Test: Introduction To Partnership Accounts - 2 - Commerce MCQ

When the dates of drawings are not specified, interest is calculated on the total amount for an average period of 6 months.

• Ram:

  Interest = Rs. 6,000 × 6% × 6/12 = Rs. 180

• Mohan:

  Interest = Rs. 4,000 × 6% × 6/12 = Rs. 120

The total interest calculated for Ram is Rs. 180 and for Mohan is Rs. 120.

Correct Answer: Option A

Explanation : C salary = 2000 × 12

= 24000

profit after giving c salary= 339000-24000=315000

commission= (315000×5)÷105

= 15000

total salary of c = 24000 + 15000

= 39000

Interest on Drawings Calculation
This calculation uses the formula: Interest = Amount × Rate × (Time/12), where the Rate is 6% per annum.

Here's the breakdown of the interest calculations for each drawing:

• July 1 Drawings (Rs. 200) - Outstanding for 9 months: Interest = 200 x 6% x 9/12 = Rs. 9
• August 1 Drawings (Rs. 200) - Outstanding for 8 months: Interest = 200 x 6% x 8/12 = Rs. 8
• September 1 Drawings (Rs. 300) - Outstanding for 7 months: Interest = 300 x 6% x 7/12 = Rs. 10.50
• November 1 Drawings (Rs. 50) - Outstanding for 5 months: Interest = 50 x 6% x 5/12 = Rs. 1.25
• February 1 Drawings (Rs. 100) - Outstanding for 2 months: Interest = 100 x 6% x 2/12 = Rs. 1

Total Interest: Rs. 29.75

The profit or loss from revaluation is shared among the old partners in their old profit-sharing ratio. This is because the revaluation reflects adjustments to the value of assets and liabilities before any new partner joins. Therefore, it's fair to allocate any gains or losses based on the original agreement among the existing partners.

Subject to the contract between the partners, interest on capital is paid only from profits. If the net profit is less than the interest on capital, the profit is distributed in the capital ratio of partners.

Interest on Drawings Calculation

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

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:

• Considered an appropriation of profits in partnership accounts.
• Not treated as an expense; it is a distribution of profit to partners.
• Calculated based on the agreed percentage and capital balance.

Partners pay interest on drawings only when certain conditions are met. These include:

• An agreement between the partners.
• Consent is given, as mentioned in both options (a) and (c).

Thus, partners are required to pay interest only when it is agreed upon by the partners themselves. 

A partnership deed is a written legal document to avoid unnecessary misunderstanding, harassment and unpleasantness among the partners in the event of any dispute.

Partners can make or insert clauses in their partnership deed.

In case if partner does not make agreement or deed, then partners are entitled for interest on loans and advances and their profit sharing ratio will be equal. They are not entitled for salary and commission.

A partnership deed is a written legal document to avoid unnecessary misunderstanding, harassment and unpleasantness among the partners in the event of any dispute.

Partners can make or insert clauses in their partnership deed.

In case if partner does not make agreement or deed, then partners are entitled for interest on loans and advances and their profit sharing ratio will be equal. They are not entitled for salary and commission.

The balance of a Partner's Current Account can vary:

• It may have a debit balance if withdrawals exceed contributions.
• It may have a credit balance if contributions exceed withdrawals.
• Therefore, it can be either 'debit' or 'credit' depending on the transactions.

When equal monthly amounts are drawn at the beginning of each month, the average time considered for calculating interest is typically 6.5 months. This is because:

• Drawings are made at the start, increasing the time money is used.
• The average time for these drawings is slightly more than halfway through the year.
• This results in an adjusted time frame of 6.5 months.

The features of a partnership firm are as follows:

• Two or more persons are involved in running a common business based on an agreement.

• They share profits and losses in a fixed ratio.

• The business is carried out by all partners, or any one of them, acting on behalf of all.

• Therefore, the correct answer is Option D. 

• To close the Partner's Drawings Account, you can transfer it to the Capital or Current Account on the debit side.

• Therefore, the correct answer is Option A.