Accounting for Partnership: Basic Concepts Test 44

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Accounting for Partnership: Basic Concepts Test 44

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Question 1
1 / -0

How would you close the Partner's Drawings Account?

A
By transfer to Capital or Current A/c debit side.

B
By transfer to Capital A/c credit side.

C
By transfer to Current A/c credit side.

D
Either (B) or (C).

Solution

A
The drawing account is a temporary owner equity account, it must be closed at the end of each accounting year. The account is also a contra account to the owner’s equity, so the drawing account’s debit balance is contrary to the expected balance of an owner equity account. The drawing account is closed directly to the capital or current account.
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Question 2
1 / -0

Following are the differences between partnership & joint venture except __________.

A
a joint venture is essentially planned for short-term mainly for one contract. However, partnerships are normally undertaken as going concerns and are excepted to last for a very long period.

B
the persons involved in a joint venture are called co-ventures whereas persons involved in a partnership are called partners.

C
any specific statute of the government does not govern joint ventures but the Indian Partnership Act, 1932, governs partnerships.

D
memorandum of understanding is mandatory to be drafted to spell the relationship between the co-ventures whereas the basic relationship between the partners is defined by the partnership deed.

Solution

Option D is correct.
Parties to a joint venture usually execute an agreement to govern their relationship. This agreement determines their rights and liabilities, obligations, duties, profit/loss sharing ratio, etc. It can even mention the duration of the venture.
These partners function by sharing rights, liabilities, duties, profits and losses with each other. They determine the terms of their partnership firm using an agreement known as a partnership deed.

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Question 3
1 / -0

Following are the essential elements of a partnership firm except _____________.

A
At least two persons.

B
There is an agreement between all partners.

C
Equal share of profits and losses.

D
Partnership agreement is for some business.
Solution
Following are the essential elements of the partnership:
Two or more partners,
Agreement.
Lawful business,
Profit sharing,
Business can be carried on by all or any of the partners acting for all.
For any partnership, it is not essential that the partners should agree to share the losses also.
Question 4
1 / -0

Balance in revaluation account is transferred to old partners in ________________.

A
New profit sharing ratio

B
Old profit sharing ratio

C
Sacrificing ratio

D
Gain ratio

Solution

Revaluation account increase in the assets and decrease in its liabilities is credited because it is gain and decrease in the value of assets and increase in its liabilities is debited because it is a loss, unrecorded assets are credited, and unrecorded liabilities are debited.
If the account finally shows a credit balance, then it indicates net gain and if there is a debit balance then it indicates the net loss. Profit or loss will be transferred to the capital accounts of the old partners in old ratio.
Question 5
1 / -0

The name under which the business of partnership is carried on is called _________.

A
Firm

B
Firm name

C
Partnership

D
Partner
Question 6
1 / -0

Is rent paid to a partner an appropriation of profits?

A
Yes.

B
No.

C
If partner's contribution as capital is maximum.

D
If partner is a working partner.

Solution

Partner's rent unless provided in the deed has to be treated as a charge against profit and so it is transferred to profit and loss a/c. Rent paid by a firm is such an expenditure which is incurred irrespective of any partner the rent paid is debited to P/L account instead of Appropriation account.'
Question 7
1 / -0

To avoid misunderstanding between the partners, the partners need _________________.

A
clear mutual understanding

B
clear communication between partners

C
clear agreement of terms and conditions

D
clear objectives

Solution

To avoid misunderstanding between the partners, the partners need clear agreement of terms and conditions and which is called partnership deed. It is written agreement of partnership, which depicts the contract between two or more individuals who decide to manage and operate a business together for profit-making. The deed defines the management roles and once the Partnership deed is completed, all of the Partners will sign and date the deed and keep copies of the deed for their records.
Thus the correct answer is C.
Question 8
1 / -0

A partner was supposed to contribute Rs.50,000 in a partnership firm. He gave Rs.80,000 to the firm. How much interest he will get on the extra money he contributed to the firm above his agreed share in the firm.

A
Nil

B
6% of 30,000

C
6% of 80,000

D
6% of 50,000

Solution

Partner contribute to Rs.50,000 & he gave Rs.80,000
80,000 - 50,000 = 30,000
Rs.30,000 extra money
Interest = 30,000/50,000 x 100% = 6%.
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Question 9
1 / -0

One of the partner contributed Rs.30,000 in the firm. How much interest he will get on the capital contributed?

A
Nil

B
6% of 30,000

C
5% of 30,000

D
Income of the above

Solution

Partner contributed Rs 30,000 in the firm, but he will receive interest only if it is mentioned in partnership deed.
Question 10
1 / -0

Partnership business in India is governed by India Partnership Act of ____________.

A
$$1913$$

B
$$1932$$

C
$$1984$$

D
$$1928$$

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Accounting for Partnership: Basic Concepts Test 44

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Accounting for Partnership: Basic Concepts Test 44

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SHARING IS CARING

Question 1

By transfer to Capital or Current A/c debit side.

By transfer to Capital A/c credit side.

By transfer to Current A/c credit side.

Either (B) or (C).

Solution

Question 2

a joint venture is essentially planned for short-term mainly for one contract. However, partnerships are normally undertaken as going concerns and are excepted to last for a very long period.

the persons involved in a joint venture are called co-ventures whereas persons involved in a partnership are called partners.

any specific statute of the government does not govern joint ventures but the Indian Partnership Act, 1932, governs partnerships.

memorandum of understanding is mandatory to be drafted to spell the relationship between the co-ventures whereas the basic relationship between the partners is defined by the partnership deed.

Solution

Question 3

At least two persons.

There is an agreement between all partners.

Equal share of profits and losses.

Partnership agreement is for some business.

Solution

Question 4

New profit sharing ratio

Old profit sharing ratio

Sacrificing ratio

Gain ratio

Solution

Question 5

Firm

Firm name

Partnership

Partner

Question 6

Yes.

No.

If partner's contribution as capital is maximum.

If partner is a working partner.

Solution

Question 7

clear mutual understanding

clear communication between partners

clear agreement of terms and conditions

clear objectives

Solution

Question 8

Nil

6% of 30,000

6% of 80,000

6% of 50,000

Solution

Question 9

Nil

6% of 30,000

5% of 30,000

Income of the above

Solution

Question 10

$$1913$$

$$1932$$

$$1984$$

$$1928$$

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