An Aid to

Accountancy-C
MCQ.8
ratio is agreed, partners share the losce.
osses also
when profit-sharing
Partnership
Assertion (A): In
a
4.
same ratio.
definition it is written that profits will be shared. However profits in
in the
Reason (R): Although
losses als0.
which of the following is correct?
two statements,
context of above the correct
In the are correct but the Reason (R) is not exolan
planat
and Reason (R)
aAssertion (A)
Assertion (A). correct explanation of Acco.
are correct and
Keason (R) is the
Assertion (A) and Reason (R)
6Both
is correct.

Only Assertion (A)

is correct
dOnly Reason (R) should be lawful although not specifically includa
Business of the partnership
5. Assertion (A):
definition. business should
Thus, also he
cannot be carried in the country.
unlawful activity
Reason (R): Any
to be carried out.
correct?
which of the following is
of above two statements,
In the context
(R) is not the correct explanat
are correct but the Reason
Assertion (A) and Reason (R)
a)
Assertion (A).
are correct and Reason (R) is the
correct explanation of Assert
Assertion (A) and Reason (R)
Both (R) is not correct.

Assertion (A) is correct but the Reason

Reason (R) are not correct.
Assertion (A) and
Both
Partners are principals but not the agents of other partners.
6. Assertion (A): any of them
business can be carried on by all or
partnership,
As per the definition of
Reason (R):
and also the agents.
for all. Thus, they are the principals
two statements, which of
the following is correct?
In the context of above not the correct explanat
Reason (R) is
are correct but the
aAssertion (A) and Reason (R)
Assertion (A).
Reason (R) correct and Reason (R) is the correct explanation of Assert
Both Assertion (A) and
are

Assertion (A) is correct.

Ony
(A) is not correct but the Reason (R) is correct.
-3
Assertion Partr
have clauses that are different from the provisions the of
pan

7. Assertion (A): Apartnership deed can the provis

in Partnership Deed prevail over
Act, 1932 and in such situations, clauses
the Partnership Act, 1932.

1932 apply when the partners have not agree

Reason (R): The provisions of the Partnership Act,
matter (say, profit-sharing ratio).
In the context of above two statements, which of the following is correct?
(A) and Reason (R) are correct but the Reason (R) is not the correct explana
aAssertion
Assertion (A).
6Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanatio
Assertion (A).

Assertion (A) is correct but the

(R) is not correct.Reason
aBoth Assertion (A) and Reason (R) are not correct
8. Assertion (A}: Only Capital Account is maintained for each partner under Fluctuating Capital
Method.
Reason (R): Interest on Capital, remuneration (Salary/Commission) and profit share are transferred
credit ofPartners' Capital Accounts while Interest on Drawings and share of loss are ta
to the debit.
Multiple Choice Questions MCO.9

is correct?
In the context of above two statements, which of the following
Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of
(a)
Assertion (A).
Both Assertion (A) and Reason (R) correct and Reason (R) is the correct explanation of
b) are

Assertion (A).
Assertion (A) is correct but the Reason (R) is not correct.
aAssertion (A) is not correct but the Reason (R) is correct.
is shown in the Profit and Loss Account.
9. Assertion (A): In a specified situation, Interest on Partners' Capital
Reason (R): Interest on Capital is transferred to the debit of Profit and Loss Account,
if it is specified to

be a charge.
In the context of above two statements, which of the following is correct
of
a Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation
Assertion (A).

Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)
Assertion (A) is correct but the Reason (R) is not correct.
aBoth Assertion (A) and Reason (R) are incorrect.
amounts of drawings is not same,
10. Assertion (A}: If drawings by a partner is on different dates and/or
interest on drawings is calculated using Product Method.
In case, the amount
Reason (R): Interest Drawings is charged for the period it is drawn by a partner.
on
methods cannot be
of Drawings and/or period for which it is drawn is not uniform, average
applied to determine interest on capital
correct?
in the context of above two statements, which of the following is
(A) and Reason (R) are correct but the Reason (R) is not the correct explanation of
eAssertion
Assertion (A).
is the correct explanation of Assertion (A).
6Both Assertion (A) and Reason (R) are correct and Reason (R)
is correct.
Only Assertion (A)
aAssertion (A) is not correct but the Reason (R) is correct.

and losses in their profit-sharing ratio and not in the ratio of

11. Assertion (A): Partners distribute profits
their capitals.
Reason (R): The amount of appropriations, as per Partnership Deed are more than the amount of profit
available for distribution, profit is distributed in the ratio of appropriations.

