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Accounting for Partnership: Basic Concepts Test 56

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Accounting for Partnership: Basic Concepts Test 56
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Weekly Quiz Competition
  • Question 1
    1 / -0
    Partners are supposed to pay interest on drawings only when ______ by the _________. 
    Solution
    Partners are supposed to pay interest on drawings only when they are provided by the agreement and are agreed by the partners. 
  • Question 2
    1 / -0
    X, Y and Z are partners in a firm. At the time of division of profit for the year, there was a dispute between the partners. Profits before interest on partner's loan were Rs. 12,000 and Y determined interest @ 24% p.a. on his loan of Rs.1,60,000. There was no agreement on this point. Calculate the amount payable to X, Y and Z respectively.
    Solution
    When there is no agreement or deed among the partners, interest on loan is to be provided @ 6% pa.. Hence, interest will be Rs.1,60,000 x 6/100 = Rs.9,600.
    Profit left for distribution = Profit before interest - Interest 
                                             = 12,000 - 9,600
                                             = RS-2,400.
    Each partner's share = Rs.2,400/3
                                       = Rs.800.
    Amount payable to X = Rs.800.
    Amount payable to Y = Rs.9,600 (Interest of Partner Y's loan) + Rs.800
                                        = Rs.10,400.
    Amount payable to Z = Rs.800.
  • Question 3
    1 / -0
    What time would be taken into consideration if equal monthly amount is drawn as drawing at the beginning of each month? 
    Solution
    If a fixed amount is withdrawn in the beginning of every month of the calendar year, the interest on the total amount of drawings will be calculated for 6.5 months.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 + 1 
    -----------
          2
    = 6.5 months
  • Question 4
    1 / -0
    Where will you record interest on drawings? 
    Solution
    Interest on drawings will be shown on the credit side of the profit and loss appropriation account. Interest on drawings is the interest charged by the firm on the drawings made by the partners. It is a source of income for the firm and hence, it is to be credited to profit and loss appropriation account. 
  • Question 5
    1 / -0
    When Profit & Loss Appropriation Account is prepared? 
    Solution
    Profit and loss Appropriation Account is prepared for partnership firm. It is an extension of Profit and Loss Account. It is used for allocation and distribution of net profit among partners, reserves and dividends. It Is usually prepared after preparing Profit and Loss Account.
  • Question 6
    1 / -0
    X, Y and Z are partners in a firm. At the time of division of profit for the year, there was a dispute between the partners. Profits before interest on partners' capital were Rs.12,000. X wanted interest on capital @ 20% as his capital contributions were Rs. 2,00,000 as compared to that of Y and Z which was Rs. 1,50,000 and Rs. 1,00,000 respectively. Calculate amounts payable to X, Y and Z. 
    Solution
    When there is no partnership deed or agreement between the partners no interest on capital, interest on drawings, remuneration or salary is provided or charged. Hence, the profit available will be solely used for distribution of profit. Rs.12,000 will be equally distributed among partners.
  • Question 7
    1 / -0
    X and Y are partners sharing profits and losses in the ratio 4:1. Z was manager who received the salary of Rs.8,000 p.m. in addition to a commission of 5% on net profits after charging such commission. Profits for the year is Rs. 13,56,000 before charging salary. Find the total remuneration of Z? 
    Solution
    Total remuneration = Salary + commission 
                                     = (Rs.8,000 x 12) + Rs.60,000 (WN 1)
                                     = Rs.1,56,000.

    Working Note (WN):-
    1. Net profit for commission = Rs.13,56,000 - Rs.(8,000 x 12)
                                               = RS-12,60,000.
    Commission after charging such commission
    = Rs.12,60,000 x 5/105
    = Rs-60,000.


  • Question 8
    1 / -0
    X and Y are partners sharing profits and losses in the ration of 3:2 having the capital of Rs. 1,60,000 and Rs. 1,00,000 respectively. They are entitled to 9% p.a. interest on capital before distributing the profits. During the year firm earned Rs.15,600 before allowing any interest on capital. Profits apportioned among X and Y is ___________. 
    Solution
    Interest on capital = Capital x Rate of interest
    X :-
    = Rs.1,60,000 x 9/100
    = Rs.-14,400.
    Y:-
    = Rs.1,00,000 x 9/100
    = Rs-9,000.

    Apportioned in the ratio of interest to be allowed to the extent of profits available:-
    X:-
    = Rs.14,400
    -------------- x Rs.15,600
     Rs.23,400
    = RS-9,600.
    Y:-
    = Rs.9,000 
    ------------- x Rs.15,600
      Rs.23,400
    = Rs-6,000.
  • Question 9
    1 / -0
    To constitute a partnership agreement, it _____________.
    Solution
    To constitute a partnership agreement, it can be oral or written. In absence of partnership agreement, partners share the profits and losses equally. Partnership Agreement can be defined as a contract between two or more business partners that is used to establish the responsibilities, and profit and loss distribution in a partnership firm.
  • Question 10
    1 / -0
    Fluctuating Capital Account is credited with:
    Solution
    Fluctuating capital is a type of capital account which changes/fluctuates every time there is addition in capital or when capital is withdrawn. Interest on capital, profit, salary, commission all appears on the credit side and interest on drawings, drawings appears on the debit side. 
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