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All Free Accounting MCQs with Answers

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1,971 questions · page 99 of 99

1961. A partner's fluctuating capital account has an opening balance of Rs. 100,000. During the year, he brings in Rs. 20,000, withdraws Rs. 15,000, receives Rs. 30,000 as profit share, and is credited with Rs. 5,000 interest on capital. What is the closing balance?

  • A. Rs. 125,000
  • B. Rs. 135,000
  • C. Rs. 140,000
  • D. Rs. 150,000

Explanation: The closing capital is calculated as 100,000 plus 20,000 minus 15,000 plus 30,000 plus 5,000. The resulting balance is Rs.

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Correct answer: Rs. 150,000

1962. A firm pays Rs. 5,000 in cash as expenses incurred during dissolution. Which journal entry is correct?

  • A. Cash Account Dr. 5,000; Realisation Account Cr. 5,000
  • B. Realisation Account Dr. 5,000; Cash Account Cr. 5,000
  • C. Partners' Capital Accounts Dr.; Cash Account Cr.
  • D. Realisation Account Dr.; Partners' Capital Accounts Cr.

Explanation: Dissolution expenses are losses connected with realisation, so the Realisation Account is debited.

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Correct answer: Realisation Account Dr. 5,000; Cash Account Cr. 5,000

1963. During dissolution, an asset with a book value of Rs. 70,000 is taken over by a partner at an agreed value of Rs. 60,000. Which entry records the transfer?

  • A. Partner's Capital Account Dr. 60,000; Realisation Account Cr. 60,000
  • B. Realisation Account Dr. 60,000; Partner's Capital Account Cr. 60,000
  • C. Cash Account Dr. 60,000; Realisation Account Cr. 60,000
  • D. Partner's Capital Account Dr. 70,000; Asset Account Cr. 70,000

Explanation: When a partner takes over an asset, the partner's capital account is debited at the agreed value.

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Correct answer: Partner's Capital Account Dr. 60,000; Realisation Account Cr. 60,000

1964. A and B share profits in the ratio of 3:2. On retirement of B, the firm records a loss on revaluation of Rs. 25,000. What amount is debited to B's capital account?

  • A. Rs. 5,000
  • B. Rs. 10,000
  • C. Rs. 15,000
  • D. Rs. 25,000

Explanation: A revaluation loss is borne by the partners in their old profit-sharing ratio. B's share is two-fifths of Rs. 25,000, equal to Rs. 10,000.

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Correct answer: Rs. 10,000

1965. A, B and C share profits in the ratio of 3:2:1. C dies four months after the beginning of the year. The previous year's profit was Rs. 180,000, and profit is assumed to accrue evenly. What amount is credited to C's account for the period before death?

  • A. Rs. 5,000
  • B. Rs. 10,000
  • C. Rs. 15,000
  • D. Rs. 30,000

Explanation: C's annual share is one-sixth of Rs. 180,000, or Rs. 30,000. For four months, the credited amount is one-third of that annual share, equal…

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Correct answer: Rs. 10,000

1966. A, B and C have capital balances of Rs. 60,000, Rs. 40,000 and Rs. 20,000 respectively. C becomes insolvent and leaves a deficiency of Rs. 30,000. Under the Garner v. Murray principle, how much of this deficiency is borne by A?

  • A. Rs. 10,000
  • B. Rs. 12,000
  • C. Rs. 18,000
  • D. Rs. 20,000

Explanation: The solvent partners bear the insolvent partner's deficiency in the ratio of their capitals.

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Correct answer: Rs. 18,000

1967. When a partner withdraws cash for personal use from a firm with fluctuating capital accounts, which account is normally debited?

  • A. Cash Account
  • B. Drawings Account
  • C. Partner's Capital Account
  • D. Profit and Loss Account

Explanation: Under the fluctuating capital method, drawings are recorded directly in the partner's capital account by a debit.

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Correct answer: Partner's Capital Account

1968. When an existing asset is increased in value during the admission of a partner, which account is credited for the increase?

  • A. Revaluation Account
  • B. New Partner’s Capital Account
  • C. Old Partners’ Capital Accounts
  • D. Cash Account

Explanation: An increase in an asset is recorded by debiting the asset account and crediting the Revaluation Account.

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Correct answer: Revaluation Account

1969. If a partnership agreement is silent about interest on drawings, what treatment generally applies under the Partnership Act?

  • A. Interest is charged at 6% per year
  • B. Interest is charged at the firm’s lending rate
  • C. No interest is charged on drawings
  • D. Interest is fixed by the managing partner

Explanation: Interest on drawings is charged only when the partnership agreement provides for it.

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Correct answer: No interest is charged on drawings

1970. A new partner brings Rs. 80,000 in cash as capital on admission. Which journal entry records this contribution?

  • A. New Partner’s Capital Account Dr, Cash Account Cr
  • B. Cash Account Dr, New Partner’s Capital Account Cr
  • C. Revaluation Account Dr, Cash Account Cr
  • D. Cash Account Dr, Revaluation Account Cr

Explanation: The firm receives cash, so the Cash Account is debited. The partner’s capital increases by the same amount, so the New Partner’s Capital…

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Correct answer: Cash Account Dr, New Partner’s Capital Account Cr

1971. A memorandum revaluation account is used when partners do not want to change the book values of assets and liabilities. In the second part of this account, any reversal profit or loss is transferred among which partners?

  • A. Old partners in their old ratio
  • B. All partners in their new ratio
  • C. Old partners in their new ratio
  • D. The incoming partner alone

Explanation: The first part records the original revaluation result for the old partners, while the second part reverses it.

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Correct answer: All partners in their new ratio
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