Partnership Accounts Questions and Answers

Answer: C

A business run as a partnership is called a firm.

Under Section 4 of the Indian Partnership Act, 1932, persons who have entered into partnership are individually called partners and collectively a firm, and the name under which the business is carried on is the firm name.

'Partnership' is the name of the relationship between the partners, not of the business organisation. A company is a separate legal person incorporated under the Companies Act. An industry is a group of firms producing similar goods, not one business.

Answer: C

The value of the firm's goodwill is ₹ 27,000.

In the new ratio 3 : 2 : 1, Z's share is 1/6. The premium he brings is his share of the firm's goodwill.

\[ \begin{aligned} \tfrac{1}{6} \times G &= 4{,}500 \\ G &= 4{,}500 \times 6 = 27{,}000 \end{aligned} \]

₹ 4,500 is only Z's share, not the firm's goodwill. ₹ 18,000 treats Z's share as 1/4, and ₹ 24,000 does not correspond to Z's 1/6 share at all.

Answer: A

The shares are ₹ 4,680 and ₹ 3,120.

The ₹ 7,800 is profit after interest on capital, so it is simply divided in the profit sharing ratio of 3 : 2:

\[ \begin{aligned} \text{Varsha} &= 7800 \times \tfrac{3}{5} = 4680 \\ \text{Monica} &= 7800 \times \tfrac{2}{5} = 3120 \end{aligned} \]

Options B and C also add up to ₹ 7,800 but are not in the ratio 3 : 2, and option D does not even add up to ₹ 7,800. The interest on capital has already been allowed and is not deducted again.

Answer: B

The goodwill is credited to X only.

Goodwill brought in by a new partner goes to the old partners in their sacrificing ratio, the old share minus the new share:

\[ \begin{aligned} X &= \tfrac{3}{4} - \tfrac{2}{4} = \tfrac{1}{4} \\ Y &= \tfrac{1}{4} - \tfrac{1}{4} = 0 \end{aligned} \]

Y keeps the same quarter share, so only X sacrifices, and the whole ₹ 4,000 is credited to X.

Splitting it 3,000 and 1,000 uses the old ratio instead of the sacrificing ratio, and 2,500 and 1,500 has no basis in either ratio. Y alone sacrificed nothing, so 'Y only' is wrong.

Answer: A

The new ratio is 3 : 1 : 1.

\[ \begin{aligned} \text{X gives} &= \tfrac{7}{10} \times \tfrac{1}{7} = \tfrac{1}{10} \\ \text{Y gives} &= \tfrac{3}{10} \times \tfrac{1}{3} = \tfrac{1}{10} \end{aligned} \]

\[ \begin{aligned} \text{X} &= \tfrac{7}{10} - \tfrac{1}{10} = \tfrac{6}{10} \\ \text{Y} &= \tfrac{3}{10} - \tfrac{1}{10} = \tfrac{2}{10} \\ \text{Z} &= \tfrac{1}{10} + \tfrac{1}{10} = \tfrac{2}{10} \end{aligned} \]

So the ratio is 6 : 2 : 2, which simplifies to 3 : 1 : 1. The other ratios come from treating the fractions as fractions of the whole profit rather than of each partner's own share.

Answer: C

The new profit sharing ratio is 4 : 2 : 3. Z takes one third of the profit, so the remaining two thirds is shared by X and Y in their old ratio of 2 : 1:

\[ X = \frac{2}{3} \times \frac{2}{3} = \frac{4}{9} \]

\[ Y = \frac{2}{3} \times \frac{1}{3} = \frac{2}{9} \]

\[ Z = \frac{1}{3} = \frac{3}{9} \]

So the ratio is 4 : 2 : 3, option C. Option A, 3 : 3 : 3, gives all three equal shares, which would give Z one third but changes the old 2 : 1 ratio of X and Y. Options B and D give Z a share other than one third.

Answer: A

On dissolution of a partnership the realised cash is applied first to the expenses of dissolution, then to outsiders' claims, then to any partner's loan, and finally to the partners' capital and current account balances. The sequence is therefore (c), (d), (a), (b).

Any order which pays a partner's loan or capital before the outsiders breaks the rule that external creditors rank ahead of the partners, and paying capital before loans reverses the order of the settlement. Only option A keeps the correct ranking.

Answer: B

Interest is charged on ₹ 6000 for an average period of 6 months. A partner who draws an equal amount in the middle of every month (here on the 16th) has his total drawings for the year outstanding, on average, for half the year. The twelve drawings remain outstanding for 11.5, 10.5, and so on down to 0.5 months, which total 72 months, or an average of 6 months on the total of ₹ 6000. A period of 6.5 months would apply to drawings at the beginning of each month and 5.5 months to drawings at the end, while 12 months would treat the whole sum as drawn on the first day.