Accounting for Partnership: Basic Concepts (12 Accountancy)
Practise chapter-wise MCQs for Class 12 Accountancy — Accounting for Partnership: Basic Concepts. Every question comes with the correct answer and an expla
TL;DR: Practise chapter-wise MCQs for Class 12 Accountancy — Accounting for Partnership: Basic Concepts. Every question comes with the correct answer and an…
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Practise chapter-wise MCQs for Class 12 Accountancy — Accounting for Partnership: Basic Concepts. Every question comes with the correct answer and an expla
Accounting for Partnership: Basic Concepts MCQs with Answers & Explanations
Q1. The Partnership Act, 1932, governs partnerships in India. Under this act, if the partnership deed is silent on the matter of interest on drawings, what is the prescribed rate of interest to be charged from partners?
- 6% per annum
- 12% per annum
- No interest is charged ✓ (correct)
- As per the discretion of the managing partner
Explanation: The Partnership Act, 1932, clearly states that if the partnership deed is silent on interest on drawings, no interest shall be charged from the partners.
Q2. What is the primary purpose of a Partnership Deed?
- To calculate the market value of the firm's assets
- To prepare the annual financial statements
- To record the daily transactions of the firm
- To outline the terms and conditions of the partnership ✓ (correct)
Explanation: A Partnership Deed is a written agreement that lays down the mutual rights, duties, and obligations of the partners, as well as the rules governing the partnership's operations.
Q3. P and Q are partners in a firm. P contributed ₹5,00,000 and Q contributed ₹3,00,000. They agreed to share profits and losses in the ratio of 3:2. However, they did not have a partnership deed. According to the Partnership Act, 1932, what will be the profit-sharing ratio?
- 1:1 ✓ (correct)
- 3:2
- 5:3
- Cannot be determined
Explanation: In the absence of a partnership deed, the profits and losses are to be shared equally among all partners, irrespective of their capital contributions.
Q4. If partners' capital accounts are maintained under the fixed capital method, where are adjustments like interest on capital, partner's salary, and drawings credited or debited?
- Partner's Capital Account
- Partner's Current Account ✓ (correct)
- Profit and Loss Account
- Revaluation Account
Explanation: Under the fixed capital method, all routine adjustments related to profits and drawings are made through the Partner's Current Account, while the Partner's Capital Account remains fixed, except for permanent additions or withdrawals of capital.
Q5. Which of the following accounts is prepared to ascertain the profit or loss of a partnership firm for a specific accounting period?
- Partner's Capital Account
- Partner's Loan Account
- Profit and Loss Appropriation Account ✓ (correct)
- Fixed Asset Account
Explanation: The Profit and Loss Appropriation Account is specifically prepared to distribute the net profit (or loss) earned by the firm among the partners after considering appropriations like interest on capital, salary, commission, and interest on drawings.
Q6. A partnership firm has a net profit of ₹1,50,000 before interest on partners' capital and salary. Partner A is entitled to a salary of ₹2,000 per month and interest on capital of ₹10,000. Partner B is entitled to interest on capital of ₹15,000. If the partnership deed does not mention the treatment of loss if appropriations exceed profits, what will be the treatment?
- The profit will be distributed in the fixed profit-sharing ratio.
- The excess appropriation will be debited to the partners' capital accounts directly.
- The excess appropriation will be ignored.
- The excess appropriation will be treated as a loss and borne by partners in their profit-sharing ratio. ✓ (correct)
Explanation: If the total appropriations (like salary, interest on capital) exceed the net profit, the profit is first distributed as far as it goes, and any shortfall is treated as a loss and borne by the partners in their profit-sharing ratio.
Q7. In the case of fluctuating capital accounts, which of the following accounts will be debited/credited with interest on drawings?
- Partner's Capital Account ✓ (correct)
- Partner's Current Account
- Profit and Loss Appropriation Account
- Cash Account
Explanation: When fluctuating capital accounts are maintained, all transactions, including drawings, interest on drawings, salary, interest on capital, and profit/loss share, are recorded directly in the Partner's Capital Account.
Q8. Which of the following is NOT a feature of a partnership firm?
- Agreement between partners
- Separate legal entity ✓ (correct)
- Unlimited liability of partners
- Mutual agency
Explanation: A partnership firm does not have a separate legal entity distinct from its partners. The partners are personally liable for the debts of the firm.
Q9. Ramesh and Suresh are partners. Ramesh advanced a loan of ₹1,00,000 to the firm. The partnership deed is silent on the rate of interest on loans. What is the minimum rate of interest Ramesh is entitled to receive from the firm as per the Partnership Act, 1932?
- 9% per annum
- 12% per annum
- 6% per annum ✓ (correct)
- 4% per annum
Explanation: The Partnership Act, 1932, mandates that in the absence of a partnership deed specifying the rate of interest on loans, the lender partner is entitled to receive interest at a rate of 6% per annum.
Q10. Guaranteed profit given to a partner means:
- The total profit of the firm before appropriations.
- The profit distributed among partners after all expenses.
- The profit earned by the firm in the previous year.
- A minimum profit assured to a partner by the other partners or the firm. ✓ (correct)
Explanation: A guaranteed profit ensures that a partner receives a minimum amount of profit, regardless of the firm's actual profitability. If the actual share is less, the deficiency is made up by the guaranteeing partners.
More 12 Accountancy MCQs
- Goodwill: Nature and Valuation
- Reconstitution of a Partnership Firm - Change in Profit Sharing Ratio
- Reconstitution of a Partnership Firm - Admission of a Partner
- Reconstitution of a Partnership Firm - Retirement and Death of a Partner
- Dissolution of Partnership Firm
- Accounting for Share Capital
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