Below are listed Content of partnership Deed except:
Interest paid on debentures is a charge against the profit. Partnership Deed is mainly concerned with the appropriations and some charge. Main contents of partnership deed are interest on capital, interest on drawings, name of the firm, partners, their names and address etc.
What is the status of partnership from an accounting viewpoint
There are two main views. One is from the accounting point of view, according to that, status of partnership is different i.e. it has a separate business entity. From the point of view of law, it has no separate business entity. Partners and firm are one.
The members of the partnership firm are called
Members of the firm are called partners. Proprietor word is mainly used in case of sole proprietorship. But in case of partnership persons join hands together to run a business are called partners. They contribute capitals individually and responsible for all profits or losses.
From the following, what is important for a partnership?
Sharing of profits is must for a partnership business. Profits earned by a partnership firm should be divided amongst partners in the agreed profit sharing ratio. If profit sharing ratio is not mentioned in the partnership deed or partnership deed is silent on the distribution of profits, in such a case profits will be shared equally.
From the following, identify a situation when fixed capitals of the partners may change?
Fixed capitals of the partners will remain fixed but there are two situations when fixed capitals of the partners may change:
1. When additional capital is introduced by the partners
2. When capital is withdrawn permanently under an agreement.
When liabilities of partners are unlimited that implies
Mostly, the liability of the partners of a firm is unlimited. Their personal properties can be disposed off to pay the debts of the firm if required. The creditors can claim their dues from any one of the partner or from all of them, meaning partners are liable:
Mutual Agency implies:
The business of partnership can be carried on by all the partners or any one of them acting for all. Thus, every partner is principal as well as agent of other partners and of the firm. Thus,
(i) Each partner is liable for acts performed by other partners,
(ii) Each partner can bind other partners and the firm by his acts done in the ordinary course of business.
Partners have decided to provide jobs to the women of economically backward society. What values can be depicted from the decision of partners.
The partners has taken a decision to provide employment to the women of economically backward section of the society. By this decision, partners are communicating the valued to the society i.e. financial security to the weaker section of society and social responsibility.
If the partnership agreement is silent as to Interest on capital
When rate of interest on capital is not mentioned in partnership deed, partners cannot claim for interest on capital. Interest on capital will be allowed to the partners only if rate of interest is mentioned in the partnership deed.
Money withdrawn by a partner on 1st July Rs. 20,000 and interest on drawings is fixed @ 6% (Books are closed on 31st March.) The amount of interest will be Rupees:
Correct Answer :- A
Explanation : Loan interest to be provided @ 6% p.a.
Loan Amount = ₹ 20,000
Time (from 1st July to 31st March) = 9 months
A’s loan interest = 20,000 * 6/100 * 9/12
A and B are partners sharing profit and losses in the ratio of 3:5. On 1st July, 2012 A and B advanced loan to the business of ?40,000 and ?20,000 respectively at the agreed @ 5% p.a. Calculate Interest on loan. When accounting books are closed on 31st December every year and partnership deed allows interest on loan to the partners.
Calculation of Interest on loan:
Interest on A’s Loan = 40,000 × 5/100 × 6/12 = 1,000
Interest on B’s Loan = 20,000 × 5/100 × 6/12 = 500
Revaluation A/c is prepared to find out the profit or loss on :
A Revaluation Account is prepared in order to ascertain net gain or loss on revaluation of assets and liabilities and bringing unrecorded items into books. The Revaluation profit or loss is transferred to the capital account of all partners including retiring or deceased partners in their old profit sharing ratio.
Rent paid to a partner comes under:
Rent paid to a partner is a charge against the profit. It means it will reduce the profit. That’s why it is shown in Profit and Loss Account instead of Profit and Loss Appropriation Account.
When a partner withdraws Rs. 4000 at the beginning of each quarter, the interest on his drawings @ 6% p.a. will be Rs.:
Correct Answer :- d
Explanation : If a fixed amount is withdrawn on the first day of every quarter, then the interest is calculated on the amount withdrawn for a period of seven and half months.
Total drawings made by the partner during the whole year is 4000 * 4 = 16000
Interest on drawings = 16000 * 6/100 * 7.5/12
Interest on capital to be given to X & Y when Profits shown by P/L A/C Rs. 1500 and capitals invested by X & Y are Rs. 30,000 and 20,000 (rate of interest is 10% p.a.).
Interest due to X and Y is ?3,000 and ?2,000 (total Rs.5,000) but profit is only ?1,500. In this case Ratio of appropriation will be 3 : 2 (3,000 : 2,000). Now divide profit ?1,500 in Ratio of appropriation i.e. 3:2.
Salary paid to the manager will be shown in:
Salary paid to manager is a charge against the profit. It means this transaction will reduce the profit of the firm. All charge items are shown in profit and loss account only. That’s why salary paid to manager is shown in profit and loss account.
Salary paid to a partner will be shown in:
Salary paid to partner is an appropriation of profit. All appropriation items are shown in the Profit and loss appropriation account.
If ?3,000 withdrawn by a partner on the first day of every quarter, interest on drawings will be calculated for:
When a partner draws a fixed amount in the beginning of each quarter for his personal use then average period will be calculated as : Time after first drawing 12 months + Time after last drawing 3 months, and average period will be = 15/2 = 7.5.
Under fluctuating Capital method how many accounts of each partner is maintained
When accounts are prepared under fluctuating capital method, only one account is prepared for the partners i.e. partners capital account. All items related to partners i.e. capital, interest on capital, interest on drawings, salary, commission etc. are shown in partners capital account.
If dates of the withdrawal of drawings are not given then interest on drawings should be charged