In the context of above two statements, which of the following is correct?

Reason (R) are correct but the Reason (R) is not the correct explanation of
aAssertion (A) and
Assertion (A).
(Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)

Assertion (A) is correct but the Reason (R) is not correct.

Assertion (A) is not correct but the Reason (R) is correct.

to the credit of Partner's Capital Account and not

12. Assertion (A): Rent payable to a partner is transferred
to Rent Payable Account.
is transaction
letting the firm use his personal property for business
a
Reason (R): Rent payable to a partner for
that is not related to him being a partner. Therefore, it is credited to Rent Payable Account
13. AxserinnA: N atatne INtivenf thesdetit t l'utit andlos Aount but i

NAiR taanfvtitnd thedett ot Piafit andtos Aont

Awttn' isvat kbut the Raawn is noMet

AtiY ' isnt t but the Reasom (R) isoet

hariny dt intvest.
Reason R): In the anenr f atneslhi Iexnt. prVINONs of thhe Pautnership Act 1932 app
teest onlntotan tner should behayed d oo p.l. othewise interest is allowed:

Ast A Rtn A
conet but the Reason (R) is not the onet
enplanati-
AhAmtAai Rism A are comNt and Reaason (R) is the Corect
eplanation
Asset s e t Dut the Reason (A) is not correct.
of Asserti

15. Assertion (A):

interest on lan bv Putner is allwed at the agreed rate of interest and in the abse.

Reason (R): in the absne or

Patnerslhip Devd, Interest Loan by Partner is not allowed.
on
*r"ANr tw s¢iteents wh o'the tolowiny is coTECt:
Assertn and Reason (A) ae coeTt but the Reason
Assertion A (R) is not the corect expianat
Soth Assevtion Al and Reason (A)
are cortat and Reason (R) is the corect
Assertion A is correct but the Reason (R) is not correct. explanation of Assert
Bon Assertion A and Reason (R) are not correct.
16. Assertion (A}:
Ainasth, a partner
in the firm
gave loan of ? 5.00 000 to the firm
o rate of
interest. Interest on Loan without an agree
by Avinash
Reason (R): In the absence
ot
is to be allowed6o p.a.
nterest on Loan to
Partnership Deed. provisions of the
Partner should Partnership Act. 1982 3pph
he contet aove HO statements which be charged 6o p.a.
Assertion (A)
of the following is correct
and Reason (R) are correct but the Reason
Assertion A (R) is not the correct
Both Assetion (A) and Reason expia
(R are corrext and
Assertion (A) is correct but Reason (R) is the correct
the Reason (R) is
incorrect.
explanation et Assett
Assertion A is not correct
but the Reason
(R) is correct.
 utiple hu'ur uestions MCOI

25. Assertion (A): Vaun Walyam and Yogesh are partners. 1he partnership deed provinted to charge nterest
n drawings øooo pa Varun withdrew S,000 pe month n the begming of the nontl
Warvam in the middle of the month while Yogesh withdrew at the end of the montlh

Intert will be chagend dhawings of oo 000 fom Vanun tor

on
os month», Wu yan for
o months and Yogesh for s.5 months
Reason (R): Interest on Drawings is changed at the agieed iate of inteest, ie, o pa on 00000 tor
the period amount is witthdr.awnby a pautner Varun hasdiawn in the beymng of the month
and therefore interest will be charged for o.5 months tom hin and on the sane bass Irom
Waryam and Yogesh for o months and 5.5 months espe tively

in the cowtetofatove two stttemets which of the following iscornect?

explanation of
Assertion (A) and Reason (R) are conect but the Reason () is not the conect
Assertion (A)
B o t h Assertion (A) and Reason (R) are coect and Reason (R) is the conect explanation of Assertion (R)

Assertion (A) is corect but the Reason (R) is not corect.

