Partnership Questions

At the time of retirement of a partner, undistributed profits appearing in the balance sheet of the old firm is transferred to the capital account of:

Identify the required condition under which the clauses of a partnership deed can be modified or altered.

A and B are partners sharing profits equally with capitals of $\text{Rs. }45,000$ each. They admitted C as a new partner for $\frac{1}{3}\text{rd}$ share in the profit. C brings $\text{Rs. }60,000$ as his capital. Find the goodwill of the firm.

Which amongst the following is not a ground for dissolution of a partnership firm on the happening of certain contingencies?

In case of the dissolution of a firm, the firm ceases to conduct business and has to settle its accounts. Losses, including deficiencies of capital, shall be paid in the following manner and order:(A) Out of capital of partners.
(B) By the partners individually in their profit sharing ratio.
(C) Profits.Choose the correct answer from the options given below:

A newly admitted partner acquires an immediate statutory right to:

On retirement of a partner, the retiring partner's capital account will be credited with _____

In the event of the death of a partner, the ratio in which the continuing partners acquire the share from the deceased partner is called .......

$A$, $B$ and $C$ are partners sharing profits in the ratio of $3:2:1$. $C$ died on 1st July, 2023. On this date, final accounts were prepared to ascertain profits for the period. It resulted in a profit of $\text{₹ }1,75,000$ to the firm. To give effect to the above:

A and B share profits in the ratio of $3:2$. C was admitted as a partner who gets $\frac{1}{5}$ share. New profit sharing ratio, if C acquires $\frac{3}{20}$ from A and $\frac{1}{20}$ from B, would be:

Under the fixed capital method, the capital of the partners shall remain fixed unless additional capital is introduced or a part of the capital is withdrawn as per the agreement between the partners. Which among the following is NOT a feature of the fixed capital method?

Yadu, Madhu and Vidu are partners, sharing profit and losses in the ratio of $2:2:1$. Their fixed capitals on April 01, 2018 were: Yadu $\text{Rs. }5,00,000$, Madhu $\text{Rs. }4,00,000$ and Vidu $\text{Rs. }3,50,000$.As per the partnership deed, partners are entitled to interest on capital $@5\%\text{ p.a.}$ and Yadu has to be paid a salary of $\text{Rs. }2,000$ per month. The net loss of the firm as per profit and loss account for the year ending March 31, 2019, amounted to $\text{Rs. }75,000$. On the basis of the profit and loss appropriation account, Partners' distribution of loss would be:

A partnership can have maximum $50$ partners. This limit has been set by the:

Case StudyRead the following information to answer.Arun and Ram are partners in a restaurant business sharing profits and losses in capital ratio. Their fixed capital from the beginning of the firm was Rs. $2,00,000$ and Rs. $1,50,000$ respectively.The profit for the year ended 31 March 2022 before the appropriation of Salary and Interest on Capital was Rs. $2,20,000$. Ram is allowed a salary of Rs. $2,000$ per quarter and interest on capital @ $10\%$ p.a.Due to the further expansion of the business, they decided to enter Sanjeev as a new partner for $\frac{1}{5}$ share in profits. It was agreed that Sanjeev will bring Rs. $1,00,000$ as capital and Rs. $50,000$ as his share of Goodwill. It was decided that he will give Rs. $1,00,000$ as loan to the firm for 3 years.Rate of Interest on loan given by Sanjeev will be:

The old Profit Sharing ratio among $M$, $N$ and $P$ is $2:2:1$. The New profit sharing ratio after $N$ 's retirement is set at $3:2$. The gaining ratio between $M$ and $P$ will be:

Which of the following is NOT a valid method for the valuation of goodwill?

On the dissolution of a firm, creditors are transferred to:

$A$, $B$ and $C$ are partners sharing profits in the ratio of $3:3:4$. They decide to share the future profits equally. The sacrifice or gain of partners are:

According to Section __________ of the Indian Partnership Act 1932, the dissolution of partnership between all the partners of a firm is called the dissolution of the firm.

Which of the following indicates a situation of compulsory dissolution?

