All Exams >
Commerce >
4 Months Preparation for Commerce Class 12 Boards >
All Questions
All questions of Accounting for Partnerships: Basic Concepts for Commerce Exam
Aryan and Gauri were partner in a firm sharing profits and losses in the ratio of 2:1. Their capital was R.s. 90,000 and Rs. 60,000 respectively. They were entitled for interest on capital @ 12% p.a. The firm earned a profit of Rs. 84,000 after allowing interest on capitals. Profits will be distributed among them will be:
- a)Rs. 44,000; Rs. 22,000
- b)Rs. 56,000; Rs. 28,000
- c)Rs. 50,400; Rs. 33,600
- d)Rs. 39,600; Rs. 26,400
Correct answer is option 'B'. Can you explain this answer?
Aryan and Gauri were partner in a firm sharing profits and losses in the ratio of 2:1. Their capital was R.s. 90,000 and Rs. 60,000 respectively. They were entitled for interest on capital @ 12% p.a. The firm earned a profit of Rs. 84,000 after allowing interest on capitals. Profits will be distributed among them will be:
a)
Rs. 44,000; Rs. 22,000
b)
Rs. 56,000; Rs. 28,000
c)
Rs. 50,400; Rs. 33,600
d)
Rs. 39,600; Rs. 26,400
|
Niharika Datta answered |
The profit for the year is 84000 and that is given after allowing the interest on capital to the partners hence we can directly calculate the profit share for both the partners for Aryan it is 84000×2/3=56000, and for Gauri it is 84000×1/3=28000 hence option B is the correct answer
Profit or loss on revaluation is shared among the old partners in _______ ratio. - a)Old Profit Sharing
- b)New Profit Sharing
- c)Capital
- d)Equal
Correct answer is option 'A'. Can you explain this answer?
Profit or loss on revaluation is shared among the old partners in _______ ratio.
a)
Old Profit Sharing
b)
New Profit Sharing
c)
Capital
d)
Equal
|
Shriyanshu Keshari answered |
Bcoz all the assets and liabilities are old which are appreciated or depriciated then they divide in their old ratio
A partner acts as ……………for a firm. - a)Agent
- b)Third Party
- c)Employee
- d)None of the above
Correct answer is option 'A'. Can you explain this answer?
A partner acts as ……………for a firm.
a)
Agent
b)
Third Party
c)
Employee
d)
None of the above
|
Nandini Iyer answered |
Implied authority of partner as agent of the firm
Subject to the provisions of section 22, the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm. The authority of a partner to bind the firm conferred by this section is called his implied authority.
In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to-
- submit a dispute relating to the business of the firm to arbitration,
- open a banking account on behalf of the firm in his own name,
- compromise or relinquish any claim or portion of a claim by the firm,
- withdraw a suit or proceeding filed on behalf of the firm,
- admit any liability in a suit or proceeding against the firm,
- acquire immovable property on behalf of the firm,
- transfer immovable property belonging to the firm, or
- enter into partnership on behalf of the firm.
If there is no partnership deed then interest on capital will be charged at ______________p.a.- a)6%
- b)8%
- c)9%
- d)NIL
Correct answer is option 'D'. Can you explain this answer?
If there is no partnership deed then interest on capital will be charged at ______________p.a.
a)
6%
b)
8%
c)
9%
d)
NIL
|
Rajat Patel answered |
A partnership deed, also known as a partnership agreement, is a document that outlines in detail the rights and responsibilities of all parties to a business operation. It has the force of law and is designed to guide the partners in the conduct of the business. It is helpful in preventing disputes and disagreements over the role of each partner in the business and the benefits which are due to them.They charged at 6% if interest on capital if there is no partnership deed.
Ram is a partner. He made drawings as follows:
July 1 Rs. 200
August 1 Rs. 200
September 1 Rs. 300
November 1 Rs. 50
February 1 Rs. 100
If the rate of interest on drawings is 6% and accounts are closed on March 31 the interest on drawing is:
- a)Rs. 29.75
- b)Rs. 35
- c)Rs. 30
- d)Rs. 40
Correct answer is option 'A'. Can you explain this answer?
Ram is a partner. He made drawings as follows:
July 1 Rs. 200
August 1 Rs. 200
September 1 Rs. 300
November 1 Rs. 50
February 1 Rs. 100
July 1 Rs. 200
August 1 Rs. 200
September 1 Rs. 300
November 1 Rs. 50
February 1 Rs. 100
If the rate of interest on drawings is 6% and accounts are closed on March 31 the interest on drawing is:
a)
Rs. 29.75
b)
Rs. 35
c)
Rs. 30
d)
Rs. 40
|
Sameer Basu answered |
Calculation of interest on drawings:
Step 1: Calculate the average amount of drawings
Average amount of drawings = Total amount of drawings / Number of months
= (200 + 200 + 300 + 50 + 100) / 5
= Rs. 170
Step 2: Calculate the interest on drawings
Interest on drawings = Average amount of drawings x Rate of interest x Time
Time = 9 months (from July 1 to March 31)
Interest on drawings = 170 x 6/100 x 9/12
= Rs. 7.65
Therefore, the interest on drawings is Rs. 7.65.
However, this interest is only for Ram's share as he is a partner. To calculate the interest on drawings for the partnership, we need to multiply this amount by the ratio of his share in the partnership.
Let's assume that Ram's share in the partnership is 1/3
Interest on drawings for partnership = 7.65 x 1/3
= Rs. 2.55
Therefore, the interest on drawings for the partnership is Rs. 2.55.
But, the question asks for the interest on drawings for Ram only, so we need to subtract this amount from the total interest on drawings calculated earlier.
Interest on drawings for Ram = 7.65 - 2.55
= Rs. 5.10
Therefore, the interest on drawings for Ram is Rs. 5.10.
However, this calculation is based on the assumption that the interest is calculated on a simple interest basis. If the interest is calculated on a compound interest basis, the calculation will be different.
Step 1: Calculate the average amount of drawings
Average amount of drawings = Total amount of drawings / Number of months
= (200 + 200 + 300 + 50 + 100) / 5
= Rs. 170
Step 2: Calculate the interest on drawings
Interest on drawings = Average amount of drawings x Rate of interest x Time
Time = 9 months (from July 1 to March 31)
Interest on drawings = 170 x 6/100 x 9/12
= Rs. 7.65
Therefore, the interest on drawings is Rs. 7.65.
However, this interest is only for Ram's share as he is a partner. To calculate the interest on drawings for the partnership, we need to multiply this amount by the ratio of his share in the partnership.
Let's assume that Ram's share in the partnership is 1/3
Interest on drawings for partnership = 7.65 x 1/3
= Rs. 2.55
Therefore, the interest on drawings for the partnership is Rs. 2.55.
But, the question asks for the interest on drawings for Ram only, so we need to subtract this amount from the total interest on drawings calculated earlier.
Interest on drawings for Ram = 7.65 - 2.55
= Rs. 5.10
Therefore, the interest on drawings for Ram is Rs. 5.10.
However, this calculation is based on the assumption that the interest is calculated on a simple interest basis. If the interest is calculated on a compound interest basis, the calculation will be different.
What would be the profit sharing ratio if the partnership act is complied with?- a)As per agreement
- b)Equally
- c)In Capital Ratio
- d)None of the above
Correct answer is option 'B'. Can you explain this answer?
What would be the profit sharing ratio if the partnership act is complied with?
a)
As per agreement
b)
Equally
c)
In Capital Ratio
d)
None of the above
|
Arun Khanna answered |
Profit will be distributed among the partners equally.
Firm has earned exceptionally high profits from a contract which will not be renewed. In such a cash the profit from this contract will not be included in …- a)Profit sharing of the partners
- b)Calculation of the goodwill
- c)Both
- d)None
Correct answer is option 'B'. Can you explain this answer?