Both Assertion (A) and Reason (R) are incorect

26. Assertion (A): Ankur, Bhaskar and Rakesh are partnerswith capitals of 3,00,000; 4,00,000and 5,00,000
respectively. The partnership deed provided to allow remuneation to each partner of
50,000 p.a.and interest on Capital 59%p.a. Profit tor theyear ended 31st March, 2021 of
2,10.000 wasdistributed without allowing remuneration and interest oncapital. Rectitying
entry for the above will be Dr. Ankur and Cr. Rakesh by ? 5,000.
Reason (R): Remuneration and Interest to Ankur, Bhaskar and Rakesh are 65,000, R 70,000 and ? 75,000
respectively. Each partner was credited by 70,000. As a result, Ankur was excess credited by
5,000 and Rakesh was short credited by 5,000.Thus, Ankur will be debited and Rakesh
will be credited by 5,000.
n the context of above two statements, which of the following is correct?

Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of
Assertion (A).
Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).
Assertion (A) is correct but the Reason (R) is notcorrect.
Both Assertion (A) and Reason (R) are incorrect.

27. Assertion (A): Pawan, Raman and Sharman are partners sharing profits in the ratio of 5: 3: 2. Raman is
guaranteed minimum profit share of R 1,00,000 p.a. after appropriations to be borne by
Pawan. Net profitfor the year ended was R5,00,000 and after appropriations, it was 3,00,000.
Pawan's Capital Account will be debited 10,000 as shortfall in guaranteed profit to Raman.
Reason (R): Profit share of Raman will be 90,000 (R 3,00,000 x 3/10). Therefore, Pawan's Capital Account
will be debited by 7 10,000 to meet the shortfall.
In the context of above two statements, which of the following is correct?

Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of
Assertion (A).
Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).
Assertion (A) is correct but the Reason (R) is not correct.
Both Assertion (A) and Reason (R) are incorrect.
 An Aid to ountancy
MCQ.14 in the ratio of 3
sharing profits
Prerna and
Nimrat are partners
after appropriations p.1
Assertion (A}: Parul, 75,000 p.a.
28. profit share of Nimrat will
guaranteed
minimum

was
1,80.000. Profit share of
Parul and
will be R90
after all appropriations.
30.000.
actual share is
? 60,000 (R 1,80,000x 2/ B
her
is 7 75,000 since ratio of 3:1.Th an
Reason (R): Profit share
1.05.000
of Parul b e t w e e n Paruland
will be distributed 26.250.
Nimrat in the
1.Thus, Parul
will get
778.750and Nimrat is correct?
statements, which of the following
h e conteXT ofobove
two
Reason (R) is rect
not the correct explane
but the
and Reason (R)
correct
Assertion (A)
Assertion
is the correct explanation of
explanation of Assertcn
correct and Reason (R)
Ssertion (A) and Reason (R) are

are not
correct.
Reason (R)
Both Assertion (A) and
Reason (R) is correct.
not correc: but
the
Assertion (A) is
should contribute capital in the f.
that all the partners firm
Assertion (A): It is a necessary condition
29.
written agreement
profits
exists to share of thebiuci
busine
condition is that a
Reason (R): The essential
them acting for all.
be carried on by ail or any of
the business may
is correct?
in

the cont'Ext
ofabove two statements which ofthe following
not the correct explanas
correct but the Reason (R) IS

EAssertion (A) and Reason (R) are

Assertion ()

(R) is the correct explanation of Assertion

A Reason R are correct and Reason
Assertion and

not correct.
Assertion A s correct but the Reason (R) is
Both Assertion (A) and Reason (R) are not correct.
to carry on business
that the partners should agree
ang
30. Assertion (A): it is a necessary condition
profits and losses
the basis of written or oral agreement for sharing pre
Reason (R): Partnership may be carried on

not the losses

is correct?
n

of above two stotements, which of the following

the contert
but the Reason (R) is not the correct explanat
and Reason (R) are correct
ssertion
ssertion

ssertion A and Reason (R) are correct and Reason (R) is the correct explanation of Asserto
but the Reason (R) is not correct.
Assertion (A) is correct
Both Assertion (A) and
Reason (R) are incorrect.

Case Study Based Questions

1. Amrish and Yogesh are partners since 1st October, 2017 sharing profits in the ratio of 3: 2. Thef
as on 15t April, 2020 were of ? 5,00,000and? 3,00,000 respectively.
They did not have a Partnership Deed but had agreed to allow Interest on Capital @ 56 p.a a
acce
ogesh is to be allowed of 7 25,000 per annum. The accountant was preparing the annu

the year and identified that during the yearInterest on Capital was not allowed but Yogeom
allowed. Profit after Yogesh's salary was ? 1,49,300. Also, provision was not made for Manager
@5% of the Net Profit.
Answer the following questions on the basis of the above.
Profit before Yogesh's salary will be

1,41,000.
1,57,300.
1,66,000.
1,74,300.
Maltiplehoice Questions MCQ.15

Net Profit transferred to Profit and Loss Appropriation Account is 1,82,600.

