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Following are the essential elements of a partnership firm except:
The essential elements of partnership firm are at least two persons, there is an agreement between all partners and partnership agreement is for some business. But its not necessary to that the partners have equal share of profits. They may have any profit sharing ratio as agreed or in the deed.
The relationship between persons who have agreed to share the profit of a business carried on by all or any of them acting for all is known as________.
It is a definition given by Partnership act 1932 in sec 4
It contains 3 three parameters
2) sharing of profit and losses
3) carried on by all any of them acting for all means mutual agency
above three things required to form a partnership.
Every partner is bound to attend diligently to his ______ in the conduct of the business.
Every partner is bound to attend diligently to his duties in the conduct of the business. Every partner is an agent of the partnership firm. The business in the partnership firm can be carred on by all the partners or any one of them acting for all.
‘Salary Rs. 5,000 paid to partner’ The above item will appear in _________.
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.
nterest on drawings is treated as:
Interest on drawing is treated as revenue for the firm because interest is paid by the proprietor for withdrawal from the business and it will became revenue for the firm.
Three partners A , B , C start a business . B's Capital is four times C's capital and twice A's capital is equal to thrice B's capital . If the total profit is Rs 16500 at the end of a year ,Find out B's share in it.
Suppose C's capital = x then
B's capital = 4x (Since B's Capital is four times C's capital)
A's capital = 6x ( Since twice A's capital is equal to thrice B's capital)
A:B:C =6 x : 4x : x
= 6 : 4 : 1
B's share = 16500 * (4/11) = 1500*4 = 6000
What would be the profit sharing ratio if the partnership act is complied with?
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.
Is rent paid to a partner is appropriation of profits?
The amount of rent would be seen as this partner's capital contribution instead of needing it paid from the venture.
Insurance Premium paid by the firm on the life Insurance policy of a partner is
When the partners decide to treat the premium on Joint Life Policy as an expense, then they debit the Premium A/c to the Profit and Loss A/c every year to close it. In this situation, the full amount of policy received from the Insurance Company becomes a gain.
Following are the differences between Capital Account and Current Account except:
The correct option is Option A.
Fixed capital system of accounting states that the capital of partners will remain the same as in the beginning.
To record any entry related to capital introduction or withdrawal, partners' capital account is prepared and to record any appropriation in the profit like interest on drawing, capital and salaries of partners, partners' current account is prepared so that there is no change in capitals of partners.
The account is debited with capital withdrawn, drawings, interest on drawings and share of loss of the partner. As a result, the balance in this account goes on fluctuating periodically. Under this method, the partner's capital account may show either credit balance or debit balance.
Which Section of the Partnership Act defines partnership as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all?
Section 4 of the Indian Partnership Act, 1932 defines partnership as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.
In the absence of partnership deed profit sharing ratio will be:
When there is no partnership deed or partnership deed is prepared but it is silent on profit sharing ratio, in such a case rules of Partnership Act, 1932 will be applicable. According to which, profits or losses will be shared by the partners equally irrespective of their capitals.
It is better to have the agreement in writing to avoid any ___
Partnership deed plays important role in regulating the duties and responsibilities of each partner. A written partnership deed is useful to resolve disputes and misunderstanding among partners because every thing is in written form.
Partnership is established by ___________
The beginning of partnership is always because of an agreement. There should be an agreement among the partners to start a partnership business. Agreement can be written or oral that does not matter.
The persons who have entered into a partnership business with one another are individually called
A person who joins a partnership business, individually called a partner. The group of partners is called Firm and the name under which all business activities going on is known as firm’s name
Indian Partnership Act year is
In India, Partnership Act, 1932 is followed by all the partnership firms. Specially in the absence of partnership deed, all provisions of Partnership Act, 1932 will be applicable.
If partners are running a business without a partnership deed how much interest on their capitals will be given?
Partners are entitled to interest on capital only if rate of interest is mentioned in the partnership deed. But in this case business is continued without partnership deed. As per the Partnership Act, 1932, partners are enttiled to interest on capital only when there is partnership deed and rate of interest is mentioned in it.
Partners collectively are called:
A person who joins a partnership business, individually called a partner. The group of partners is called Firm and the name under which all business activities going on is known as firm’s name.
Which of the following is not a content of partnership deed?
Interest on bank loan will be fixed by the bank and not by the partners or partnership deed. A partnership deed can show only those contents which are concerned with partners or firm. Interest on bank loan is a charge against the profit. It means it will be paid in all conditions whether there is profit or loss in the business.
Registration of partnership firm is _________
Registration of a partnership firm is optional. It means there is no need for the registration of a partnership firm. As per the Partnership Act, 1932, it is an option for a partnership firm to get registered or not. But it is always advisable to get registered.
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.
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, 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.
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.
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.
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
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.
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 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.
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
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.
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.
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:
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.
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:
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
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.
When a partner withdraws Rs. 4000 at the beginning of each quarter, the interest on his drawings @ 6% p.a. will be Rs.:
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
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.
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.