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All questions of Unit 1: Introduction to Partnership Accounts for CA Foundation 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
|
|
Nikita Singh answered |
According to the partnership act the partners are to share profits equally unless anything else is agreed by the partners or is in the agreement.
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.
Seeta and Geeta are partners sharing profits and losses in the ratio 4:1. Meeta was manager who received the salary of Rs. 4,000 p.m. in addition to a commission of 5% on net profits after charging such commission. Profits for the year is Rs. 6,78,000 before charging salary. Find the total remuneration of Meeta.- a)Rs. 78,000.
- b)Rs. 88,000.
- c)Rs. 87,000.
- d)Rs. 76,000.
Correct answer is option 'A'. Can you explain this answer?
Seeta and Geeta are partners sharing profits and losses in the ratio 4:1. Meeta was manager who received the salary of Rs. 4,000 p.m. in addition to a commission of 5% on net profits after charging such commission. Profits for the year is Rs. 6,78,000 before charging salary. Find the total remuneration of Meeta.
a)
Rs. 78,000.
b)
Rs. 88,000.
c)
Rs. 87,000.
d)
Rs. 76,000.
|
Sai Kulkarni answered |
Given data:
- Profit sharing ratio of Seeta and Geeta is 4:1.
- Meeta is the manager and receives a salary of Rs. 4,000 per month.
- Meeta also receives a commission of 5% on net profits after charging such commission.
- The profits for the year before charging the salary is Rs. 6,78,000.
To find: Total remuneration of Meeta.
Calculations:
1. Calculate the net profits after charging Meeta's salary:
- Meeta's salary for a year = Rs. 4,000 x 12 = Rs. 48,000
- Net profits after charging Meeta's salary = Profits for the year - Meeta's salary = Rs. 6,78,000 - Rs. 48,000 = Rs. 6,30,000
2. Calculate Meeta's commission on net profits:
- Commission = 5% of net profits = 5/100 x Rs. 6,30,000 = Rs. 31,500
3. Calculate Meeta's total remuneration:
- Total remuneration = Meeta's salary + Meeta's commission = Rs. 48,000 + Rs. 31,500 = Rs. 79,500
Therefore, the total remuneration of Meeta is Rs. 79,500.
Answer:
The correct option is A) Rs. 78,000.
‘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.
X, Y and Z are partners in a firm. At the time of division of profit for the year there was dispute between the partners. Profits before interest on partner’s capital was Rs. 6,000 and Y determined interest @ 24% p.a. on his loan of Rs. 80,000. There was no agreement on this point. Calculate the amount payable to X, Y and Z respectively.- a)Rs. 2,000 to each partner.
- b)Loss of Rs. 4,400 for X and Z & Y will take home Rs. 14,800.
- c)Rs. 400 for X, Rs. 5,200 for Y and Rs. 400 for Z.
- d)Rs. 2,400 to each partner.
Correct answer is option 'C'. Can you explain this answer?
X, Y and Z are partners in a firm. At the time of division of profit for the year there was dispute between the partners. Profits before interest on partner’s capital was Rs. 6,000 and Y determined interest @ 24% p.a. on his loan of Rs. 80,000. There was no agreement on this point. Calculate the amount payable to X, Y and Z respectively.
a)
Rs. 2,000 to each partner.
b)
Loss of Rs. 4,400 for X and Z & Y will take home Rs. 14,800.
c)
Rs. 400 for X, Rs. 5,200 for Y and Rs. 400 for Z.
d)
Rs. 2,400 to each partner.
|
Priya Patel answered |
The question clearly states that there was no agreement on tne issue.
The partnership act 1932 provides that if there is no deed,
1. Partners are not entitled to
1a. Any salary
1b. Interest on capital or,
1c. Interest on drawings.
2. The profit sharing ratio shall be equal.
3. Interest on partner's loan can be allowed @ 6%.
Hence, y's claim for 24% cannot be allowed. Interest on loan to y Rs.4800(80000*6%) is allowed to y first.
The remaining profit Rs.1200 (6000-4800) is divided equally among the three. Hence, x gets 400, y gets 5200 (4800+400) and z gets 400.
Following are the differences between Capital Account and Current Account except:- a)Capital Account is prepared under fixed capital method whereas current account is prepared under fluctuating capital method.
- b)In capital account only capital introduced and withdrawn is recorded, all other transactions between the firm and partner is recorded in the current account.
- c)Interest is sometimes paid on capital account balance but no such interest is payable on current account balances.
- d)‘b’ and ‘c’ above.
Correct answer is option 'A'. Can you explain this answer?
Following are the differences between Capital Account and Current Account except:
a)
Capital Account is prepared under fixed capital method whereas current account is prepared under fluctuating capital method.
b)
In capital account only capital introduced and withdrawn is recorded, all other transactions between the firm and partner is recorded in the current account.
c)
Interest is sometimes paid on capital account balance but no such interest is payable on current account balances.
d)
‘b’ and ‘c’ above.
|
|
Karishma Arya answered |
'A' is correct because in fluctuating capital method capital account is made and in fixed capital method current account is also made
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.
In the absence of an agreement, partners are entitled to- a)Salary.
- b) Commission.s
- 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.s
c)
Interest on Loan and Advances.
d)
Profit share in capital ratio.
|
|
Alok Mehta answered |
RULES APPLICABLE IN THE ABSENCE OF PARTNERSHIP DEED
As we know from the previous discusion that it is not cumpulsory to have a partnership deed for a partnership firm. Hence if a firm is not having any written agreement or a partnership deed or if partnership deed is there but it is silent on certain issues the following provisions of the Indian Partnership Act 1932 will be applicable.
