Rs. 360. (Note: In the absence of Partnership deed, 6% p.a will be allowed as Interest on Loan)

Question. A,B and C are partners and decided that no interest on drawings is to be charged from any Partner. But after one Year ‘C’wants that interest on drawings should be charged from every partner. State how ‘C’ can do this?
Answer: He can do so only by changing the Partnership deed with the consent of all partners.

Question. If the partners’ capitals account are fixed where will you record drawings of partners?
Answer: Debit side of partners current A/c.

Question. Would a “Charitable Dispensary” run by 8 members be deemed a Partnership Firm? Give reason in support of your answer.
Answer: (i) In Partnership, there must be a business;
(ii) There must be sharing of profits from such business among the partners.

Question. Under fixed capital method, partner’s drawings are shown in which account?
Answer: Partners Current A/cs

Question. What is a legal status of a firm?
Answer: A firm is not a legal person it is merely a collection of partners.

Question. Mention two items that are recorded in Partners Fixed Capital Account.
Answer: i) Capital Withdrawal ii) Fresh Capital Introduced.

Question. What is meant by Partnership? / Define Partnership.
Answer: According to Section 4 of Indian Partnership Act 1932, “Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all”.

Question. A & B are two working partners whereas B is sleeping partner in the firm. B wants to inspect books of Accounts but A denies. What shall be done?
Answer: A is wrong, he cannot deny as B holds the right to inspect the accounts.

Question. Debit balance of Partners Current A/Cs is shown on which side of the balance sheet?
Answer: Assets side.

 Question. What do you understand by Sacrificing Ratio?
Answer:_Sacrificing ratio is the ratio in which the partner or partners have agreed to sacrifice their share of profit in favour of one or more partners of the firm. Sacrificing ratio of each partner is calculated as follows: Sacrificing Ratio = Old Ratio – New Ratio

Question. How will you calculate interest on drawings when date of withdrawal is not given?
Answer: It will be calculated on the average basis of 6 months.

Question. In which account interest on partners loan is debited and why?
Answer: It is debited to Profit and Loss Account because it is a charge against theprofit

Question. Name the Act under which partnership is governed?
Answer: Partnership Act, 1932.

Question. What do you understand by Sacrificing Partners?
Answer:_The partners whose share stand decreased as a result of change in profit-sharing ratio are known as Sacrificing Partners. Sacrificing ratio shows the sacrifice of share of each sacrificing partner.

Question. Why is it preferable to have a written agreement between the partners?
Answer: To avoid all kinds of misunderstanding and disputes among the partners.

Question. Which Act of the Parliament specified the number of partners in Partnership?
Answer: Section 464 of Companies Act, 2013

Question. What share of profits would a “sleeping partner” who has contributed 75% of the total Capital get in the absence of Partnership Deed?
Answer: In the absence of Partnership Deed, a sleeping partner will get equal share of profits.

Question. Give the journal entry of P & L credit balance.
Answer: Profit and Loss A/c Dr
To Profit and Loss Appropriation A/c.

Question. What share of profits would a “sleeping partner” who has contributed 75% of the total Capital get in the absence of Partnership Deed?
Answer: In the absence of Partnership Deed, a sleeping partner will get equal share of profits.

 Question. Anna and Bobby were partners sharing profits and losses in the ratio of 5 : 3. On 1st April 2014, their capital accounts showed balances of Rs 3,00,000 and Rs 2,00,000 respectively. Calculate the amount of profit to be distributed between the partners if the partnership deed provided for interest on capital @ 10% per annum and the firm earned a profit of Rs 45,000 for the year ended 31st March 2015.
Answer:_No profit will be distributed as the amount of profit (i e., Rs 45,000) is not sufficient to pay the interest on capital (Rs 50,000),so Interest on capital i.e. Rs.45,000, to be provided in the interest ratio of the partners.

Question. What is the status of partnership firm from an accounting viewpoint?
Answer: From the accounting view point, Partnership is a separate business entity from the partners.

Question. Can a Partner be exempted from sharing the losses in a firm? If yes, under what circumstances?
Answer: Yes, if Partnership Deed provides so.

 Question. What are the circumstances under which the balance of the ‘Fixed capitals Accounts’ may change?
Answer: i) Additional capital Introduced. ii) Capital Withdrawn.

 Question. Why is that the Fixed Capital Account of a partner does not show “Debit Balance” in spite of regular and Consistent losses year after year?
Answer: When the capitals are fixed, the Capital Account of a partner will never show debit balance since, all transactions between the firm and the partner are recorded in Current Account.

 Question. Can a Partner be exempted from sharing the losses in a firm? If yes, under what circumstances?
Answer: Yes, if Partnership Deed provides so.

