CHAPTER- ACCOUNTING FOR PARTNERSHIP FIRMS- FUNDAMENTALS

Q.1 Assertion (A):

Bhaghat, a partner in the firm gave loan of Rs 5,00,000 to the firm without an agreement as to rate
of interest. At the year end, the remaining partners agreed to allow Interest on Loan by Bhaghat @
8% p.a.

Reason (R):

In the absence of Partnership Deed, provisions of the Partnership Act, 1932 apply. Thus, Interest on
Loan to Partner should be charged @ 6% p.a, and not @ 8% p.a.

In the context of above two statements, which of the following is correct?

(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of
Assertion (A).

(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of
Assertion (A)

(c) Assertion (A) is correct but the Reason (R) is not correct.

(d) Assertion (A) is not correct but the Reason (R) is correct.

Q.2 Assertion (A):

Interest charged on drawings is debited to Profit & Loss Appropriation Account.

Reason (R):

Interest on drawings is charged even if the Partnership Deed does not provide.

In the context of above two statements, which of the following is correct?

(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the correct explanation of
Assertion (A).

(b) Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)

(c) Assertion (A) is correct but the Reason (R) is not correct.

(d) Both Assertion (A) and Reason (R) are incorrect.

Q.3 Match the following items:

(i) Permanent Drawings (a) Credit side of Partner’s Current A/c

(ii) Partners Salary (b) Debit side of Partner’s Capital A/c
(iii) Fresh Capital Introduced (c) Debit side of Partner’s Current A/c
(iv) Interest on Drawings (d) Credit side of Partner’s Capital A/c
Choose the correct option-

(a) (i) b; (ii) a; (iii) d; (iv) c

(b) (i) a; (ii) b; (iii) c; (iv) d

(c) (i) d; (ii) c; (iii) a; (iv) b

(d) (i) c; (ii) d; (iii) b; (iv) a

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Q.4 If Interest on drawings is charged @8% p.a.

(i) Interest on Drawings Rs 8,800 (a) Withdrew Rs 20,000 in the beginning of

every month
(ii) Interest on Drawings Rs 10,400 (b) Withdrew Rs 20,000 every month
(iii) Interest on Drawings Rs 9,600 (c) Withdrew Rs 20,000 at the end of every
month
(iv) Interest on Drawings Rs 12,000 (d) Withdrew Rs 20,000 in the beginning of
every quarter
Choose the correct option:

(a) (i) c; (ii) a; (iii) b; (iv) d

(b) (i) a; (ii) b; (iii) d; (iv) c

(c) (i) d; (ii) a; (iii) b; (iv) c

(d) (i) b; (ii) c; (iii) a; (iv) d

Q.5 Mickey, Tom and Jerry were partners in the ratio of 5:3:2. On 31st March 2021, their books
reflected a net profit of Rs 2,10,000. As per the terms of the partnership deed they were entitled for
interest on capital which amounted to Rs 80,000, Rs 60,000 and Rs 40,000 respectively. Besides this a
salary of Rs 60,000 each was payable to Mickey and Tom.

Calculate the ratio in which the profits would be appropriated.

(a) 1:1 1

(b) 5:3:2

(c) 7:6:2

(d) 4:3:2

Q.6 Ajay is a partner in a firm. He withdrew Rs 2,000 per month on the last day of every month
during the year ended 31st March, 2021. If interest on drawings is charged @ 9% p.a. the interest
charged will be:

(a) Rs 990

(b) Rs 1,080

(c) Rs 1,170

(d) Rs 2,160

Q.7 P, Q and R sharing profits in the ratio of 2:1:1 have fixed capitals of Rs 4,00,000, Rs 3,00,000 and
Rs 2,00,000 respectively. After closing the accounts for the year ending 31st March, 2021 it was
discovered that interest on capitals was provided @ 6% instead of 8% p.a. In the adjusting entry:

(a) Cr. P Rs 1,000; Dr. Q Rs 1,500 and Cr. R Rs 500

(b) Dr. P Rs 500; Cr. Q Rs 1,500 and Dr. R Rs 1,000

(c) Cr. P Rs 500; Dr. Q Rs 1,500 and Cr. R Rs 1,000

(d) Dr. P Rs 1,000; Cr. Q Rs 1,500 and Dr. R Rs 500

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Q.8 X, Y and Z are partners in the ratio of 4:3:2. Salary to X Rs 15,000 and to Z Rs 3,000 omitted and
profits distributed. For rectification, now X will be credited:

(a) Rs 15,000

(b) Rs 1,000

(c) Rs 12,000

(d) Rs 7,000

Q.9 X. Y and Z are partners sharing profits in the ratio of 2: 1: 1. Their capitals as on 1st April, 2020
were Rs 1,00,000, Rs 60,000 and Rs 40,000 respectively. At the end of the year ending 31st March,
2021 it was found out that interest on capitals @6% p.a., salaries to X, Rs 1,000 per month and Z Rs
2,000 per month were not adjusted from the profits. In the adjusting entry to be made in the next
year:

(a) Dr. X Rs 6,000; Dr. Y Rs 8,400 and Cr. Z Rs 14,400

(b) Cr. X Rs 6,000; Cr. Y Rs 8,400 and Dr. Z Rs 14,400

(c) Dr. X Rs 500; Dr. Y Rs 150 and Cr. Z Rs 650

(d) Cr. X Rs 500; Cr. Y Rs 150 and Dr. Z Rs 650

Q.10 Kaveri, Tapti and Krishna are partners. On 31st March, 2021 their Capitals were Rs 6,00,000, Rs
4,00,000 and Rs 2,00,000 respectively after making adjustments for profits and drawings. Drawings
of the partners were Rs 50,000, Rs 40,000 and Rs 30,000 respectively. Profit for the year ended 31st
March, 2021 was Rs 2,40,000.

Subsequently it was discovered that interest on Capital @ 10% p.a. has been omitted. Interest on
Capital will be:

(a) Kaveri Rs 63,000; Tapti Rs 44,000; Krishna Rs 25,000

(b) Kaveri Rs 60,000; Tapti Rs 40,000; Krishna Rs 20,000

(c) Kaveri Rs 57,000; Tapti Rs 36,000; Krishna Rs 15,000

(d) Kaveri Rs 47,000; Tapti Rs 28,000; Krishna Rs 9,000

Case Based MCQs:

A, B and C are in partnership. On 1st April, 2020 their capitals were : A Rs 10,00,000 (Credit), B Rs
6,00,000 (Credit) and C Rs 1,00,000 (Debit). As per partnership deed interest on capital is to be
allowed @ 8% p.a. and interest on drawings is to be charged @ 10% p.a.

You find that:

(i) On 1st January, 2021, A withdrew Rs 1,50,000 against Capital;

(ii) B withdrew Rs 10,000 p.m. during the year.

(iii) C withdrew Rs 1,20,000 during the year.

The profit for the year ended 31st March, 2021 amounted to Rs 5,63,000

You are required to answer the following questions:

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Q.11 Interest on A’s Drawings will amount to:

(a) Rs 15,000

(b) Rs 3,750

(c) Rs Nil

(d) Rs 3,000

Q.12 Interest on A’s Capital will amount to:

(a) Rs 80,000

(b) Rs 77,000

(c) Rs 68,000

(d) Rs 74,000

Q.13 Each Partner’s share of profit will be:

(a) Rs 1,50,000

(b) Rs 1,51,250

(c) Rs 1,49,000

(d) Rs 1,54,000

Q.14 Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason
(R):

Assertion (A):

Salary allowed to a partner is shown in Profit and Loss Appropriation A/c.

Reason (R):

Salary is allowed to a partner only when there is a provision for the same in the partnership deed.

In the context of the above statements, which of the following is correct?

(a) (A) is correct, but (R) is incorrect.

(b) Both (A) and (R) are correct.

(c) (A) is incorrect, but (R) is correct.

(d) Both (A) and (R) are incorrect

Q.15 P, Q and R are partners with capitals of Rs 3,00,000; Rs 4,00,000 and Rs 5,00,000 respectively.
As per partnership deed interest on capital is to be allowed 5% p.a. and A is also allowed a quarterly
salary of Rs 40,000. Net profit for the year amounted to Rs 2,50,000. Balance of profit will be
distributed among them equally.

Reason (R):

Distributable profit for the year is sufficient to allow all appropriations. Hence, balance of profit will
be distributed among them equally.

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In the context of the above two statements, which of the following is correct?

Codes:

(a) Both (A) and (R) are correct and (R) is the correct reason of (A).