1. Profit sharing Ratio : Profits and losses would be shared equally among partners.
2. Interest on capital : No interest on capital would be allowed to partners. If tehre is an agreement to allow interest on capital it is to be allowed only in case of profits.
3. Interest on drawings: No interest on drawings would be charged from partners.
4. Salary: No salary or commission is to be allowed to partners.
5. Interest on Loan : If apartner has provided any Loan to the firm, he would be paid Interest at the rate 6% p.a. This interest on laon is a charge against profits i.e. it is to be allowed even if there are losses to the firm.
6. Admission of a new partner: A new Partner can be admitted only with the consent of all the existing partners.
7. Right to participate in the business: Each partner has a right to participate in the proceedings of the business.
8. Inspection of the accounts of the firm: Each partner has the right to inspect the accounts of the firm and can have a copy of the same.
Any of the above provisions can be changed by the partners after an agreement.
Following is the difference between partnership deed and partnership agreement.- a)Partnership deed is in writing and partnership agreement is oral.
- b)Partnership deed is signed by all the partners but partnership agreement is signed by majority of the partners.
- c)Partnership deed is registered in the court of law whereas partnership agreement is not registere
- d)Partnership deed is not subject to changes unless all partners agrees to it.Partnership agreement can be amended with the consent of more than 50% partners.
Correct answer is option 'C'. Can you explain this answer?
Following is the difference between partnership deed and partnership agreement.
a)
Partnership deed is in writing and partnership agreement is oral.
b)
Partnership deed is signed by all the partners but partnership agreement is signed by majority of the partners.
c)
Partnership deed is registered in the court of law whereas partnership agreement is not registere
d)
Partnership deed is not subject to changes unless all partners agrees to it.Partnership agreement can be amended with the consent of more than 50% partners.
|
|
Arjun Singhania answered |
Whenever any agreement is registered it becomes a 'DEED'. (for example, sale agreement, partnership agreement, etc.,).
As per Partnership Act, Registration is optional.
But, in the interest of business, it is prudent to get it registered. Because, only a registered firm can sue on its' name.
Following are the essential elements of a partnership firm except:- a)Atleast two persons.
- b)There is an agreement between all partners.
- c)Equal share of profits and losses.
- d)Partnership agreement is for some business.
Correct answer is option 'C'. Can you explain this answer?
Following are the essential elements of a partnership firm except:
a)
Atleast two persons.
b)
There is an agreement between all partners.
c)
Equal share of profits and losses.
d)
Partnership agreement is for some business.
|
|
Arun Khanna answered |
Essential elements of partnership in business are given below:
This definition contains five elements which constitute a partnership, namely:
(1) There must be a contract;
(2) Between two or more persons;
(3) Who agree to carry on a business?
(4) With the object of sharing profits; and
(5) The business must be carried on by all or any of them acting for all (i.e., there must be mutual agency).
All the above elements must coexist in order to constitute a partnership. If any of these is not present, there cannot be a partnership.
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.
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.
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.
|
Shila Verma answered |
Because any account has two balance:-1)Debit balance(2) Credit balance
=other side partner's current account has mostly credit balance but some time it has Debit balance.
=other side partner's current account has mostly credit balance but some time it has Debit balance.
A, B and C had capitals of Rs. 50,000; Rs. 40,000 and Rs. 30,000 respectively for carrying on business in partnership. The firm’s reported profit for the year was Rs. 80,000. As per provisions of the Indian Partnership Act, 1932, find out the share of each partner in the above amount after taking into account that no interest has been provided on an advance by A of Rs. 20,000, in addition to his capital contribution.- a)Rs. 26,267 for Partner B and C & Rs. 27,466 for partner A.
- b)Rs. 26,667 each partner.
- c)Rs. 33,333 for A, Rs. 26,667 and Rs. 20,000 for C.
- d)Rs. 30,000 each partner.
Correct answer is option 'A'. Can you explain this answer?
A, B and C had capitals of Rs. 50,000; Rs. 40,000 and Rs. 30,000 respectively for carrying on business in partnership. The firm’s reported profit for the year was Rs. 80,000. As per provisions of the Indian Partnership Act, 1932, find out the share of each partner in the above amount after taking into account that no interest has been provided on an advance by A of Rs. 20,000, in addition to his capital contribution.
a)
Rs. 26,267 for Partner B and C & Rs. 27,466 for partner A.
b)
Rs. 26,667 each partner.
c)
Rs. 33,333 for A, Rs. 26,667 and Rs. 20,000 for C.
d)
Rs. 30,000 each partner.
|
|
Arun Khanna answered |
As per the provisions of the Indian Partnership Act of 1932, interest @ 6% p.a. is provided to the partners for any amount advanced by them to the firm by way of loan. Here, A will be entitled to receive interest of Rs 1,200 (20,000 @ 6%). Thereafter, the remaining profits (80,000−-1,200) will be shared equally among A, B and C.
So, A will get Rs 27,466 (his share of profit + interest on loan i.e. Rs 26,266 + 1,200)
B & C will get Rs 26267 each.
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.
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.
|
|
Ameya Menon answered |
Explanation:
Interest on drawings refers to the interest charged by the proprietor on the amount of drawings made by him from the business. It is a type of expense for the business.
The correct method of recording interest on drawings is as follows:
Record in Profit and Loss Appropriation Account:
- Interest on drawings is debited to the partner's current account and credited to the Profit and Loss Appropriation Account.