PRACTICAL QUESTIONS :

Question. Raju and Jai commenced business in partnership on April 1, 2019. No partnership agreement was made whether oral or written. They contributed ₹4,00,000 and ₹1,00,000 respectively as capitals. In addtion, Raju advanced ₹2,00,000 as loan to the firm on October 1, 2019. Raju met with an accident on July 1, 2019 and could not attend the business up to september 30, 2019. The profit for the year ended March 31, 2020 amounted to ₹50,000 before charging interest on Raju’s loan. Disputes have arisen between them on sharing the profits of the firm. Raju Claims:
(i) He should be given interest at 10% p.a. on capital and so also on loan.
(ii) Profit should be distributed in the proportion of capitals. Jai Claims: (i) Net profit should be shared equally. (ii) He should be allowed remuneration of ₹1,000 p.m. during the period of Raju’s illness.
(iii) Interest on capital and loan should be given @ 6% p.a.
State the correct position on each issue as per the provisions of the Partnership Act, 1932.
Solution:
Settlement of disputes as per the provisions of the Partnership Act, 1932:
(i) No interest is payable on Partners’ capitals in the absence of partnership agreement.
(ii) Interest on Raju’s loan is payable @6% p.a., i.e., 2,00,000 × 6% × 6/12 = `6,000
(iii) Jai’s claim for remuneration @ `1,000 p.m. is not valid since no remuneration is payable when there is no partnership agreement.
(iv) Profits should be distributed equally among the partners irrespective of their capital contributions.
Net profit after charging interest on Raju’s loan = 50,000 – 6,000 = `44,000, which will be distributed equally between Raju and Jai, i.e. RS `22,000 each.

According to Section -4 of the Indian Partnership Act, 1932:

 

(ii) Current Account 

The Current account may show a debit or credit balance. All the usual adjustments such as interest on Capital, partner’s salary/commission, drawings (out of profits), interest on drawings and share in profits or losses etc. are recorded in this account.All the Current Year's adjustments are recorded in this account, that is why it is called Current account.

 

Partner’s Current A/Cs

 

Note :

1. Debit balance of Current Account is shown in Assets side of Balance Sheet.

2. Credits balance of Current Account A/c is shown in Liabilities side of balance Sheet.

3. Balance of Fixed Capital Accounts are always shown in Liabilities side of Balance Sheet as it will be always be credit balance.

 

2. Fluctuating Capital Accounts

In this method only one account i.e., Capital Account of each and every partner is prepared and all the adjustment such as interest on capital interest on drawings etc, are recorded in this account under this method, Capital account may show a debit or credit balance and the balance of this account changes frequently from time to time therefore it is called fluctuating Capital Account.In this method the capitals are not fixed. In the absence of information, the Capital Accounts should be prepared by this method.

 

Partner’s Capital

 

INTEREST ON CAPITAL

Interest on partners capital will be allowed only when it has been specifically mentioned in the partnership deed. If interest on capital is to be allowed as per the agreement, it should be calculated with respect to the time, rate of interest and the amount of capital. Interest on Capital can be treated as either:

a. An Appropriation of profit; or 

b. A charge against profit.

 

A. Interest on Capital: An Appropriation of Profits:

 

B. Interest on Capital: As a Charge against Profits:

Interest on Capital is always allowed in full irrespective of amount of profits of losses.

 

Note:

Interest on Capital is always calculated on the OPENING CAPITAL.

Il’ Opening Capital is not given in the question, it should be ascertained as follows:

 

INTEREST ON DRAWINGS

Interest on drawing is charged by the firm only when it is clearly mentioned in Partnership Deed. It is calculated with reference to the time period for which the money was withdrawn. There are two cases in which calulation of interest on drawings may arise:

 

Case 1: When Rate of Interest on Drawings is given in %

Interest on Drawings is calculated on flat rate irrespective of period.

Case 2: When Rate of Interest on Drawings is given in % p.a.

 

1. When date of Drawing is not given

 

2. When date of Drawings is given

 

 

Case 3: When different amount are withdrawn on different dates:

We have the following two methods to calculate the amount of interest on Drawing:

 

1. Simple Interest Method

In this method, interest on drawing is calculated for each amount of drawing individually on the basis of periods for which it remained withdrawn till the close of accounting period.

 

2. Product Method

In this method, the amounts of drawings are multiplied by the period for which it remained withdrawn during the period;Thereafter the products are added and interest is calculated on the total of products so arrived at for one month. The advantage of this system is that separate calculations are not required each time.

We can explain the above mentioned two methods with the help of an example.

 

 

Interest on drawings is to be charged @ 9% p.a

 

SIMPLE METHOD

 

 

 

Interest = Total of products * 9/100* 1/12= 306000*9/100*1/12 = Rs 2295/-.

 

Case 4: When an equal amount is withdrawn regularly

Interest on Drawing can be calculated using either Product Method or Direct Method (i.e. Short Cut Method)

Direct Method will be used only if all the following three conditions are satisfied:

1. Amount should be same throughout the period

2. Date of Drawings should be same throughout the period

3. Drawings should be made regularly without any gap.

 

To Interest on Loan A/c

(Being Interest on loan transferred to P & L A/c)

It is always DEBITED to Profit and Loss A/c

Rent Paid to Partner.