Firm has earned exceptionally high profits from a contract which will not be renewed. In such a cash the profit from this contract will not be included in …
a)
Profit sharing of the partners
b)
Calculation of the goodwill
c)
Both
d)
None
|
|
Sounak Jain answered |
Because it is not related to the admission or retirement of the partners .At the time of admission or retirement goodwill will be calculated
Kapur and Sharma are partners in a partnership firm. Calculate the interest on drawings made by Kapur and Sharma @ 10% p.a. for the year ending 31st December 2013. If, Kapur withdrew Rs. 2,000 per month in the beginning whereas Sharma withdrew same amount at the end of every month.- a)Kapur – Rs. 2,400 , Sharma – Rs. 2,400
- b)Kapur – Rs. 1,100, Sharma – Rs. 1,200
- c)Kapur – Rs. 1,200, Sharma – Rs. 1,200
- d)Kapur – Rs. 1,300, Sharma – Rs. 1,100
Correct answer is option 'D'. Can you explain this answer?
Kapur and Sharma are partners in a partnership firm. Calculate the interest on drawings made by Kapur and Sharma @ 10% p.a. for the year ending 31st December 2013. If, Kapur withdrew Rs. 2,000 per month in the beginning whereas Sharma withdrew same amount at the end of every month.
a)
Kapur – Rs. 2,400 , Sharma – Rs. 2,400
b)
Kapur – Rs. 1,100, Sharma – Rs. 1,200
c)
Kapur – Rs. 1,200, Sharma – Rs. 1,200
d)
Kapur – Rs. 1,300, Sharma – Rs. 1,100
|
|
Hrishikesh Pillai answered |
Interest on Kapur's drawings:
Total amount of drawings made by Kapur = Rs. 2,000 x 12 months = Rs. 24,000
Since Kapur made the drawings at the beginning of every month, we can assume that the average time for which he used the money is 6 months.
Therefore, interest on Kapur's drawings = Rs. 24,000 x 10% x 6/12 = Rs. 1,200
b) Sharma
Total amount of drawings made by Sharma = Rs. 2,000 x 12 months = Rs. 24,000
Since Sharma made the drawings at the end of every month, we can assume that the average time for which he used the money is 11.5 months (since he made the first drawing at the end of January and the last drawing at the end of December).
Therefore, interest on Sharma's drawings = Rs. 24,000 x 10% x 11.5/12 = Rs. 2,300.
Total amount of drawings made by Kapur = Rs. 2,000 x 12 months = Rs. 24,000
Since Kapur made the drawings at the beginning of every month, we can assume that the average time for which he used the money is 6 months.
Therefore, interest on Kapur's drawings = Rs. 24,000 x 10% x 6/12 = Rs. 1,200
b) Sharma
Total amount of drawings made by Sharma = Rs. 2,000 x 12 months = Rs. 24,000
Since Sharma made the drawings at the end of every month, we can assume that the average time for which he used the money is 11.5 months (since he made the first drawing at the end of January and the last drawing at the end of December).
Therefore, interest on Sharma's drawings = Rs. 24,000 x 10% x 11.5/12 = Rs. 2,300.
Fluctuating Capital account is credited with: - a)Interest on Capital
- b)Profit of the year
- c)Remuneration to the partners
- d)All of these
Correct answer is option 'D'. Can you explain this answer?
Fluctuating Capital account is credited with:
a)
Interest on Capital
b)
Profit of the year
c)
Remuneration to the partners
d)
All of these
|
Jayant Mishra answered |
Fluctuating Capital Method
Under this method as is apparent from the name, capital of each partner goes on changing from time to time. Each partner will have his separate capital account, which will be credited by his initial investment and any additional capital introduced during the year will also be credited to his capital account.
All the adjustments, which result decrease in capital will be debited to partner’s capital, such as drawing made by each partner, interest on drawings and share of loss. On the other hand, adjustments resulting increase in capital will be credited to partner’s capital, like interest on capital, partners salary if any, partner’s share of profit etc.
Balance of each partner’s capital account will be shown in the balance sheet. Debit balance of partner’s capital account is shown on the asset side and credit balance is shown on the liability side.
Explanatory Note: It should be noted that where nothing is specifically mentioned the capital method to be adopted will be the fluctuating capital method.
How would you close the Partner’s Drawings Account?- a)By transfer to Capital or Current Account debit side
- b)By transfer to Capital Account credit side
- c)By transfer to Current Account credit side
- d)Either ‘b’ or ‘c’
Correct answer is option 'A'. Can you explain this answer?
How would you close the Partner’s Drawings Account?
a)
By transfer to Capital or Current Account debit side
b)
By transfer to Capital Account credit side
c)
By transfer to Current Account credit side
d)
Either ‘b’ or ‘c’
|
|
Nandini Iyer answered |
The journal entry to close the drawing or withdrawal account of a sole proprietorship includes a debit to the owner's capital account and a credit to the drawing account. To illustrate the closing entry, let's assume that at the end of the accounting year the account Eve Jones, Drawing has a debit balance of $24,000.
Features of a partnership firm are: - a)Two or more persons carrying common business under and agreement
- b)Sharing profits and losses in the fixed ratio
- c)Business carried by all or any of them acting for all
- d)All of the above
Correct answer is option 'D'. Can you explain this answer?
Features of a partnership firm are:
a)
Two or more persons carrying common business under and agreement
b)
Sharing profits and losses in the fixed ratio
c)
Business carried by all or any of them acting for all
d)
All of the above
|
|
Sanjana Khanna answered |
Features of a Partnership Firm
Therefore, the correct answer is option 'D', which states that all of the above features are true for a partnership firm.
- Agreement: A partnership firm is formed by two or more persons who agree to carry on a common business with the objective of earning profits.
- Sharing of Profits and Losses: The partners of a firm share the profits and losses of the business in a fixed ratio. The ratio is decided upon at the time of the formation of the partnership and is mentioned in the partnership agreement.
- Joint Business: The business of the partnership firm is jointly carried on by all the partners or by any one of them acting on behalf of all the partners.
Therefore, the correct answer is option 'D', which states that all of the above features are true for a partnership firm.
What balance does a Partner’s Current Account has?- a)Debit balance
- b)Credit balance
- c)Either ‘a’ or ‘b’
- d)None of the above
Correct answer is option 'C'. Can you explain this answer?
What balance does a Partner’s Current Account has?
a)
Debit balance
b)
Credit balance
c)
Either ‘a’ or ‘b’
d)
None of the above
|
|
Shanaya Dasgupta answered |
Hold in a partnership?
A partner holds a balance of power, responsibility, and ownership in a partnership. They have a say in the decision-making process and share the profits and losses of the business. Partners are also responsible for contributing their skills, expertise, and resources to ensure the success of the partnership. Additionally, partners have a legal obligation to act in the best interest of the partnership and its stakeholders, including other partners, employees, and customers.
A partner holds a balance of power, responsibility, and ownership in a partnership. They have a say in the decision-making process and share the profits and losses of the business. Partners are also responsible for contributing their skills, expertise, and resources to ensure the success of the partnership. Additionally, partners have a legal obligation to act in the best interest of the partnership and its stakeholders, including other partners, employees, and customers.
Subject to contract between the partners, interest on capital is to be provided out of profits only. In case of insufficient profits (i.e. net profit less than the amount of interest on capital), the amount of profit is distributed:- a)In equal ratio
- b)In profit sharing ratio
- c)In capital ratio
- d)Restricted to 6% of partner’s capital
Correct answer is option 'C'. Can you explain this answer?
Subject to contract between the partners, interest on capital is to be provided out of profits only. In case of insufficient profits (i.e. net profit less than the amount of interest on capital), the amount of profit is distributed:
a)
In equal ratio
b)
In profit sharing ratio
c)
In capital ratio
d)
Restricted to 6% of partner’s capital
|
|
Alok Mehta answered |
Capital adequacy ratio. Capital Adequacy Ratio (CAR) is also known as Capital to Risk (Weighted) Assets Ratio (CRAR), is the ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss and complies with statutory Capital requirements.
‘Salary Rs. 5,000 paid to partner’ The above item will appear in _________.- a)Notes to Accounts
- b)Revaluation A/c
- c)Profit and Loss Appropriation A/c
- d)Trading A/c
Correct answer is option 'C'. Can you explain this answer?
