Accounting for Partnership: Basic Concepts Test 4

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Accounting for Partnership: Basic Concepts Test 4

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SHARING IS CARING

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Weekly Quiz Competition

Question 1
1 / -0

A nominal partner is ________________.

A
Not liable to third parties

B
Not liable for the other partners acts

C
Entitled to equal share in the business

D
Not entitled to share in the profits
Question 2
1 / -0

Interest on drawings is ______________.

A
Debited to P/L A/C

B
Credited to P/L A/C

C
Debited to capital A/C

D
None

Solution

Interest on drawings will be debited to capital account. Interest on drawing is an income for the firm and is payable by the partners to the firm hence, is deducted/debited. Interest is charge on the money/goods taken by the partners for their personal use during the year.
Question 3
1 / -0

Which of the following is correct in respect of partnership accounts?
1. In the absence of any provision in the partnership agreement to the contrary partners can charge interest at 6% p.a. on loans given by them to the partnership firm.
2. An ordinary partnership firm can have not more than 50 partners
3. A banking partnership firm can have not more than 50 partners
4. In the absence of an agreed ratio in the agreement, partners will share profits and losses in the ratio their capitals.
Select the correct answer using the codes given below.

A
1 and 2

B
1 and 3

C
1, 3 and 4

D
2, 3 and 4

Solution

A) 1 and 2.
According to the Indian Partnership Act, 1932, in the absence of any provision in the partnership agreement, partners can charge interest at 6% p.a. on loans given by them to the partnership firm.
And also an ordinary partnership can not have more than 50 partners,
Question 4
1 / -0

If there is no partnership deed then interest on capital will be charged at ______p.a.

A
6%

B
8%

C
9%

D
NIL

Solution

When there is no partnership deed then interest on capital will not be charged. There will be no interest provided on the capital.
Question 5
1 / -0

______ is limited exposure to financial risk by investors of a company or a partnership.

A
Unlimited liability

B
Limited liability

C
Corporate authority

D
Corporate responsibility

Solution

Limited exposure to financial risk means outside liabilities and various dues which are faced by investors in the firm is known as limited up to their holding of equity or capital. As the name suggests, liability of investors is limited to an extent and above that limit they have no responsibility to pay from their personal asset.
Question 6
1 / -0

The balance in the investments Fluctuation Fund, after meeting the loss on revaluation of investment at the time of admission of a partner will be transferred to _____________ .

A
The old Partners Capital Accounts

B
The Revaluation Account

C
The general Reserve

D
None of the above

Solution

At the time of admission of a partner, the firm is reconstituted and all accumulated reserves are distributed. Investment fluctuation reserve is made to prevent any loss from a sudden fall in the value of investments. If at the time of revaluation of investments there is a fall in price of the investments, this loss is deducted from the investment fluctuation reserve and is distributed among the old partners in their profit sharing ratio.
The accounting entry is:
Investment Fluctuation Reserve a/c....
To Partner's capital a/c
Question 7
1 / -0

The Agreement of Partnership ________________.

A
Must be oral

B
Must be in writing

C
Can be either oral or in writing

D
Must be in writing on a stamp paper

Solution

Agreement to carry on a business between the partners, partnership comes into existence. The partnership agreement can be either oral or written. The Partnership Act does not require that the agreement must be in writing. But when the agreement is in written form, it is called 'Partnership Deed'.
Question 8
1 / -0

The Advance Ruling Authority shall comprise of

A
One member from amongst the officers of Central tax.

B
One member from amongst the officers of State tax or Union Territory tax as the case may be.

C
(a) & (b)

D
None of the above
Question 9
1 / -0

Which of the following is not an example of Partnership ?

A
Sonu and Charu, co-owners, agrees to conduct the business in common for profits

B
Four Bus operators each having 10 buses combine by an agreement into one firm

C
Kalpna and Vandna jointly own a boat which they use for rowing as business on Sundays and holidays and equally divide the earnings

D
Chandrika and Arpana from an association to which each contributes Rs. 1000 annually. The purpose is to produce cloth for distributing free to war-widows

Solution

Common goals are important in partnerships, but at the end of the day each partner's main objective is to improve their own business. More than shared goals, a shared vision and clearly communicated objectives are necessary to make great business partnerships succeed.
Free distribution of products for social cause does not amounts to partnership.

Question 10

1 / -0

Match List-I with List-II and select the correct answer using the codes given the lists.

List-I	List-II
I. Partner's current accounts	(a) Dissolution of partnership
II. Goodwill account	(b) Admission of a partner
III. Partner's drawing account	(c) Fixed capital of partners
IV. Realisation account	(d) Goods taken by a partner for self-consumption

I-(a), II-(d), III-(b), IV-(c)

I-(c), II-(b), III-(d), IV-(a)

I-(a), II-(b), III-(d), IV-(c)

I-(c), II-(d), III-(b), IV-(a)

Solution

In case of partnership type of ownership in a business, partner current account is prepared when capital is fixed. Transactions such as drawings, salary, and interest on capital and drawings are recorded.
In case of Admission of Partner. The incoming partner brings in some amount as his share of Goodwill or Premium to compensate the existing partners for the loss of their share in the future profits of the firm.
A drawing account is an accounting record maintained to track money withdrawn from a business by its owners. A drawing account is used primarily for businesses that are taxed as sole proprietorships or partnerships.
Realisation account refers to an account opened by the firm when it goes to dissolution to record the profit made from the sale of assets and loss suffered on the settlement of liabilities.

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Re-Attempt Weekly Quiz Competition

Accounting for Partnership: Basic Concepts Test 4

Result

Accounting for Partnership: Basic Concepts Test 4

Score

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Rank

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SHARING IS CARING

Question 1

Not liable to third parties

Not liable for the other partners acts

Entitled to equal share in the business

Not entitled to share in the profits

Question 2

Debited to P/L A/C

Credited to P/L A/C

Debited to capital A/C

None

Solution

Question 3

1 and 2

1 and 3

1, 3 and 4

2, 3 and 4

Solution

Question 4

6%

8%

9%

NIL

Solution

Question 5

Unlimited liability

Limited liability

Corporate authority

Corporate responsibility

Solution

Question 6

The old Partners Capital Accounts

The Revaluation Account

The general Reserve

None of the above

Solution

Question 7

Must be oral

Must be in writing

Can be either oral or in writing

Must be in writing on a stamp paper

Solution

Question 8

One member from amongst the officers of Central tax.

One member from amongst the officers of State tax or Union Territory tax as the case may be.

(a) & (b)

None of the above

Question 9

Sonu and Charu, co-owners, agrees to conduct the business in common for profits

Four Bus operators each having 10 buses combine by an agreement into one firm

Kalpna and Vandna jointly own a boat which they use for rowing as business on Sundays and holidays and equally divide the earnings

Chandrika and Arpana from an association to which each contributes Rs. 1000 annually. The purpose is to produce cloth for distributing free to war-widows

Solution

Question 10

I-(a), II-(d), III-(b), IV-(c)

I-(c), II-(b), III-(d), IV-(a)

I-(a), II-(b), III-(d), IV-(c)

I-(c), II-(d), III-(b), IV-(a)

Solution

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