(b) Both (A) and (R) are correct but (R) is not the correct reason of (A).

(c) Only (A) is correct.

(d) Both (A) and (R) are wrong.

Q.16 Esha, Kavya and Ruchi were partners sharing profits in the ratio of 2:2:1. Esha withdrew Rs
5,000 every month and Kavya withdrew Rs 7,500 every month. Interest on drawings @ 6% p.a. was
charged, whereas the partnership deed was silent about interest on drawings.

In the adjustment entry:

(a) Cr. Kavya Rs 1,800 and Dr. Ruchi Rs 1,800

(b) Dr. Kavya Rs 1,800 and Cr. Ruchi Rs 1,800

(c) Cr. Kavya Rs 900 and Dr. Ruchi Rs 900

(d) Dr. Kavya Rs 900 and Cr. Ruchi Rs 900

Q.17 On 1st April, 2020 the Capitals of Monika and Shreya were Rs 4,00,000 and Rs 2,00,000
respectively. They divided profits in the ratio of 3:2. Profits for the year ended 31st March, 2021 were
Rs 3,00,000 which have been duly distributed among the partners, but the following transactions
were not passed through the books:

(i) Interest on Capitals @ 8% p.a.

(ii) Interest on Drawings of Monika Rs 8,000

(iii) Monika is to be paid a salary of Rs 15,000 per quarter

In the adjustment entry:

(a) Cr. Monika Rs 24,000 and Dr. Shreya Rs 24,000

(b) Dr. Monika Rs 24,000 and Cr. Shreya Rs 24,000

(c) Cr. Monika Rs 6,000 and Dr. Shreya Rs 6,000

(d) Dr. Monika Rs 6,000 and Cr. Shreya Rs 6,000

Q.18 P, Q and R are partners in 3:2:1. R is guaranteed that his share of profit will not be less than Rs
Rs 70,000. Any deficiency will be borne by P and Q in the ratio of 2:1. Firms profit was Rs 2,40,000.
Share of P will be:

(a) Rs 1,00,000

(b) Rs 1,10,000

(c) Rs 1,20,000

(d) Rs 1,02,000

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Q.19 X, Y and Z are partners in the ratio of 5:4:3. X has given to Z a guarantee of minimum Rs 10,000
profit. For the year ending 31st March, 2021, firms profit is Rs 28,800. X’s share in profit will be:

(a) Rs 9,200

(b) Rs 9,600

(c) Rs 7,200

(d) Rs 12,000

Q.20 Vidit and Seema were partners in a firm sharing profits and losses in the ratio of 3:2. Their
capitals were Rs 1,20,000 and Rs 2,40,000, respectively. They were entitled to interest on capitals @
10% p.a. The firm earned a profit of Rs 18,000 during the year. The interest on Vidit’s Capital will be:

(a) Rs 12,000

(b) Rs 10,800

(c) Rs 7,200

(d) Rs 6,000

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Answer Keys

Ans.1 (c) Assertion (A) is correct but the Reason (R) is not correct.

Ans.2 (d) Both Assertion (A) and Reason (R) are incorrect.

Ans.3 (a) (i) b; (ii) a; (iii) d; (iv) c

Ans.4 (a) (i) c; (ii) a; (iii) b; (iv) d

Ans. 5 (c) 7:6:2

Ans.6 (a) Rs 990

Ans.7 (d) Dr. P Rs 1,000; Cr. Q Rs 1,500 and Dr. R Rs 500

Ans.8 (d) Rs 7,000

Ans.9 (a) Dr. X Rs 6,000; Dr. Y Rs 8,400 and Cr. Z Rs 14,400

Ans.10 (c) Kaveri Rs 57,000; Tapti Rs 36,000; Krishna Rs 15,000

Ans.11 (c) Rs Nil

Ans.12 (b) Rs 77,000

Ans.13 (a) Rs 1,50,000

Ans.14 (b) Both (A) and (R) are correct.

Ans.15 (a) Both (A) and (R) are correct and (R) is the correct reason of (A).

Ans.16 (c) Cr. Kavya Rs 900 and Dr. Ruchi Rs 900

Ans.17 (a) Cr. Monika Rs 24,000 and Dr. Shreya Rs 24,000

Ans.18 (a) Rs 1,00,000

Ans.19 (a) Rs 9,200

Ans.20 (d) Rs 6,000