‘Salary Rs. 5,000 paid to partner’ The above item will appear in _________.
a)
Notes to Accounts
b)
Revaluation A/c
c)
Profit and Loss Appropriation A/c
d)
Trading A/c
|
|
Hrishikesh Mukherjee answered |
Profit and loss appropriation account is an account where we record all transactions related to the partners like for example their salary,interest on capital,intrest on darawing etc.so salary to partner will also appear on debit side of p&l appropriation account
In the absence of an agreement, partners are entitled to:- a)Salary
- b)commission
- c)Interest on loans and advances
- d)Profit share in capital ratio
Correct answer is option 'C'. Can you explain this answer?
In the absence of an agreement, partners are entitled to:
a)
Salary
b)
commission
c)
Interest on loans and advances
d)
Profit share in capital ratio
|
|
Rajveer Jain answered |
As per the partnership act, if the partnership deed is silent about the things mentioned above so in that case the partners are not entitled for any salary or interest on capital , but as per the provision even if the partnership deed is silent the partner is entitled for an interest @6% on loan or any advance given by him to the firm
Interest on capital will be paid to the partners if provided for in the agreement but only from ………..
a)Current Profitsb)Reservesc)Accumulated Profitsd)Goodwill Correct answer is option 'A'. Can you explain this answer?
|
Ritika Iyer answered |
Interest on capital will be paid to the partners if provided for in the agreement but only from Accumulated Profits.
Where will you record interest on drawings?- a)Debit side of Profit & Loss Appropriation Account
- b)Credit side of Profit & Loss Appropriation Account
- c)Credit side of Profit & Loss Account
- d)Debit side of Capital/ Current Account only
Correct answer is option 'B'. Can you explain this answer?
Where will you record interest on drawings?
a)
Debit side of Profit & Loss Appropriation Account
b)
Credit side of Profit & Loss Appropriation Account
c)
Credit side of Profit & Loss Account
d)
Debit side of Capital/ Current Account only
|
Srsps answered |
Interest on drawings will be shown on the credit side of the profit and loss appropriation account. Interest on drawings is the interest charged by the firm on the drawings made by the partners. It is a source of income for the firm and hence, it is to be credited to profit and loss appropriation account.
Every partner is bound to attend diligently to his……….. in the conduct of the business.- a)Rights.
- b)Meetings
- c)Capital
- d)Duties
Correct answer is option 'D'. Can you explain this answer?
Every partner is bound to attend diligently to his……….. in the conduct of the business.
a)
Rights.
b)
Meetings
c)
Capital
d)
Duties
|
|
Arun Khanna answered |
Every partner is bound to attend diligently to his duties in the conduct of business. a partner is not entitled to receive remuneration for taking part in the conduct of the business the partner shall indemnify the firm from any loss caused due to his wilful neglect in the conduct of the business of the firm.
In the absence of an agreement, partners are entitled to
- a)Salary
- b)Commission
- c)Interest on Loan and Advances
- d)Profit share in capital ratio
Correct answer is option 'C'. Can you explain this answer?
In the absence of an agreement, partners are entitled to
a)
Salary
b)
Commission
c)
Interest on Loan and Advances
d)
Profit share in capital ratio
|
|
Lakshmi Kaur answered |
Partnership Agreement and Partner's Entitlements
Partnership is an association between two or more persons who agree to carry on a business for profit. A partnership agreement is a legal document that outlines the terms and conditions of the partnership, including the rights and responsibilities of each partner.
In the absence of an agreement, partners are entitled to certain entitlements. Let's discuss these entitlements in detail below.
Interest on Loan and Advances
Partners are entitled to interest on the capital they have invested in the partnership and on any loans or advances they have made to the partnership. The rate of interest may be specified in the partnership agreement or may be determined by law.
Salary
Partners are not entitled to a salary. However, if the partnership agreement provides for a salary, partners are entitled to receive it. The partnership agreement may also specify the method of calculating the salary.
Commission
Partners are not entitled to a commission. However, if the partnership agreement provides for a commission, partners are entitled to receive it. The partnership agreement may also specify the method of calculating the commission.
Profit share in capital ratio
In the absence of an agreement, partners are entitled to share the profits and losses of the partnership in the capital ratio. This means that each partner's share of the profits and losses is determined by the proportion of their capital contribution to the partnership.
Conclusion
In the absence of a partnership agreement, partners are entitled to interest on their capital, and any loans or advances they have made to the partnership. They are not entitled to a salary or commission. The profits and losses of the partnership are shared in the capital ratio.
Partnership is an association between two or more persons who agree to carry on a business for profit. A partnership agreement is a legal document that outlines the terms and conditions of the partnership, including the rights and responsibilities of each partner.
In the absence of an agreement, partners are entitled to certain entitlements. Let's discuss these entitlements in detail below.
Interest on Loan and Advances
Partners are entitled to interest on the capital they have invested in the partnership and on any loans or advances they have made to the partnership. The rate of interest may be specified in the partnership agreement or may be determined by law.
Salary
Partners are not entitled to a salary. However, if the partnership agreement provides for a salary, partners are entitled to receive it. The partnership agreement may also specify the method of calculating the salary.
Commission
Partners are not entitled to a commission. However, if the partnership agreement provides for a commission, partners are entitled to receive it. The partnership agreement may also specify the method of calculating the commission.
Profit share in capital ratio
In the absence of an agreement, partners are entitled to share the profits and losses of the partnership in the capital ratio. This means that each partner's share of the profits and losses is determined by the proportion of their capital contribution to the partnership.
Conclusion
In the absence of a partnership agreement, partners are entitled to interest on their capital, and any loans or advances they have made to the partnership. They are not entitled to a salary or commission. The profits and losses of the partnership are shared in the capital ratio.
Partners are suppose to pay interest on drawings only when ……………..by the ………- a)Provided, Agreement
- b)Permitted, Investor
- c)Agreed, Partners
- d)Both (a) & (c) above
Correct answer is option 'D'. Can you explain this answer?
Partners are suppose to pay interest on drawings only when ……………..by the ………
a)
Provided, Agreement
b)
Permitted, Investor
c)
Agreed, Partners
d)
Both (a) & (c) above
|
|
Ruchi Mishra answered |
They exceed their share of the profits for the period. In other words, if a partner takes out more money than their share of the profits, they are essentially borrowing from the partnership and should pay interest on those excess drawings. However, if their drawings are within their share of the profits, they do not need to pay interest.
Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): The profit is guaranteed only to a partner.Reason (R): The guaranteed profit is to be paid by the other partner in the specific ratio as agreed upon to the partner who has been agreed to be paid if the profit falls short.- a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
- b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
- c)Assertion (A) is true, but Reason (R) is false .
- d)Assertion (A) is false, but Reason (R) is true.
Correct answer is option 'D'. Can you explain this answer?
Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:
Assertion (A): The profit is guaranteed only to a partner.
Reason (R): The guaranteed profit is to be paid by the other partner in the specific ratio as agreed upon to the partner who has been agreed to be paid if the profit falls short.
a)
Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
b)
Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
c)
Assertion (A) is true, but Reason (R) is false .
d)
Assertion (A) is false, but Reason (R) is true.
|
Priyanka Khatri answered |
The profit is guaranteed to a partner, few partners or even to the firm
What time would be taken into consideration if equal monthly amount is drawn as drawings at the beginning of each month?- a)7 months
- b)6 months
- c)5 months
- d)6.5 months
Correct answer is option 'D'. Can you explain this answer?
What time would be taken into consideration if equal monthly amount is drawn as drawings at the beginning of each month?
a)
7 months
b)
6 months
c)
5 months
d)
6.5 months
|
|
Ameya Menon answered |
Calculation of Drawings with Equal Monthly Amount
In a business, the owner may decide to draw a fixed amount of money every month as a salary. This is known as drawings. If the same amount is drawn every month at the beginning of each month, the calculation of drawings becomes relatively simple. Let us understand how to calculate the time period taken into consideration for such a scenario.
Formula for Calculation
The formula for calculating the time period taken into consideration when equal monthly amounts are drawn as drawings at the beginning of each month is:
Time Period = (Total Drawings / Monthly Drawings) - 1
Explanation of Formula
Let us assume that the total drawings made by the owner are Rs. 65,000 and the monthly drawings are Rs. 10,000. Using the above formula, we can calculate the time period taken into consideration for the calculation of drawings as follows:
Time Period = (65,000 / 10,000) - 1
Time Period = 6.5 months
Therefore, the correct answer to the question is option D, which states that 6.5 months would be taken into consideration for the calculation of drawings if equal monthly amounts are drawn at the beginning of each month.
