Q. How is goodwill treated in the accounts of a partnership firm?
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A.
It is recorded as an asset
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B.
It is not recorded
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C.
It is recorded as a liability
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D.
It is recorded in the profit and loss account
Solution
Goodwill is recorded as an intangible asset in the accounts of a partnership firm.
Correct Answer:
A
— It is recorded as an asset
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Q. How is the profit shared among partners if no agreement exists?
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A.
Equally
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B.
In the ratio of their capital contributions
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C.
In the ratio of their drawings
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D.
As per the discretion of the managing partner
Solution
In the absence of a partnership agreement, profits are shared equally among partners.
Correct Answer:
A
— Equally
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Q. How is the profit-sharing ratio determined in a partnership?
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A.
Equal distribution among partners
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B.
Based on capital contribution
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C.
Based on the partnership agreement
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D.
Based on the age of partners
Solution
The profit-sharing ratio is determined based on the partnership agreement, which outlines how profits and losses are to be shared.
Correct Answer:
C
— Based on the partnership agreement
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Q. What happens to the capital accounts when a partner retires?
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A.
They are closed
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B.
They are transferred to the new partner
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C.
They are adjusted for goodwill
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D.
They remain unchanged
Solution
When a partner retires, the capital accounts are adjusted for goodwill to reflect the value of the partnership.
Correct Answer:
C
— They are adjusted for goodwill
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Q. What is the effect of a partner's loan to the firm on the capital accounts?
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A.
Increase in capital account
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B.
Decrease in capital account
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C.
No effect on capital account
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D.
Transfer to drawings account
Solution
A partner's loan to the firm increases the capital account as it represents an investment in the business.
Correct Answer:
A
— Increase in capital account
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Q. What is the effect of depreciation on partnership accounts?
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A.
Increases net income
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B.
Decreases net income
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C.
No effect on net income
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D.
Increases cash flow
Solution
Depreciation is an expense that reduces net income in partnership accounts.
Correct Answer:
B
— Decreases net income
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Q. What is the journal entry for the depreciation of a partnership asset?
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A.
Debit Depreciation Expense, Credit Accumulated Depreciation
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B.
Debit Accumulated Depreciation, Credit Depreciation Expense
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C.
Debit Asset Account, Credit Depreciation Expense
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D.
Debit Depreciation Expense, Credit Asset Account
Solution
The correct entry for recording depreciation is to debit the depreciation expense and credit accumulated depreciation.
Correct Answer:
A
— Debit Depreciation Expense, Credit Accumulated Depreciation
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Q. What is the journal entry for the distribution of profits to partners?
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A.
Debit Profit and Loss Account, Credit Partner's Capital Accounts
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B.
Debit Partner's Capital Accounts, Credit Profit and Loss Account
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C.
Debit Drawings Account, Credit Profit and Loss Account
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D.
Debit Profit and Loss Appropriation Account, Credit Partner's Capital Accounts
Solution
The correct entry for distributing profits is to debit the profit and loss account and credit the partners' capital accounts.
Correct Answer:
A
— Debit Profit and Loss Account, Credit Partner's Capital Accounts
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Q. What is the journal entry for the revaluation of assets in a partnership?
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A.
Debit Asset Account, Credit Revaluation Surplus
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B.
Debit Revaluation Surplus, Credit Asset Account
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C.
Debit Asset Account, Credit Capital Accounts
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D.
Debit Capital Accounts, Credit Asset Account
Solution
The correct entry is to debit the Asset Account for the increase in value and credit the Revaluation Surplus.
Correct Answer:
A
— Debit Asset Account, Credit Revaluation Surplus
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Q. What is the journal entry for the withdrawal of a partner's capital?
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A.
Debit Capital Account, Credit Cash
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B.
Debit Cash, Credit Capital Account
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C.
Debit Drawings Account, Credit Cash
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D.
Debit Cash, Credit Drawings Account
Solution
The correct entry is to debit the Capital Account of the partner and credit Cash for the amount withdrawn.
Correct Answer:
A
— Debit Capital Account, Credit Cash
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Q. What is the purpose of preparing a final account in a partnership?
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A.
To determine the profit or loss
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B.
To assess the financial position
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C.
To distribute profits among partners
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D.
All of the above
Solution
The final account is prepared to determine the profit or loss, assess the financial position, and distribute profits among partners.
Correct Answer:
D
— All of the above
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Q. Which accounting standard governs the treatment of partnership accounts?
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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 26
Solution
AS 26 deals with the accounting for intangible assets, which includes goodwill in partnership accounts.
Correct Answer:
D
— AS 26
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Q. Which inventory valuation method is commonly used 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 any of the inventory valuation methods, including FIFO, LIFO, and Weighted Average.
Correct Answer:
D
— All of the above
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Q. Which method is commonly used for inventory valuation in partnership accounts?
-
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
All of the above methods (FIFO, LIFO, and Weighted Average) can be used for inventory valuation in partnership accounts.
Correct Answer:
D
— All of the above
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Q. Which of the following is NOT included in the trial balance?
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A.
Assets
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B.
Liabilities
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C.
Expenses
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D.
Cash Flow Statement
Solution
The Cash Flow Statement is not included in the trial balance as it is a financial statement, not a ledger account.
Correct Answer:
D
— Cash Flow Statement
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