- This is because the interest on drawings is an appropriation of profit and not a business expense.
- The Profit and Loss Appropriation Account is used to distribute the profit among the partners as per the agreed terms.
Record on the credit side of Profit and Loss Appropriation Account:
- The interest on drawings is recorded on the credit side of the Profit and Loss Appropriation Account.
- This is because the interest on drawings is added to the profits of the business and shared among the partners.
Example:
Suppose a partner withdraws Rs.10,000 from the business and charges an interest of 10% p.a. on the amount. The interest on drawings would be Rs.1,000 (10% of Rs.10,000).
The journal entry to record interest on drawings would be as follows:
Partner's current account debit - Rs.1,000
Profit and Loss Appropriation Account credit - Rs.1,000
Conclusion:
Hence, the correct answer is option 'B', i.e., the interest on drawings is recorded on the credit side of the Profit and Loss Appropriation Account.
Interest on drawings refers to the interest charged by the proprietor on the amount of drawings made by him from the business. It is a type of expense for the business.
The correct method of recording interest on drawings is as follows:
Record in Profit and Loss Appropriation Account:
- Interest on drawings is debited to the partner's current account and credited to the Profit and Loss Appropriation Account.
- This is because the interest on drawings is an appropriation of profit and not a business expense.
- The Profit and Loss Appropriation Account is used to distribute the profit among the partners as per the agreed terms.
Record on the credit side of Profit and Loss Appropriation Account:
- The interest on drawings is recorded on the credit side of the Profit and Loss Appropriation Account.
- This is because the interest on drawings is added to the profits of the business and shared among the partners.
Example:
Suppose a partner withdraws Rs.10,000 from the business and charges an interest of 10% p.a. on the amount. The interest on drawings would be Rs.1,000 (10% of Rs.10,000).
The journal entry to record interest on drawings would be as follows:
Partner's current account debit - Rs.1,000
Profit and Loss Appropriation Account credit - Rs.1,000
Conclusion:
Hence, the correct answer is option 'B', i.e., the interest on drawings is recorded on the credit side of the Profit and Loss Appropriation Account.
Bill and Monica are partners sharing profits and losses in the ratio of 3:2 having the capital of Rs. 80,000 and Rs. 50,000 respectively. They are entitled to 9% p.a. interest on capital before distributing the profits. During the year firm earned Rs. 7,800 after allowing interest on capital. Profits apportioned among Bill and Monica is:- a)4,680 and 3,120.
- b)4,800 and 3,000.
- c)5,000 and 2,800.
- d)None of the above.
Correct answer is option 'A'. Can you explain this answer?
Bill and Monica are partners sharing profits and losses in the ratio of 3:2 having the capital of Rs. 80,000 and Rs. 50,000 respectively. They are entitled to 9% p.a. interest on capital before distributing the profits. During the year firm earned Rs. 7,800 after allowing interest on capital. Profits apportioned among Bill and Monica is:
a)
4,680 and 3,120.
b)
4,800 and 3,000.
c)
5,000 and 2,800.
d)
None of the above.
|
|
Maheshwar Goyal answered |
Partnership Profit and Loss Calculation
Given data:
- Capital of Bill = Rs. 80,000
- Capital of Monica = Rs. 50,000
- Ratio of sharing profits and losses = 3:2
- Interest on capital = 9% p.a.
- Profit earned by the firm = Rs. 7,800
Interest on Capital Calculation
Interest on capital is calculated before distributing the profits. The interest on capital for Bill and Monica is:
- Interest on Bill's capital = 9% of Rs. 80,000 = Rs. 7,200
- Interest on Monica's capital = 9% of Rs. 50,000 = Rs. 4,500
Total interest on capital = Rs. 7,200 + Rs. 4,500 = Rs. 11,700
Calculation of Profit and Loss
The profits or losses are shared in the ratio of 3:2. The total ratio is 3+2 = 5.
- Share of Bill in profits = 3/5 of total profit
- Share of Monica in profits = 2/5 of total profit
Total profit earned by the firm = Rs. 7,800
Profit shared by Bill = (3/5) x Rs. 7,800 = Rs. 4,680
Profit shared by Monica = (2/5) x Rs. 7,800 = Rs. 3,120
Final Calculation
The profits shared by Bill and Monica after deducting the interest on capital are:
- Bill's share = Rs. 4,680 - Rs. 7,200 = (-) Rs. 2,520 (loss)
- Monica's share = Rs. 3,120 - Rs. 4,500 = (-) Rs. 1,380 (loss)
Therefore, the answer is option A. The profits apportioned among Bill and Monica are Rs. 4,680 and Rs. 3,120, respectively.
Given data:
- Capital of Bill = Rs. 80,000
- Capital of Monica = Rs. 50,000
- Ratio of sharing profits and losses = 3:2
- Interest on capital = 9% p.a.
- Profit earned by the firm = Rs. 7,800
Interest on Capital Calculation
Interest on capital is calculated before distributing the profits. The interest on capital for Bill and Monica is:
- Interest on Bill's capital = 9% of Rs. 80,000 = Rs. 7,200
- Interest on Monica's capital = 9% of Rs. 50,000 = Rs. 4,500
Total interest on capital = Rs. 7,200 + Rs. 4,500 = Rs. 11,700
Calculation of Profit and Loss
The profits or losses are shared in the ratio of 3:2. The total ratio is 3+2 = 5.
