Accounting for Partnership Firms: Fundamentals quiz

In the absence of a partnership deed, partners share profits:

In the absence of a partnership deed, the rate of interest allowed on a partner's loan to the firm is:

The maximum number of partners allowed in a partnership firm under the Companies (Miscellaneous) Rules, 2014 is:

Under the fixed capital method, interest on capital is credited to the partner's:

If a partner withdraws an equal amount at the beginning of each month for twelve months, interest on drawings is calculated for an average period of:

Interest on a partner's loan is:

Interest on drawings is:

A partner withdraws Rs 6,000 at the end of each quarter for a year. Interest on drawings at 10% per annum is:

Under the fluctuating capital method, which of the following is NOT recorded?

If a partner is guaranteed a minimum profit and his actual share is less than the guaranteed amount, the deficiency is borne by:

State any two differences between a partnership firm and a sole proprietorship. (2 marks)

Why is a partnership deed preferably made in writing? Give two reasons. (2 marks)

What is meant by mutual agency in a partnership? Why is it called the cardinal principle of partnership? (2 marks)

Give two circumstances in which the Capital Account of a partner may show a debit balance under the fluctuating capital method. (2 marks)

Distinguish between a charge against profit and an appropriation of profit, giving one example of each. (2 marks)

Pass the journal entry for interest on capital allowed to partner A, Rs 12,000, when capitals are fluctuating. (2 marks)

State the average period for which interest on drawings is charged when equal amounts are withdrawn (i) at the end of each month and (ii) at the beginning of each quarter, over a year. (2 marks)

What are past adjustments? Why are they made through partners' Capital or Current Accounts rather than by reopening the old accounts? (2 marks)

Explain why interest on capital is not allowed when the firm incurs a loss, unless the deed provides otherwise. (2 marks)

Pass the journal entry for transferring the net profit of Rs 80,000 to the Profit and Loss Appropriation Account. (2 marks)

Kavita withdrew Rs 15,000 at the beginning of each quarter during the year ended 31 March 2026. Calculate interest on drawings at 10% per annum. Also calculate it if the drawings were made at the end of each quarter. (3 marks)

Harish and Neha are partners with capitals of Rs 3,00,000 and Rs 2,00,000. Interest on capital is 8% per annum and they share profits in the ratio 3:2. The net profit is Rs 30,000. Calculate the amount each partner receives as interest on capital, assuming that the deed is silent about the treatment of insufficient profit. (3 marks)

Mohan, a working partner, is entitled to a commission of 10% of the net profit after charging such commission. The net profit before commission is Rs 2,20,000. Calculate Mohan's commission and the divisible profit. (3 marks)

A, B and C share profits in the ratio 2:2:1. C is guaranteed a minimum profit of Rs 30,000 and the deficiency is to be borne by A alone. The firm earns a profit of Rs 1,00,000. Calculate the final share of profit of each partner. (3 marks)

Arun drew Rs 20,000 on 1 June 2025, Rs 12,000 on 30 September 2025 and Rs 18,000 on 1 December 2025. The accounts are closed on 31 March 2026. Calculate interest on drawings at 12% per annum using the product method (take months to the nearest whole month). (3 marks)

Read the passage and answer the questions. Ankit, Bhavna and Charu started a catering business in Pune. They signed a partnership deed which provides that profits will be shared in the ratio 2:2:1, interest on capital will be allowed at 6% per annum, Charu will get a salary of Rs 5,000 per month and interest on drawings will be charged at 10% per annum. Their capitals are Rs 2,00,000, Rs 1,50,000 and Rs 1,00,000. During the year Charu withdrew Rs 4,000 at the end of every month. The net profit for the year was Rs 2,10,000. (i) Calculate interest on capital for each partner. (ii) Calculate interest on Charu's drawings. (iii) Calculate the divisible profit and each partner's share of it. (5 marks)

