Accounting for Partnership Firms – Fundamentals

Topics in this chapter

• Partnership Fundamentals and Deed
• Rights and Mutual Agency
• Capital and Current Accounts
• Profit Appropriation and Divisible Profit
• Remuneration and Interest Adjustments
• Loans, Guarantees, and Special Adjustments

Cheat sheet

Practice questions

1. Question 1Q-C45618

   Which of the following items is recorded on the debit side of the Profit and Loss Appropriation Account?

   1. A.Interest on Partners' Capitals
   2. B.Interest on Partners' Drawings
   3. C.Share of Profit transferred from Profit and Loss Account
   4. D.Partners' Salaries received from external parties
   See the answer and solution
2. Question 2Q-25CF45

   In the absence of a partnership deed, interest on a partner's loan advanced to the firm is allowed at what rate?

   1. A.6% per annum
   2. B.12% per annum
   3. C.10% per annum
   4. D.No interest is allowed
   See the answer and solution
3. Question 3Q-7A6EBA

   X and Y are partners sharing profits in the ratio of 3:2. Their capitals are Rs. 2,00,000 and Rs. 1,00,000 respectively. Interest on capital is agreed @ 10% p.a. The net profit for the year before allowing interest on capital is Rs. 15,000. Assuming the partnership deed is silent on whether interest on capital is a charge or an appropriation, how much interest will be allowed to X and Y?

   1. A.X: Rs. 20,000; Y: Rs. 10,000
   2. B.X: Rs. 15,000; Y: Rs. 0
   3. C.X: Rs. 10,000; Y: Rs. 5,000
   4. D.X: Rs. 7,500; Y: Rs. 7,500
   See the answer and solution
4. Question 4Q-42D379

   Under the fluctuating capital method, where is the share of profit of a partner recorded?

   1. A.Debit side of Partner's Current Account
   2. B.Credit side of Partner's Capital Account
   3. C.Debit side of Profit and Loss Account
   4. D.Credit side of Partner's Current Account
   See the answer and solution
5. Question 5Q-D1FBFF

   A partner withdraws Rs. 10,000 at the end of each month throughout the year. If the rate of interest on drawings is 12% p.a., what will be the total interest on drawings calculated using the average period method?

   1. A.Rs. 6,600
   2. B.Rs. 7,200
   3. C.Rs. 7,800
   4. D.Rs. 6,000
   See the answer and solution