Q. How is goodwill treated in the final accounts of a partnership?
-
A.
As an asset
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B.
As a liability
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C.
As an expense
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D.
Not recorded
Solution
Goodwill is treated as an intangible asset in the final accounts of a partnership.
Correct Answer:
A
— As an asset
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Q. How is inventory valued in a partnership firm?
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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 in a partnership firm is valued at cost or market value, whichever is lower, in accordance with accounting principles.
Correct Answer:
A
— At cost or market value, whichever is lower
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Q. In a partnership, how is profit typically distributed among partners?
-
A.
Equally
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B.
Based on capital contribution
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C.
Based on partnership agreement
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D.
Equally after expenses
Solution
Profit distribution in a partnership is typically based on the partnership agreement, which outlines the terms for sharing profits.
Correct Answer:
C
— Based on partnership agreement
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Q. What accounting standard governs the recognition of revenue in partnerships?
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A.
IFRS 15
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B.
IAS 2
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C.
GAAP
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D.
IFRS 9
Solution
IFRS 15 provides the framework for revenue recognition, which is applicable to partnerships as well.
Correct Answer:
A
— IFRS 15
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Q. What is the effect of revaluation of assets on partners' capital accounts?
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A.
Increase in all partners' capital
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B.
Decrease in all partners' capital
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C.
Increase or decrease based on ownership ratio
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D.
No effect on capital accounts
Solution
Revaluation of assets can lead to an increase or decrease in partners' capital accounts based on their ownership ratio in the partnership.
Correct Answer:
C
— Increase or decrease based on ownership ratio
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Q. What is the primary purpose of preparing a trial balance?
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A.
To calculate net income
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B.
To ensure debits equal credits
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C.
To prepare financial statements
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D.
To assess cash flow
Solution
The primary purpose of preparing a trial balance is to ensure that total debits equal total credits, indicating that the books are in balance.
Correct Answer:
B
— To ensure debits equal credits
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Q. What method of depreciation is commonly used for partnership assets?
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A.
Straight-line method
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B.
Declining balance method
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C.
Units of production method
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D.
Sum-of-the-years'-digits method
Solution
The straight-line method is commonly used for simplicity and consistency in partnership accounting.
Correct Answer:
A
— Straight-line method
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Q. When a partner withdraws from the partnership, what is the journal entry?
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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, Credit Capital Account
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D.
Debit Capital Account, Credit Drawings
Solution
When a partner withdraws, the Capital Account is debited to reduce the partner's equity, and Cash is credited to reflect the payment.
Correct Answer:
A
— Debit Capital Account, Credit Cash
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Q. Which inventory valuation method is often preferred by partnerships for tax purposes?
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A.
FIFO
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B.
LIFO
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C.
Weighted average
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D.
Specific identification
Solution
LIFO (Last In, First Out) is often preferred by partnerships for tax purposes as it can result in lower taxable income during inflation.
Correct Answer:
B
— LIFO
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