SHOP NO 8, KISHOR KUNJ 7, BESIDES REGISTRATION OFFICE, VIRAR (W) CONT NO: 9022876425

Chapter 1 Accounting in partnership : Distribution of profit

1. A partnership firm has four partners. How many additional partners can be admitted into the business as
per the provisions of the Companies Act, 2013?
(a) 50 (b) 46 (c) 100 (d) 96

2. In the absence of partnership deed, the profits of a firm are divided among the partners:
(a) In the ratio of capital
(b) Equally
(c) In the ratio of time devoted for the firm's business
(d) According to the managerial abilities of the partners

3. Which of the following items will not appear in a Partner’s Fixed Capital A/c?
(a) Additional capital introduced (c) Opening balance of capital
(b) Interest on capital (d) Permanent withdrawal of capital

4. Which of the following items, does not appear in the Profit and Loss Appropriation Account?
(a) Salaries to partners (b) Interest on capital (c) Interest on drawings (d) Drawings

5. In the absence of partnership deed, partners are entitled to an interest on the amount of additional capital
advanced by him to the firm at a rate of:
(a) entitled for 6% p.a. on their additional capital, only when there are profits
(b) entitled for 10% p.a. on their additional capital
(c) entitled for 12% p.a. on their additional capital
(d) not entitled for any interest on their additional capital

6. Vijay and Ajay are partners in a firm. The partnership agreement provides for interest on drawings @
12% per annum. Which of the following accounts will be debited to transfer interest on drawings to Profit
and Loss Appropriation A/c?
(a) Interest on Drawings Account (c) Partners’ Current Account
(b) Bank Account (d) Partners’ Capital Account

7. When equal amounts are withdrawn in the beginning of each quarter during the year, the interest on
drawings will be calculated as:
(a) Total Drawings × Rate/100 × 7.5/12
(b) Total Drawings × Rate/100 × 8/12
(c) Total Drawings × Rate/100 × 4.5/12
(d) Total Drawings × Rate/100 × 6/12

8. Suchi and Ruchi were partners in a firm sharing profits and losses equally. Throughout the year Ruchi
withdrew ₹ 12,000 in the middle of each month. Interest on drawings is to be charged @ 6% p.a. as per
partnership agreement. The average period for calculation of interest on drawings will be:
(a) 6 ½ Months b. 6 Months c. 5 ½ Months d. 1 Months
9. On 1st October 2020, Amit, a partner, advanced a loan of ₹1,20,000 to the firm. In the absence of
partnership deed, the amount of interest on loan to be paid on 31st March, 2021 will be:
(a) ₹3,600 (b) ₹7,200 (c) ₹12,000 (d) ₹6,000

10. Calculate manager’s commission if profit is ₹66,000 and commission is allowed at 10% after charging
such commission.
(a) ₹6,600 (b) ₹5,500 (c) ₹6,000 (d) ₹5,000

11. Current account of a partner

(a) will always have a credit balance (c) can never have a debit balance
(b) will always have a debit balance (d) may have a debit or credit balance

12. Amit, Sumit and Kiara are partners sharing profits and losses in the ratio [Link]. Sumit is entitled to a
commission of 15% on the net profit after charging such commission. The net profit before charging
commission is ₹9,20,000. The amount of commission payable to Sumit will be:
(a) ₹1,20,000 (b) ₹1,38,000 (c) ₹48,000 (d) ₹55,000

13. Mohit and Rohit were partners in a firm with capitals of ₹80,000 and ₹40,000 respectively. The firm
earned a profit of ₹30,000 during the year. Mohit’s share in the profit will be:
(a) ₹20,000 (b) ₹8,000 (c) ₹15,000 (d) ₹18,000

14. Which of the following statements is incorrect in context of partnership?

(a) Interest on partner’s drawings is to be given @10% p.a. if the partnership deed is silent about the rate of
interest.
(b) Fixed capital accounts always show a credit balance while fluctuating capital accounts may show a credit
or debit balance.
(c) Every partner including sleeping partner will get equal share of profit in the absence of a deed.
(d) Debit balance of a partner’s current account would indicate that the partner has withdrawn in excess of
what was due to him. So, it will be shown on the assets side of balance sheet.

15. Interest on capital is provided to partners, when:

(a) Capitals are more than ₹5,00,000 (c) Drawings are not made by partners
(b) A loan is provided by partner (d) It is provided in the partnership deed

16. P and Q are partners in a firm. They are entitled to interest on their capitals but the net profit was not
sufficient for this interest. The net profit will be distributed between partners in:
(a) Agreed Ratio (b) Profit sharing Ratio (c) Capital Ratio (d) Equal Ratio

17. Amit and Rohit are partners sharing profit in the ratio of 1:2. Kaveri was the manager who received the
salary of ₹12,000 p.m. in addition to commission of 10% on net profit after charging such commission.
Total remuneration to Kaveri amounted to ₹2,04,000. Profit for the year before charging salary and
commission was:
(a) ₹8,20,000 (b) ₹7,80,000 (c) ₹8,04,000 (d) ₹6,00,000

18. Choose the correct sequence of the following transactions in context of Division of Profits:
(i) Guarantee by Firm to Partners
(ii) Guarantee by Partners to Firm
(iii) Transfer of Profits to Profit and Loss Appropriation Account
(iv) Guarantee by Partner to Partner
19. Green and Orange are partners. Green draws a fixed amount at the beginning of every month. Interest on
drawings is charged @ 8% p.a. At the end of the year interest on Green’s drawings amounts to ₹2,600.
Monthly drawings of Green were:
(a) ₹8,000 (b) ₹7,000 (c) ₹60,000 (d) ₹5,000

20. Girdhar, a partner withdrew ₹5,000 in the beginning of each quarter and interest on drawings was
calculated as ₹1,500 at the end of accounting year 31 March, 2022. What is the rate of interest on drawings
charged?
(a) 6% p.a (b) 12% p.a. (c) 10% p.a.

