Accounting for Partnership: Basic Concepts Test 46

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Accounting for Partnership: Basic Concepts Test 46

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SHARING IS CARING

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Weekly Quiz Competition

Question 1
1 / -0

In a partnership firm one of the partner x had no capital account. What could be the reason__________________.

A
he is not a partner

B
he is employee

C
he did not contribute any money

D
all of the above
Question 2
1 / -0

One advantage of operating as a partnership would include ____________.

A
Being able to raise capital through share issues

B
Limited liability for all partners

C
Access to knowledge, skills, experience and contacts at larger level

D
Greater power than a sole trader for decision-making

Solution

One of the main advantages of a partnership business is by working in a business partnership you can benefit from access to knowledge, skills, experience and contacts of other partners.
Question 3
1 / -0

A debit balance on a partner's current account must indicate that _________.

A
they have withdrawn more than they have earned in the partnership

B
they have a credit balance on their capital account

C
drawings are higher than the profit share for that year

D
they are insolvent

Solution

A debit balance in the current account indicates that the partner has withdrawn too much money or goods in anticipation of profits. His drawings are greater than the amount of profits due to him, and he becomes a temporary debtor of the business. Hence, a debit balance in a partner’s current account appears as a current asset on the balance sheet.
Question 4
1 / -0

What is not common in a partnership firm.

A
Partnership deed

B
An agreement between partners

C
Some partners are major and some are minor

D
Carried on for doing business.

Solution

The partnership firms incorporated till today's date are more or less based upon the same criteria, but what makes every partnership unique or uncommon is the combination of partners.
Usually in a partnership firm, partners are majors, but sometimes the firm decides to include minors as well due to their innovative thoughts and skills. This is possible only when the firm has legalized minor inclusion from accounting council.
In every partnership, a deed or agreement is common, but what makes them uncommon is major partners along with minors.
Question 5
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 we contributed to the firm above his agreed share in the firm __________.

A
Nill

B
6% of 30,000

C
6% of 80,000

D
6% of 50,000

Solution

Partners time to time introduce capital in their firm and it is considered as introduction of capital or additional capital introduced.
The partner has brought Rs80,000 for his part in the capital but his actual capital to be brought was Rs50,000. The additional amount of Rs30,000 is considered as additional capital introduced by the partner.
Thus, no interest is paid by the firm to its partner for the additional amount because interest is paid only when a certain loan is taken by firm from the partner.`
Question 6
1 / -0

_______________ a/c is debited for loss on adjustment under past adjustments through profit and loss adjustment account.

A
Profit and Loss

B
Profit and Loss Adjustment

C
Partner's Capital

D
Partner's Current

Solution

There are two ways of correcting a mistake after finalization of accounts:
1. Through the Profit & Loss Adjustment A/c.
A In this method, whatever amount has been wrongly given to partners is taken aback by debiting partners capital A/c and crediting Profit and Loss Adjustment A/c.
B In the second step Profit & Loss Adjustment A/c is debited and partners credited with the amounts which were actually due to them. In this way, no balance is left in the Profit & Loss Adjustment A/c and rectification is made in partners' capital account.

2. Directly through partners' capital account.
A. In this method, partners' capital accounts are debited with the amounts which were wrongly credited to them.
B The total amount so debited earlier to the partners is credited to their accounts in profit sharing ratio.
Question 7
1 / -0

A new agreement of a partnership firm to replace the old one is formed only in these conditions.

A
Admission of new partner

B
Death of a partner

C
Change in profit sharing

D
All the above

Solution

Partnership deed can only be revised or changed with the new one on the following conditions.
When a new partner is admitted in the firm, there is a change in profit sharing ration of partners. Moreover, old reserves have to distributed among existing partners. Hence, there is a need to create a new deed.
Death of a partner also leads to creation of a new agreement because the existing partners have to now change the ratios in which reserves and profit have to be distributed.
When profit sharing ratio of existing partners is changed, a new deed is created because partners again need to decide what terms and conditions must be there so that fair treatment is done to each partner.
Question 8
1 / -0

For adjustment _______________, a statement of accounts to ascertain the net effect of omission on partner's capital accounts is to be worked out at first.

A
Through profit and loss adjustment account

B
Profit and loss account

C
Directly in partner's capital accounts

D
Both a and b

Solution

Partner's capital account is prepared separately one of the items of omissions, then first ascertain the partners' capital at the beginning. The adjustment can also be made directly in the Partners' Capital Accounts without shall prepare a statement to find out the net effect of omissions and commissions.
Question 9
1 / -0

Interest on capital is given from profit and loss appropriation account to a partner __________________.

A
Only if allowed as per agreement

B
Only if there are any profits in P&L appropriation account

C
Both a & b

D
None of the above

Solution

Interest on capital is that amount which any partner receives at the end of a financial year because of his capital being invested in business. Moreover, interest on capital is not charged against profits, It is appropriation of profit.
Interest on capital is given to partners only when it is mentioned in the partnership deed or agreement and if the company has earned any profit in the respective year.
If there is any loss in the business, interest on capital will not be provided to partners.
Question 10
1 / -0

As per companies Act there can be _____no of partners.

A
100

B
10

C
Unlimited

D
50

Solution

The maximum number of partners in a partnership firm is 100. The new Companies Act 2013 provides that the maximum number of members for a partnership shall not exceed 100. A partnership is created by the agreement of at least two or more individuals to contribute capital and engage in business.

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Re-Attempt Weekly Quiz Competition

Accounting for Partnership: Basic Concepts Test 46

Result

Accounting for Partnership: Basic Concepts Test 46

Score

-

Rank

-

SHARING IS CARING

Question 1

he is not a partner

he is employee

he did not contribute any money

all of the above

Question 2

Being able to raise capital through share issues

Limited liability for all partners

Access to knowledge, skills, experience and contacts at larger level

Greater power than a sole trader for decision-making

Solution

Question 3

they have withdrawn more than they have earned in the partnership

they have a credit balance on their capital account

drawings are higher than the profit share for that year

they are insolvent

Solution

Question 4

Partnership deed

An agreement between partners

Some partners are major and some are minor

Carried on for doing business.

Solution

Question 5

Nill

6% of 30,000

6% of 80,000

6% of 50,000

Solution

Question 6

Profit and Loss

Profit and Loss Adjustment

Partner's Capital

Partner's Current

Solution

Question 7

Admission of new partner

Death of a partner

Change in profit sharing

All the above

Solution

Question 8

Through profit and loss adjustment account

Profit and loss account

Directly in partner's capital accounts

Both a and b

Solution

Question 9

Only if allowed as per agreement

Only if there are any profits in P&L appropriation account

Both a & b

None of the above

Solution

Question 10

100

10

Unlimited

50

Solution

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