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Free Partnership Accounts MCQs with Answers

34 Partnership Accounts MCQs from Accounting, each with the correct answer and a written explanation of why it is correct. Free and unlimited, with no account needed.

Partnership accounts cover the partnership agreement, capital and current accounts, profit and loss appropriation, salaries, interest on capital, interest on drawings and profit-sharing ratios. They also address changes in partnership, including admission, retirement, goodwill, revaluation, dissolution and the settlement of partners’ balances.

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34 questions · page 2 of 2

21. If a partnership agreement does not specify the profit-sharing ratio, how are profits normally divided among the partners?

  • A. Equally among all partners
  • B. According to their salary allowances
  • C. According to their capital contributions
  • D. According to their drawings

Explanation: In the absence of an agreement, the usual legal rule is that partners share profits equally.

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Correct answer: Equally among all partners

22. A firm's average profit is Rs. 80,000 and its normal profit is Rs. 60,000. If goodwill is valued at three years' purchase of super profit, what is its value?

  • A. Rs. 60,000
  • B. Rs. 80,000
  • C. Rs. 140,000
  • D. Rs. 180,000

Explanation: Super profit is Rs. 20,000, calculated as average profit minus normal profit. Goodwill is therefore Rs.

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Correct answer: Rs. 60,000

23. On the admission of a partner, an existing General Reserve of Rs. 90,000 is transferred to the old partners. A and B share profits in the ratio of 2:1. What amount is credited to B?

  • A. Rs. 20,000
  • B. Rs. 30,000
  • C. Rs. 45,000
  • D. Rs. 60,000

Explanation: An existing reserve belongs to the old partners and is distributed in their old profit-sharing ratio. B receives one-third of Rs.

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Correct answer: Rs. 30,000

24. 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. 150,000
  • D. Rs. 140,000

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

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

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

26. 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. Realisation Account Dr. 60,000; Partner's Capital Account Cr. 60,000
  • B. Partner's Capital Account Dr. 60,000; Realisation 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

27. 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. 15,000
  • C. Rs. 10,000
  • 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

28. 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. 30,000
  • C. Rs. 15,000
  • D. Rs. 10,000

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

29. 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. 18,000
  • B. Rs. 12,000
  • C. Rs. 10,000
  • 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

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

  • A. Cash Account
  • B. Partner's Capital Account
  • C. Drawings 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

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

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

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

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

33. 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

34. 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. Old partners in their new ratio
  • C. All 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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