- Share of Bill in profits = 3/5 of total profit
- Share of Monica in profits = 2/5 of total profit
Total profit earned by the firm = Rs. 7,800
Profit shared by Bill = (3/5) x Rs. 7,800 = Rs. 4,680
Profit shared by Monica = (2/5) x Rs. 7,800 = Rs. 3,120
Final Calculation
The profits shared by Bill and Monica after deducting the interest on capital are:
- Bill's share = Rs. 4,680 - Rs. 7,200 = (-) Rs. 2,520 (loss)
- Monica's share = Rs. 3,120 - Rs. 4,500 = (-) Rs. 1,380 (loss)
Therefore, the answer is option A. The profits apportioned among Bill and Monica are Rs. 4,680 and Rs. 3,120, respectively.
Ram and Shyam are partners with the capital of Rs. 25,000 and Rs. 15,000 respectively.
Interest payable on capital is 10% p.a. Find the interest on capital for both the partners when the profits earned by the firm is Rs. 2,400.- a)Rs. 2,500 and Rs. 1,500.
- b)Rs. 1,500 and Rs. 900.
- c)Rs. 1,200 and Rs. 1,200.
- d)None of the above.
Correct answer is option 'B'. Can you explain this answer?
Ram and Shyam are partners with the capital of Rs. 25,000 and Rs. 15,000 respectively.
Interest payable on capital is 10% p.a. Find the interest on capital for both the partners when the profits earned by the firm is Rs. 2,400.
Interest payable on capital is 10% p.a. Find the interest on capital for both the partners when the profits earned by the firm is Rs. 2,400.
a)
Rs. 2,500 and Rs. 1,500.
b)
Rs. 1,500 and Rs. 900.
c)
Rs. 1,200 and Rs. 1,200.
d)
None of the above.
|
|
Jayant Mishra answered |
As per the question, int on Capital should be 2500 & 1500. But profit is not sufficient to pay off interest. So the interest will be distributed in their capital ratio i. e 5:3 you will get 1500 & 900.
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.
|
|
Nandini Iyer answered |
Duties of every partner and the said duties are not subject to any contract to the contrary. Therefore, partners are bound to carry on the business of the firm to the greatest common advantage, to be just and faithful to each other and to render accounts and full information of all things affecting the firm to any partner or his legal representative and every partner is bound to indemnify the firm for any loss caused to it by fraud in the conduct of the business of the firm.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.
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.
|
Ujwal Patel answered |
Understanding the Role of a Partner in a Firm
In a business context, partners play a crucial role in the functioning and management of a firm. Their relationship with the firm can be best understood by examining the concept of agency.
Agency Relationship
- A partner acts as an agent for the firm, meaning they have the authority to make decisions and enter into contracts on behalf of the business.
- This agency relationship is fundamental because it allows partners to operate the firm effectively, representing the interests of the business in various transactions.
Implications of Being an Agent
- Decision-Making Power: As agents, partners can take actions that bind the firm legally. This empowers them to make strategic decisions without needing prior approval from other partners.
- Fiduciary Duty: Partners owe a fiduciary duty to the firm and each other, meaning they must act in the best interest of the business. This includes loyalty, honesty, and full disclosure of relevant information.
Distinction from Other Roles
- Third Party: Unlike third parties, who are external to the firm and have no authority to act on its behalf, partners are integral to the firm's operations.
- Employee: While partners may perform functions similar to employees, they are not employees in the traditional sense; they have ownership stakes and share in profits and losses.
Conclusion
In summary, the correct answer is option 'A' because a partner inherently acts as an agent for a firm, holding significant responsibilities and authority that influence the firm's overall direction and success. Understanding this role is vital for anyone involved in or studying business partnerships.
In a business context, partners play a crucial role in the functioning and management of a firm. Their relationship with the firm can be best understood by examining the concept of agency.
Agency Relationship
- A partner acts as an agent for the firm, meaning they have the authority to make decisions and enter into contracts on behalf of the business.
- This agency relationship is fundamental because it allows partners to operate the firm effectively, representing the interests of the business in various transactions.
Implications of Being an Agent
- Decision-Making Power: As agents, partners can take actions that bind the firm legally. This empowers them to make strategic decisions without needing prior approval from other partners.
- Fiduciary Duty: Partners owe a fiduciary duty to the firm and each other, meaning they must act in the best interest of the business. This includes loyalty, honesty, and full disclosure of relevant information.
Distinction from Other Roles
- Third Party: Unlike third parties, who are external to the firm and have no authority to act on its behalf, partners are integral to the firm's operations.
- Employee: While partners may perform functions similar to employees, they are not employees in the traditional sense; they have ownership stakes and share in profits and losses.
Conclusion
In summary, the correct answer is option 'A' because a partner inherently acts as an agent for a firm, holding significant responsibilities and authority that influence the firm's overall direction and success. Understanding this role is vital for anyone involved in or studying business partnerships.
Interest on capital will be paid to the partners if provided for in the agreement but only from …………- a)Current Profits.
- b)Reserves.
- c)Accumulated Profits.
- d)Goodwill.
Correct answer is option 'A'. Can you explain this answer?
Interest on capital will be paid to the partners if provided for in the agreement but only from …………
a)
Current Profits.
b)
Reserves.
c)
Accumulated Profits.
d)
Goodwill.
|
|
Bird Singh answered |
When interest on capital given written in agreement than this interest is treated as charge and all charges are charge form current year profit.
Would interest on loan be allowed in the absence of any agreement or when partnership deed is silent?- a)No interest allowed.
- b)Allowed only if agreed by all the other partners.
- c)Will be paid only when there are sufficient profits.
- d)Allowed @ 6% p.a.
Correct answer is option 'D'. Can you explain this answer?
