Wednesday, November 27, 2024

Accountancy HS 2nd Year Chapter 1: Accounting for Partnership: Basic Concepts

 

Nature of Partnership

  1. What is the minimum number of partners required to form a partnership?
    A) 1
    B) 2
    C) 3
    D) 4
    Answer: B

  2. Under the Companies Act, 2013, the maximum number of partners in a partnership is limited to:
    A) 10
    B) 20
    C) 50
    D) 100
    Answer: C

  3. Which of the following is a mandatory characteristic of a partnership?
    A) Mutual agency
    B) Written agreement
    C) Registration
    D) Limited liability
    Answer: A

  4. A partnership firm’s name represents:
    A) Its legal identity
    B) The name agreed upon by all partners
    C) Ownership of assets
    D) None of the above
    Answer: B

  5. The liability of partners in a partnership firm is:
    A) Limited
    B) Unlimited
    C) Fixed to their capital contribution
    D) Dependent on the agreement
    Answer: B

Partnership Deed

  1. What document governs the internal rules of a partnership?
    A) Articles of Association
    B) Memorandum of Association
    C) Partnership Deed
    D) None of the above
    Answer: C

  2. If the partnership deed is silent on profit-sharing, profits are shared:
    A) In the ratio of capital contributions
    B) Equally
    C) Proportionally to time worked
    D) At the discretion of the managing partner
    Answer: B

  3. What is the rate of interest on partner’s loans if the deed is silent?
    A) 6%
    B) 10%
    C) 12%
    D) No interest
    Answer: A

  4. Which of these is generally not included in a partnership deed?
    A) Names of partners
    B) Partner’s salaries
    C) Details of competition laws
    D) Profit-sharing ratio
    Answer: C

  5. Changes to the partnership deed require:
    A) Majority approval
    B) Consent of all partners
    C) Approval of the registrar
    D) None of the above
    Answer: B

Accounting for Partnership

  1. How many methods exist for maintaining capital accounts of partners?
    A) 1
    B) 2
    C) 3
    D) 4
    Answer: B

  2. Which account is maintained in the fixed capital method for non-capital transactions?
    A) Current Account
    B) Reserve Account
    C) Suspense Account
    D) Appropriation Account
    Answer: A

  3. In which method does the balance of the capital account remain fixed?
    A) Fluctuating Capital Method
    B) Fixed Capital Method
    C) Both
    D) Neither
    Answer: B

  4. Under fluctuating capital method, drawings are recorded in the:
    A) Profit and Loss Account
    B) Capital Account
    C) Current Account
    D) Loan Account
    Answer: B

  5. Which of the following is prepared to allocate net profit among partners?
    A) Trading Account
    B) Profit and Loss Appropriation Account
    C) Reserve Account
    D) None of the above
    Answer: B

Interest on Capital and Drawings

  1. Interest on capital is usually allowed to partners to:
    A) Reward their contribution to management
    B) Provide returns on their investment
    C) Avoid profit-sharing disputes
    D) Offset losses
    Answer: B

  2. If a partner withdraws a fixed amount monthly at the beginning of each month, interest is calculated for:
    A) 6 months
    B) 6.5 months
    C) 5.5 months
    D) 7 months
    Answer: B

  3. When varying amounts are withdrawn at different times, interest on drawings is calculated using:
    A) Straight-line method
    B) Weighted average method
    C) Product method
    D) None of the above
    Answer: C

  4. If the deed is silent, interest on drawings:
    A) Is not charged
    B) Is charged at 6%
    C) Is charged equally to all partners
    D) Depends on profits
    Answer: A

  5. Which factor does not affect interest on capital calculations?
    A) Time period of capital usage
    B) Amount of capital
    C) Profit-sharing ratio
    D) Rate of interest agreed upon
    Answer: C

Special Adjustments

  1. What happens if a partner’s guaranteed profit exceeds their share of profit?
    A) The excess is ignored
    B) The excess is borne by other partners
    C) The firm is dissolved
    D) A loan is raised
    Answer: B

  2. Guaranteed profits are shared by the guaranteeing partners in:
    A) Profit-sharing ratio
    B) Ratio of capital contributions
    C) Agreed ratio
    D) Both A and C
    Answer: D

