CHAPTER 2 –ACCOUNTING FOR PARTNERSHIP:
FUNDAMENTALS
I.MULTIPLE CHOICE QUESTIONS
Sr.No Question:
1. For which one of the following, the balance in the Securities premium Reserve
Account cannot be used?
(A)To write off the preliminary expenses of the company
(B) To pay a premium on the redemption of preference shares of the company.
(C) To pay interest on the debentures of the company
(D)To pay for buyback of its own shares.
2. Capital employed in a business is Rs. 2,00,000. Normal Rate of Return on capital
employed is 15%. During the year, the firm earned a profit of Rs. 48,000. Calculate
goodwill on the basis of 3 years’ purchase of Supper Profit.
(A) Rs. 54,000
(B) Rs. 60,000
(C) Rs. 50,000
(D) None of these
3. Galib&Jakib are partners in a firm. Galib is to get commission of 10% of net profit
before charging any commission. Jakib is to get a commission of 10% on net profit
after charging all commissions. Net Profit for the year ended 31st March, 2021 was
Rs 55,000. What will be amount of Profit to be distributed to each?
(A) Rs. 5,500 to Galib& Rs. 4,500 to Jakib.
(B) Rs. 27,500 each.
(C) Rs. 22,500 each.
(D) None of the above
4. If the guarantee is given to the partner by some partners, deficiency on such will
be borne by
(A) Partnership firm.
(D) All of the other partners.
KVS ZIET BHUBANESWAR 12/10/2021 1
, (C) Partners who had given the guarantee.
(D) None of the above
5. If the Partners are maintaining the capital account on Fixed basis, partner’s capital
account will have:
(A) Credit balance.
(B) Debit balance.
(C) Credit or Debit balance.
(D) May have Nil balance
6. If the partnership deed is silent interest on drawings will be charged @
(A) 6% P.a
(B) 6% P.m
(C) Any other Rate.
(D) Will not be charged
7. Which is not the clause of the Partnership Deed?
(A) Business can be carried on by all or any of the partner’s acting for all.
(B) Commencement of business.
(C) Rights & Duties of Partner.
(D) None of the above
8. The Net profits of Kamini were Rs. 20,000. Gulafsa the manager was to be given
the commission of Rs 6,000; the distribution of profits will be done as:
(A) Rs. 10,000 to each.
(B) Rs. 7,000 to each.
(C) Rs. 13,000 to each.
(D) None of the above
9. Shalu, Shan& Julie are partners sharing profits in the ratio of 6 : 4 : 1. Julie is
guaranteed a minimum profit of Rs. 20,000. The firm incurred a loss of Rs.
2,20,000 for the year ended 31st March, 2021. What amount of deficiency will be
borne by Shaluand Shan.
(A) Rs. 10,000 each.
KVS ZIET BHUBANESWAR 12/10/2021 2
, (B) Rs. 20,000 each.
(C) Rs. 24,000 by Shalu& Rs. 16,000 by Shan.
(D) Rs. 12,000 by Shalu& Rs. 8,000 by Shan.
10. Om& Prakash were partner’s without any deed where Prakash invested the total
capital and Om had the complete hold on the business as Prakash was the sleeping
partner, but as Prakash invested complete capital demanded to share the profits in
the Ratio of 5 : 1 and Om object’s to this.
(A) Om’s objection is correct.
(B) Prakash’s demand is correct.
(C) Both are wrong.
(D) As investment is of Prakash he should be given interest on capital.
11. Following are essential elements of a partnership firm except:
(A) At least two persons.
(B) There is an agreement between all partners.
(C) Equal share of profits and losses.
(D) Partnership agreement is for some business.
12. Which of the following items is not dealt through Profit and Loss Appropriation
Account?
(A)Interest on Partner’s Loan
(B) Partner’s Salary
(C) Interest on Partner’s Capital
(D)Partner’s Commission
13. A partner withdrew Rs. 4,000 per month from 1st July, 2016, on beginning of every
month. Accounts are closed at 31st March, 2017. Calculate interest on drawings
while rate of interest is 10% per annum.