149.300.
1.66.000. 1,74,000.
Accounts of each partner are
i) Total appropriation transferred to Capital
85.600 and S0,400 respectively. 760,600 and 40,400 respectively.
25.000 and 40,000 respectively. 25,000 and 15,000 respectively.
iv) Managers commission is

a charge against the profit.

a n appropriation of profit.
a charge sometime and sometimes it is an appropriation.

an expense that is debited to Capital Accounts of partners.

vManager's commission will be

3.80o. 63,080.
8.030. T8,300.
2. Amar, Binod and Chaman are in trading business of Jute and Jute products. They have been sharing profits
equally up to the year ended 31st March, 2020. They reconstituted the firm and profit-sharing ratio was
that he should be paid annual salary of
changed to 3:2:1.Chaman being a working partner demanded him minimum
The partners did not agree to salary demanded by Chaman but agreed give
to
75,000.
guaranteed profit of R 60,000. Their capitals as on 1st April, 2020 were 5,00,000, F 4,00,000 and RT 3,00,000
respectively. Profit for the year ended on 31st March, 2021 was 3,00,000.
Answer the following questions on the basis of above.
0)What will be partners' profit share if Chaman's share of profit is guaranteed at 7 60,000?
1.50,000, 90,000, 60,000. 1,90,000, 50,000, 60,000.
T1,60,000, T80,000, 7 60,00o. 1,44,000, 96,000, F 60,000.
i) Whatwillbepartners profit share if deficiency in Chaman's profit share is to be borne by Amar and
Binod in the ratio of 4:12
1,50,000, 90,000, 60,00o 6 1,42,000, 98,000, 7 60,000
1,44,000, 96,000, t 60,000 71,20,000, 7 1,20,000, 60,000
(ii) What will be partners' profit shares, if Chaman's share of profit is guaranteed by Amar personally?
1,40,000, 1,00,000, 60,000. 1,44,000, 96,000, 60,000.
71,60,000, F 80,000, 7 60,000.
(iv) What will be
1,20,000, 1,20,000, 60,000.
partners' profit shares, if Chaman's share of profit is guaranteed after allowing interest on
capital @ 6% p.a.
a1,09,600; 56,400; 7 60,000. 89,600; 7 76,400; 60,000.
799,600; 7 66,400; 7 60,000. R 1,00,800; R 67,200; 60,00o.
3. Raman and Danish started a firm on 1st May, 2020 to trade in real estate in
losses in the ratio of partnership sharing profits and
2:3. They introduced capitals of T 5,00,000 and T 4,00,000 respectively. The business got
good response and kept both the
partners busy. As a result, they
forgot to settle the terms of partnership
and to have a Partnership
Deed. Each partner withdrew 10,000
per month for their personal use. Raman
made the withdrawal in the
beginning of the month whereas Danish withdrew at the end of each month.
At the time of
preparing final accounts for the year ended 31st March, 2021, faced the issues of they
interest on capital, salaries to partners,
interest on drawings and sharing of profit.
show the distribution of profits/losses for the year ended 31st March 2021, in each of the following cases:
 An Aid to
MCO.16 Accountanes
I f profit for the year is ? 2.50,000 and theissues of Interest on Capitals, Salaries and Intere
were not settled by them nterest onDi
M
Share of profit: Raman 1,00,000; Danish 1,50,000.

Share of profit: Raman 1,25,000; Danish 1,25,000.

