AHSEC - CLASS 12 : Accounting for Partnership : Basic Concepts Important Notes for 2023 Exam

AHSEC Class 12 Accountancy Chapter 2 : Accounting for Partnership : Basic Concepts Question Answer can be very Valuable & useful for the Preparation of Assam Higher Secondary Education HS 2nd Year Examination . Assam Board AHSEC HS 2nd Year ACCOUNTANCY NOTES gives you the best information of Accounting for Partnership : Basic Concepts . You can find solutions to their questions at both basic and advanced levels

CLASS 12 ACCOUNTANCY

Chapter 2

Short Answer Type Questions (Carrying 2 Marks each)

1. What is partnership Deed?

Ans. The document containing the partnership agreement among partners is called "partnership deed". It contains the terms and conditions which are agreed upon by all the partners.

2. State any two essential of a partnership.

Ans. The following are the essentials of a partnership:

(a) There is a limit of resources of sole trader. To over come the resources, there sole traders may want to form a partnership.

(b) Limited working capacity of an individual compels him to join hands with others.

Then partnership business may be formed

3.State the minimum and maximum number of persons in case of a partnership firm.

Ans. To form a partnership atleast two persons are required. The maximum number of persons is ten in case of firms having banking business and twenty in case of firms having non-banking business.

4. Mention two rights of a partner.

Ans. In a partnership, each partner has the following rights:

(a) Involvement in the conduct and management of the business.

(b) Share profits equally, unless otherwise agreed in partnership deed.

5. Mention two circumstances under which the fixed capitals of partners may change.

Ans. (a) If partners introduced additional capital at the business (b) If partners withdrawn capital from the business.

6.What do you mean by 'partner' and 'firm'?

Ans. The persons who are entered into partnership with one another are called individually 'partner and collectively as 'firm'

7. What is profit and Loss Appropriation Account?

Ans. Profit and Loss Appropriation Account is an extension of profit and loss account and is prepared to show the distribution of net profit among the partners. This account is debited with interest on capitals, partners salary and commission and division of profits among the partners and credited with net profit before appropriations and interest on partners' drawings

8.Mention four items that may appear on the debit side of profit and Loss Appropriation Account.

Ans. Four items that may appear on the debit side of profit & Loss Appropriation Account are

(a) Interest on partners capital,

(b) Partners salary.

(d) Bonus to partners

9. Mention four items that may appear on the debit side of a partners capital when capitals are fluctuating.

Ans. Four items that may appear on the debit side of fluctuating capital account are

(a) Drawings;

(b) Interest on Drawings

(d) Goodwill (written off)

10. Write the adjustment entries for interest on capital and drawing when the capital of the partners are fixed.

Ans. The adjustment entries are

(a) For interest on capital:

(i) Interest on capital A/c Dr.

To partners current A/c

(ii) Profit and Loss Appropriation A/c. Dr.

To interest on capital A/c

(b) For interest on Drawings

(i) Partners current A/c. Dr.

To interest on Drawings A/c

(ii) Interest on Drawings A/c. Dr

To profit and Loss Appropriation A/c

11. Give adjustment entries in connection with a partnership firm.(i) Gross profit and (ii) Net loss

Ans. (a) For Gross profit:

Trading A/c Dr.

To profit and loss A/c

(b) For Net loss :

Profit and loss appropriation A/c Dr.

To profit and loss A/c

12. Give adjustment entries in respect of:

(a) Outstanding salary and

(b) Prepaid insurance

Ans. Adjustment entries are:

(a) For outstanding salary:

Salary A/c Dr.

To outstanding salary A/c

(b) For prepaid insurance;

Prepaid insurance A/c. Dr.

To insurance Ale

13. Give adjustment entries in respect of: (i) Outstanding interest on drawings.

(ii) Accrued interest on investment.

Ans. Adjustment entries in respect of the following are For outstanding interest on drawings;

(i)For Outstanding interest on drawing A/c Dr.

To Drawings Ale

(ii) For Accrued interest on investment

Accrued interest on investment A/c

To investment A/c

14. Why is interest on partners capital allowed?

Ans. Interest on partners capital is allowed for following reasons

(a) If the capital of all the partners is equal and profit ratio is unequal, the partner with smaller share of profits suffers because he contributes proportionately more capital without any extra return.

(b) If the capital of all the partners is unequal and profit ratio is equal, the partner with larger capital contribution losses because he gets proportionately smaller share of profits.

15. Mention four items which may appear on the credit side of a partners capital Account when partners capital Accounts are fluctuating.

Ans. Four items which may appear on the credit side of a partners capital account are:

(a) Share of profit,

(b) Interest on capital;

(d) Salary of partners.

16. What is meant by guaranting of profit to a partner?

Ans. Guarantee is an assurance given to the partner of the firm that at least a fixed amount shall be given to him irrespective of actual earnings. If actual share of profits work out to be less than the guaranteed amount in that case the deficit amount shall be borne either by the firm or by any partner as the case may be.