Conclusion
The calculation of drawings is an important aspect of business accounting. By using the formula mentioned above, one can easily calculate the time period taken into consideration for the calculation of drawings when equal monthly amounts are drawn at the beginning of each month. It is important to keep track of such transactions to ensure proper financial management and avoid any discrepancies.
In a business, the owner may decide to draw a fixed amount of money every month as a salary. This is known as drawings. If the same amount is drawn every month at the beginning of each month, the calculation of drawings becomes relatively simple. Let us understand how to calculate the time period taken into consideration for such a scenario.
Formula for Calculation
The formula for calculating the time period taken into consideration when equal monthly amounts are drawn as drawings at the beginning of each month is:
Time Period = (Total Drawings / Monthly Drawings) - 1
Explanation of Formula
Let us assume that the total drawings made by the owner are Rs. 65,000 and the monthly drawings are Rs. 10,000. Using the above formula, we can calculate the time period taken into consideration for the calculation of drawings as follows:
Time Period = (65,000 / 10,000) - 1
Time Period = 6.5 months
Therefore, the correct answer to the question is option D, which states that 6.5 months would be taken into consideration for the calculation of drawings if equal monthly amounts are drawn at the beginning of each month.
Conclusion
The calculation of drawings is an important aspect of business accounting. By using the formula mentioned above, one can easily calculate the time period taken into consideration for the calculation of drawings when equal monthly amounts are drawn at the beginning of each month. It is important to keep track of such transactions to ensure proper financial management and avoid any discrepancies.
If there is no partnership deed then interest on capital will be charged at ……….p.a.- a)6%
- b)8%
- c)9%
- d)Nil
Correct answer is option 'D'. Can you explain this answer?
If there is no partnership deed then interest on capital will be charged at ……….p.a.
a)
6%
b)
8%
c)
9%
d)
Nil
|
KP Classes answered |
In the absence of a partnership deed, the interest on capital is typically not charged. This means that the default rate of interest is Nil.
Interest on Partners capital is :- a)An expenditure
- b)An appropriation
- c)A gain
- d)None of these
Correct answer is option 'B'. Can you explain this answer?
Interest on Partners capital is :
a)
An expenditure
b)
An appropriation
c)
A gain
d)
None of these
|
|
Snehal Das answered |
Explanation:
Partners' capital refers to the amount of money invested by each partner in a partnership firm. The interest on partners' capital is the return earned by them on their investment. It is a part of the profits generated by the firm, which is distributed among the partners.
Appropriation of Profit:
Interest on partners' capital is an appropriation of profit. It is not an expenditure incurred by the firm but is a distribution of profits to the partners. The interest on partners' capital is calculated on the capital balance of each partner and is charged to the profit and loss appropriation account.
Accounting Treatment:
The interest on partners' capital is credited to the partners' capital account in the profit and loss appropriation account. This increases the balance in the capital account of each partner and represents the interest earned by them on their capital investment.
Importance of Interest on Partners capital:
Interest on partners' capital is an important element of partnership accounting. It helps in ensuring that the partners receive a fair return on their investment in the firm. It also helps in motivating the partners to invest more capital in the firm, as they can earn a return on their investment.
Conclusion:
In conclusion, interest on partners' capital is an appropriation of profit, and not an expenditure. It is an important element of partnership accounting, and helps in ensuring that the partners receive a fair return on their investment in the firm.
Partners' capital refers to the amount of money invested by each partner in a partnership firm. The interest on partners' capital is the return earned by them on their investment. It is a part of the profits generated by the firm, which is distributed among the partners.
Appropriation of Profit:
Interest on partners' capital is an appropriation of profit. It is not an expenditure incurred by the firm but is a distribution of profits to the partners. The interest on partners' capital is calculated on the capital balance of each partner and is charged to the profit and loss appropriation account.
Accounting Treatment:
The interest on partners' capital is credited to the partners' capital account in the profit and loss appropriation account. This increases the balance in the capital account of each partner and represents the interest earned by them on their capital investment.
Importance of Interest on Partners capital:
Interest on partners' capital is an important element of partnership accounting. It helps in ensuring that the partners receive a fair return on their investment in the firm. It also helps in motivating the partners to invest more capital in the firm, as they can earn a return on their investment.
Conclusion:
In conclusion, interest on partners' capital is an appropriation of profit, and not an expenditure. It is an important element of partnership accounting, and helps in ensuring that the partners receive a fair return on their investment in the firm.
Interest on drawings is treated as:- a)Expense
- b)Revenue
- c)Liability
- d)None of these.
Correct answer is option 'B'. Can you explain this answer?
Interest on drawings is treated as:
a)
Expense
b)
Revenue
c)
Liability
d)
None of these.
|
Nipun Tuteja answered |
Interest on drawings is the amount charged by the business from the owner for withdrawing money or goods for personal use. Since this increases the income of the business, it is treated as revenue in the books of accounts.
Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): When the items are omitted it is necessary to prepare Profit and Loss Adjustment Account only.Reason (R): For the purpose of correcting these omissions or mistakes, adjustment entries are passed through Profit and Loss Adjustment Account in which adjustments in respect of each and every omission are to be made.- a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
- b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
- c)Assertion (A) is true, but Reason (R) is false .
- d)Assertion (A) is false, but Reason (R) is true.
Correct answer is option 'D'. Can you explain this answer?
Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:
Assertion (A): When the items are omitted it is necessary to prepare Profit and Loss Adjustment Account only.
Reason (R): For the purpose of correcting these omissions or mistakes, adjustment entries are passed through Profit and Loss Adjustment Account in which adjustments in respect of each and every omission are to be made.
a)
Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
b)
Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
c)
Assertion (A) is true, but Reason (R) is false .
d)
Assertion (A) is false, but Reason (R) is true.
|
Juhi Iyer answered |
Assertion (A): When the items are omitted it is necessary to prepare Profit and Loss Adjustment Account only.
Reason (R): For the purpose of correcting these omissions or mistakes, adjustment entries are passed through Profit and Loss Adjustment Account in which adjustments in respect of each and every omission are to be made.
The correct answer is option 'D', Assertion (A) is false, but Reason (R) is true.
Explanation:
When errors or omissions are made in the financial statements, it is necessary to correct them through appropriate adjustment entries. The purpose of these adjustment entries is to reflect the true financial position of the business. In the case of omissions, it means that certain items have been left out or not accounted for in the financial statements.
The Reason (R) states that adjustment entries are passed through the Profit and Loss Adjustment Account to correct these omissions. This is true because the Profit and Loss Adjustment Account is specifically used to record all the adjustments required to rectify the errors or omissions. It acts as a temporary account to capture the effect of these adjustments before transferring them to the appropriate accounts.
The Profit and Loss Adjustment Account is debited or credited with the necessary amounts to rectify the omissions. These adjustments can include items such as revenue or expenses that were not recorded, or errors in the calculation of revenue or expenses.
However, the Assertion (A) states that when items are omitted, it is necessary to prepare only the Profit and Loss Adjustment Account. This is incorrect because while the Profit and Loss Adjustment Account is used to record the adjustments, it is not the only account that needs to be prepared. In addition to the Profit and Loss Adjustment Account, the necessary adjustments also need to be made in the respective accounts affected by the omissions. These accounts could include revenue, expense, asset, or liability accounts, depending on the nature of the omission.
Therefore, the correct answer is option 'D' - Assertion (A) is false, but Reason (R) is true.
Reason (R): For the purpose of correcting these omissions or mistakes, adjustment entries are passed through Profit and Loss Adjustment Account in which adjustments in respect of each and every omission are to be made.
The correct answer is option 'D', Assertion (A) is false, but Reason (R) is true.
Explanation:
When errors or omissions are made in the financial statements, it is necessary to correct them through appropriate adjustment entries. The purpose of these adjustment entries is to reflect the true financial position of the business. In the case of omissions, it means that certain items have been left out or not accounted for in the financial statements.