Would interest on loan be allowed in the absence of any agreement or when partnership deed is silent?
a)
No interest allowed.
b)
Allowed only if agreed by all the other partners.
c)
Will be paid only when there are sufficient profits.
d)
Allowed @ 6% p.a.
|
Om Kumar answered |
Understanding Interest on Loans in Partnerships
In partnerships, the treatment of interest on loans can vary based on the partnership agreement or deed. When no specific agreement exists or the deed is silent regarding interest on loans, the following points apply:
Legal Provisions
- According to the Indian Partnership Act, if there is no agreement concerning the payment of interest on capital or loans, the partnership will default to specific statutory provisions.
Interest Rate Specification
- In the absence of any agreement, partners are entitled to receive interest on their loans at a statutory rate of 6% per annum. This is a legal safeguard to ensure that partners who contribute capital in the form of loans are compensated.
Implications of Partnership Deed Silence
- If the partnership deed does not mention interest on loans, it does not mean interest is disallowed; rather, it defaults to the statutory rate.
Distribution of Profits Not Required
- Interest on loans is payable irrespective of the partnership's profit situation unless specifically stated otherwise. Therefore, even if the partnership is not profitable, partners are entitled to interest on their loans.
Conclusion
- In summary, when a partnership deed is silent on the matter, interest on loans is allowed at a rate of 6% per annum as per legal provisions, ensuring fair treatment of partners who extend financial support to the firm.
In partnerships, the treatment of interest on loans can vary based on the partnership agreement or deed. When no specific agreement exists or the deed is silent regarding interest on loans, the following points apply:
Legal Provisions
- According to the Indian Partnership Act, if there is no agreement concerning the payment of interest on capital or loans, the partnership will default to specific statutory provisions.
Interest Rate Specification
- In the absence of any agreement, partners are entitled to receive interest on their loans at a statutory rate of 6% per annum. This is a legal safeguard to ensure that partners who contribute capital in the form of loans are compensated.
Implications of Partnership Deed Silence
- If the partnership deed does not mention interest on loans, it does not mean interest is disallowed; rather, it defaults to the statutory rate.
Distribution of Profits Not Required
- Interest on loans is payable irrespective of the partnership's profit situation unless specifically stated otherwise. Therefore, even if the partnership is not profitable, partners are entitled to interest on their loans.
Conclusion
- In summary, when a partnership deed is silent on the matter, interest on loans is allowed at a rate of 6% per annum as per legal provisions, ensuring fair treatment of partners who extend financial support to the firm.
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
|
|
Nipun Tuteja answered |
Step 1: Calculate Salary
C gets ₹2000 per month
So, for 12 months:
Salary = 2000 × 12 = ₹24,000
So, for 12 months:
Salary = 2000 × 12 = ₹24,000
Step 2: Calculate Commission
Let the commission be x.
C's commission is 5% of net profit after charging commission.
x = 5% of (339000 - 24000 - x)
x = 0.05 × (315000 - x)
x = 15750 - 0.05x
x + 0.05x = 15750
1.05x = 15750
x = 15750 / 1.05 = ₹15,000
C's commission is 5% of net profit after charging commission.
x = 5% of (339000 - 24000 - x)
x = 0.05 × (315000 - x)
x = 15750 - 0.05x
x + 0.05x = 15750
1.05x = 15750
x = 15750 / 1.05 = ₹15,000
Step 3: Total Remuneration
Total Remuneration = Salary + Commission = 24000 + 15000 = ₹39,000
If a firm prefers Partners’ Capital Accounts to be shown at the amount introduced by the partners as capital in firm then entries for salary, interest, drawings, interest on capital and drawings and profits are made in- a)Trading Account.
- b)Profit and Loss Account
- c)Balance Sheet
- d)Partners’ Current Account.
Correct answer is option 'D'. Can you explain this answer?
If a firm prefers Partners’ Capital Accounts to be shown at the amount introduced by the partners as capital in firm then entries for salary, interest, drawings, interest on capital and drawings and profits are made in
a)
Trading Account.
b)
Profit and Loss Account
c)
Balance Sheet
d)
Partners’ Current Account.
|
Anand Dasgupta answered |
If a firm prefers partners, it means that the firm values collaboration and believes that working together with partners is more beneficial than working alone. This preference for partners may be driven by several factors, such as:
1. Complementary skills and expertise: Partnerships allow firms to join forces with other organizations that possess complementary skills, knowledge, and expertise. By combining their strengths, firms can enhance their capabilities and offer a wider range of products or services.
2. Shared resources and cost-sharing: Partnerships enable firms to pool their resources, including financial, technological, or human resources. This can lead to cost-sharing and efficiency gains, as partners can jointly invest in infrastructure or research and development activities.
3. Access to new markets or customers: Partnerships provide firms with opportunities to access new markets or customer segments that they may not have been able to reach on their own. By collaborating with partners who have established networks or market presence, firms can expand their reach and increase their customer base.
4. Risk-sharing and diversification: Partnerships allow firms to share risks and diversify their business. By partnering with other organizations, firms can spread their exposure to market fluctuations, regulatory changes, or other external risks, reducing their overall vulnerability.
5. Innovation and knowledge-sharing: Partnerships foster innovation and knowledge-sharing between organizations. By collaborating with partners, firms can gain access to new ideas, research, and development capabilities, which can help them stay competitive and adapt to changing market conditions.
Overall, a firm's preference for partners reflects a strategic choice to leverage the strengths of other organizations and achieve mutual benefits through collaboration.
