MP Board Class 12th Accountancy Important Questions Chapter 2 Partnership Accounts: Basic Concepts

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MP Board Class 12th Accountancy Important Questions Chapter 2 Partnership Accounts: Basic Concepts

Partnership Accounts: Basic Concepts Important Questions

Partnership Accounts: Basic Concepts Objective Type Questions

Question 1.
Choose the correct Answer:

Question 1.
The maximum number of members in a partnership firm performing banking business is:(MP 2010)
(a) 20
(b) 15
(c) 10
(d) None of the above.
Answer:
(c) 10

Question 2.
In the absence of partnership deed interest on loan will be: (MP 2011,15)
(a) 10% p.a.
(b) 6%
(c) 6% p.a.
(d) 10%.
Answer:
(b) 6%

Question 3.
In the absence of partnership deed profit is divided in:
(a) Capital ratio
(b) Equally
(c) Liability ratio
(d) None of the above.
Answer:
(b) Equally

Question 4.
Liabilities of partners is:
(a) Limited
(b) Unlimited
(c) Limited up to capital
(d) None of above.
Answer:
(b) Unlimited

Question 5.
Partnership deed means:
(a) Rules of purchase and sale in business
(b) Rules and conditions of partnership business
(c) Rules of dissolution of partnership
(d) None of these.
Answer:
(b) Rules and conditions of partnership business

Question 6.
The balance of current account of the partner will always have:
(a) Debit balance
(b) Credit balance
(c) Either of the two
(d) None of these.
Answer:
(c) Either of the two

Question 7.
Preparation of Partnership deed is: (MP 2009 Set B, 13)(MP 2014)
(a) Compulsory
(b) Voluntary
(c) Partly compulsory
(d) Not necessary.
Answer:
(b) Voluntary

Question 8.
When the new partner brings premium (goodwill) in cash, it is transferred to: (MP 2009 Set B)
(a) New partner’s capital A/c
(b) Premium A/c
(c) New partner’s current A/c
(d) Bank A/c
Answer:
(b) Premium A/c

Question 9.
Interest on drawings is:
(a) Firm’s loss
(b) Partner’s income
(c) Firm’s income
(d) None of the above.
Answer:
(c) Firm’s income

Question 10.
On the admission of partnership the profit on revaluation A/c should be en¬ter: (MP2016)
(a) In the capital account of all partners
(b) In the capital account of new partners
(c) In the old partners capital account
(d) In profit sharing account.
Answer:
(c) In the old partners capital account

Question 11.
On dissolution of firm, the balance of partner’s Loan A/c is transferred to:
(a) Realization A/c
(b) Partner’s Capital A/c
(c) Partner’s current A/c
(d) None of these.
Answer:
(d) None of these.

Question 12.
Profit on revaluation is distributed in:
(a) Sacrificing ratio
(b) Equally
(c) Gaining ratio
(d) Old profit sharing ratio.
Answer:
(d) Old profit sharing ratio.

Question 13.
Profit on revaluation is transferred to:
(a) All partner’s Capital A/c
(b) New partner’s Capital A/c
(c) Old partner’s Capital A/c
(d) Profit & Loss A/c.
Answer:
(c) Old partner’s Capital A/c

Question 14.
New Ratio – Old Ratio:
(a) Sacrificing ratio
(b) Equal ratio
(c) Gaining ratio
(d) None of these.
Answer:
(c) Gaining ratio

Question 2.
Fill in the blanks:

1. Partnership is the outcome of ………….. between partners.
2. Indian Partnership Act is of ……………. (MP 2013)
3. In fixed capital method ………….. account is also made.(MP 2013)
4. By Product method interest on …………… is calculated. (MP 2010)
5. In ………….. account method partner’s capital is always fixed. (MP 2009 Set A)
6. In partnership the liability of the partners is ………….
7. Preparation of partnership deed is ……………… (MP 2011)
8. Gaining ratio = New ratio …………… (MP 2011)
9. The liability of the partners in a firm is ……………
10. The registration of partnership is …………… (MP 2016)

Answer:

1. Agreement
2. 1932
3. Current account
4. Drawings
5. Fixed capital
6. Unlimited
7. Not compulsory
8. Old ratio
9. Unlimited
10. Compulsory.

Question 3.
Match the columns:

Answer:

1. (b) 10
2. (c) 6%
3. (a) 20
4. (e) 1932
5. (d) 1956
6. (f) Loan from partner
7. (g) Current account.).

Question 4.
Write true or false:

1. Partnership is an agreement between partners to share profit.
2. Partnership, a partner can transfer his interest in favor of any other partner without the consent of all other partners.
3. In absence of partnership deed neither interest is paid on capital nor charged, interest on drawing.
4. The liability of each partner in partnership is limited. (MP 2013)
5. In case of insolvency of a partner the deficiency of his capital is borne by all other partners.
6. Current account is opened in fluctuating capital method. (MP 2009 Set B)
7. To make partnership deed is compulsory. (MP 2012)
8. New Ratio – Old Ratio = Profit Receipt Ratio. (MP 2016)
9. Registration of partnership is not compulsory.
10. If the deed is silent on interest, then interest on partner’s loan will be paid @ 12% p.a.
11. Without any written agreement among the partners, a legal partnership can be formed.
12. Maximum numbers of members in a banking firm may be 20.’
13. If the deed is silent on interest, then interest on partner’s drawings will be charged @ 6% p.a.
14. Every partner in the firm beside taking active part in the firm also work as an agent of the other partners.
15. Disputes among the partners will not be solved as per the provisions of the partnership deed.