(A) Rs. 1,600
(B) Rs. 1,800
(C) Rs. 1,500
KVS ZIET BHUBANESWAR 12/10/2021 3
, (D) Rs. 2,200
14. A, B and C sharing profits in the ratio of 2: 2: 1 have fixed capitals of Rs. 3,00,000,
Rs. 2,00,000 and Rs. 1,00,000 respectively. After closing the accounts for the year
ending 31st March 2019 it was discovered that interest on capitals was provided @
12% instead of 10% p.a. In the adjusting entry:
(A) Cr. A Rs. 1,200; Dr. B Rs. 800 and Dr. C Rs. 400
(B) Dr. A Rs. 1,200; Cr. B Rs. 800 and Cr. C Rs. 400
(C) Cr. A Rs. 800; Cr. B Rs. 400 and Dr. C Rs. 1,200
(D) Dr. A Rs. 800; Dr. B Rs. 400 and Cr. C Rs. 1,200
15. A partner withdraws Rs.8,000 each on 1st April and 1st Oct. Interest on his
drawings @ 6% p.a. on 31st March will be:
(A) Rs. 480
(B) Rs.720
(C) Rs. 240
(D) Rs. 960
16 [ A&E] If Goodwill is Rs. 1,20,000, Average Profit is Rs. 60,000 Normal. Rate of
Return is10% on Capital Employed Rs. 4,80,000. Calculate capitalized value of
the firm:-
a. Rs. 6,00,000
b. Rs. 5,00,000
c. Rs. 4,00,000
d. Rs. 7,00,000
17 [ A ] A business has earned Super profit of Rs. 1,00,000during the last few years
and Normal rate of returns in 10% Calculate goodwill
a. Rs. 10,00,000
b. Rs. 54,000
C. 20,000
d. 36,000
18 (U)Rani and Shyam is partner in a firm. They are entitled to interest on their
capital but the net profit was not sufficient for paying his interest, then the net
profit will be disturbed among partner in
KVS ZIET BHUBANESWAR 12/10/2021 4
FUNDAMENTALS
I.MULTIPLE CHOICE QUESTIONS
Sr.No Question:
1. For which one of the following, the balance in the Securities premium Reserve
Account cannot be used?
(A)To write off the preliminary expenses of the company
(B) To pay a premium on the redemption of preference shares of the company.
(C) To pay interest on the debentures of the company
(D)To pay for buyback of its own shares.
2. Capital employed in a business is Rs. 2,00,000. Normal Rate of Return on capital
employed is 15%. During the year, the firm earned a profit of Rs. 48,000. Calculate
goodwill on the basis of 3 years’ purchase of Supper Profit.
(A) Rs. 54,000
(B) Rs. 60,000
(C) Rs. 50,000
(D) None of these
3. Galib&Jakib are partners in a firm. Galib is to get commission of 10% of net profit
before charging any commission. Jakib is to get a commission of 10% on net profit
after charging all commissions. Net Profit for the year ended 31st March, 2021 was
Rs 55,000. What will be amount of Profit to be distributed to each?
(A) Rs. 5,500 to Galib& Rs. 4,500 to Jakib.
(B) Rs. 27,500 each.
(C) Rs. 22,500 each.
(D) None of the above
4. If the guarantee is given to the partner by some partners, deficiency on such will
be borne by
(A) Partnership firm.
(D) All of the other partners.
KVS ZIET BHUBANESWAR 12/10/2021 1
, (C) Partners who had given the guarantee.
(D) None of the above
5. If the Partners are maintaining the capital account on Fixed basis, partner’s capital
account will have:
(A) Credit balance.
(B) Debit balance.
(C) Credit or Debit balance.
(D) May have Nil balance
6. If the partnership deed is silent interest on drawings will be charged @
(A) 6% P.a
(B) 6% P.m
(C) Any other Rate.
(D) Will not be charged
7. Which is not the clause of the Partnership Deed?
(A) Business can be carried on by all or any of the partner’s acting for all.
(B) Commencement of business.