Kavita and Lalita are partners, sharing profits in the ratio of $2:1$. They decide to admit Mohan for $1/4\text{th}$ share in future profits with a guaranteed amount of $\text{₹ }25,000$. Both Kavita and Lalita undertake to meet the liability arising due to the guaranteed amount to Mohan in their respective profit-sharing ratio. The firm earned profits of $\text{₹ }76,000$ for the year 2022–23. The deficiency borne by Kavita is:

On dissolution of a firm, bank overdraft is transferred to :

The clauses of a partnership deed can be altered with the consent of ______

Section 49 of the Indian Partnership Act, 1932 deals with:

The journal entry for treatment of goodwill, when a new partner brings his share of goodwill in cash and one of the old partners gains, involves the following:(A) Gaining Partner’s Capital Account is debited(B) Premium for Goodwill Account is debited(C) Sacrificing Partner’s Capital Account is credited(D) Gaining Partner’s Capital Account is credited Choose the correct answer from the options given below:

The share of loss of a deceased partner, calculated on the basis of previous year's profit/loss, is:

Which of the following statements are correct about a partnership?(A) Each partner carrying on the business is the principal as well as the agent for all the other partners.(B) If the deed is silent, interest at the rate of $6\%\text{ p.a.}$ would be charged on the drawings made by the partner.(C) If the partnership deed is silent about the profit sharing ratio, the profits and losses of the firm are to be shared equally by partners.(D) Interest on partner's loan is to be given @ $12\%\text{ p.a.}$, if the deed is silent about the rate.Choose the correct answer from the options given below:

$A$ and $N$ are partners sharing profits in the ratio $2:1$. $A$ 's son $Ashu$ was admitted as a partner for $\frac{1}{4}\text{th}$ share, half of which was gifted by $A$ to her son. The remaining portion was contributed by $N$. The goodwill of the firm is valued at Rs. $40,000$. How much amount will be credited to the old partners' capital accounts respectively for goodwill?

Sameer and Yasmin are partners with capitals of $\text{Rs }15,00,000$ and $\text{Rs }10,00,000$ respectively, sharing profits in the ratio of $3:2$. The financial year closes on March 31 every year. They admit Ravi on October 1, 2019. On that same date, Sameer introduces additional capital of $\text{Rs }3,00,000$. If interest on capital is provided at $@5\%\text{ p.a.}$, calculate the amount of interest on Sameer's capital for the financial year 2019–20.

While doing adjustment of partners' capital, for the amount of capital to be brought in by the partner, the following entry will be passed:

The Deceased Partner’s Capital Account includes which of the following amounts/balances prior to final settlement?(A) Opening balance of his capital(B) His share of profit/loss till the date of death(C) His share of General Reserve(D) His drawings till the date of death(E) Amount paid to his executors Choose the correct answer from the options given below:

What will be the share of deceased partner, whose ratio was $\frac{1}{4}$, if the turnover in year of death till the date of death was Rs. $8,00,000$ and in previous year was Rs. $20,00,000$? Profit in previous year was Rs. $4,00,000$.

A and B are partners without any partnership deed. B has given a loan of $\text{Rs. }2,00,000$ to the firm on 1st July 2023. B claims interest on loan @ $10\%\text{ p.a.}$ How much interest on loan will be paid to B for the year ending on 31st March 2024?

Read the following case study carefully and answer the question:G, K, and B were partners running a partnership for the last 10 years, sharing profit and loss in the ratio of $5:3:2$. Post-Covid, their firm was affected badly and started incurring losses. On 31st March 2023, they all decided to dissolve the firm due to continuous losses. Their capital balances were $\text{₹ }4,00,000$, $\text{₹ }3,00,000$, and $\text{₹ }2,00,000$ respectively. The firm had liabilities of $\text{₹ }80,000$, Cash balance $\text{₹ }40,000$, other Sundry Assets $\text{₹ }8,50,000$, and P&L A/c constituted the rest. Assets were realised at $80\%$, and liabilities were paid in full. There was an unrecorded liability of $\text{₹ }50,000$, which was settled at $\text{₹ }40,000$. Realisation expenses amounted to $\text{₹ }30,000$, being paid by G on behalf of the firm. Determine the balancing amount of the Profit and Loss Account prior to dissolution.