  3. If there is a deficiency in profits, the interest on capital is:
    A) Paid fully
    B) Paid partially from profits
    C) Ignored
    D) Shared as per capital ratio
    Answer: B

  4. A partner's salary is an example of:
    A) Appropriation of profit
    B) Charge against profit
    C) Reserve allocation
    D) Distribution of losses
    Answer: A

  5. When does a partner’s current account show a debit balance?
    A) When drawings exceed credits
    B) When profits are very high
    C) When liabilities exceed assets
    D) Never
    Answer: A

Admission of a Partner

  1. When a new partner is admitted, the old partnership is:
    A) Continued as is
    B) Reconstituted
    C) Dissolved
    D) Converted into a company
    Answer: B

  2. Which of the following is not adjusted upon admission of a new partner?
    A) Revaluation of assets and liabilities
    B) Goodwill
    C) Partner’s liability
    D) Profit-sharing ratio
    Answer: C

  3. The capital brought in by a new partner is generally credited to:
    A) Capital account of the new partner
    B) Current account of the new partner
    C) Goodwill account
    D) Profit and Loss Appropriation Account
    Answer: A

  4. Goodwill is shared by old partners in:
    A) Equal ratios
    B) New profit-sharing ratios
    C) Old profit-sharing ratios
    D) As per the partnership deed
    Answer: C

  5. When goodwill is raised but not retained in the books, it is:
    A) Credited to the goodwill account
    B) Credited to capital accounts of old partners
    C) Credited to capital accounts of all partners
    D) Credited to the new partner’s capital account
    Answer: B

Retirement of a Partner

  1. When a partner retires, the amount due to them is:
    A) Paid immediately
    B) Transferred to a loan account if not paid immediately
    C) Retained in the firm indefinitely
    D) Paid only if there are profits
    Answer: B

  2. The retiring partner’s share of goodwill is adjusted to:
    A) All partners’ capital accounts
    B) Continuing partners’ capital accounts
    C) Retiring partner’s current account
    D) None of the above
    Answer: B

  3. Upon retirement, the retiring partner's share in profits up to the date of retirement is credited to:
    A) Revaluation account
    B) Profit and Loss Appropriation account
    C) Partner's capital account
    D) General reserve
    Answer: C

  4. The revaluation account is prepared during:
    A) Admission of a partner
    B) Retirement of a partner
    C) Death of a partner
    D) All of the above
    Answer: D

  5. On retirement, accumulated profits are distributed among:
    A) All partners in their profit-sharing ratio
    B) Continuing partners only
    C) Retiring partners only
    D) None of the above
    Answer: A

Dissolution of Partnership

  1. What happens to a partnership firm upon dissolution?
    A) Business continues
    B) All assets and liabilities are transferred to a new partner
    C) The firm ceases to exist
    D) The firm is converted into a company
    Answer: C

  2. Upon dissolution, which account is prepared to settle accounts?
    A) Profit and Loss Appropriation Account
    B) Realization Account
    C) Revaluation Account
    D) Partner’s Capital Account
    Answer: B

  3. Which of the following is paid first during dissolution?
    A) Partners’ capital
    B) Partners’ loans
    C) External liabilities
    D) Reserves
    Answer: C

  4. In the realization account, any surplus after paying liabilities is transferred to:
    A) Partners' loan account
    B) Profit and Loss Account
    C) Partners' capital account in their profit-sharing ratio
    D) None of the above
    Answer: C

  5. Loss on realization is borne by partners in:
    A) Equal ratios
    B) Profit-sharing ratios
    C) Capital contribution ratios
    D) As agreed in the deed
    Answer: B

Special Adjustments in Partnership

  1. Which of the following is a charge against profit?
    A) Partners’ salaries
    B) Partners’ commission
    C) Manager’s salary
    D) Partners’ drawings
    Answer: C

  2. When partners provide loans to the firm, interest is treated as a:
    A) Charge against profit
    B) Distribution of profit
    C) Reserve adjustment
    D) None of the above
    Answer: A

  3. If a partner carries out business in competition with the firm without consent, the profits must:
    A) Be retained by the partner
    B) Be shared with the firm
    C) Be credited to goodwill
    D) Not be disclosed
    Answer: B