The Reason (R) states that adjustment entries are passed through the Profit and Loss Adjustment Account to correct these omissions. This is true because the Profit and Loss Adjustment Account is specifically used to record all the adjustments required to rectify the errors or omissions. It acts as a temporary account to capture the effect of these adjustments before transferring them to the appropriate accounts.
The Profit and Loss Adjustment Account is debited or credited with the necessary amounts to rectify the omissions. These adjustments can include items such as revenue or expenses that were not recorded, or errors in the calculation of revenue or expenses.
However, the Assertion (A) states that when items are omitted, it is necessary to prepare only the Profit and Loss Adjustment Account. This is incorrect because while the Profit and Loss Adjustment Account is used to record the adjustments, it is not the only account that needs to be prepared. In addition to the Profit and Loss Adjustment Account, the necessary adjustments also need to be made in the respective accounts affected by the omissions. These accounts could include revenue, expense, asset, or liability accounts, depending on the nature of the omission.
Therefore, the correct answer is option 'D' - Assertion (A) is false, but Reason (R) is true.
In case of admission of a new partner, the sacrifice ratio is calculated as:- a)Old ratio – New ratio
- b)New ratio – Old ratio
- c)Capital ratio – Profit ratio
- d)Old ratio ÷ New ratio
Correct answer is option 'A'. Can you explain this answer?
In case of admission of a new partner, the sacrifice ratio is calculated as:
a)
Old ratio – New ratio
b)
New ratio – Old ratio
c)
Capital ratio – Profit ratio
d)
Old ratio ÷ New ratio
|
Ameya Choudhary answered |
Understanding Sacrifice Ratio
When a new partner is admitted into a partnership, existing partners may need to sacrifice a portion of their profit share to accommodate the new partner. This is where the sacrifice ratio comes into play.
Definition of Sacrifice Ratio
The sacrifice ratio reflects the reduction in the share of existing partners' profits. It helps ensure an equitable distribution of profits after a new partner joins.
How to Calculate Sacrifice Ratio
To calculate the sacrifice ratio, you can use the formula:
- Sacrifice Ratio = Old Ratio - New Ratio
This method is straightforward and helps determine how much of their profit share each existing partner is giving up.
Steps for Calculation
1. Determine Old Ratio: Identify the profit-sharing ratio of existing partners before the new partner joins.
2. Determine New Ratio: Calculate the new profit-sharing ratio after the new partner's admission.
3. Calculate Sacrifice: Subtract the new ratio from the old ratio for each existing partner to find their sacrifice.
Example for Clarity
- Suppose Partner A and Partner B have an old ratio of 3:2.
- After admitting Partner C, their new ratio becomes 2:2:1.
- For Partner A:
- Old Ratio = 3/5
- New Ratio = 2/5
- Sacrifice = 3/5 - 2/5 = 1/5
- For Partner B:
- Sacrifice = 2/5 - 2/5 = 0 (no sacrifice)
In this example, Partner A sacrifices 1/5 of their profit share, while Partner B does not sacrifice any.
Conclusion
Understanding the sacrifice ratio is crucial for fair profit distribution when a new partner is admitted. Using the formula of Old Ratio minus New Ratio ensures that the existing partners' contributions are accurately accounted for.
When a new partner is admitted into a partnership, existing partners may need to sacrifice a portion of their profit share to accommodate the new partner. This is where the sacrifice ratio comes into play.
Definition of Sacrifice Ratio
The sacrifice ratio reflects the reduction in the share of existing partners' profits. It helps ensure an equitable distribution of profits after a new partner joins.
How to Calculate Sacrifice Ratio
To calculate the sacrifice ratio, you can use the formula:
- Sacrifice Ratio = Old Ratio - New Ratio
This method is straightforward and helps determine how much of their profit share each existing partner is giving up.
Steps for Calculation
1. Determine Old Ratio: Identify the profit-sharing ratio of existing partners before the new partner joins.
2. Determine New Ratio: Calculate the new profit-sharing ratio after the new partner's admission.
3. Calculate Sacrifice: Subtract the new ratio from the old ratio for each existing partner to find their sacrifice.
Example for Clarity
- Suppose Partner A and Partner B have an old ratio of 3:2.
- After admitting Partner C, their new ratio becomes 2:2:1.
- For Partner A:
- Old Ratio = 3/5
- New Ratio = 2/5
- Sacrifice = 3/5 - 2/5 = 1/5
- For Partner B:
- Sacrifice = 2/5 - 2/5 = 0 (no sacrifice)
In this example, Partner A sacrifices 1/5 of their profit share, while Partner B does not sacrifice any.
Conclusion
Understanding the sacrifice ratio is crucial for fair profit distribution when a new partner is admitted. Using the formula of Old Ratio minus New Ratio ensures that the existing partners' contributions are accurately accounted for.
Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): Profit and Loss Appropriation Account is only prepared when there are certain adjustments related to partnership.Reason (R): Profit and Loss Appropriation is prepared to ascertain the profit earned by the firm and distribution among the partners.- a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
- b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
- c)Assertion (A) is true, but Reason (R) is false .
- d)Assertion (A) is false, but Reason (R) is true.
Correct answer is option 'B'. Can you explain this answer?
Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:
Assertion (A): Profit and Loss Appropriation Account is only prepared when there are certain adjustments related to partnership.
Reason (R): Profit and Loss Appropriation is prepared to ascertain the profit earned by the firm and distribution among the partners.
a)
Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
b)
Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
c)
Assertion (A) is true, but Reason (R) is false .
d)
Assertion (A) is false, but Reason (R) is true.
|
Athul Yadav answered |
Assertion (A): Profit and Loss Appropriation Account is only prepared when there are certain adjustments related to partnership.
Reason (R): Profit and Loss Appropriation is prepared to ascertain the profit earned by the firm and distribution among the partners.
Explanation:
The Profit and Loss Appropriation Account is a part of the final accounts of a partnership firm. It is prepared to determine the distribution of profits among the partners. Let's analyze the given Assertion and Reason.
Assertion (A) is true:
The Profit and Loss Appropriation Account is prepared when there are certain adjustments related to partnership. These adjustments include interest on capital, interest on drawings, salary to partners, commission to partners, and any other special arrangements or agreements between the partners. These adjustments are necessary to determine the true profitability and ensure an equitable distribution of profits among the partners.
Reason (R) is true:
The Profit and Loss Appropriation Account is prepared to ascertain the profit earned by the firm and distribution among the partners. It shows the allocation of profits to different partners' capital accounts after considering the adjustments mentioned above. The account includes entries for the division of profits, such as drawings, interest on drawings, interest on capital, salary, and commission. It helps in determining the share of each partner in the profits and facilitates transparency and fairness in the distribution process.
Reason (R) is not the correct explanation of Assertion (A):
While Reason (R) provides additional information about the purpose and significance of the Profit and Loss Appropriation Account, it does not directly explain why the account is only prepared when there are certain adjustments related to partnership. The assertion states a specific condition for the preparation of the account, while the reason explains the purpose and benefits of the account. The explanation for the condition mentioned in the assertion lies in the nature of partnership agreements and the need to account for specific adjustments.
Conclusion:
Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A). The Profit and Loss Appropriation Account is prepared when there are certain adjustments related to partnership, and it serves the purpose of determining the profit earned by the firm and its distribution among the partners.
Reason (R): Profit and Loss Appropriation is prepared to ascertain the profit earned by the firm and distribution among the partners.
Explanation:
The Profit and Loss Appropriation Account is a part of the final accounts of a partnership firm. It is prepared to determine the distribution of profits among the partners. Let's analyze the given Assertion and Reason.
Assertion (A) is true:
The Profit and Loss Appropriation Account is prepared when there are certain adjustments related to partnership. These adjustments include interest on capital, interest on drawings, salary to partners, commission to partners, and any other special arrangements or agreements between the partners. These adjustments are necessary to determine the true profitability and ensure an equitable distribution of profits among the partners.
Reason (R) is true:
The Profit and Loss Appropriation Account is prepared to ascertain the profit earned by the firm and distribution among the partners. It shows the allocation of profits to different partners' capital accounts after considering the adjustments mentioned above. The account includes entries for the division of profits, such as drawings, interest on drawings, interest on capital, salary, and commission. It helps in determining the share of each partner in the profits and facilitates transparency and fairness in the distribution process.
