Accounting for Partnership Firms

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Accounting for Partnership Firms — solved practice questions

8 Class 12 Accountancy questions with step-by-step solutions. Attempt each, then reveal the answer.

1. Q1easy

   In the absence of a partnership deed, at what rate is interest allowed on a loan advanced by a partner to the firm?

   • A6% per annum
   • B8% per annum
   • C10% per annum
   • D12% per annum
   Show answer & solution

   Correct answer: (A) 6% per annum

   As per the Indian Partnership Act 1932, when the deed is silent, a partner is entitled to interest on loan given to the firm at 6% per annum.

2. Q2easy

   In the absence of a partnership deed, how are the profits and losses of the firm shared among partners?

   • AIn the ratio of their capitals
   • BEqually
   • CIn the ratio of time devoted
   • DAs decided by the senior partner
   Show answer & solution

   Correct answer: (B) Equally

   When there is no partnership deed, profits and losses are shared equally by all partners irrespective of their capital contributions.

3. Q3medium

   A partner withdrew Rs 10,000 at the beginning of each quarter during the year. Interest on drawings is charged at 8% per annum. The interest on drawings for the year is:

   • ARs 1,200
   • BRs 2,000
   • CRs 2,400
   • DRs 1,600
   Show answer & solution

   Correct answer: (B) Rs 2,000

   Total drawings Rs 40,000; average period for drawings at the beginning of each quarter is 7.5 months, so interest = 40,000 x 8% x 7.5/12 = Rs 2,000.

4. Q4medium

   A firm's profits for the last four years were Rs 40,000, Rs 50,000, Rs 60,000 and Rs 90,000. Goodwill is to be valued at 2 years' purchase of the average profit. The value of goodwill is:

   • ARs 60,000
   • BRs 1,80,000
   • CRs 2,40,000
   • DRs 1,20,000
   Show answer & solution

   Correct answer: (D) Rs 1,20,000

   Average profit = (40,000 + 50,000 + 60,000 + 90,000)/4 = Rs 60,000; Goodwill = 60,000 x 2 = Rs 1,20,000.

5. Q5medium

   Capital employed is Rs 5,00,000, the normal rate of return is 10% and the average profit is Rs 90,000. Goodwill is valued at 3 years' purchase of super profit. The value of goodwill is:

   • ARs 90,000
   • BRs 1,50,000
   • CRs 1,20,000
   • DRs 40,000
   Show answer & solution

   Correct answer: (C) Rs 1,20,000

   Normal profit = 5,00,000 x 10% = Rs 50,000; Super profit = 90,000 - 50,000 = Rs 40,000; Goodwill = 40,000 x 3 = Rs 1,20,000.

6. Q6hard

   Average profit is Rs 90,000, the normal rate of return is 10% and the net assets (capital employed) are Rs 5,00,000. Under the capitalisation of average profit method, goodwill is:

   • ARs 4,00,000
   • BRs 9,00,000
   • CRs 5,00,000
   • DRs 40,000
   Show answer & solution

   Correct answer: (A) Rs 4,00,000

   Capitalised value = 90,000 x 100/10 = Rs 9,00,000; Goodwill = Capitalised value - Net assets = 9,00,000 - 5,00,000 = Rs 4,00,000.

7. Q7medium

   X and Y are partners sharing profits in the ratio 3:2. Z is admitted for a 1/5 share, which he acquires from X and Y in their old ratio. The new profit-sharing ratio of X, Y and Z is:

   • A3:2:1
   • B2:2:1
   • C9:6:5
   • D12:8:5
   Show answer & solution

   Correct answer: (D) 12:8:5

   Z takes 1/5 in old ratio, so X and Y continue to share the remaining 4/5 as 3:2. New shares: X = 12/25, Y = 8/25, Z = 5/25, i.e., 12:8:5.

8. Q8medium

   A, B and C are partners sharing profits in the ratio 3:2:1. C retires and A and B decide to continue sharing future profits in their old ratio. The gaining ratio of A and B is:

   • A1:1
   • B2:1
   • C3:2
   • D3:1
   Show answer & solution

   Correct answer: (C) 3:2

   When the continuing partners share future profits in their old ratio, the gaining ratio equals the old ratio between them, i.e., 3:2.

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