Rent paid to a partner is also a charge against profits and it will also be

 

DEBITED to Profit and Loss A/c

 

PAST ADJUSTMENTS

If, after preparation of Final Accounts of firm, it is found that some errors or commission in accounts has occurred than such errors or omissions are rectified in the next year by passing an adjustment entry.

A statement is prepared to ascertain the net effect of such errors or omissions on partner’s capital/current accounts in the following manner.

 

Statement showing adjustment

 

+ Indicates Amount to be Credited to Partner’s Capital Account – Indicates Amount to be Debited to Partners Capital Account

During Past Adjustment it is not compulsory that capital accounts of all partners are affected.

More than one partners Capital Account may be debited or credited but amount of debit & credit should be equal.

 

GUARANTEE OF PROFITS TO A PARTNER

 

Guarantee is an assurance given to the partner of the firm that at least a fixed amount shall be given to him/her irrespective of his/her actual share in profits of the firm. If actual share in profits is less than the guaranteed amount in that case the deficit amount shall be borne either by the firm or by any partner as the case may be or as may have been decided bya na agreement.

 

Note: Guarantee to a partner is given for minimum share in profits. If the actual share in profits is more than the minimum share in profits, then the actual profits will be allowed to the partner.

 

Case: 1. When guarantee is given by FIRM (i.e. by all the Partners of the firm)

1. If share in actual profits is less than the guaranteed amount then. Guaranteed amount to a partner is first written off against the profits and then,

2. Remaining profits are distributed among the remaining partners in the remaining ratio.

 

Case: 2. When guarantee is given by a partner or partners to another partner.

1. Calculate the share in profits for the partner to whom guarantee is given.

2. If share in profits is more than the guaranteed amount, distribute the profit as per the profit and loss sharing ratio in usual manner.

3. If share in profits is less than the guaranteed amount, find the difference between the share in profits and the guaranteed amount and the difference known as deficiency.

Deficiency is contributed by the partner or partners who guaranteed in certain ratio and subtracted from his or their respective shares.

Q.1. A and B are partners. A gave a loan of ₹ 8,000 to the firm on 1.4.12. The Partnership Deed is silent upon interest on loan. How much interest on loan will be provided to him?
Accounting year is calendar year
(a) ₹ 480
(b) ₹360
(c) ₹ 200
(d) none of the above
Answer : B

Q.2. On 31.3.12, after the close of books of accounts, the capital a/c of Ram, Shyam & Mohan showed a balance of ₹24,000, ₹ 18,000 and ₹ 12,000 respectively. The profits for the year ended 31.3.12 amounted to Rs. 36,000 and the partner’s drawings had been Ram-Rs. 3,600, Shyam-₹ 4,500 and Mohan-₹ 2,700. The Profit Sharing Ratio was 3:2:1. How much will be the opening capital?
(a) Ram-₹15,600, Shyam-₹10,500, Mohan-₹ 8,700
(b) Ram-₹15,650, Shyam-₹ 10,550, Mohan-₹ 2,750
(c) Ram-₹15,600, Shyam-₹10,500, Mohan-₹ 2,800
(d) None of the above
Answer : A

Q.3. If Partnership Deed is silent, how much salary will be provided to partners?
(a) Proportionate to capital contribution
(b) Proportionate to time spent
(c) Nil
(d) none of the above
Answer : C

Q.4. A, B and C are partners in a firm. They decided to share profits upto ₹ 10,000 in the ratio of 50%, 30% and 20% respectively. Above this amount, profits are shared equally. If the profits of the firm for the year was ₹25,600. Distribute the profits.
(a) A-₹10,000, B-₹8,500, C-₹7,500
(b) A-₹10,200, B-₹8,100, C-₹7,300
(c) A-₹10,200, B-₹8,200, C-₹7,200
(d) A-₹10,200, B-₹8,200, C-₹.7,500
Answer : C

Q.5. A, B and C are partners sharing profits and losses in the ratio of 2:1:2. Their capitals were ₹3,00,000, ₹1,00,000 and ₹2,00,000 respectively. Interest on capital for the year 2011 was credited to them @ 9% p.a. instead of 10% p.a. The profits for the year before charging interest was ₹ 2,50,000. Which of the following journal entry is correct?
(a) A’s Capital A/c Dr. 200
     C’s Capital A/c Dr. 400
             To B’s Capital A/c 600
(b) B’s Capital A/c Dr. 200
     C’s Capital A/c Dr. 400
             To A’s Capital A/c 600
(c) B’s Capital A/c Dr. 200
     A’s Capital A/c Dr. 400
             To C’s Capital A/c 600
(d) None of the above
Answer : B

Q.6. X and Y are partners. X drew regularly ₹400 at the beginning of every month for six months ending 30.6.12. Calculate interest on drawings @ 5% p.a.?
(a) ₹ 40
(b) ₹ 38
(c) ₹ 29
(d) ₹35
Answer : D