In case of dissolution, a Machine costing $\text{Rs. }20,000$, along with cash of $\text{Rs. }5,000$ were given to creditors of $\text{Rs. }30,000$ in full settlement of their claim.In this case, Realisation A/c will be Debited with:

L and M are partners sharing profits in the ratio $3:2$. N is admitted as a partner for $\frac{1}{5}\text{th}$ of the share which is acquired entirely from L. Goodwill of the firm is valued at $\text{Rs. }40,000$ on N's admission. N will have to pay for Goodwill:

Read the following case study carefully and answer the question:G, K, and B were partners running a partnership for the last 10 years, sharing profit and loss in the ratio of $5:3:2$. Post-Covid, their firm was affected badly and started incurring losses. On 31st March 2023, they all decided to dissolve the firm due to continuous losses. Their capital balances were $\text{₹ }4,00,000$, $\text{₹ }3,00,000$, and $\text{₹ }2,00,000$ respectively. The firm had liabilities of $\text{₹ }80,000$, Cash balance $\text{₹ }40,000$, other Sundry Assets $\text{₹ }8,50,000$, and P&L A/c constituted the rest. Assets were realised at $80\%$, and liabilities were paid in full. There was an unrecorded liability of $\text{₹ }50,000$, which was settled at $\text{₹ }40,000$. Realisation expenses amounted to $\text{₹ }30,000$, being paid by G on behalf of the firm. The journal entry for realization expenses in the above case study will be:

If a partner retires in the middle of the year his/her share of profit from the date of last balance sheet till the date of retirement will be transferred to : ____

John Ibrahim, a partner in Ancient Tours and Travels, withdrew money during the year ending March 31, 2020, from his capital account for personal use. He withdrew $\text{Rs. }3,000$ per month at the beginning of every month. Calculate the interest on drawings that should be charged from John Ibrahim if the rate of interest on drawings is $9\%$ per annum.

If an asset is taken over by a creditor in full lieu of the amount due to him, then the journal entry will be:

Which of the following would affect the Revaluation Account at the time of reconstitution of a partnership firm?

Goodwill can also be ascertained by capitalising the super profit directly under which method?

In the absence of any structural information regarding how the remaining partners acquire the share of a retiring or deceased partner, it is assumed that they will acquire it in their:

Arrange the following steps in the correct sequence for the application of assets during the settlement of accounts upon the dissolution of a partnership firm (as per Section 48 of the Indian Partnership Act, 1932):(A) The balance should be applied to repay loans made by partners to the firm.(B) The assets of the firm should be used in paying the debts of the firm to third parties.(C) The balance assets may be used for paying partners proportionately on account of capital.(D) The asset residue, if any, shall be divided among the partners in their profit-sharing ratio.Choose the correct answer from the options given below:

X and Y are partners sharing profits in the ratio $3:2$. Z is entered into the business for $\frac{1}{4}\text{th}$ share of profits, with the guarantee of minimum profits of ₹ 30,000. Profit earned by the business for the year ended March 31st, 2024 is ₹ 1,00,000. The amount of deficiency, if any, will be borne by:

Match List-I with List-II:List-I(A) Salary to partner(B) Interest on partner's loan(C) Interest on partner's drawings(D) Additional capital introducedList-II(I) Credit side of Partner's Capital Account(II) Debit side of Partner's Current Account(III) Debit side of Profit and Loss Account(IV) Credit side of Partner's Current AccountChoose the correct answer from the options given below:

Which among the following are the modes of dissolution?A. Dissolution by NatureB. Compulsory DissolutionC. Dissolution by AgreementD. Dissolution by NoticeChoose the correct answer from the options given below:

The Partnership Deed usually contains the following details:(A) Amount of capital to be contributed by each partner(B) The accounting period of the firm(C) Profit and loss sharing ratio(D) The rights, duties and liabilities of each partnerChoose the correct answer from the options given below:

The adjustment required for overvaluation of closing stock, while calculating adjusted profit for calculating goodwill is:(A) Reduction from concerned year's profit.(B) Reduction from next year's profit.(C) Addition to next year's profit.(D) Addition to previous year's profit. Choose the correct answer from the options given below:

In case of dissolution of partnership firm, any liability assumed/paid by a partner is shown on ________?

