Retirement or Death of a partner Test

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Retirement or Death of a partner Test - 5

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Question 1
1 / -0

Unrecorded Legal charges will be:

A
Credited to the partners account

B
Will be shown in Balance Sheet

C
Debited to the Revaluation account

D
Credited to the Revaluation account

Solution

Unrecorded legal charges are the liability of the firm, so it should be recorded in the debit side of revaluation account and same should be shown in the liabilities side of the balance sheet.
Question 2
1 / -0

When Retiring partners balance is treated as loan , in the absence of any information, he will get:

A
Interest 7.5%

B
Bank Rate (Fluctuating rate)

C
Interest only 6% per annum

D
Interest 10%

Solution

In the absence of any information regarding interest on loan to the partner, it should be paid @ 6% per annum.
Question 3
1 / -0

When outgoing partner’s share is not settled and business is continued , we follow:

A
Section 37 of the Indian Partnership Act

B
Section 4 of Indian Partnership Act

C
Section 13 of the Indian Partnership Act

D
Section 17 of the Indian Partnership Act

Solution

If a partnership firm continues its business without adjusting the account of outgoing partner, in such a case Section 37 of the Indian Partnership Act will be applicable. According to that outgoing partner is entitled for interest or profit.

Sec.37

Where any member of a firm has died or otherwise ceased to be a partner, and the surviving or continuing partners carry on the business of the firm with the property
of the firm without any final settlement of accounts as between them and the outgoing partner or his estate, then, in the absence of a contract to the contrary, the
outgoing partner or his estate is entitled at the option of himself or his representatives to such share of the profits made since he ceased to be a partner as
may be attributable to the use of his share of the property of the firm or to interest at the rate of six per cent. per annum on the amount of his share in the property of
the firm :
Provided that where by contract between the partners an option is given to surviving or continuing partners to purchase the interest of a deceased or outgoing partner,
and that option is duly exercised, the estate of the deceased partner, or the outgoing partner of his estate, as the case may be, is not entitled to any further or other
share of profits, but if any partner assuming to act in exercise of the option does not in all material respects comply with the terms thereof, he is liable to account under
the foregoing provisions of this section.
Question 4
1 / -0

The minimum share application money is:

A
10% of nominal value of shares

B
5% of nominal value of shares

C
Rs. 5 per share

D
none of the above

Solution

5% of nominal value of shares
Question 5
1 / -0

Deceased partner’s share of profit is shown in:

A
Credit side of his capital account and in the B/S liability side

B
Debit side of his capital account only

C
Credit side of his capital account only

D
Credit side of his capital account and in the B/S asset side

Solution

The amount payable to deceased partner’s executor as profit (up to the date of death) will be transferred to the credit side of deceased partner’s capital account and same will be shown in the assets side of the balance sheet. as P/L Suspense A/c.
Question 6
1 / -0

Calculation of sharing of profit up to date of death will be calculated on the basis of

A
Yearly basis

B
Turnover basis

C
Time basis

D
Both Time basis and Turnover basis

Solution

Deceased partner’s share will be calculated on the basis of:
•Time
•Turnover
Note : Read the question carefully while calculating the share of profit of deceased partner.
Question 7
1 / -0

Amount due to a deceased partner shown by his Capital Account is transferred to ____ account

A
Retired Partners Account

B
His Executor’s Account

C
Continuing Partners Account

D
All partners Account

Solution

Amount due to deceased partner i.e. his capital balance, share of reserve, share of profit, revaluation profit or loss etc. will be adjusted in deceased partner’s capital account, and same will be handed over to the executor of deceased partner.
Question 8
1 / -0

How deceased partners executors account settled:

A
Paid in installments without interest

B
Paid off immediately

C
Paid in installments with interest

D
Both Paid off immediately and Paid in installments with interest

Solution

Deceased partner’s account can be settled by paying off to his executor:
•Full amount immediately
•In installment with interest
Question 9
1 / -0

In case of private placement of shares to raise the amount of capital, a company:

A
Invite the public through advertisement

B
Invites the public through prospectus

C
Does not invite the public

D
None of the above

Solution

Does not invite the public
Question 10
1 / -0

What journal entry will be recorded when cash paid to retiring partner (for his due amount) at the time of retirement?

A
Retiring Partner’s capital A/c Dr.
To Cash A/c

B
Cash A/c Dr.
To Executor’s A/c

C
Cash A/c Dr.
To Retiring partner’s capital A/c

D
Executor’s A/c Dr.
To Cash A/c

Solution

Following journal entry will be recorded at the time of payment to retiring partner:
Retiring Partner’s capital A/c Dr.
To Cash A/c
(Being cash paid to the retiring partner)

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Retirement or Death of a partner Test - 5

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Retirement or Death of a partner Test - 5

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Question 1

Credited to the partners account

Will be shown in Balance Sheet

Debited to the Revaluation account

Credited to the Revaluation account

Solution

Question 2

Interest 7.5%

Bank Rate (Fluctuating rate)

Interest only 6% per annum

Interest 10%

Solution

Question 3

Section 37 of the Indian Partnership Act

Section 4 of Indian Partnership Act

Section 13 of the Indian Partnership Act

Section 17 of the Indian Partnership Act

Solution

Question 4

10% of nominal value of shares

5% of nominal value of shares

Rs. 5 per share

none of the above

Solution

Question 5

Credit side of his capital account and in the B/S liability side

Debit side of his capital account only

Credit side of his capital account only

Credit side of his capital account and in the B/S asset side

Solution

Question 6

Yearly basis

Turnover basis

Time basis

Both Time basis and Turnover basis

Solution

Question 7

Retired Partners Account

His Executor’s Account

Continuing Partners Account

All partners Account

Solution

Question 8

Paid in installments without interest

Paid off immediately

Paid in installments with interest

Both Paid off immediately and Paid in installments with interest

Solution

Question 9

Invite the public through advertisement

Invites the public through prospectus

Does not invite the public

None of the above

Solution

Question 10

Retiring Partner’s capital A/c Dr. To Cash A/c

Cash A/c Dr. To Executor’s A/c

Cash A/c Dr. To Retiring partner’s capital A/c

Executor’s A/c Dr. To Cash A/c

Solution

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Retiring Partner’s capital A/c Dr.
To Cash A/c

Cash A/c Dr.
To Executor’s A/c

Cash A/c Dr.
To Retiring partner’s capital A/c

Executor’s A/c Dr.
To Cash A/c