  4. When goodwill is written off, it is debited to:
    A) Old partners’ capital accounts
    B) New partners’ capital accounts
    C) All partners’ capital accounts
    D) Current accounts
    Answer: C

  5. Guarantee of profit to a partner is generally given to:
    A) All existing partners
    B) A newly admitted partner
    C) A retiring partner
    D) None of the above
    Answer: B

Practical Scenarios

  1. If interest on capital exceeds profits, the interest is:
    A) Paid fully
    B) Paid proportionally to available profits
    C) Not paid at all
    D) Adjusted against reserves
    Answer: B

  2. If drawings are made at the beginning of every month, the interest period is assumed to be:
    A) 6 months
    B) 6.5 months
    C) 5.5 months
    D) 7 months
    Answer: B

  3. When the deed is silent, profits and losses are distributed:
    A) In capital ratios
    B) Equally
    C) According to effort
    D) Based on seniority
    Answer: B

  4. If a partner’s share of profit is less than the guaranteed amount, the shortfall is adjusted by:
    A) The partner who received more profit
    B) The guaranteeing partners
    C) The firm’s reserves
    D) No adjustment is made
    Answer: B

  5. The realization account records:
    A) Income and expenditure
    B) Assets and liabilities during dissolution
    C) Day-to-day transactions
    D) Revaluation adjustments
    Answer: B

Interest on Loans, Drawings, and Capital

  1. When interest on a partner’s loan is paid, it is treated as:
    A) An expense for the firm
    B) A profit-sharing adjustment
    C) A liability to be adjusted later
    D) A capital adjustment
    Answer: A

  2. Interest on drawings is charged to:
    A) Profit and Loss Appropriation Account
    B) Partner's Capital/Current Account
    C) Realization Account
    D) Revaluation Account
    Answer: B

  3. Interest on drawings discourages partners from:
    A) Investing additional capital
    B) Excessive withdrawals
    C) Changing the profit-sharing ratio
    D) Participating in firm management
    Answer: B

  4. Which method is preferred when calculating interest on irregular withdrawals?
    A) Product method
    B) Average period method
    C) Straight-line method
    D) Fluctuating balance method
    Answer: A

  5. If a partner withdraws Rs. 10,000 quarterly at the end of each quarter, interest is calculated for:
    A) 7.5 months
    B) 6 months
    C) 4.5 months
    D) 3 months
    Answer: C

Goodwill Accounting

  1. Goodwill is an:
    A) Intangible asset
    B) Tangible asset
    C) Current liability
    D) Reserve
    Answer: A

  2. Goodwill is shared among partners when:
    A) A new partner is admitted
    B) A partner retires
    C) A partnership is dissolved
    D) All of the above
    Answer: D

  3. When goodwill is not shown in the books, it is:
    A) Ignored during accounting adjustments
    B) Distributed to all partners
    C) Written off against the capital accounts of partners
    D) Recorded in a suspense account
    Answer: C

  4. Goodwill raised at the time of a new partner’s admission is credited to:
    A) Old partners in their capital accounts
    B) New partner’s capital account
    C) Revaluation account
    D) General reserve
    Answer: A

  5. Goodwill written off after admission is debited to:
    A) All partners’ capital accounts in the new ratio
    B) Old partners' accounts in the old ratio
    C) New partner only
    D) Reserves
    Answer: A

Profit-Sharing and Adjustments

  1. If the partnership deed does not specify a ratio, profits are shared:
    A) Based on time worked
    B) Based on capital contribution
    C) Equally
    D) Based on seniority
    Answer: C

  2. Profit and Loss Appropriation Account records:
    A) Distribution of profits among partners
    B) Revaluation of assets and liabilities
    C) Daily business transactions
    D) Adjustments for errors in financial statements
    Answer: A

  3. In case of insufficient profits, partner's salaries are:
    A) Fully paid
    B) Proportionately paid
    C) Not paid at all
    D) Adjusted as liabilities
    Answer: B

  4. What happens to accumulated losses upon admission of a new partner?
    A) They are transferred to the revaluation account
    B) They are written off against reserves
    C) They are shared among old partners in the old ratio
    D) The new partner shares them equally
    Answer: C

