Q. How is goodwill calculated when a new partner joins a partnership?
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A.
Average profit x Number of years
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B.
Total assets - Total liabilities
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C.
Capital contribution of new partner - Net assets
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D.
Net assets - Capital contribution of new partner
Solution
Goodwill is calculated as the capital contribution of the new partner minus the net assets of the partnership.
Correct Answer:
C
— Capital contribution of new partner - Net assets
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Q. How is the net profit of a partnership firm distributed among partners?
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A.
Equally among all partners
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B.
Based on their capital contribution
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C.
As per the partnership agreement
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D.
Based on the number of partners
Solution
The net profit is distributed according to the terms specified in the partnership agreement.
Correct Answer:
C
— As per the partnership agreement
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Q. In a partnership, what is the purpose of the Profit and Loss Appropriation Account?
-
A.
To record all income and expenses
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B.
To allocate profits among partners
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C.
To determine the net profit
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D.
To record capital contributions
Solution
The Profit and Loss Appropriation Account is used to allocate the net profit among the partners as per the partnership agreement.
Correct Answer:
B
— To allocate profits among partners
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Q. What is the effect of a partner's admission on the existing partners' capital accounts?
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A.
Increase for all existing partners
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B.
Decrease for all existing partners
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C.
No effect
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D.
Depends on the agreement
Solution
The effect on existing partners' capital accounts depends on the partnership agreement regarding the admission of a new partner.
Correct Answer:
D
— Depends on the agreement
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Q. What is the impact of revaluation of assets on partners' 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 impact on capital accounts
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D.
Increase in liabilities
Solution
Revaluation of assets typically results in an increase in the capital accounts of the partners reflecting the increased value of assets.
Correct Answer:
A
— Increase in capital accounts
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Q. What is the journal entry for recording depreciation on a partnership asset?
-
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 is to debit Depreciation Expense and credit Accumulated Depreciation to record the depreciation.
Correct Answer:
A
— Debit Depreciation Expense, Credit Accumulated Depreciation
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Q. What is the journal entry for recording depreciation on a partnership's asset?
-
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
-
D.
Debit Depreciation Expense, Credit Asset Account
Solution
The correct entry is to debit Depreciation Expense and credit Accumulated Depreciation to record the depreciation.
Correct Answer:
A
— Debit Depreciation Expense, Credit Accumulated Depreciation
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Q. What is the journal entry to record the capital contribution of a partner in a partnership?
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A.
Debit Cash, Credit Partner's Capital Account
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B.
Debit Partner's Capital Account, Credit Cash
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C.
Debit Partner's Drawings Account, Credit Cash
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D.
Debit Cash, Credit Partner's Drawings Account
Solution
The correct entry is to debit Cash and credit the Partner's Capital Account to reflect the capital contribution.
Correct Answer:
A
— Debit Cash, Credit Partner's Capital Account
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Q. What is the journal entry to record the profit sharing among partners?
-
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 is to debit the Profit and Loss Account and credit the Partner's Capital Accounts to distribute profits.
Correct Answer:
A
— Debit Profit and Loss Account, Credit Partner's Capital Accounts
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Q. What is the primary accounting standard that governs partnership accounting?
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A.
IFRS
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B.
GAAP
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C.
IAS
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D.
FASB
Solution
GAAP (Generally Accepted Accounting Principles) is the primary accounting standard that governs partnership accounting.
Correct Answer:
B
— GAAP
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Q. When a partner withdraws cash from the partnership, which account is debited?
-
A.
Partner's Capital Account
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B.
Partner's Drawings Account
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C.
Cash Account
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D.
Income Account
Solution
The Partner's Drawings Account is debited when a partner withdraws cash from the partnership.
Correct Answer:
B
— Partner's Drawings Account
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Q. Which inventory valuation method is commonly used in partnership accounting?
-
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 methods (FIFO, LIFO, and Weighted Average) can be used in partnership accounting depending on the firm's policy.
Correct Answer:
D
— All of the above
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Q. Which of the following accounts is NOT included in the trial balance of a partnership?
-
A.
Partner's Capital Account
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B.
Partner's Current Account
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C.
Drawings Account
-
D.
Profit and Loss Appropriation Account
Solution
The Profit and Loss Appropriation Account is not included in the trial balance as it is prepared after the trial balance.
Correct Answer:
D
— Profit and Loss Appropriation Account
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