Accounting for Partnership: Basic Concepts Test 7

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Accounting for Partnership: Basic Concepts Test 7

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SHARING IS CARING

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Weekly Quiz Competition

Question 1
1 / -0

In case of insolvency of a partner, any balance in reserve fund or profit and loss accounts is distributed to all the partners ______________.

A
Equally

B
In the profit sharing ratio

C
In the ratio of capitals

D
In sacrificing ratio
Solution
In general, unless otherwise agreed upon, the partnership is dissolved upon the insolvency of a partner. In some cases, partnership agreements are made to ensure that if a partner becomes insolvent, there are clear guidelines on how the partnership continues.
The following rules shall be observed subject to agreement by the partners:
All the losses of the company including deficiencies of capital shall be paid out of profits first, then out of the capital and lastly if necessary by the partners individually in proportions to which they are entitled to share profits.
All the assets of the company including all the sums contributed by the partners shall be applied in the following manner:
In paying all the debts of the firm to the third parties
in paying each partner rateable what is due to him from the firm for advances as distinguished from capital
in paying to each partner rateable what is due to him on account of capital
The residue shall be divided among the partners in the proportions in which they were entitled to share profits.
Question 2
1 / -0

Which of the following are of revenue nature ?

A
Cost of extension of factory building

B
Cost of painting the old building

C
Legal cost of acquiring land for extension

D
Purchase of freehold land
Question 3
1 / -0

Which of the following statement/s is/are appropriate in respect of partnership account?
1. In the absence on any provision in the partnership agreement to the contrary, partners can charge interest @6% per annum on loans given by them to the partnership firm.
2. An ordinary partnership firm can have not more than 20 partners
3. A banking partnership firm can have not more than 10 partners.
4. In the absence of any provision in the partnership agreement to the contrary, profits and losses are shared by the partners in the ratio of their capitals.
Select the correct answer from the codes given below:

A
1, 2 and 3

B
1 and 3

C
2, 3 and 4

D
1, 3 and 4
Question 4
1 / -0

Advance received in connection with the contract to supply goods which was later on forfeited for breach of contract, it is an example of ______________.

A
Revenue receipt

B
Capital receipt

C
Deferred revenue receipt

D
None of the above

Solution

Revenue receipts are money received by a business as a result of its normal business operations. In this way, revenue receipts affect the profit or loss of a business. Capital receipts are non-recurring receipts that either increase a liability or decrease an asset.
Question 5
1 / -0

Entrance Fee/Admission Fee may be treated as ____________.

A
Revenue receipt

B
Capital receipt

C
Both (A) and (B)

D
None of the above

Solution

It is the amount which a member pays at the time of admission. Thus, it is a one-time fee and also non-recurring in nature. As per the rules of the organization, it is either capitalized or treated as revenue.
Question 6
1 / -0

In case of an unregistered firm a partner cannot:

A
Get a share in profit

B
Get interest on his capital

C
File a suit against another partner

D
Get interest on loan

Solution

A partner in an unregistered firm cannot file a suit against said firm or his/her partners to enforce any rights arising from the contract.
While you can question them all the same, there is no way you can take them to the court, since your firm does not have a valid agreement.
Question 7
1 / -0

The interest on partners capital accounts is to be credited to _______________.

A
Interest Account

B
Profit and Loss Account

C
Drawing Account

D
Partner's Capital Account

Solution

Interest on partner's capital is an amount at an agreed rate of interest which is credited to a partner based on the amount of capital contributed by him/her.
Interest on partner's capital is an expense to the firm and hence debited to profit and loss appropriation A/c. On the other hand it is an income for partners and hence credited to partner's capital A/c.
Question 8
1 / -0

Amount realization from the sale of private estate of partners is used first to pay off ___________________.

A
Debts of the firm

B
Private debts of the partner

C
Wife's loan

D
Bank loan of the firm
Solution
- Assets of the firm and the capital contributed by the partners to set-off losses of the firm will be applied in the following order–
1. Third party debts will be paid first
2. Next, loan amount taken by firm from any partner will be repaid to that partner
3. Capital contributed by each partner will be repaid to him in the capital contribution ratio
4. Balance amount will be shared among the partners in their profit sharing ratios.
Question 9
1 / -0

Consider the following statements :
1. It is compulsory to have a Partnership Deed.
2. It is compulsory for a partnership firm to get itself registered.
3. A partner of an unregister firm can file a suit for the dissolution of the firm.
Which of the above statement/s is/are not correct ?

A
1, 2 and 3

B
2 and 3

C
Only 1

D
1 and 3

Solution

According to the Partnership Act, 1932, it is not compulsory for a partnership firm to get itself registered. But partners prefer to get itself registered to overcome following limitations:
1. The partner of an unregistered firm can not file a suit against other partners to settle the disputes.
2. The partner of an unregistered firm can not file a suit for the dissolution of firm.
3. The partner of an unregistered firm can not file a suit against third party or an outsider for recovery of any claim.
Question 10
1 / -0

Which of the following is correct statement ?

A
Partner's current accounts are opened in case their capital accounts are fixed

B
In the absence of partnership deed, partner's shall be paid salaries

C
The interest on partner's drawings is to be debited to profit and loss account

D
Where a partner is entitled to interest on capital contributed by him, such interest will be payable only out of capital

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Re-Attempt Weekly Quiz Competition

Accounting for Partnership: Basic Concepts Test 7

Result

Accounting for Partnership: Basic Concepts Test 7

Score

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Rank

-

SHARING IS CARING

Question 1

Equally

In the profit sharing ratio

In the ratio of capitals

In sacrificing ratio

Solution

Question 2

Cost of extension of factory building

Cost of painting the old building

Legal cost of acquiring land for extension

Purchase of freehold land

Question 3

1, 2 and 3

1 and 3

2, 3 and 4

1, 3 and 4

Question 4

Revenue receipt

Capital receipt

Deferred revenue receipt

None of the above

Solution

Question 5

Revenue receipt

Capital receipt

Both (A) and (B)

None of the above

Solution

Question 6

Get a share in profit

Get interest on his capital

File a suit against another partner

Get interest on loan

Solution

Question 7

Interest Account

Profit and Loss Account

Drawing Account

Partner's Capital Account

Solution

Question 8

Debts of the firm

Private debts of the partner

Wife's loan

Bank loan of the firm

Solution

Question 9

1, 2 and 3

2 and 3

Only 1

1 and 3

Solution

Question 10

Partner's current accounts are opened in case their capital accounts are fixed

In the absence of partnership deed, partner's shall be paid salaries

The interest on partner's drawings is to be debited to profit and loss account

Where a partner is entitled to interest on capital contributed by him, such interest will be payable only out of capital

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