  5. Which account shows how profits are distributed?
    A) Realization Account
    B) Revaluation Account
    C) Profit and Loss Appropriation Account
    D) Partner’s Current Account
    Answer: C

Death of a Partner

  1. Upon the death of a partner, their share of goodwill is:
    A) Ignored
    B) Paid to the legal heirs
    C) Adjusted in the new profit-sharing ratio
    D) Credited to their loan account
    Answer: B

  2. The share of profit up to the date of death is:
    A) Shared equally by all partners
    B) Credited to the deceased partner’s account
    C) Retained in the firm
    D) Credited to reserves
    Answer: B

  3. Which method is used to calculate the share of profit up to the date of death?
    A) Time-apportionment method
    B) Turnover method
    C) Both A and B
    D) Neither A nor B
    Answer: C

  4. The executor of the deceased partner is entitled to:
    A) Only their share of capital
    B) Interest on drawings
    C) Share of profit, capital, and goodwill
    D) None of the above
    Answer: C

  5. Upon a partner’s death, revaluation of assets is:
    A) Optional
    B) Mandatory
    C) Determined by the partnership deed
    D) Not required
    Answer: B

Miscellaneous

  1. Revaluation account is also called:
    A) Realization account
    B) Adjustment account
    C) Appropriation account
    D) Current account
    Answer: B

  2. When a new partner is admitted, reserves are shared among:
    A) Old partners in the old ratio
    B) All partners in the new ratio
    C) Old partners equally
    D) The new partner only
    Answer: A

  3. A partnership firm can be dissolved by:
    A) Mutual agreement
    B) Completion of a project
    C) Insolvency of all partners
    D) All of the above
    Answer: D

  4. Which method is generally used when partners withdraw fixed amounts every month?
    A) Straight-line method
    B) Product method
    C) Average period method
    D) None of the above
    Answer: C

  5. Which of the following is an appropriation of profit?
    A) Partners’ interest on loan
    B) Partners’ commission
    C) Interest on drawings
    D) Manager’s salary
    Answer: B

Revaluation of Assets and Liabilities

  1. Revaluation of assets and liabilities is required in the case of:
    A) Admission of a partner
    B) Retirement of a partner
    C) Death of a partner
    D) All of the above
    Answer: D

  2. Revaluation of assets is credited to:
    A) Revaluation account
    B) Partners’ capital accounts in old profit-sharing ratio
    C) Reserve account
    D) New partner's capital account
    Answer: B

  3. Loss on revaluation is borne by:
    A) All partners in the new profit-sharing ratio
    B) Old partners in the old profit-sharing ratio
    C) Continuing partners only
    D) New partners only
    Answer: B

  4. If the value of an asset decreases during revaluation, it is:
    A) Debited to the revaluation account
    B) Credited to the revaluation account
    C) Credited to the capital account
    D) Ignored
    Answer: A

  5. Revaluation is not required when:
    A) A new partner is admitted
    B) Partners decide to dissolve the firm
    C) The profit-sharing ratio is unchanged
    D) A partner retires
    Answer: C

Loan and Interest Adjustments

  1. Interest on partner’s loan is:
    A) An appropriation of profit
    B) A charge against profit
    C) A distribution of capital
    D) An adjustment in current accounts
    Answer: B

  2. If no rate of interest is agreed upon for a partner’s loan, the rate is:
    A) 6%
    B) 8%
    C) 10%
    D) No interest is allowed
    Answer: A

  3. Partner's loan appears on the:
    A) Assets side of the balance sheet
    B) Liabilities side of the balance sheet
    C) Partner’s capital account
    D) Reserve account
    Answer: B

  4. If a partner’s loan remains unpaid upon dissolution, it is:
    A) Transferred to realization account
    B) Treated as a firm's loss
    C) Adjusted against assets
    D) Paid before capital accounts
    Answer: D

  5. Interest on partner’s loan is shown in the:
    A) Revaluation account
    B) Realization account
    C) Profit and Loss Account
    D) Partners’ capital accounts
    Answer: C

Special Adjustments

  1. If partners withdraw different amounts at different intervals, interest on drawings is calculated using:
    A) Average period method
    B) Product method
    C) Straight-line method
    D) None of the above
    Answer: B

