Q. How is depreciation treated in the final accounts of a partnership?
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A.
As an expense in the profit and loss account
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B.
As an asset in the balance sheet
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C.
As a liability in the balance sheet
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D.
Not considered in final accounts
Solution
Depreciation is treated as an expense in the profit and loss account, reducing the net profit of the partnership.
Correct Answer:
A
— As an expense in the profit and loss account
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Q. How is goodwill calculated when a new partner is admitted?
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A.
Average profit multiplied by the number of years
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B.
Total assets minus total liabilities
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C.
Excess of the purchase price over the net assets
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D.
Net profit divided by the number of partners
Solution
Goodwill is calculated as the excess of the purchase price paid by the new partner over the net assets of the partnership.
Correct Answer:
C
— Excess of the purchase price over the net assets
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Q. How is inventory valued in a partnership?
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A.
At cost or market value, whichever is lower
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B.
At market value only
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C.
At cost only
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D.
At replacement cost
Solution
Inventory is valued at the lower of cost or market value according to accounting principles.
Correct Answer:
A
— At cost or market value, whichever is lower
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Q. What is the effect of a partner's withdrawal on the capital accounts?
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A.
Increase in capital accounts
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B.
Decrease in capital accounts
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C.
No effect on capital accounts
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D.
Transfer to current accounts
Solution
When a partner withdraws, it results in a decrease in the capital accounts of the partners.
Correct Answer:
B
— Decrease in capital accounts
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Q. What is the journal entry for the distribution of profits among partners?
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A.
Debit Profit and Loss Account, Credit Partners' Capital Accounts
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B.
Debit Partners' Capital Accounts, Credit Profit and Loss Account
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C.
Debit Partners' Current Accounts, Credit Profit and Loss Account
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D.
Debit Profit and Loss Appropriation Account, Credit Partners' Capital Accounts
Solution
The distribution of profits is recorded by debiting the profit and loss account and crediting the partners' capital accounts.
Correct Answer:
A
— Debit Profit and Loss Account, Credit Partners' Capital Accounts
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Q. What is the journal entry to record the admission of a new partner?
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A.
Debit Cash, Credit Capital Account
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B.
Debit Capital Account, Credit Cash
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C.
Debit Goodwill, Credit Capital Account
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D.
Debit Capital Account, Credit Goodwill
Solution
When a new partner is admitted, the cash contributed by the new partner is debited to the cash account and credited to the capital account.
Correct Answer:
A
— Debit Cash, Credit Capital Account
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Q. What is the purpose of preparing a profit and loss appropriation account in a partnership?
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A.
To calculate net profit
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B.
To distribute profits among partners
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C.
To record all expenses
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D.
To prepare the balance sheet
Solution
The profit and loss appropriation account is prepared to distribute the net profit among the partners according to their profit-sharing ratio.
Correct Answer:
B
— To distribute profits among partners
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Q. What method is commonly used for inventory valuation in partnership firms?
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A.
FIFO
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B.
LIFO
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C.
Weighted Average
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D.
All of the above
Solution
Partnership firms can use FIFO, LIFO, or Weighted Average methods for inventory valuation, depending on their accounting policy.
Correct Answer:
D
— All of the above
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Q. Which accounting standard governs the accounting for partnerships in India?
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A.
AS 1
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B.
AS 2
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C.
AS 3
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D.
AS 4
Solution
Accounting Standard 1 (AS 1) deals with the disclosure of accounting policies, which is relevant for partnerships.
Correct Answer:
A
— AS 1
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Q. Which of the following is a method of calculating depreciation?
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A.
Straight-line method
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B.
Market value method
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C.
Cost method
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D.
Inventory method
Solution
The straight-line method is a common method used to calculate depreciation.
Correct Answer:
A
— Straight-line method
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Q. Which of the following is NOT a component of the trial balance?
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A.
Assets
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B.
Liabilities
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C.
Income Statement
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D.
Equity
Solution
The trial balance includes assets, liabilities, and equity, but does not include the income statement.
Correct Answer:
C
— Income Statement
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