Which of the following events result in the reconstitution of a partnership firm?(A) Change in the profit-sharing ratio among existing partners.(B) Admission of a new partner.(C) Dissolution of a partnership firm.(D) Dissolution of a partnership due to death or retirement.Choose the correct answer from the options given below:

Match List-I with List-IIList-I (Revaluation Event)List-II (Journal Entry)(A) For increase in the value of an asset(I) Revaluation A/c Dr. To Asset A/c(B) For reduction in the amount of a liability(II) Revaluation A/c Dr. To Liability A/c(C) For reduction in the value of an asset(III) Asset A/c Dr. To Revaluation A/c(D) For appreciation in the amount of a liability(IV) Liability A/c Dr. To Revaluation A/cChoose the correct answer from the options given below:

The assets of the firm, including any sum contributed by the partners to make up deficiencies of capital, shall be applied first for paying:

Gitansh withdrew Rs. $5000$ pm at the end of every month for ten months. Interest on drawing is charged @ $10\%$ p.a. Gitansh's interest on drawings is :

The goodwill brought in by the new partner is distributed by old partner their:

Match List-I with List-II (under the Fixed Capital Method):List-IList-II(A) Bank (fresh capital introduced)(I) Debit side of Partner's Current Account(B) Interest on drawings(II) Debit side of Partner's Capital Account(C) Bank (permanent withdrawal of capital)(III) Credit side of Partner's Current Account(D) Commission(IV) Credit side of Partner's Capital AccountChoose the correct answer from the options given below:

Arrange the sequential accounting processing steps required at the time of the death of a partner in the correct logical order:(A) Preparation of deceased partner's capital account(B) Ascertainment of new profit sharing ratio and gaining ratio(C) Preparation of revaluation account, if required(D) Settlement by making payment to the deceased partner's executorChoose the correct answer from the options given below:

Which of the following accounts is NOT transferred to the Realisation Account at the time of dissolution of a firm?

$P$, $Q$ and $R$ are partners in a firm. If $S$ is admitted as a new partner then:

When a new partner brings his share of goodwill in cash, the amount brought in is credited to:

Which of the following statements truly makes the distinction between Dissolution of Partnership and Dissolution of Firm:(A) In dissolution of partnership, business is not terminated, while in dissolution of firm business is terminated.(B) The Court intervenes in dissolution of Partnership because a partnership is not dissolved by mutual agreement. A firm can not be dissolved by court order.(C) Economic relationships between partners continue in a changed form in dissolution of partnership. Economic relationships between the partners come to an end at the dissolution of the Firm.(D) Dissolution of Partnership doesn't require permanent closure of books, while in Dissolution of firm books are closed.Choose the correct answer from the options given below:

In case there is no information regarding the acquisition of a share in profit of the retiring/deceased partner by the remaining partners, the assumption is that they will acquire his/her share in the:

On the admission of a new partner, an increase in the value of assets is debited to:

In partnership, a minor can be partner:

If the partnership deed is silent, at what rate, the interest would be charged on the drawings made by the partner:

$R$ and $S$ are partners in a firm sharing profits in the ratio of $5:3$. They admitted $B$ as a new partner for $\frac{1}{7}\text{th}$ share in the profit. The new profit sharing ratio among $R$, $S$, and $B$ becomes $4:2:1$. The sacrificing ratio of $R$ and $S$ is:

Dissolution of a firm takes place on the happening of certain contingencies under Section 42 of the Indian Partnership Act. Choose them from the following:(A) By the death of a partner(B) By the adjudication of a partner as an insolvent(C) When the business of the firm becomes illegal(D) If constituted for a fixed term, by the expiry of that termChoose the correct answer from the options given below:

When a new partner is admitted, the increase in the value of the assets is debited to which account?

When realization expenses are paid by the firm on behalf of a partner, such expenses are debited to:

When the total amount withdrawn is given but the date of withdrawal is not given then interest on drawings is charged for a period of:

Sindhu, Neha, and Priya are partners sharing profits in the ratio of $5:3:2$. If Neha retires from the firm, calculate the new profit-sharing ratio and the gaining ratio between Sindhu and Priya, assuming no other modifications are specified.