1. Complementary skills and expertise: Partnerships allow firms to join forces with other organizations that possess complementary skills, knowledge, and expertise. By combining their strengths, firms can enhance their capabilities and offer a wider range of products or services.
2. Shared resources and cost-sharing: Partnerships enable firms to pool their resources, including financial, technological, or human resources. This can lead to cost-sharing and efficiency gains, as partners can jointly invest in infrastructure or research and development activities.
3. Access to new markets or customers: Partnerships provide firms with opportunities to access new markets or customer segments that they may not have been able to reach on their own. By collaborating with partners who have established networks or market presence, firms can expand their reach and increase their customer base.
4. Risk-sharing and diversification: Partnerships allow firms to share risks and diversify their business. By partnering with other organizations, firms can spread their exposure to market fluctuations, regulatory changes, or other external risks, reducing their overall vulnerability.
5. Innovation and knowledge-sharing: Partnerships foster innovation and knowledge-sharing between organizations. By collaborating with partners, firms can gain access to new ideas, research, and development capabilities, which can help them stay competitive and adapt to changing market conditions.
Overall, a firm's preference for partners reflects a strategic choice to leverage the strengths of other organizations and achieve mutual benefits through collaboration.
When is the Profit & Loss Appropriation Account prepared?- a) For Proprietorship firm.
- b) For partnership firm.
- c) Both ‘a’ and ‘b’
- d) None of the above
Correct answer is option 'B'. Can you explain this answer?
When is the Profit & Loss Appropriation Account prepared?
a)
For Proprietorship firm.
b)
For partnership firm.
c)
Both ‘a’ and ‘b’
d)
None of the above
|
Tarun Chaudhary answered |
Profit and loss appropriation account is an extension of profit and loss account.it is prepared for partnership firm and profit and loss account is prepared for sole proprietorship.
Following are the differences between Partnership and Joint Venture except:- a)Joint venture is essentially planned for short term mainly for one transaction.
However, partnerships are normally undertaken as going concerns and are expected to last for a very long period. - b)The persons involved in a joint venture are called co-venturers whereas persons involved in a partnership are called partners.
- c)Any specific statute of the Government does not govern joint ventures but the Indian Partnership Act, 1932, governs partnerships.
- d)Memorandum of Understanding is mandatory to be drafted to spell the relationship between the co-venturers whereas the basic relationship between the partners is defined by the partnership deed.
Correct answer is option 'D'. Can you explain this answer?
Following are the differences between Partnership and Joint Venture except:
a)
Joint venture is essentially planned for short term mainly for one transaction.
However, partnerships are normally undertaken as going concerns and are expected to last for a very long period.
However, partnerships are normally undertaken as going concerns and are expected to last for a very long period.
b)
The persons involved in a joint venture are called co-venturers whereas persons involved in a partnership are called partners.
c)
Any specific statute of the Government does not govern joint ventures but the Indian Partnership Act, 1932, governs partnerships.
d)
Memorandum of Understanding is mandatory to be drafted to spell the relationship between the co-venturers whereas the basic relationship between the partners is defined by the partnership deed.
|
|
Malavika Basak answered |
Understanding Joint Ventures vs. Partnerships
The correct answer to the question regarding the differences between partnerships and joint ventures is option 'D'. Here’s a detailed explanation:
Nature of Agreements
- In joint ventures, while it is common to draft a Memorandum of Understanding (MoU) to outline the terms of the collaboration, it is not strictly mandatory. The purpose of an MoU is to clarify the intentions and expectations of the co-venturers, but the lack of one does not render the joint venture invalid.
- On the other hand, partnerships are governed by the Indian Partnership Act, 1932, which necessitates a partnership deed to define the relationship between partners. This deed serves as a formal agreement detailing the roles, responsibilities, and profit-sharing ratios among partners.
Duration and Intent
- Joint ventures are typically established for a specific project or a limited duration, emphasizing short-term goals. In contrast, partnerships are designed to function as ongoing entities with a long-term perspective, aimed at continuous business operations.
Terminology
- The participants in a joint venture are referred to as co-venturers, while in a partnership, they are known as partners. This distinction in terminology underscores the different nature of these business arrangements.
Regulatory Framework
- Joint ventures do not fall under a specific regulatory statute; they are instead guided by the contractual agreements made between the parties involved. In contrast, partnerships are strictly governed by the provisions laid out in the Indian Partnership Act, 1932.
In summary, while options A, B, and C clearly delineate the differences between partnerships and joint ventures, option D is misleading since drafting an MoU is not a mandatory requirement for joint ventures.
The correct answer to the question regarding the differences between partnerships and joint ventures is option 'D'. Here’s a detailed explanation:
Nature of Agreements
- In joint ventures, while it is common to draft a Memorandum of Understanding (MoU) to outline the terms of the collaboration, it is not strictly mandatory. The purpose of an MoU is to clarify the intentions and expectations of the co-venturers, but the lack of one does not render the joint venture invalid.
- On the other hand, partnerships are governed by the Indian Partnership Act, 1932, which necessitates a partnership deed to define the relationship between partners. This deed serves as a formal agreement detailing the roles, responsibilities, and profit-sharing ratios among partners.
Duration and Intent
- Joint ventures are typically established for a specific project or a limited duration, emphasizing short-term goals. In contrast, partnerships are designed to function as ongoing entities with a long-term perspective, aimed at continuous business operations.
Terminology
- The participants in a joint venture are referred to as co-venturers, while in a partnership, they are known as partners. This distinction in terminology underscores the different nature of these business arrangements.
