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Accounting for Partnership: Basic Concepts Test 55

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Accounting for Partnership: Basic Concepts Test 55
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  • Question 1
    1 / -0
    If a fixed amount is withdrawn on the middle day of every quarter of a calendar year, the interest on total amount of drawings will be calculated for ________. 
    Solution
    If a fixed amount is withdrawn on middle day of every quarter of the calendar year, the interest on the total amount of drawings will be calculated for 6 months. Average period will be calculated as:-
    = Months left after first drawing + months left after last drawing 
     ------------------------------------------------------------------------------------------
                                                            2
    = 10.5 + 1.5
    ------------
           2
    = 6 months

    Explanation:- 
    Suppose if the first drawing is made on ( 1st quarter January to March) 15th February then 10.5 months will be left and in the last quarter October to December last drawing will be made on 15th November and 1.5 months will be left. 
  • Question 2
    1 / -0
    Which of the following appear in the Profit & Loss Appropriation Account? 
    Solution
    A AND C.
    A Profit and loss Appropriation account is an account which is prepared after profit and loss account and is usually prepared by partnership firms for distribution/allocation of profit earned by the firm to partners. Only items relating to partners will be entered in Profit and loss Appropriation like interest on capital, profit, interest on drawings, salary/commission to partners. 
  • Question 3
    1 / -0
    If a fixed amount is withdrawn on the middle day of every month of a calendar year, the interest on the total amount of drawings will be calculated for ________. 
    Solution
    If a fixed amount is withdrawn on the middle day of every month of the calendar year, the interest on the total amount of drawings will be calculated for 6 months. Average period will be calculated as:-
    = Months left after first drawing + months left after last drawing 
     ------------------------------------------------------------------------------------------
                                                           2
    = 11.5 + 0.5
    ------------------
             2
    = 6months
  • Question 4
    1 / -0
    When the interest on capital is allowed to partners, interest on capital account is debited and partner's capital account is credited. It is called _____________. 
    Solution
    When the interest on capital is allowed to partners, interest on capital account is debited and partner's capital account is credited. It is called as an adjusting entry. Adjusting entries are usually done at the end of the year for incomes and expenses.
  • Question 5
    1 / -0
    If a fixed amount is withdrawn on the first day of every quarter of a calendar year, the interest on total amount of drawings will be calculated for _______. 
    Solution
    If a fixed amount is withdrawn on first day of every quarter of the calendar year, the interest on the total amount of drawings will be calculated for 6.5 months. Average period will be calculated as:-
    = Months left after first drawing + months left after last drawing 
     ------------------------------------------------------------------------------------------
                                                            2
    = 12 + 3 
    ------------
           2
    = 7.5 months

    Explanation:- 
    Suppose if the first drawing is made on 1st January then 12 months will be left and in the last quarter October to December last drawing will be made on 1st October and 3 months will be left. 
  • Question 6
    1 / -0
    Which of the following does not appear in the Profit & Loss Appropriation Account? 
    Solution
    A Profit and loss Appropriation account is an account which is prepared after profit and loss account and is usually prepared by partnership firms for distribution/allocation of profit earned by the firm to partners. Salary/commission to manager is an item of Profit and loss account. Only items relating to partners will be entered in Profit and loss Appropriation like interest on capital, profit, interest on drawings, salary/commission to partners. 
  • Question 7
    1 / -0
    When the interest on drawings is charged to partners, interest on drawing account is credited, and partner's capital account is debited. It is called __________. 
    Solution
    When the interest on drawings is charged to partners, interest on drawing account is credited, and partner's capital account is debited. It is called as an adjusting entry. Adjusting entries are usually done at the end of the year for incomes and expenses.
  • Question 8
    1 / -0
    If a fixed amount is withdrawn on the last day of every quarter of a calendar year, the interest on the total amount of drawings will be calculated for __________.
    Solution
    If a fixed amount is withdrawn on last day of every quarter of the calendar year, the interest on the total amount of drawings will be calculated for 6.5 months. Average period will be calculated as:-
    = Months left after first drawing + months left after last drawing 
     ------------------------------------------------------------------------------------------
                                                            2
    = 9 + 0 
    ------------
           2
    = 4.5 months

    Explanation:- 
    Suppose if the first drawing is made on 31st march( 1st quarter Jan-march) then 9 months will be left and in the last quarter October to December last drawing will be made on 31st December and 0 months will be left. 
  • Question 9
    1 / -0
    A, B and C were capitals of Rs. 50,000; Rs. 40,000 and Rs. 30,000 respectively carrying on business in partnership. The firm's reported profit for the year was Rs. 79,200. As per provisions of the Indian Partnership Act, 1932, find out the share of each partner in the above amount after taking into account that no interest has been provided on an advance by A of Rs. 20,000, in addition to his capital contribution? 
    Solution
    Profit after charging interest = Profit before charging interest - Interest on loan
                                                    = Rs.(79,200 - 1,200) (Since, interest on Partner's A loan = Rs.20,000 x 6/100 = Rs. 1,200).
                                                    = Rs.78,000.
    Profit distribution among partners = Rs.78,000/3
                                                             = Rs.26,000.
    Profit for B and C = Rs.26,000
    Profit for A = RS.26,000 + Rs.1,200
                       = Rs.27,200.

    Note:-. 
    1) When there is no mention about the profit sharing ratio among partners its assumed to be equal.
    2) If there is no agreement or no provision regarding interest on loan in the agreement then the interest will be charged @ 6% p.a. 
  • Question 10
    1 / -0
    Interest on capital will be paid to the partners if provided for in the agreement but only from __________. 
    Solution
    Interest on capital will be paid to the partners if provided for in the agreement but only from profits. Interest on capital is an appropriation and not a charge against profit hence, is provided only to the extent of profits. 
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