  2. Which account is used to record the firm's liabilities and assets at the time of dissolution?
    A) Revaluation Account
    B) Realization Account
    C) Profit and Loss Appropriation Account
    D) Partners' Current Account
    Answer: B

  3. Accumulated profits at the time of admission of a partner are:
    A) Distributed among all partners in the new profit-sharing ratio
    B) Distributed among old partners in the old ratio
    C) Credited to the new partner’s account
    D) Retained in the firm
    Answer: B

  4. When goodwill is brought in cash by a new partner, it is:
    A) Credited to the goodwill account
    B) Credited to old partners in their sacrificing ratio
    C) Debited to the new partner’s account
    D) Debited to the profit and loss account
    Answer: B

  5. If the deed is silent, remuneration to partners for firm work is:
    A) Paid based on capital contribution
    B) Not allowed
    C) Paid based on seniority
    D) Distributed equally among partners
    Answer: B

Guarantee of Profit

  1. If a partner is guaranteed a minimum profit, the deficiency is borne by:
    A) All partners in the profit-sharing ratio
    B) Only the guaranteeing partners
    C) The firm as a whole
    D) The partner who received excess profit
    Answer: B

  2. Guaranteed profits to a new partner are credited to:
    A) Capital accounts of all partners
    B) Profit and Loss Appropriation Account
    C) The new partner’s capital account
    D) The guaranteeing partner’s account
    Answer: C

  3. If only one partner guarantees the profit of a new partner, the shortfall is borne by:
    A) All partners equally
    B) The guaranteeing partner only
    C) Continuing partners in the profit-sharing ratio
    D) All partners in the new ratio
    Answer: B

  4. A deficiency in guaranteed profit is adjusted:
    A) Against revaluation reserves
    B) Against goodwill
    C) By debiting the guaranteeing partners’ accounts
    D) By increasing the new partner’s capital
    Answer: C

  5. Guaranteed profit adjustments are recorded in the:
    A) Profit and Loss Appropriation Account
    B) Revaluation Account
    C) Partner’s Current Account
    D) Capital Account of new partners only
    Answer: A

Miscellaneous Scenarios

  1. Partners are considered both:
    A) Principals and agents
    B) Owners and employees
    C) Shareholders and managers
    D) Agents and creditors
    Answer: A

  2. If a partner uses firm property for personal gain, the profits must:
    A) Be shared with the firm
    B) Be retained by the partner
    C) Be recorded as goodwill
    D) Be credited to reserves
    Answer: A

  3. The balance of the current account under fixed capital method:
    A) Always shows a debit balance
    B) Can show either a debit or credit balance
    C) Always shows a credit balance
    D) Is adjusted in the revaluation account
    Answer: B

  4. When a partner retires, their capital account is:
    A) Transferred to the profit-sharing account
    B) Paid in full or transferred to a loan account
    C) Distributed among other partners
    D) Ignored
    Answer: B

  5. Dissolution of a partnership means:
    A) The end of the partnership agreement
    B) Continuation of the firm under new terms
    C) Admission of a new partner
    D) Revaluation of assets only
    Answer: A

Advanced Adjustments and Accounting Concepts

  1. When a partner is admitted, his share of goodwill is adjusted in the:
    A) Revaluation Account
    B) Old partners’ capital accounts
    C) Current accounts of all partners
    D) Realization Account
    Answer: B

  2. If the partnership deed does not specify otherwise, interest on capital is:
    A) Allowed at 6%
    B) Allowed at 12%
    C) Not allowed
    D) Shared equally among partners
    Answer: C

  3. The balance in the realization account after all liabilities are paid is transferred to:
    A) Partner's loan account
    B) Partner's capital accounts in their profit-sharing ratio
    C) Reserves
    D) Suspense account
    Answer: B

  4. Which of the following is shown in the liabilities side of a balance sheet in a partnership firm?
    A) Capital accounts of partners
    B) Drawings accounts of partners
    C) Fixed assets
    D) Prepaid expenses
    Answer: A

  5. On dissolution of a partnership firm, accumulated losses appear on the:
    A) Debit side of the realization account
    B) Credit side of the realization account
    C) Debit side of the partner’s capital account
    D) Credit side of the partner’s loan account
    Answer: A