Short Answer Type Question (Carrying 3 Marks each)

1.Mention any three essential features of a partnership.

Ans. Essential features of a partnership are

(a) Association of two or more persons For a valid partnership, there must be at least two persons. Partnership Act does not specify the maximum number of person but, the Indian companies Act, 1956, restricts the number of persons to10 (ten) for a partnership carrying on banking business and in any other case at 20 (twenty).

(b) Agreement In order to have a partnership, it is necessary that there must be an agreement between partners. The agreement may be oral or written.

2. Mention six important clauses usually included in a partnership Deed.

Ans. The important clauses are

(a) Name of the firm;

(b) Place of business,

(d) Duration of partnership.

(e) Contribution of capital and

(f) Profit sharing ratio

3.What is the need of a partnership Deed?

Ans. It is not compulsory for every firm to have a partnership Deed. The partnership Deed is prepared by the partners mutually For the following reasons it is important needed.

(a) Ifavails any misunderstandings amongst the partners as all the necessary legalities/ formalities have been laid down before hand in the deed.

(b) It is a legal document which help in settling the dispute which may arise amongst partner in future.

4. Explain the rules applicable in the following matters at the time of preparing final accounts of a partnership firm in the absence of a partnership agreement.

(i) Sharing of profits and losses.

(ii) Interest on capital.

(iii) Rate of interest on loan provided by partners.

Ans. In the absence of a partnership agreement/Deed:

(i) Profit or losses will be shared equally by all partners;

(ii) No interest on capital will be allowed, (iii) Interest on loan will be allowed @ 6% p.a.

5. In the absence of a partnership agreement how would you deal with the following:

(i) Salary to partners;

(ii) Commission to partners;

(iii) Admission of a new partner in the partnership business.

Ans. In the absence of partnership agreement

(i) No salary will be allowed to any partner.

(ii) No commission will be allowed to any partner

(iii) A new partner can not be introduced into a firm without consent of all the partners

6.What is meant by "Unlimited liability of a partner"?

Ans. Each partner is liable jointly for all acts done while he was a partner. In case firm's assets are not sufficient to meet the liabilities of firm, the partner is liable to pay the claims of the firm of his personal assets

7. What accounts are maintained regarding capital:

(i) When the capitals of the partners are fixed.

(ii) When the capitals of the partners are fluctuating.

Ans. (i) When the capitals of the partners are fixed, partners current Accounts are prepared.

(ii) When the capitals of the partners are fluctuating, fluctuating capital Accounts are prepared for partners.

8. How is interest on drawings by partners calculated under following circumstances:

(i) When a partner regularly withdraws a fixed amount on the first day of each month.

(ii) When a partner regularly withdraws a fixed amount on the middle of each month.

(iii) When a partner regularly withdraws a fixed amount on the last day of each month.

Ans. (i) When a partner regularly withdraws a fixed amount on the first day of each month then interest on total amount of drawings is calculated for 6 months.

(ii) When a partner regularly withdraws a fixed amount on the middle of each month then interest on total amount of drawings is calculated for 6 months.

(iii) When a partner regularly withdraws a fixed amount on the last day of each month then interest on total amount of drawings is calculated for 5 months.

9. Give three points of difference between profit and Loss Account and profit and Loss Appropriation Account.

Ans. Difference between profit and Loss Account and profit and Loss Appropriation Account:

Long Answer Type Questions (Carrying 5 Mark each)

1.Define partnership. Mention its four essential elements.

Ans. When two or more than two persons agree to carry on business for mutual distribution of profits or losses, they are said to have formed a partnership. According to Section 4 of the Indian partnership Act, 1932, "partnership is the relations between persons who have agreed to share the profits of a business carried on by all or any of them acting for all". The following are the essential elements of a partnership firm:

(a) Association of two or more persons. To form a valid partnership atleast two pesons are required Partnership Act, 1932, does not specify the maximum number of persons. In case of firms having banking business, the maximum number of persons is ten and twenty in case of firms having non-banking business.

(b) Agreement: There must be a agreement between two or more persons. The agreement to form a partnership may be in writing or oral.

(d) Profit Sharing: The partners shares profits of the firm to predetermined ratio.

2. Mention five distinctions between 'Fixed' and 'Fluctuating' capital.

Ans. Distinctions between 'Fixed' and 'Fluctuating' capital:

3.What is current Account? Mention three distinctions between 'Current Account and 'Capital Account?

Ans. When the fixed capital account is operated in the firm, all the transactions relating to parters viz interest on capital or drawings, salary or commission, share profit or loss etc. are made in a separate account is called the current account. Distinctions between Current account' and 'capital account":

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AHSEC - CLASS 12 : Accounting for Partnership : Basic Concepts Important Notes for 2023 Exam | HS 2nd Year Accountancy Notes