Torsha started a business with ₹ 2250 while Trisha invested ₹ 2880 after a few months. If the end-of-12-months (from Torsha's investment) profit is shared by Torsha and Trisha in the ratio 25: 24, for how many months did Trisha stay invested?

$L$ and $M$ are partners sharing profits in the ratio $3:2$. $N$ is admitted as a partner for $\frac{1}{5}\text{th}$ of the share which is acquired entirely from $L$. Goodwill of the firm is valued at Rs. $40,000$ on $N$ 's admission. $N$ will have to pay for Goodwill:

Partners' current accounts are transferred to respective Partners' ______ Accounts at the time of dissolution of a firm.

Comprehension:A partner withdrew money during the financial year ending March 31, 2020 from his capital account for personal use.The individual amounts withdrawn were:Rs. $12,000$ on June 01, 2019Rs. $8,000$ on August 31, 2019Rs. $3,000$ on September 30, 2019Rs. $7,000$ on November 30, 2019Rs. $6,000$ on January 31, 2020The rate of interest on drawings is $9\%$ per annum.Question: Calculate the interest on drawings specifically for the amount of Rs. $3,000$ drawn on September 30, 2019.

The Profit and Loss Appropriation Account is an extension of the Profit and Loss Account of the firm. Which of the following items is NOT shown in the Profit and Loss Appropriation Account?

Neha contributed $\text{Rs. }30,000$ and Saloni $\text{Rs. }90,000$ as capital. What will be Saloni's share in profits if the partnership agreement is silent regarding profit-sharing?

On the retirement or death of a partner, the remaining partners who have gained due to the change in profit-sharing ratio should compensate:

X, Y and Z are partners in the ratio of $\frac{1}{2}:\frac{2}{5}:\frac{1}{10}$. What will be the new ratio of the remaining partner if X retires?

When a partnership firm undergoes dissolution, the Balance of the Investment Account and the Balance of the Investment Fluctuation Fund Account shown in the Firm's Balance Sheet are transferred respectively into:

According to Section ___________ of the Indian Partnership Act 1932, the dissolution of partnership between all the partners of a firm is called the dissolution of the firm.

Which of the following is the correct journal entry to transfer a net profit (credit balance of the Profit and Loss Account) to the Profit and Loss Appropriation Account?

Comprehension:A partner withdrew money during the financial year ending March 31, 2020 from his capital account for personal use.The individual amounts withdrawn were:Rs. $12,000$ on June 01, 2019Rs. $8,000$ on August 31, 2019Rs. $3,000$ on September 30, 2019Rs. $7,000$ on November 30, 2019Rs. $6,000$ on January 31, 2020The rate of interest on drawings is $9\%$ per annum.Question: The total cumulative amount of interest on drawings charged to the partner for the year will be:

A and B are partners in a firm sharing profits in the ratio of $3:2$. They admit M as a new partner for a $\frac{1}{4}$ share. The new profit-sharing ratio between A and B is set to be $2:1$. Calculate their sacrificing ratio.

Comprehension:A partner withdrew money during the financial year ending March 31, 2020 from his capital account for personal use.The individual amounts withdrawn were:Rs. $12,000$ on June 01, 2019Rs. $8,000$ on August 31, 2019Rs. $3,000$ on September 30, 2019Rs. $7,000$ on November 30, 2019Rs. $6,000$ on January 31, 2020The rate of interest on drawings is $9\%$ per annum.Question: Calculate the interest on drawings specifically for the amount of Rs. $6,000$ drawn on January 31, 2020.

The profits of a partnership firm over five years are recorded as follows:YearProfit (Rs.)2012–1320,0002013–1424,0002014–1520,0002015–1620,0002016–1716,000Calculate the value of goodwill on the basis of three years' purchase of average profits.