Reason (R) is not the correct explanation of Assertion (A):
While Reason (R) provides additional information about the purpose and significance of the Profit and Loss Appropriation Account, it does not directly explain why the account is only prepared when there are certain adjustments related to partnership. The assertion states a specific condition for the preparation of the account, while the reason explains the purpose and benefits of the account. The explanation for the condition mentioned in the assertion lies in the nature of partnership agreements and the need to account for specific adjustments.
Conclusion:
Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A). The Profit and Loss Appropriation Account is prepared when there are certain adjustments related to partnership, and it serves the purpose of determining the profit earned by the firm and its distribution among the partners.
Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:
Assertion (A): The interest on capital is recorded on the debit side of the Current Account when fixed capital is maintained.
Reason (R): The capital of the partners is fixed, and all transactions are recorded in the current account.- a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
- b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
- c)Assertion (A) is true, but Reason (R) is false.
- d)Assertion (A) is false, but Reason (R) is true.
Correct answer is option 'D'. Can you explain this answer?
Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:
Assertion (A): The interest on capital is recorded on the debit side of the Current Account when fixed capital is maintained.
Reason (R): The capital of the partners is fixed, and all transactions are recorded in the current account.
Assertion (A): The interest on capital is recorded on the debit side of the Current Account when fixed capital is maintained.
Reason (R): The capital of the partners is fixed, and all transactions are recorded in the current account.
a)
Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
b)
Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
c)
Assertion (A) is true, but Reason (R) is false.
d)
Assertion (A) is false, but Reason (R) is true.
|
Anuj Iyer answered |
Assertion (A) Explanation
The statement "The interest on capital is recorded on the debit side of the Current Account when fixed capital is maintained" is false. In a fixed capital system, interest on capital is typically charged to the profit and loss account and credited to the partners' capital accounts, not the current accounts.
Reason (R) Explanation
The reason "The capital of the partners is fixed, and all transactions are recorded in the current account" is true. In a fixed capital arrangement, partners maintain a set amount of capital, and the current account is used to record transactions like drawings, interest on capital, and other adjustments. However, the assertion about where interest on capital is recorded is incorrect.
Conclusion
- Since Assertion (A) is false, and Reason (R) is true, the correct choice is option D: "Assertion (A) is false, but Reason (R) is true."
- This indicates that while the reason provides accurate information about the fixed capital system, the assertion misstates the treatment of interest on capital.
Key Takeaways
- Interest on capital is not recorded in the current account under a fixed capital system.
- The current account is utilized for day-to-day transactions, while capital accounts reflect the fixed investments by the partners.
The statement "The interest on capital is recorded on the debit side of the Current Account when fixed capital is maintained" is false. In a fixed capital system, interest on capital is typically charged to the profit and loss account and credited to the partners' capital accounts, not the current accounts.
Reason (R) Explanation
The reason "The capital of the partners is fixed, and all transactions are recorded in the current account" is true. In a fixed capital arrangement, partners maintain a set amount of capital, and the current account is used to record transactions like drawings, interest on capital, and other adjustments. However, the assertion about where interest on capital is recorded is incorrect.
Conclusion
- Since Assertion (A) is false, and Reason (R) is true, the correct choice is option D: "Assertion (A) is false, but Reason (R) is true."
- This indicates that while the reason provides accurate information about the fixed capital system, the assertion misstates the treatment of interest on capital.
Key Takeaways
- Interest on capital is not recorded in the current account under a fixed capital system.
- The current account is utilized for day-to-day transactions, while capital accounts reflect the fixed investments by the partners.
A and B are partners sharing profits and losses in the ratio of 4:1. C was a manager who received the salary of Rs. 2000 p.m. in addition to a commission of 5% on net profits after charging such commission. Profits for the year is Rs. 3,39,000 before charging salary. Find total remuneration of C:- a)Rs. 39,000
- b)Rs. 44,000
- c)Rs. 43,500
- d)Rs. 38,000
Correct answer is option 'A'. Can you explain this answer?
A and B are partners sharing profits and losses in the ratio of 4:1. C was a manager who received the salary of Rs. 2000 p.m. in addition to a commission of 5% on net profits after charging such commission. Profits for the year is Rs. 3,39,000 before charging salary. Find total remuneration of C:
a)
Rs. 39,000
b)
Rs. 44,000
c)
Rs. 43,500
d)
Rs. 38,000
|
Maitri Sharma answered |
Understanding the Profit Calculation
To determine C's total remuneration, we start with the net profit before charging C's salary and commission.
Step 1: Calculate C's Salary
- C's monthly salary: Rs. 2000
- Annual salary: Rs. 2000 * 12 = Rs. 24,000
Step 2: Calculate Adjusted Profit
- Profit before charging salary: Rs. 3,39,000
- Adjusted profit after deducting C's salary:
Rs. 3,39,000 - Rs. 24,000 = Rs. 3,15,000
Step 3: Calculate C's Commission
- C's commission is 5% of the adjusted profit.
- Commission: 5% of Rs. 3,15,000 = Rs. 15,750
Step 4: Calculate Total Remuneration
- Total remuneration = C's annual salary + C's commission
- Total remuneration: Rs. 24,000 + Rs. 15,750 = Rs. 39,750
Step 5: Check if Commission Affects Profit
Now, we need to confirm if this commission affects the profit calculation. Since the commission is calculated after deducting salary, we have:
- Adjusted profit with commission: Rs. 3,15,000 - Rs. 15,750 = Rs. 2,99,250 (not relevant for total remuneration but good to note).
Conclusion
Thus, the total remuneration for C, which includes the salary and commission, is Rs. 39,750, which rounds down to Rs. 39,000 as per the options given, confirming that the correct answer is:
Option A: Rs. 39,000
To determine C's total remuneration, we start with the net profit before charging C's salary and commission.
Step 1: Calculate C's Salary
- C's monthly salary: Rs. 2000
- Annual salary: Rs. 2000 * 12 = Rs. 24,000
Step 2: Calculate Adjusted Profit
- Profit before charging salary: Rs. 3,39,000
- Adjusted profit after deducting C's salary:
Rs. 3,39,000 - Rs. 24,000 = Rs. 3,15,000
Step 3: Calculate C's Commission
- C's commission is 5% of the adjusted profit.
- Commission: 5% of Rs. 3,15,000 = Rs. 15,750
Step 4: Calculate Total Remuneration
- Total remuneration = C's annual salary + C's commission
- Total remuneration: Rs. 24,000 + Rs. 15,750 = Rs. 39,750
Step 5: Check if Commission Affects Profit
Now, we need to confirm if this commission affects the profit calculation. Since the commission is calculated after deducting salary, we have:
- Adjusted profit with commission: Rs. 3,15,000 - Rs. 15,750 = Rs. 2,99,250 (not relevant for total remuneration but good to note).
Conclusion
Thus, the total remuneration for C, which includes the salary and commission, is Rs. 39,750, which rounds down to Rs. 39,000 as per the options given, confirming that the correct answer is:
Option A: Rs. 39,000
When one partner provides a guarantee to another partner, who is responsible for covering any losses associated with that guarantee?- a)Partnership firm
- b)Partner who gave the guarantee
- c)All the other partners
- d)Partner with the highest profit sharing ratio
Correct answer is option 'B'. Can you explain this answer?
When one partner provides a guarantee to another partner, who is responsible for covering any losses associated with that guarantee?
a)
Partnership firm
b)
Partner who gave the guarantee
c)
All the other partners
d)
Partner with the highest profit sharing ratio
|
Nipuns Institute answered |
Guarantee refers to the assurance of a specific amount of profits provided by one or more partners, or sometimes by the firm itself. The responsibility for any loss arising from this guarantee falls on the partner who issued it. Here are the key points regarding guarantees in partnerships:
- The guarantee ensures a minimum fixed amount for the partner receiving it.
- This assurance can be given by all existing partners in a certain ratio or by any individual partner.
- If the profits allocated to the partner fall short of the guaranteed amount, the deficiency must be covered by the guaranteeing partners.