Answer:

1. True
2. False
3. True
4. False
5. True
6. True
7. False
8. True
9. True
10. False
11. True
12. True
13. False
14. True
15. False.

Question 5.
Write the Answer in one word/sentence:

1. Name the agreement which sets out the terms and conditions for running the partnership business among partners ?
2. In which account the balance of profit and loss account is transferred in partnership business ?
3. What is maximum number of members in partnership ?
4. Whether registration of partnership is compulsory or optional ?(MP 2014)
5. The persons who have entered into a partnership with one another are collectively called.(MP 2009 B, 16)
6. In which system the current account is prepared ?(MP 2009 D)
7. The capital withdrawn by partners for personal use is termed by which name ? (MP 2015)

Answer:

1. Partnership deed
2. Profit and loss appropriation account
3. 20 or 10 (Banking business)
4. Optional
5. Partners
6. Fixed capital system
7. Drawings.

Partnership Accounts: Basic Concepts Short Answer type Questions

Question 1.
What is partnership deed ?
Answer:
A partnership deed is a document containing the important terms of
partnership as agreed between the partners. A partnership deed may be
written or verbal.

Question 2.
What are the rules applicable in the absence of partnership deed ?
Answer:
As per the Indian Partnership Act 1932, the rules applicable in the absence of partnership deed are:

1. Interest on capital: Interest on capital is not allowed to any partner.
2. Profit/loss distribution: Profit/loss of the firm will be distributed equally among all the partners.
3. Remuneration: No partner is entitled to get any remuneration like salary, bonus, commission etc.
4. Interest on partner’s loan: If any partner has given loan to the firm then interest on such loan will be paid @ 6 % p.a.
5. Interest on drawings: No interest will be charged on the drawings of the partners.

Question 3.
What is partnership deed ? Define it.
Answer:
Partnership deed is an agreement among the partners on the basis of
which the firm is formed. The terms and conditions for carrying on
partnership are recorded here. The object of preparing this agreement is
to conduct the business smoothly. It may be oral or written.
“Partnership deep or Partnership agreement” is that document which
defines and describe the rules and condition for conducting business of
the firm.

Question 4.
Why is it desirable to have a written partnership deed ?
Answer:
For the smooth conduct of the business and to have a healthy relation
among the partners. The partnership deed is considered as a base. It is
not compulsory to have a written deed. An oral deed is also considered
as valid. But for avoiding any conflict among the partners in future, a
written partnership deed is considered more relevant.

Question 5.
Why profit and loss adjustment account is prepared ? Explain.
Answer:
Is sole trade, the balance of profit and loss account is transferred to
the personal account of the sole trader. But is partnership profit and
loss adjustment account is prepared to ascertain the net profit or loss.
All the factors effecting the profit and loss of the partners like
interest on capital, salary, commission, interest on drawings, drawings
of goods etc. are entered and the net profit or loss is ascertained.
This profit and loss is distributed among the partners in agreed ratio
or equally as mentioned in the deed.

Question 6.
Write any two circumstances when the fixed capital of partners get change.
Answer:
Following are the two conditions when there is change in the fixed capital of partners:

• When additional capital is introduced by the partners.
• When drawings are made by the partners.

Question 7.
Explain four characteristics of partnership.
Answer:
Four characteristics of partnership:
1. Two or more person:
For making partnership, the number of persons must not less than two. In
the event of death or retirement, if the number of partners become less
than two, the firm automatically get dissolved. But the maximum number
of members not to exceed more than 20.

2. Agreement between partners:
According to Indian Partnership Act 1932 the partnership must be formed
on the basis of an agreement. The agreement among the partners may be
oral or written.

3. Legal business:
The existence of a legal business is necessary for the formation of a partnership firm.

4. Unlimited liability:
With reference to the repayment of the firm’s external debts, the liability of each partner of the firm is unlimited.

Question 8.
If a fixed amount is withdrawn on the first day of every quarterly. What
period will be considered for calculating the interest on drawings ?
Answer:
If a fixed amount is withdrawn on the first day of every quarterly, then
the period for calculating the interest on drawings will be taken as 712
months. If the drawings is made in the middle of the quarterly, then
the period will be of 6 months. And if the drawings are made on the last
day of every quarterly, the period will be of 412 months for calculating interest on drawings.

Partnership Accounts: Basic Concepts Long Answer Type Questions

Question I.
Discuss the various methods used for calculating interest on drawings.
Ans. Interest on drawings in calculated on the basis of following
methods.

1. Product method:
In this method number of months are calculated from the date of drawings
up to the date of closing accounts and it is multiplied with the amount
of drawings. The following formula interest is calculated.

2. Average due date method:
To calculate interest in this method, first of all the amount of
drawings are added together. Each amount of drawings is multiplied with
number of drawings months and the product is obtained. After that
average month is calculated and interest is calculated from the
following formula

3. Simple method:
In this method, at first interest is calculated separately on each
drawings for their drawing periods. Afterwords amount of interest so
obtained are added together to find out the total interest chargeable on
drawings.

Question 2.
Differentiate between fixed capital and fluctuating capital method.
(MP 2000 Set C; 01 R Set C; 02 R Set A, B, C; 03 R Set B; 06 Set C; 08 Set B; 09 Set B; 2010 Model paper 12, IS, 17)
Answer:
Differences between fixed and fluctuating capital accounts:

Final Words