Match List-I with List-II:List-IList-II(A) Admission of a partner(I) Executor Accounts(B) Retirement of a partner(II) Sacrificing Ratio(C) Death of a partner(III) Realisation Account(D) Dissolution of a firm(IV) Gaining RatioChoose the correct answer from the options given below:

A, B and C were partner's in a firm sharing profit and losses in the Ratio of $5:3:2$. They admitted D into partnership for $1/5$ share of profit which he takes equally from A and B. D brought sufficient amount of goodwill in cash. Capital brought in by is Rs. $50,000$. On the date of admission the Balance Sheet of A, B and C was as follows :

Goodwill is to be valued at $3$ years purchase of average profit of last $4$ years which were Rs. $60,000$ (2017-18), Rs. $60,000$ (18-19), Rs. $30,000$ (19-20). On revaluation it was found that all debtors are good.Goodwill brought in by new partners would be _________.

Which of the following statements are TRUE?(A) Dissolution of a partnership is completely different from the dissolution of a firm.(B) A partnership is broken up/dissolved when a partner passes away.(C) A firm can be dissolved if all partners give their consent to it.(D) A firm is compulsorily dissolved whenever any single partner decides to retire.Choose the correct answer from the options given below:

Comprehension:A partner withdrew money during the financial year ending March 31, 2020 from his capital account for personal use.The individual amounts withdrawn were:Rs. $12,000$ on June 01, 2019Rs. $8,000$ on August 31, 2019Rs. $3,000$ on September 30, 2019Rs. $7,000$ on November 30, 2019Rs. $6,000$ on January 31, 2020The rate of interest on drawings is $9\%$ per annum.Question: Calculate the interest on drawings specifically for the amount of Rs. $12,000$ drawn on June 01, 2019.

Upon the admission of a new partner, any upward revaluation adjustment (increase in the value of assets) is directly debited to:

Comprehension:A partner withdrew money during the financial year ending March 31, 2020 from his capital account for personal use.The individual amounts withdrawn were:Rs. $12,000$ on June 01, 2019Rs. $8,000$ on August 31, 2019Rs. $3,000$ on September 30, 2019Rs. $7,000$ on November 30, 2019Rs. $6,000$ on January 31, 2020The rate of interest on drawings is $9\%$ per annum.Question: Calculate interest on drawings specifically for the amount of Rs. $7,000$ withdrawn on November 30, 2019.

Arrange the following in correct order in which assets of the firm can be used in their settlement upon dissolution.(A) Residue shall be divided between the partners in their profit sharing ratio.(B) In paying the partners proportionately what is due to him/her on account of capital.(C) In paying the partners proportionately what is due to him/her from the firm for advances/loans.(D) In paying the debts of the firm to the third parties.Choose the correct answer from the options given below:

Which from the following is not a feature of a partnership firm?

Case study: A and B were partners in a partnership firm. Due to the ill health of B they decided to dissolve the firm. The position of Assets and Liabilities on the date of dissolution was:

It was agreed that following transactions will take place :A. A wanted to start the business in sole proprietorship So he took Building and Furniture at $10\%$ less than book value.B. All the debtors proved good except a person C who did not pay Rs. $10,000$.The accumulated profits and reserve are transferred to:

Case studyA and B were partners in a partnership firm. Due to the ill health of B they decided to dissolve the firm. The position of Assets and Liabilities on the date of dissolution was:

It was agreed that following transactions will take place :A. A wanted to start the business in sole proprietorship So he took Building and Furniture at $10\%$ less than book value.B. All the debtors proved good except a person C who did not pay Rs. $10,000$.The treatment of Goodwill appearing in the balance sheet will be:

It is the amount-paid to the person who is not the regular employee of the institution.

A, B and C were partner's in a firm sharing profit and losses in the Ratio of $5:3:2$. They admitted D into partnership for $1/5$ share of profit which he takes equally from A and B. D brought sufficient amount of goodwill in cash. Capital brought in by is Rs. $50,000$. On the date of admission the Balance Sheet of A, B and C was as follows :Balance Sheet as on 31st March, 2021

Goodwill is to be valued at $3$ years purchase of average profit of last $4$ years which were Rs. $60,000$ (2017-18), Rs. $60,000$ (18-19), Rs. $30,000$ (19-20). On revaluation it was found that all debtors are good.What would be the new Profit Sharing Ratio :

At the time a new partner is admitted, revaluation of assets and liabilities is made for the:

In which of the following cases does the economic relationship between the partners come to an end?