21. W and Q are partners with capitals of ₹20,00,000 and ₹16,00,000 respectively. The Partnership Deed
provides for interest on capital @ 10% p.a. If the firms earned a profit of ₹2,70,000 for the year ended 31st
March, 2020, then Interest on Capital respectively credited to the Partners Capital Accounts was:
(a) ₹2,00,000 and ₹1,60,000
(b) ₹1,35,000 and ₹1,35,000
(c) No interest on capital will be allowed and ₹1,20,000
(d) ₹1,50,000 and ₹1,20,000

22. X, Y and Z are partners in a firm sharing profits in the ratio of [Link]. Z was guaranteed a minimum profit
of ₹60,000. Any deficiency arising out of this will be borne by X and Y in the ratio of 2:1. Profit for the year
ended 31.3.2021 amounted to ₹2,70,000. How much deficiency will be borne by X?
(a) ₹10,000 (b) ₹15,000 (c) ₹20,000

23. P and Q were partners sharing profit and losses in the ratio of 2:1. Their capitals were ₹12,00,000 and
₹8,00,000 respectively. They were allowed interest on capital @6% p.a. and interest on drawings was to be
charged @10% p.a. Their drawings during the year were P = ₹2,40,000 and Q = ₹1,60,000. Q’s share of net
divisible profit as per Profit and Loss Appropriation Account amounted to ₹1,60,000. Net Profit of the firm
before any appropriation was:
(a) ₹4,00,000 (b) ₹3,80,000 (c) ₹5,60,000

24. Sarvesh, Sriknetan and Srinivas are partners in the ratio of [Link]. If Sriknetan’s share of profit at the end
of the year amounted to ₹1,50,000, what will be Sarvesh’s share of profits?
(a) ₹5,00,000 (b) ₹1,50,000 (c) ₹3,00,000 (d) ₹2,50,000

25. A, B and C are partners, their partnership deed provides for interest on drawings at 8% per annum. B
withdrew a fixed amount in the middle of every month and his interest on drawings amounted to ₹4,800 at
the end of the year. What was the amount of his monthly drawings?
(a) ₹10,000 (b) ₹5,000 (c) ₹1,20,000 (d) ₹48,000

26. Mickey, Tom and Jerry were partners in the ratio of [Link]. On 31st March 2021, their books reflected a
net profit of ₹2,10,000. As per the terms of the partnership deed, they were entitled to interest on capital
which amounted to ₹80,000, ₹60,000 and ₹40,000 respectively. Besides this, a salary of ₹60,000 each was
payable to Mickey and Tom.
Calculate the ratio in which the profits would be appropriated.
(a) [Link] (b) [Link] (c) [Link] (d) [Link]

27. P, Q and R are partners in a firm sharing profits and losses in the ratio of [Link]. For the year ended 31st
March, 2022, interest on capital was credited to them @10% p.a. instead of 5% p.a. Their fixed capitals
were ₹2,00,000, ₹1,00,000; ₹50,000 respectively. The necessary adjustment entry to rectify the error will be:
Journal
Particulars Dr. (3) Cr. (3)
(a) P's Current A/c Dr. 2.000
To Q's Current A/c 1,000
To R's Current A/c 1,000
(b) P's Current A/c Dr. 3,000
To Q's Current A/c 2,000
To R's Current A/c 1,000
(c) P's Capital A/c Dr. 2,000
To Q's Capital A/c 1,000
To R's Capital A/c 1,000
(d) P's Capital A/c Dr. 3,000
To Q's Capital A/c 2,000
To R's Capital A/c 1,000

28. Given below are two statements - Statement (A) and Statement (B).
Statement (A): In the absence of a partnership deed, profits can be distributed in the capital ratio.
Statement (B): Interest on additional capital provided by a partner is provided @ 6% p.a.
Choose the correct alternative from the following:
(a) Both statement (A) and statement (B) are correct.
(b) Statement (A) is correct and statement (B) is incorrect.
(c) Statement (A) is incorrect and statement (B) is correct.
(d) Both statement (A) and statement (B) are incorrect.

29. Given below are two statements-Statement (A) and Statement (B):
Statement (A): When drawings are made in the beginning of each quarter, the interest on partners' drawings
are calculated as Total Drawings X Rate/100 x 7.5/12.
Statement (B): Interest on drawings are recorded on the credit side of partners' capital accounts.
Choose the correct alternative from the following:
(a) Both statement (A) and statement (B) are correct.
(b) Statement (A) is correct and statement (B) is incorrect.
(c) Statement (A) is incorrect and statement (B) is correct.
(d) Both statement (A) and statement (B) are incorrect.

30. Match the following items with their treatment in case of a partnership firm:

(i) Interest on Capital (A) Debited to Capital A/c

(ii) Interest on partner's Loan (B) an appropriation of profit
(iii) Drawings made (C) a charge against profits
(iv) Additional capital introduced (D) Credited to Capital A/c
(a) (i-B) (-A) (iii-D) (in-C) (b) (i-B) (fi-C) (iii-A) (iv-D)
(c) (i-C) (ii-B) (-A) (iv-D) (d) (i-A) (ii-C) (im-B) (iv-D)