(C) Rights & Duties of Partner.
(D) None of the above
8. The Net profits of Kamini were Rs. 20,000. Gulafsa the manager was to be given
the commission of Rs 6,000; the distribution of profits will be done as:
(A) Rs. 10,000 to each.
(B) Rs. 7,000 to each.
(C) Rs. 13,000 to each.
(D) None of the above
9. Shalu, Shan& Julie are partners sharing profits in the ratio of 6 : 4 : 1. Julie is
guaranteed a minimum profit of Rs. 20,000. The firm incurred a loss of Rs.
2,20,000 for the year ended 31st March, 2021. What amount of deficiency will be
borne by Shaluand Shan.
(A) Rs. 10,000 each.
KVS ZIET BHUBANESWAR 12/10/2021 2
, (B) Rs. 20,000 each.
(C) Rs. 24,000 by Shalu& Rs. 16,000 by Shan.
(D) Rs. 12,000 by Shalu& Rs. 8,000 by Shan.
10. Om& Prakash were partner’s without any deed where Prakash invested the total
capital and Om had the complete hold on the business as Prakash was the sleeping
partner, but as Prakash invested complete capital demanded to share the profits in
the Ratio of 5 : 1 and Om object’s to this.
(A) Om’s objection is correct.
(B) Prakash’s demand is correct.
(C) Both are wrong.
(D) As investment is of Prakash he should be given interest on capital.
11. Following are essential elements of a partnership firm except:
(A) At least two persons.
(B) There is an agreement between all partners.
(C) Equal share of profits and losses.
(D) Partnership agreement is for some business.
12. Which of the following items is not dealt through Profit and Loss Appropriation
Account?
(A)Interest on Partner’s Loan
(B) Partner’s Salary
(C) Interest on Partner’s Capital
(D)Partner’s Commission
13. A partner withdrew Rs. 4,000 per month from 1st July, 2016, on beginning of every
month. Accounts are closed at 31st March, 2017. Calculate interest on drawings
while rate of interest is 10% per annum.
(A) Rs. 1,600
(B) Rs. 1,800
(C) Rs. 1,500
KVS ZIET BHUBANESWAR 12/10/2021 3
, (D) Rs. 2,200
14. A, B and C sharing profits in the ratio of 2: 2: 1 have fixed capitals of Rs. 3,00,000,
Rs. 2,00,000 and Rs. 1,00,000 respectively. After closing the accounts for the year
ending 31st March 2019 it was discovered that interest on capitals was provided @
12% instead of 10% p.a. In the adjusting entry:
(A) Cr. A Rs. 1,200; Dr. B Rs. 800 and Dr. C Rs. 400
(B) Dr. A Rs. 1,200; Cr. B Rs. 800 and Cr. C Rs. 400
(C) Cr. A Rs. 800; Cr. B Rs. 400 and Dr. C Rs. 1,200
(D) Dr. A Rs. 800; Dr. B Rs. 400 and Cr. C Rs. 1,200
15. A partner withdraws Rs.8,000 each on 1st April and 1st Oct. Interest on his
drawings @ 6% p.a. on 31st March will be:
(A) Rs. 480
(B) Rs.720
(C) Rs. 240
(D) Rs. 960
16 [ A&E] If Goodwill is Rs. 1,20,000, Average Profit is Rs. 60,000 Normal. Rate of
Return is10% on Capital Employed Rs. 4,80,000. Calculate capitalized value of
the firm:-
a. Rs. 6,00,000
b. Rs. 5,00,000
c. Rs. 4,00,000
d. Rs. 7,00,000
17 [ A ] A business has earned Super profit of Rs. 1,00,000during the last few years
and Normal rate of returns in 10% Calculate goodwill
a. Rs. 10,00,000
b. Rs. 54,000
C. 20,000
d. 36,000
18 (U)Rani and Shyam is partner in a firm. They are entitled to interest on their
capital but the net profit was not sufficient for paying his interest, then the net
profit will be disturbed among partner in
KVS ZIET BHUBANESWAR 12/10/2021 4