Share of profit: Raman 1,50,000; Danish 1,00,000.
None of the above.
(ii) Ifthe firm incurs loss of R 1,00,000 and partners agree to allow interest on capitals @ 5.
5% P.a.
Share of Loss: Raman 50,000; Danish 50,000.
Share of Loss: Raman 40,0o0; Danish 60,000.
Share of Loss: Raman 60,000 ; Danish 40,000.
Share of Loss: Raman 7 58,000; Danish 87,000
i ) Ifthe firm earns profit of 1,00,000 and they agree to allow for interest on capitals @ 6%
P.a.
Share of Profit: Raman 18,400; Danish 27,600.
Share of Profit: Raman 18,400; Danish 18,400.
Share of Profit: Raman7 40,000: Danish 50,000.
N o profit is transferred to partners' capital accounts.
() if the firm earnsprofit of R 33,750 and they agree to allow for interest on capitals @ 5% p.a.
Share of Profit: Raman7 15,000: Danish 18,750.
Share of Profit: Raman 13,500; Danish 20,250.
Share of Profit: Raman 18,750; Danish 15,000.
Share of Profit: Raman 20,250; Danish 13,500.
4. Akhil and Bipul were in partnership. On 1st April, 2020, they had capitals of 5,00,000 and 300
respectively, General Reserve existed in the Balance Sheet at 50,000 and also Profit and Loss Aco
(Credit) of 1,00,000 (accumulated profits). On 1st October, 2020. Akhil advanced 1,00,000 as loan tot
firm and on the same date, the firm advanced loan of R 50,000 to Bipul. Both the loans
agreement. Interest on Capital is to be allowed @5% pa. as a charge. Manager's Commission of F 200
were without
was not yet allowed. Loss for the year before allowing and charging interest on loans was 50,000.
Answer the following questions on the basis of above.
0) interest on Capital
w i l l be allowed by debiting Profit and Loss Account (Accumulated Profits).
6will be allowed by debiting General Reserve.
w i l l be allowed and it will increase the amount of loss.
will not be allowed.
i) Interest on Loan by Akhil
w i l l be allowed @ 6% p.a. and debited to Profit and-Loss Account (Accumulated Prol
because the firm has incurred loss during the year.
w i l l be allowed 6% p.a. and debited to General Reserve because the firm has incurred.
during the year.
w i l l be allowed 6% p.a. and debited to Profit and Loss Account, which will increas
amount of loss.
w i l l not be allowed because the firm has incurred loss during the year.
 MCQ.17

Profit and LoSs Account (Accumulated Profits).

w t 'hage e ae pa and redited to

w t &harged e ao prd and credited to General Reserve.

wt harge' a o pa. and credited to Profit and Loss Account.

AahNNNNANMI Of 20000
w l te allwexd and debited to Profit and Loss Account (Accumulated Profits).

w i l e allowed and debited to General Reserve.

wil e alowevi and debited to Profit and Loss Account.

well Nt be allowed.

Naresh iteh and Panesh are partners sharing profits in the ratio of 3:2:1after allowing interest

P o p d and salary of 80,000 p.a. to Hitesh. Net profit for the year ended 31st March,
vta
twas SAO00 and balances in Capital Accounts were Naresh- 2,00,000; Hitesh-7 1,50,000
Nd Pavesh 20000. Naresh expressed his desire that his son Harish be admitted as partner wef.
lanuay 2oI tor one thud of his share, which he willforgo in his favour. However, Pavesh objects to
s propesal citing that as per the partnership a partnercannot be admitted unlessallthe other partners
g Hitesh however. has no objection to his admission. Naresh and Pavesh object to salary being
allowet to Hitesh and demand that they also be paid equal salary as Hitesh as they were also handling
the busines Dscussion was held and thereafter, it was agreed that from thefinancial year, both, Naresh
and Pavesh will be paid yearly salary of ? 60,000 each. As far as the current year is concerned, they will be
i d Commission o 59o of net profit each.
on the above information choose the correct answers to the questions.

Harish
cannot be admitted as a partner because all the partners should agree to admitting a new
partner, in the absence of a clause to this effect in the Partnership Deed.
c a n be admitted as a partner because majority partners (Naresh and Hitesh) do not have
objection to his admission.

c a n become a partner since Naresh is forgoing his share of profit in favour of Harish. Remaining
partners are not aftfected by the admission.

c a n be admitted even if Hitesh and Pavesh both object to the admission of Harish.
)Pavesh's share of residual profits for the year will be

R1.06, 400. b 3,77,200.

264s00. R 2,98,000.
Total amount of Appropriations credited to Hitesh for the year will be

212800. R 2,24,800.
304, 800. 3,19,600.
ommission payable to Naresh, Hitesh and Pavesh for the yearwill be

42000. Nil, z 42,000 respectively. Nil, Nil and Nil.

42000 RSO O00 42000 respectively. ( z 42,000 to Naresh and Pavesh.