Read the passage and answer the questions. Rekha and Sohan run a boutique without any written partnership deed. Rekha contributed Rs 4,00,000 and Sohan Rs 1,00,000 as capital. Rekha also advanced a loan of Rs 50,000 to the firm on 1 October 2025. The profit for the year ended 31 March 2026, before considering the loan, was Rs 61,500. Rekha wants profits shared in the capital ratio and interest on her capital at 10% per annum. (i) Can Rekha claim interest on her capital? Give a reason. (ii) Calculate the interest payable on Rekha's loan for the year. (iii) Calculate the share of profit of each partner. (5 marks)

Read the passage and answer the questions. Vikas and Waseem are partners with fixed capitals of Rs 2,00,000 and Rs 1,00,000. They share profits in the ratio 3:2. After the accounts for 2025-26 were closed, it was discovered that interest on capital at 6% per annum had not been allowed and Vikas's salary of Rs 12,000 for the year had been omitted. (i) Calculate the total amount wrongly distributed as profit. (ii) Prepare a statement showing the net effect on each partner. (iii) Pass the single adjustment entry. (5 marks)

Read the passage and answer the questions. Priya, Qadir and Rahul are partners sharing profits in the ratio 5:3:2. Rahul is guaranteed a minimum profit of Rs 40,000. Priya has guaranteed that the deficiency, if any, will be borne by her alone. The firm earned a net profit of Rs 1,50,000 for the year ended 31 March 2026. (i) Calculate Rahul's share of profit before the guarantee. (ii) Calculate the deficiency and state who bears it. (iii) Show the final distribution of profit among the three partners. (5 marks)

Read the passage and answer the questions. Kunal and Lata are partners. Their capital accounts are fluctuating. On 1 April 2025, Kunal's capital was Rs 3,00,000 and Lata's was Rs 2,00,000. During the year, Kunal withdrew Rs 30,000 and Lata Rs 20,000. Interest on capital is allowed at 5% per annum and interest on drawings totalled Rs 1,500 for Kunal and Rs 1,000 for Lata. The divisible profit, shared equally, was Rs 80,000. (i) Calculate interest on capital for each partner. (ii) Calculate the closing balance of each partner's Capital Account. (iii) Why would these partners have a Current Account if capitals were fixed? (5 marks)

Explain the provisions of the Indian Partnership Act, 1932 that apply in the absence of a partnership deed regarding profit sharing, interest on capital, interest on drawings, salary, interest on loan and admission of a new partner. Draw a chart summarising these provisions. (6 marks)

Distinguish between the fixed capital method and the fluctuating capital method on four bases. Show, in prose ledger form, the Capital Account and Current Account of partner A under the fixed capital method from the following: opening capital Rs 1,00,000, interest on capital Rs 6,000, salary Rs 24,000, share of profit Rs 30,000, drawings Rs 40,000 and interest on drawings Rs 1,200. (6 marks)

Nikhil and Om are partners sharing profits in the ratio 3:2 with capitals of Rs 5,00,000 and Rs 3,00,000. The deed provides interest on capital at 10% per annum, a salary of Rs 2,000 per month to Om, interest on drawings at 5% per annum and a transfer of 10% of the divisible profit to General Reserve. Drawings were Nikhil Rs 40,000 and Om Rs 24,000, made evenly in the middle of the year on average. The net profit for the year was Rs 2,50,000. Calculate interest on drawings and prepare the Profit and Loss Appropriation Account in prose form, showing each item and the share of profit of each partner. (6 marks)

Explain the three methods of calculating interest on drawings: simple method, product method and average period method. Draw a chart showing the average period for monthly and quarterly drawings made at the beginning, middle and end of the period, and illustrate one case with a calculation. (6 marks)

What is a guarantee of minimum profit? Explain three situations: guarantee given by the firm, guarantee given by one partner, and guarantee given by two partners in a specified ratio. Illustrate with the following: X, Y and Z share profits 3:2:1, Z is guaranteed Rs 60,000, the profit is Rs 3,00,000 and the deficiency is borne by X and Y in the ratio 1:1. Draw a flowchart showing the steps to calculate the final shares. (6 marks)