Chapter MCQ Test 2 — Accounting for Partnership: Fundamentals
10 Questions • 12 min • Chapter MCQ
12:00
Question 1 of 10
A and B contributed capitals of 3,00,000 and 1,00,000 with no deed. The firm earned 80,000. A claims profit in the capital ratio 3:1. He is:
Wrong — without a deed profit is shared equally (40,000 each)
Right — 60,000 and 20,000
Right — capital ratio always applies
Wrong — B gets all
Explanation: In the absence of a deed the Act overrides capital — profits are equal, so 40,000 each.
Question 2 of 10
A partner's loan of 2,00,000 (deed silent on interest) in a year the firm made a LOSS. The interest:
Is still allowed at 6% as a charge
Is not allowed in a loss
Is 12%
Is an appropriation
Explanation: Interest on a partner's loan is a charge against profit and is allowed even when the firm makes a loss.
Question 3 of 10
Net profit before appropriations is 50,000. Interest on capital due is 40,000 and salary due is 30,000 (total 70,000, deed says these are appropriations). They are allowed:
In the ratio 40:30, limited to the 50,000 available
In full, creating a loss
Equally
Not at all
Explanation: When profit is insufficient and items are appropriations, they are distributed in the ratio of amounts due (4:3) up to the available profit.
Question 4 of 10
A draws 12,000 at the END of every quarter; interest on drawings 10% p.a. Using the product method the average period is:
4.5 months
6 months
7.5 months
3 months
Explanation: Quarter-end drawings stay 9,6,3,0 months → average (9+6+3+0)/4 = 4.5 months.
Question 5 of 10
Under the FIXED capital method, in which account is a partner's share of profit recorded?
Current Account
Capital Account
Realisation Account
Bank Account
Explanation: Only capital introduced/withdrawn touches the fixed Capital Account; profit goes to the Current Account.
Question 6 of 10
A guarantee that a partner's share will be at least 25,000 is met by net profit 60,000 shared equally between A, B, C, with C guaranteed. C's actual share and the deficiency are:
C's 20,000, deficiency 5,000 borne by A and B
C's 25,000, no deficiency
C's 30,000
C gets nothing
Explanation: Equal share = 20,000; the 5,000 shortfall to reach the 25,000 guarantee is borne by the other partners.
Question 7 of 10
Why is interest on capital NOT allowed in a year of loss (when it is an appropriation)?
Appropriations are made only out of available profit
It is illegal
Capital earns no interest ever
The deed forbids it
Explanation: Being an appropriation, interest on capital can only be provided if there is profit to distribute.
Question 8 of 10
A partner is entitled to a commission of 10% of net profit AFTER charging such commission. If profit before commission is 1,10,000, the commission is:
Rs 10,000
Rs 11,000
Rs 9,900
Rs 12,000
Explanation: Commission = 1,10,000 × 10/110 = 10,000 (so profit after = 1,00,000, 10% of which is 10,000).
Question 9 of 10
The fluctuating capital method differs from the fixed method in that the capital balance:
Changes every year as all items pass through it
Never changes
Is always nil
Is shown as a loan
Explanation: With a single account, profit, interest, salary and drawings all alter the balance each year.
Question 10 of 10
Drawings: 20,000 on 1 April and 20,000 on 1 October (year ends 31 March); interest 12% p.a. By the product method the interest is:
Rs 3,600
Rs 4,800
Rs 2,400
Rs 1,800
Explanation: Products: 20,000×12 + 20,000×6 = 2,40,000+1,20,000 = 3,60,000; interest = 3,60,000×12%×1/12 = 3,600.