Table of Contents
PARTNERSHIP ACCOUNTS CLASS 12
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PARTNERSHIP BUSINESS is a business where two or more persons agree to carry on commercial activity to earn profits. From legal point of view, partnership firm is not a separate legal entity. In other words, it has no existence separate from its partners. It means that in case of bankruptcy of partnership firm, private estates of partners would be liable to meet the firm’s debts
•Charge Against Profit and Appropriation out of Profits
•Treatment of Interest on Loan
•Treatment of Rent
•Profit and Loss Appropriation Account MCQ’S
TREATMENT OF INTEREST ON LOAN
•Treated As a Charge against Profit.
•6% p.a. is provided incase of absence of partnership deed.
•As per Indian Partnership Act, 1932, Loan is repayable before payment of partner’s capital.
•Recorded in separate Loan Account having Credit balance.
•Recorded in Profit and Loss Account.
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PROFIT & LOSS APPROPRIATION ACCOUNT
•Profit and loss Appropriation account is an extension of Profit and Loss account. All the appropriations i.e. the distributions payable to the partners as per partnership deed are recorded in this account.
•This account is credited with the amount of net profit and debited with the amount of net loss.
FEATURES OF PROFIT AND LOSS APPROPRIATION ACCOUNT
•Prepared after preparing Profit and Loss Account.
•It is prepared for the appropriations or distributions among the partners.
•Not required as per the provisions of Income Tax Law.
•Prepared in accordance with the provisions of partnership deed.
•Reserves required for the future are created from this account.
•It is prepared by only partnership firms.
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FUNDAMENTALS OF PARTNERSHIP-II
1. Which of the following items are recorded in the Profit & Loss Appropriation Account of a partnership firm?
(A) Interest on Capital
(B) Salary to Partner
(C) Transfer to Reserve
(D) All of the above
answer:- d
2. Is rent paid to a partner appropriation of profits?
(A) It is appropriation of profit
(B) It is not appropriation of profit
(C) If partner’s contribution as capital is maximum
(D) If partner is a working partner.
answer:-b
3. According to Profit and Loss Account, the net profit for the year is ₹1,50,000. The total interest on partner’s capital is ₹18,000 and interest on partner’s drawings is ₹2,000. The net profit as per Profit and Loss Appropriation Account will be :
(A) ₹1,66,000
(B) ₹1,70,000
(C) ₹1,30,000
(D) ₹1,34,000
answer:- d
4. According to Profit and Loss Account, the net profit for the year is ₹4,20,000. Salary of a partner is ₹5,000 per month and the commission of another partner is ₹10,000. The interest on drawings of partners is ₹4,000. The net profit as per Profit and Loss Appropriation Account will be :
(A) ₹3,54,000
(B) ₹3,46,000
(C) ₹4,09,000
(D) ₹4,01,000
answer:-a
5. A and B are partners. According to Profit and Loss Account, the net profit for the year is ₹2,00,000. The total interest on partner’s drawings is ₹1,000. As salary is ₹40,000 per year and B’s salary is ₹3,000 per month. The net profit as per Profit and Loss Appropriation Account will be :
(A) ₹1,23,000
(B) ₹1,25,000
(C) ₹1,56,000
(D) ₹1,58,000
answer:-b
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6. According to Profit and Loss Account, the net profit for the year is ₹1,40,000. The total interest on partner’s capital is? 8,000 and a partner is to be allowed commission of ₹5,000. The total interest on partner’s drawings is ₹1,200. The net profit as per Profit and Loss Appropriation Account will be :
(A) ₹1,28,200
(B) ₹1,44,200
(C) ₹1,25,800
(D) ₹1,41,800
answer:-a
7. Sangeeta and Ankita are partners in a firm. Sangeeta’s capital is ₹70,000 and Ankita’s Capital is ₹50.000. Firm’s profit is ₹60,000. Ankita share in profit will be :
(A) ₹25,000
(B) ₹3 0,000
(C) ₹35,000
(D) ₹20,00
answer:-b
8. In the absence of a partnership deed, the allowable rate of interest on partner’s loan account will be :
(A) 6% Simple Interest
(B) 6% p.a. Simple Interest
(C) 12% Simple Interest
(D) 12% Compounded Annually
answer:-b
9. A and B are partners in partnership firm without any agreement. A has given a loan of ₹50,000 to the firm. At the end of year loss was incurred in the business. Following interest may be paid to A by the firm :
(A) @5% Per Annum
(B) @ 6% Per Annum
(C) @ 6% Per Month
(D) As there is a loss in the business, interest can’t be paid
answer:-b
10. Which one of the following items cannot be recorded in the profit and loss appropriation account?
(A) Interest on capital
(B) Interest on drawings
(C) Rent paid to partners
(D) Partner’s salary
answer:-c
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11. If any loan or advance is provided by partner then, balance of such Loan Account should be transferred to :
(A) B/S Assets side
(B) B/S Liability Side
(C) Partner’s Capital A/c
(D) Partner’s Current A/c
answer:-b
12. On 1st January 2019, a partner advanced a loan of ₹1,00,000 to the firm. In the absence of agreement, interest on loan on 31st March 2019 will be :
(A) Nil
(B) ₹1,500
(C) ₹3,000
(D) ₹6,000
answer:-b
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