Adjustments to Reserves and Profits

  1. Reserves at the time of admission of a new partner are transferred to:
    A) The profit and loss appropriation account
    B) The old partners’ capital accounts in the old profit-sharing ratio
    C) The revaluation account
    D) The new partner’s capital account
    Answer: B

  2. In case of insufficient profits, the amount of interest on capital:
    A) Is paid partially to the extent of available profits
    B) Is carried forward to the next year
    C) Is paid fully from reserves
    D) Is ignored entirely
    Answer: A

  3. Which of these accounts is not affected during the appropriation of profits?
    A) Partner's capital account
    B) Partner’s current account
    C) Profit and Loss Appropriation Account
    D) Realization Account
    Answer: D

  4. A new partner’s share of profit comes from:
    A) The firm's reserves
    B) The old partners' existing shares
    C) Goodwill created during revaluation
    D) Only the profits earned after their admission
    Answer: B

  5. Accumulated profits and reserves upon retirement are credited to:
    A) The capital accounts of continuing partners
    B) The capital accounts of all partners in the old ratio
    C) The realization account
    D) The capital account of the retiring partner only
    Answer: B

Retirement and Death of a Partner

  1. The share of goodwill of a retiring partner is:
    A) Ignored
    B) Transferred to the continuing partners’ accounts in the gaining ratio
    C) Credited to the retiring partner’s loan account
    D) Transferred to the profit and loss account
    Answer: B

  2. On retirement, the retiring partner’s liability for the firm's future losses:
    A) Ceases
    B) Continues until the firm’s dissolution
    C) Depends on an agreement
    D) Is transferred to the new partner
    Answer: A

  3. The amount payable to the deceased partner’s legal representatives is shown in the:
    A) Revaluation account
    B) Partner’s capital account
    C) Profit and Loss Account
    D) Realization account
    Answer: B

  4. The profit-sharing ratio for the remaining partners after a partner’s death is known as:
    A) New ratio
    B) Old ratio
    C) Sacrificing ratio
    D) Gaining ratio
    Answer: A

  5. Upon the death of a partner, the share of profit up to the date of death is calculated by:
    A) Time-apportionment method or turnover method
    B) Average cost method
    C) LIFO method
    D) Weighted-average method
    Answer: A

Capital and Current Accounts

  1. In the fixed capital method, partner’s salaries are adjusted in the:
    A) Profit and Loss Appropriation Account
    B) Capital Account
    C) Revaluation Account
    D) Current Account
    Answer: D

  2. A debit balance in a partner’s current account indicates:
    A) Excess drawings over credits
    B) Excess profits allocated
    C) Overvaluation of assets
    D) Understatement of liabilities
    Answer: A

  3. Under the fluctuating capital method, drawings are debited to the:
    A) Current account
    B) Capital account
    C) Profit and Loss Appropriation Account
    D) Realization account
    Answer: B

  4. The fixed capital method involves maintaining:
    A) One account for each partner
    B) Two accounts for each partner
    C) Three accounts for each partner
    D) No separate accounts
    Answer: B

  5. Capital accounts of partners always appear on the:
    A) Asset side of the balance sheet
    B) Liability side of the balance sheet
    C) Expense side of the profit and loss account
    D) Income side of the profit and loss account
    Answer: B

Miscellaneous

  1. The maximum number of partners in a firm as per the Companies Act, 2013 is:
    A) 10
    B) 20
    C) 50
    D) 100
    Answer: C

  2. In the absence of an agreement, a partner contributing more capital is entitled to:
    A) Higher share of profits
    B) Equal share of profits
    C) Interest on their capital contribution
    D) None of the above
    Answer: B

  3. Which of the following is not prepared during dissolution?
    A) Revaluation Account
    B) Realization Account
    C) Partners’ Capital Accounts
    D) Balance Sheet
    Answer: D

  4. The profit-sharing ratio changes during:
    A) Admission of a partner
    B) Retirement of a partner
    C) Death of a partner
    D) All of the above
    Answer: D

  5. The right to participate in the conduct of business is given to partners under:
    A) Indian Contract Act, 1872
    B) Indian Partnership Act, 1932
    C) Companies Act, 2013
    D) Income Tax Act, 1961
    Answer: B

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