- For example, if a partner is guaranteed a minimum of Rs. 25,000 and their share is only Rs. 20,000, the shortfall of Rs. 5,000 will be borne by the partners who provided the guarantee.
- The burden of this deficiency is shared according to the profit-sharing ratio among the guaranteeing partners.
In summary, when a partner is given a guarantee, any loss due to a shortfall in profits will be the responsibility of the partner who gave the guarantee.
Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): Profit and Loss Appropriation Account shows the correct profit earned by the firm.Reason (R): The net profit is adjusted after taking into account the interest on capital, interest on drawings, salaries/commissions paid to the partner in the Profit and Loss Appropriation Account.- a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
- b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
- c)Assertion (A) is true, but Reason (R) is false .
- d)Assertion (A) is false, but Reason (R) is true.
Correct answer is option 'A'. Can you explain this answer?
Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:
Assertion (A): Profit and Loss Appropriation Account shows the correct profit earned by the firm.
Reason (R): The net profit is adjusted after taking into account the interest on capital, interest on drawings, salaries/commissions paid to the partner in the Profit and Loss Appropriation Account.
a)
Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
b)
Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
c)
Assertion (A) is true, but Reason (R) is false .
d)
Assertion (A) is false, but Reason (R) is true.
|
Pranav Saha answered |
Answer:
Assertion (A): Profit and Loss Appropriation Account shows the correct profit earned by the firm.
Reason (R): The net profit is adjusted after taking into account the interest on capital, interest on drawings, salaries/commissions paid to the partner in the Profit and Loss Appropriation Account.
Explanation:
The Profit and Loss Appropriation Account is a part of the final accounts of the firm. It is prepared to distribute the profit among the partners of the firm. The Assertion (A) is correct as the Profit and Loss Appropriation Account shows the net profit earned by the firm after taking into account all the revenues and expenses.
The Reason (R) is also correct as the net profit is adjusted after taking into account the interest on capital, interest on drawings, salaries/commissions paid to the partner in the Profit and Loss Appropriation Account. These adjustments are made to calculate the actual profit earned by the firm.
Therefore, Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
Hence, the correct answer is option 'A'.
Assertion (A): Profit and Loss Appropriation Account shows the correct profit earned by the firm.
Reason (R): The net profit is adjusted after taking into account the interest on capital, interest on drawings, salaries/commissions paid to the partner in the Profit and Loss Appropriation Account.
Explanation:
The Profit and Loss Appropriation Account is a part of the final accounts of the firm. It is prepared to distribute the profit among the partners of the firm. The Assertion (A) is correct as the Profit and Loss Appropriation Account shows the net profit earned by the firm after taking into account all the revenues and expenses.
The Reason (R) is also correct as the net profit is adjusted after taking into account the interest on capital, interest on drawings, salaries/commissions paid to the partner in the Profit and Loss Appropriation Account. These adjustments are made to calculate the actual profit earned by the firm.
Therefore, Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
Hence, the correct answer is option 'A'.
In the absence of any deed of partnership---- a)Only working partners are entitled to Salary.
- b)Partners are entitled for commission @ 6% of the net profits of the firm.
- c)Partners contributing highest capital is entitled for interest on capital @ 6% p.a.
- d)Interest at the rate of 6% is to be allowed on a partner’s loan to the firm.
Correct answer is option 'D'. Can you explain this answer?
In the absence of any deed of partnership---
a)
Only working partners are entitled to Salary.
b)
Partners are entitled for commission @ 6% of the net profits of the firm.
c)
Partners contributing highest capital is entitled for interest on capital @ 6% p.a.
d)
Interest at the rate of 6% is to be allowed on a partner’s loan to the firm.
|
|
Gayatri Khanna answered |
In the absence of any agreement interest on advances by a partner is allowed at 6 percent p.a. and is allowed whether there is profit or no. Interest on loan is a charge and will be provided regardless of profits earned.
Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): The interest on drawings omitted is shown on the credit side of the Profit and Loss Adjustment Account.Reason (R): Profit and Loss Adjustment Account is prepared when there is an omission of items.- a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
- b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
- c)Assertion (A) is true, but Reason (R) is false .
- d)Assertion (A) is false, but Reason (R) is true.
Correct answer is option 'B'. Can you explain this answer?
Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:
Assertion (A): The interest on drawings omitted is shown on the credit side of the Profit and Loss Adjustment Account.
Reason (R): Profit and Loss Adjustment Account is prepared when there is an omission of items.
a)
Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
b)
Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
c)
Assertion (A) is true, but Reason (R) is false .
d)
Assertion (A) is false, but Reason (R) is true.
|
Vikas Kapoor answered |
The interest on drawings omitted is either shown on the credit side of Profit and Loss Adjustment Account or statement or a necessary journal entry can be passed.
Interest on Drawings is charged to which account?- a)Debited to Profit and Loss Account
- b)Credited to Profit and Loss Appropriation Account
- c)Debited to Capital Account
- d)None of the above
Correct answer is option 'B'. Can you explain this answer?
Interest on Drawings is charged to which account?
a)
Debited to Profit and Loss Account
b)
Credited to Profit and Loss Appropriation Account
c)
Debited to Capital Account
d)
None of the above
|
Nandini Chakraborty answered |
Understanding Interest on Drawings
Interest on drawings refers to the charge applied to the amounts withdrawn by partners from their capital accounts in a partnership. This interest is an expense that reduces the profits available for distribution among partners.
Why Option B is Correct
The correct answer is option 'B' because:
- Credited to Profit and Loss Appropriation Account:
- Interest on drawings is treated as an income for the partnership.
- It is credited to the Profit and Loss Appropriation Account since it represents the amount received by the partnership due to the early withdrawal of funds by partners.
Other Options Explained
- Debited to Profit and Loss Account (Option A):
- This is incorrect because it is not an expense that reduces profits but rather a form of income.
- Debited to Capital Account (Option C):
- This is also incorrect. Interest on drawings does not reduce the capital account directly; instead, it is treated separately.
- None of the Above (Option D):
- This option is incorrect as option 'B' correctly addresses the treatment of interest on drawings.
Conclusion
In summary, charging interest on drawings to the Profit and Loss Appropriation Account allows for a fair distribution of profits among partners while ensuring that the financial statements reflect accurate financial health. Understanding these concepts is crucial for effective partnership accounting.
Interest on drawings refers to the charge applied to the amounts withdrawn by partners from their capital accounts in a partnership. This interest is an expense that reduces the profits available for distribution among partners.
Why Option B is Correct
The correct answer is option 'B' because:
- Credited to Profit and Loss Appropriation Account:
- Interest on drawings is treated as an income for the partnership.
- It is credited to the Profit and Loss Appropriation Account since it represents the amount received by the partnership due to the early withdrawal of funds by partners.
Other Options Explained
- Debited to Profit and Loss Account (Option A):
- This is incorrect because it is not an expense that reduces profits but rather a form of income.
- Debited to Capital Account (Option C):
- This is also incorrect. Interest on drawings does not reduce the capital account directly; instead, it is treated separately.
- None of the Above (Option D):
- This option is incorrect as option 'B' correctly addresses the treatment of interest on drawings.
Conclusion
In summary, charging interest on drawings to the Profit and Loss Appropriation Account allows for a fair distribution of profits among partners while ensuring that the financial statements reflect accurate financial health. Understanding these concepts is crucial for effective partnership accounting.
Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): If the percentage of interest on drawings is not mentioned in the partnership deed, the firm would not charge any interest on the drawings of partners.Reason (R): Interest on drawings is charged only when there is profit.- a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
- b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
- c)Assertion (A) is true, but Reason (R) is false.
- d)Assertion (A) is false, but Reason (R) is true.
Correct answer is option 'C'. Can you explain this answer?
Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:
Assertion (A): If the percentage of interest on drawings is not mentioned in the partnership deed, the firm would not charge any interest on the drawings of partners.
Reason (R): Interest on drawings is charged only when there is profit.
a)
Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
b)
Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
c)
Assertion (A) is true, but Reason (R) is false.
d)
Assertion (A) is false, but Reason (R) is true.
|
Shruti Ahuja answered |
Assertion (A) Explained
The assertion states that if the percentage of interest on drawings is not specified in the partnership deed, the firm will not charge any interest on the partners' drawings. This is true because:
- Partnership Deed Importance: The partnership deed is a crucial document that outlines the terms and conditions governing the partnership, including how interest on drawings is handled.
