Accountancy _ Accounting for Partnership Firms _ August 22th, 2022 _ Medium

Read the following hypothetical text and answer the given questions.

Rohan and Mohan are two friends belonging middle class family. On 1st April, 2020 they started a
business of Tyre manufacturing in the form of a partnership firm without any agreement and
contribute ₹4,00,000 and ₹2,00,000 respectively as Capital. They know that the factory of Tyre
manufacturing pollutes the environment. Therefore, there are two options available before them:

(i) The factory can be opened in rural area where local residents are poor and illiterate.

(ii) An advanced pollution control plant can be installed in their factory to control the pollution.

They decided to choose the second option which involves an additional cost of ₹4,00,000. On 1st July
2020 to arrange this amount, the firm took a loan of ₹3,00,000 from ICICI Bank carrying interest @
12% p.a. and rest ₹1,00,000 was provided by Rohan as a loan to the firm without any agreement.
During the year Rohan withdrew ₹4,000 at the end of each quarter and Mohan withdrew ₹12,000.
Interest on drawings to be charged @ 6% p.a.

At the end of first year the firm earns a net profit of ₹1,50,000.

Q1. Drawings of Rohan will be shown on:

(a) Debit side of the Profit and Loss A/c

(b) Debit side of the Rohan's capital A/c

(c) Credit side of the Profit and Loss Appropriation A/c

(d) Credit side of the Rohan's capital A/c

Q2. Interest on Rohan's loan will be:

(a) NIL

(b) ₹12,000

(c) ₹4,500

(d) ₹9,000

Q3. State who is correct in the following case Rohan demands interest on capital @ 12% p.a. on
1,00,000 being loan given by him to firm, Mohan does not agree.

(a) Rohan

(b) Mohan

(c) Both are correct.

(d) No one is correct

Q4. Interest on Mohan's Drawings will be

(a) ₹720

(b) ₹360

(c) ₹240

(d) ₹120

Q5. Which of the following is not a part of Partnership Deed entered into amongst partners of a
firm?
(a) Names and addresses of the partners
(b) Modes of valuation of Goodwill
(c) Date of Commencement of Partnership
(d) Family details of individuals partners
Q6. When partnership deed provides for interest on capital as a charge on profit, it is debited to
(a) Profit and Loss Account
(b) Profit and Loss Appropriation Account
(c) Partner’s Capital Accounts
(d) Profit and Loss Adjustment Account
Q7. M/s Yash Enterprises has 45 partners. It can
(a) Admit up to 5 more partners
(b) Admit up to 55 more partners
(c) Admit up to 3 more partners
(d) Not admit more partners
Q8. Mr Nikhil, a partner in the firm withdrew ₹24,000 at the end of every half year. The interest
on such drawings will be charged @12%p.a. The amount of interest on drawings will be:
(a) ₹2,880
(b) ₹1,440
(c) ₹2,440
(d) ₹2,000
Q9. A, B and C are partners, sharing profits and losses in the ratio of 5 : 3 : 2 with fixed capital of
₹ 80,000 , ₹ 60,000 and ₹20,000 respectively. Partners were entitled to interest on their
capital @10 p.a. During the year firm earned a profit of ₹ 11,200. The amount of interest on
capital payable to A, B and C will be :
(a) ₹4,000, ₹3,000 , ₹2,000
(b) ₹5,600, ₹4,200, ₹1,400
(c) ₹8,000, ₹6,000, ₹2,000
(d) ₹1,400, ₹4,200, ₹5,600

Q10. P,Q and R are partners sharing profits and losses equally. Their capital balances on
beginning of the financial year was ₹80,000, ₹60,000 and ₹40,000 respectively. Their
personal assets were
P ₹20,000 , Q ₹15,000 and R ₹10,000. The extent of their liability towards the firm would be:
(a) P ₹80,000 , Q ₹60,000, R ₹40,000
(b) P ₹20,000, Q ₹15,000, R ₹10,000
(c) P ₹1,00,000, Q ₹75,000, R ₹50,000
(d) Equal

Solutions
S1. Ans. (b)

S2. Ans. (c)

6 9
Interest on Rohan’s loan = 1,00,000 × × = ₹4,500
12 12
S3. Ans. (b)

S4. Ans. (b)

6 6
Interest on Drawings = 12,000 × × = ₹720
100 12
S5. Ans. (d)

S6. Ans. (a)

S7. Ans. (a)

S8. Ans. (b)

12 3
Interest on Capital = 48,000 × × = ₹1,440
100 12
S9. Ans. (b)

S10. Ans. (c)