Regulatory Framework
- Joint ventures do not fall under a specific regulatory statute; they are instead guided by the contractual agreements made between the parties involved. In contrast, partnerships are strictly governed by the provisions laid out in the Indian Partnership Act, 1932.
In summary, while options A, B, and C clearly delineate the differences between partnerships and joint ventures, option D is misleading since drafting an MoU is not a mandatory requirement for joint ventures.
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
|
Shraddha Gupta answered |
Understanding Guarantees in Partnerships
In a partnership, when one partner provides a guarantee to another, it is essential to understand the implications of that guarantee on liability and responsibility for losses.
Who is Responsible for Covering Losses?
- The partner who gives the guarantee is primarily responsible for covering any losses associated with that guarantee.
- This means that if the guaranteed obligation is not fulfilled, the partner who provided the guarantee must step in to cover the losses incurred.
Rationale Behind This Responsibility
- Guarantees are essentially promises made by one partner to take on the financial responsibility of another’s obligations.
- In a partnership, each partner acts on behalf of the firm and also carries individual liabilities. When a guarantee is provided, it signifies a personal commitment by the guaranteeing partner.
Implications for Other Partners
- Other partners in the firm are not automatically responsible for covering the losses tied to the guarantee unless otherwise stated in the partnership agreement.
- The primary liability rests with the guaranteeing partner, safeguarding the interests of other partners.
Conclusion
- Therefore, if a loss arises from a guaranteed obligation, it is the partner who provided the guarantee (option 'B') who bears the responsibility for that loss.
- This arrangement emphasizes the importance of trust and accountability within a partnership structure.
In a partnership, when one partner provides a guarantee to another, it is essential to understand the implications of that guarantee on liability and responsibility for losses.
Who is Responsible for Covering Losses?
- The partner who gives the guarantee is primarily responsible for covering any losses associated with that guarantee.
- This means that if the guaranteed obligation is not fulfilled, the partner who provided the guarantee must step in to cover the losses incurred.
Rationale Behind This Responsibility
- Guarantees are essentially promises made by one partner to take on the financial responsibility of another’s obligations.
- In a partnership, each partner acts on behalf of the firm and also carries individual liabilities. When a guarantee is provided, it signifies a personal commitment by the guaranteeing partner.
Implications for Other Partners
- Other partners in the firm are not automatically responsible for covering the losses tied to the guarantee unless otherwise stated in the partnership agreement.
- The primary liability rests with the guaranteeing partner, safeguarding the interests of other partners.
Conclusion
- Therefore, if a loss arises from a guaranteed obligation, it is the partner who provided the guarantee (option 'B') who bears the responsibility for that loss.
- This arrangement emphasizes the importance of trust and accountability within a partnership structure.
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.
|
|
Srsps answered |
Question Analysis:
The question asks about the time period that needs to be considered if equal monthly amounts are drawn at the beginning of each month. We need to determine the number of months that would be considered.
To find the time period, we need to consider the timing of the drawings and the frequency of the drawings.
Timing of the Drawings:
The drawings are made at the beginning of each month. This means that the first drawing is made at the beginning of the first month, the second drawing at the beginning of the second month, and so on.
Frequency of the Drawings:
The equal monthly amounts are drawn. This means that the same amount is drawn every month.
Calculating the Time Period:
To calculate the time period, we need to determine the number of months that would be considered. We can do this by dividing the total amount drawn by the monthly amount.
Let's assume the total amount drawn is T and the monthly amount is M.
The number of months considered can be calculated using the formula:
Number of months = Total amount drawn / Monthly amount
In this case, since the monthly amount is drawn at the beginning of each month, we need to consider the amount drawn for a partial month.
Let's consider an example:
If the total amount drawn is $100 and the monthly amount is $20, then the number of months considered would be:
Number of months = $100 / $20 = 5 months
Therefore, the correct answer is option C: 5 months.
Final Answer:
The correct time period that needs to be taken into consideration if equal monthly amount is drawn at the beginning of each month is 5 months.
The question asks about the time period that needs to be considered if equal monthly amounts are drawn at the beginning of each month. We need to determine the number of months that would be considered.
To find the time period, we need to consider the timing of the drawings and the frequency of the drawings.
Timing of the Drawings:
The drawings are made at the beginning of each month. This means that the first drawing is made at the beginning of the first month, the second drawing at the beginning of the second month, and so on.
Frequency of the Drawings:
The equal monthly amounts are drawn. This means that the same amount is drawn every month.
Calculating the Time Period:
To calculate the time period, we need to determine the number of months that would be considered. We can do this by dividing the total amount drawn by the monthly amount.
Let's assume the total amount drawn is T and the monthly amount is M.
The number of months considered can be calculated using the formula:
Number of months = Total amount drawn / Monthly amount
In this case, since the monthly amount is drawn at the beginning of each month, we need to consider the amount drawn for a partial month.
Let's consider an example:
If the total amount drawn is $100 and the monthly amount is $20, then the number of months considered would be:
Number of months = $100 / $20 = 5 months
Therefore, the correct answer is option C: 5 months.
Final Answer:
The correct time period that needs to be taken into consideration if equal monthly amount is drawn at the beginning of each month is 5 months.
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.
Guarantee given to a partner ‘A’ by the other partners ‘B & C’ means- a)In case of loss ‘A’ will not contribute towards that loss.
- b)In case of insufficient profits ‘A’ will receive only the minimum guarantee amount.
- c)In case of loss or insufficient profits ‘A’ will withdraw the minimum guarantee amount.
- d)All of the above
Correct answer is option 'C'. Can you explain this answer?