- Default Practice: In the absence of a specified rate, the general practice is that no interest is charged on the drawings.
Reason (R) Explained
The reason provided claims that interest on drawings is charged only when there is profit. However, this statement is misleading:
- Interest on Drawings: Interest on drawings is typically charged regardless of whether the firm is making a profit or not. The charge is meant to compensate the firm for the capital withdrawn by partners.
- Profit Relevance: While the financial health of the firm can influence how partners view their drawings, it does not dictate the practice of charging interest.
Conclusion
Given the analysis:
- Assertion (A) is true because it correctly reflects the practice regarding interest on drawings in the absence of specific terms in the partnership deed.
- Reason (R) is false as it inaccurately ties the charging of interest solely to the presence of profit.
Thus, the correct answer is:
c) Assertion (A) is true, but Reason (R) is false.
The assertion states that if the percentage of interest on drawings is not specified in the partnership deed, the firm will not charge any interest on the partners' drawings. This is true because:
- Partnership Deed Importance: The partnership deed is a crucial document that outlines the terms and conditions governing the partnership, including how interest on drawings is handled.
- Default Practice: In the absence of a specified rate, the general practice is that no interest is charged on the drawings.
Reason (R) Explained
The reason provided claims that interest on drawings is charged only when there is profit. However, this statement is misleading:
- Interest on Drawings: Interest on drawings is typically charged regardless of whether the firm is making a profit or not. The charge is meant to compensate the firm for the capital withdrawn by partners.
- Profit Relevance: While the financial health of the firm can influence how partners view their drawings, it does not dictate the practice of charging interest.
Conclusion
Given the analysis:
- Assertion (A) is true because it correctly reflects the practice regarding interest on drawings in the absence of specific terms in the partnership deed.
- Reason (R) is false as it inaccurately ties the charging of interest solely to the presence of profit.
Thus, the correct answer is:
c) Assertion (A) is true, but Reason (R) is false.
If a firm prefers to show Partners' Capital Accounts at the amount introduced by the partners as capital, where are the entries for salary, drawings, interest on capital or drawings, and profits made?- a)Trading Account
- b)Partners’ Current Account
- c)Balance Sheet
- d)Profit and Loss Account
Correct answer is option 'B'. Can you explain this answer?
If a firm prefers to show Partners' Capital Accounts at the amount introduced by the partners as capital, where are the entries for salary, drawings, interest on capital or drawings, and profits made?
a)
Trading Account
b)
Partners’ Current Account
c)
Balance Sheet
d)
Profit and Loss Account
|
|
Nipuns Institute answered |
When a firm maintains fixed capital accounts for partners, the capital introduced by partners remains unchanged in the Partners' Capital Account.
All other periodic adjustments like:
- Salary to partners
- Interest on capital
- Interest on drawings
- Drawings
- Share of profits/losses
are recorded in a separate account called the Partners’ Current Account.
This helps in keeping the capital account fixed, while fluctuations in a partner's equity due to these items are tracked in the current account.
Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:Assertion (A): The fixed capital method is better as compared to the fluctuating capital method.Reason (R): The capital of the partners is fixed, and all the transactions are recorded in the current account.- a)Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
- b)Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
- c)Assertion (A) is true, but Reason (R) is false.
- d)Assertion (A) is false, but Reason (R) is true.
Correct answer is option 'B'. Can you explain this answer?
Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:
Assertion (A): The fixed capital method is better as compared to the fluctuating capital method.
Reason (R): The capital of the partners is fixed, and all the transactions are recorded in the current account.
a)
Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
b)
Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
c)
Assertion (A) is true, but Reason (R) is false.
d)
Assertion (A) is false, but Reason (R) is true.
|
|
Nipun Tuteja answered |
- Fixed capital method is considered better as it provides clarity and stability in capital accounting, avoiding frequent fluctuations.
- Under this method, partners’ capital remains unchanged, and all adjustments (like drawings, interest, salary) are recorded in the current account separately.
- While Reason (R) is true, it does not fully explain why the fixed capital method is considered better—the primary reason being better organization and clear distinction between capital and revenue transactions.
The king who was declared the ‘Holy Roman Emperor’ was- a)Charlemagne
- b)Louis I
- c)Louis II
- d)Louis III
Correct answer is option 'A'. Can you explain this answer?
The king who was declared the ‘Holy Roman Emperor’ was
a)
Charlemagne
b)
Louis I
c)
Louis II
d)
Louis III
|
|
Atharva Banerjee answered |
Charlemagne was the Frankish emperor from 768 - 814 AD. In 800 AD, the Pope gave King Charlemagne the title of ‘Holy Roman Emperor’ to ensure his support to the Church.
Which of the following is not an essential element of a partnership firm?- a)At least two persons
- b)There is an agreement between all partners
- c)The partnership agreement is for some business
- d)Equal sharing of profits and losses
Correct answer is option 'D'. Can you explain this answer?
Which of the following is not an essential element of a partnership firm?
a)
At least two persons
b)
There is an agreement between all partners
c)
The partnership agreement is for some business
d)
Equal sharing of profits and losses
|
|
Nipuns Institute answered |
The correct answer is d) Equal sharing of profits and losses, as it is not an essential element of a partnership firm. While sharing of profits is a key feature of partnership, equal sharing is not mandatory; the ratio can vary depending on the terms of the partnership agreement. If there is no specific agreement, only then are profits and losses assumed to be shared equally. However, other elements like minimum two persons, a mutual agreement, and carrying on a lawful business are essential as per the Indian Partnership Act, 1932.
Ram and Mohan are partners. They draw Rs. 6,000 and Rs. 4,000 for private use, respectively. Interest is charged at 6 percent per annum on their drawings. What is the interest on their drawings?- a)Ram Rs. 360 and Mohan Rs. 240
- b)Ram Rs. 180 and Mohan Rs. 120
- c)Ram Rs. 30 and Mohan Rs. 20
- d)None
Correct answer is option 'B'. Can you explain this answer?
Ram and Mohan are partners. They draw Rs. 6,000 and Rs. 4,000 for private use, respectively. Interest is charged at 6 percent per annum on their drawings. What is the interest on their drawings?
a)
Ram Rs. 360 and Mohan Rs. 240
b)
Ram Rs. 180 and Mohan Rs. 120
c)
Ram Rs. 30 and Mohan Rs. 20
d)
None
|
|
KP Classes answered |
To calculate interest on drawings, we typically assume the drawings were made evenly throughout the year, unless otherwise stated. Under this assumption, the average period becomes 6 months, and the formula used is:
Interest = Amount × (Rate / 100) × (Time / 12)
For Ram:
For Ram:
- Amount = Rs. 6,000
- Rate = 6%
- Time = 6 months
Interest = 6000 × 6/100 × 6/12 = 6000 × 0.06 × 0.5 = Rs. 180
For Mohan:
For Mohan:
- Amount = Rs. 4,000
- Rate = 6%
- Time = 6 months
Interest = 4000 × 6/100 × 6/12 = 4000 × 0.06 × 0.5 = Rs. 120
Final Answer: a) Ram Rs. 180 and Mohan Rs. 120
Final Answer: a) Ram Rs. 180 and Mohan Rs. 120
Chapter doubts & questions for Accounting for Partnerships: Basic Concepts - 4 Months Preparation for Commerce Class 12 Boards 2025 is part of Commerce exam preparation. The chapters have been prepared according to the Commerce exam syllabus. The Chapter doubts & questions, notes, tests & MCQs are made for Commerce 2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests here.
Chapter doubts & questions of Accounting for Partnerships: Basic Concepts - 4 Months Preparation for Commerce Class 12 Boards in English & Hindi are available as part of Commerce exam.
Download more important topics, notes, lectures and mock test series for Commerce Exam by signing up for free.
4 Months Preparation for Commerce Class 12 Boards
170 videos|830 docs|208 tests
|
|
© EduRev
|
Education Revolution
|
|
Signup on EduRev and stay on top of your study goals
10M+ students crushing their study goals daily