Guarantee given to a partner ‘A’ by the other partners ‘B & C’ means
a)
In case of loss ‘A’ will not contribute towards that loss.
b)
In case of insufficient profits ‘A’ will receive only the minimum guarantee amount.
c)
In case of loss or insufficient profits ‘A’ will withdraw the minimum guarantee amount.
d)
All of the above
|
|
Anand Dasgupta answered |
Guarantee given to a partner A by the other partners B and C means that in case of loss or insufficient profits, partner A will withdraw the minimum guarantee amount. Let's break down the options and understand why the correct answer is option C.
In case of loss A will not contribute towards that loss
This option is incorrect because if partner A is a part of the partnership, they are expected to contribute towards any losses incurred by the partnership. A guarantee does not exempt them from this responsibility.
In case of insufficient profits A will receive only the minimum guarantee amount
This option is partially correct, but it does not cover the scenario where there is a loss. In case of insufficient profits, partner A will receive the minimum guarantee amount, but in case of a loss, they will still withdraw the minimum guarantee amount even if it exceeds their share of the profit/loss.
In case of loss or insufficient profits A will withdraw the minimum guarantee amount
This option is correct as it covers both scenarios - loss and insufficient profits. Partner A will withdraw the minimum guarantee amount, which is the amount agreed upon by all partners in advance as the minimum amount that partner A will receive irrespective of the profit/loss of the partnership.
To summarize, when partners B and C give a guarantee to partner A, it means that partner A will receive the minimum guarantee amount in case of loss or insufficient profits. This provides partner A with some level of security and ensures that they will not suffer any significant financial losses.
In case of loss A will not contribute towards that loss
This option is incorrect because if partner A is a part of the partnership, they are expected to contribute towards any losses incurred by the partnership. A guarantee does not exempt them from this responsibility.
In case of insufficient profits A will receive only the minimum guarantee amount
This option is partially correct, but it does not cover the scenario where there is a loss. In case of insufficient profits, partner A will receive the minimum guarantee amount, but in case of a loss, they will still withdraw the minimum guarantee amount even if it exceeds their share of the profit/loss.
In case of loss or insufficient profits A will withdraw the minimum guarantee amount
This option is correct as it covers both scenarios - loss and insufficient profits. Partner A will withdraw the minimum guarantee amount, which is the amount agreed upon by all partners in advance as the minimum amount that partner A will receive irrespective of the profit/loss of the partnership.
To summarize, when partners B and C give a guarantee to partner A, it means that partner A will receive the minimum guarantee amount in case of loss or insufficient profits. This provides partner A with some level of security and ensures that they will not suffer any significant financial losses.
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
|
|
Jatin Mehta answered |
Profit Sharing Ratio in Partnership Act
The Partnership Act, 1932 lays down certain provisions regarding the profit sharing ratio in a partnership firm. The profit sharing ratio refers to the proportion in which the profits of the firm are distributed among the partners. The Act provides for the following methods of determining the profit sharing ratio:
1. As per agreement: The partners can decide among themselves the ratio in which the profits will be shared. This can be done through a partnership agreement.
2. Equally: In the absence of any agreement, the profits are shared equally among the partners.
3. In Capital Ratio: The profits are shared in proportion to the capital contributed by each partner.
4. None of the above: If none of the above methods is applicable, then the profits are shared in the ratio that the partners agree upon.
Profit Sharing Ratio as per Partnership Act
According to the Partnership Act, if there is no agreement among the partners regarding the profit sharing ratio, then the profits are shared equally among the partners. This means that each partner will receive an equal share of the profits, irrespective of the capital contributed or the work done by each partner.
For example, if there are three partners in a firm and they have not agreed upon any profit sharing ratio, then each partner will receive one-third of the profits of the firm.
Conclusion
In conclusion, the profit sharing ratio in a partnership firm can be determined as per the partnership agreement, equally, in capital ratio, or as agreed upon by the partners. However, in the absence of any agreement, the profits are shared equally among the partners as per the provisions of the Partnership Act.
The Partnership Act, 1932 lays down certain provisions regarding the profit sharing ratio in a partnership firm. The profit sharing ratio refers to the proportion in which the profits of the firm are distributed among the partners. The Act provides for the following methods of determining the profit sharing ratio:
1. As per agreement: The partners can decide among themselves the ratio in which the profits will be shared. This can be done through a partnership agreement.
2. Equally: In the absence of any agreement, the profits are shared equally among the partners.
3. In Capital Ratio: The profits are shared in proportion to the capital contributed by each partner.
4. None of the above: If none of the above methods is applicable, then the profits are shared in the ratio that the partners agree upon.
Profit Sharing Ratio as per Partnership Act
According to the Partnership Act, if there is no agreement among the partners regarding the profit sharing ratio, then the profits are shared equally among the partners. This means that each partner will receive an equal share of the profits, irrespective of the capital contributed or the work done by each partner.
For example, if there are three partners in a firm and they have not agreed upon any profit sharing ratio, then each partner will receive one-third of the profits of the firm.
Conclusion
In conclusion, the profit sharing ratio in a partnership firm can be determined as per the partnership agreement, equally, in capital ratio, or as agreed upon by the partners. However, in the absence of any agreement, the profits are shared equally among the partners as per the provisions of the Partnership Act.
Chapter doubts & questions for Unit 1: Introduction to Partnership Accounts - Accounting for CA Foundation 2025 is part of CA Foundation exam preparation. The chapters have been prepared according to the CA Foundation exam syllabus. The Chapter doubts & questions, notes, tests & MCQs are made for CA Foundation 2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests here.
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