CUET UG Accountancy Booster Test 2 Partnership Deed and Legal Provisions -

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CUET UG Accountancy Booster Test 2 Partnership Deed and Legal Provisions

⏱️ 30 Minutes

❓ 20 Questions

📌 Answers are locked once submitted — results and explanations appear at the end.

CUET UG Accountancy Booster Test 2 Partnership Deed and Legal Provisions

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QUESTION 1 OF 20

Assertion (A): A partnership firm holds a separate legal entity status, entirely distinct from its partners.
Reason (R): The partners are jointly and severally liable for all debts, meaning personal assets can be attached.

Answer Review

1 Assertion (A): A partnership firm holds a separate legal entity status, entirely distinct from its partners.
Reason (R): The partners are jointly and severally liable for all debts, meaning personal assets can be attached.

A Both A and R are true

B A is true, R is false

C Both A and R are false

D A is false, R is true

💡 Short Explanation

Partnership has no separate legal entity. Partners have joint and several liability. Reason is correct.

✅ Correct Answer Explanation

Assertion is false because a partnership firm is not legally separate from its partners. Reason is true because partners are jointly and severally liable, and their personal assets may be attached. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Assertion false.
Option B → Reason true.
Option C → Reason not false.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

�� Verify truthfulness separately.

Final Logic:

�� Partnership lacks separate legal identity.

🧠 Memory Trick

"Firm and Partners are One"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Legal Status – Page reference may vary by edition.

2 Evaluate these deeper conceptual statements about the purpose of a Partnership Deed:
I. It fundamentally regulates the internal rights, duties, and liabilities of each partner.
II. It has the legal power to alter the maximum limit of partners prescribed by the Companies Act.

A Both are correct

B Only I is correct

C Only II is correct

D Neither is correct

💡 Short Explanation

Deed regulates partner relationships. It cannot override Companies Act limits. Only statement I valid.

✅ Correct Answer Explanation

Statement I is correct because the deed governs internal rights and duties. Statement II is incorrect because statutory limits cannot be altered privately. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Statement II false.
Option C → Statement I true.
Option D → Statement I valid.

🎯 Strategy

Used

Statement Verification

Application:

�� Compare deed powers with law.

Final Logic:

�� Deed cannot override legislation.

🧠 Memory Trick

"Deed Regulates, Law Dominates"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Purpose of Deed – Page reference may vary by edition.

3 Though an oral partnership agreement is legally valid, formalizing it into a written deed is highly recommended primarily to:

A Legally evade paying corporate income tax

B Satisfy the minimum capital requirements of the state

C Act as clear evidence of the agreed terms and avoid future disputes

D Increase the maximum permitted partner limit to 100 members

💡 Short Explanation

Written deeds provide proof. Reduce misunderstandings and disputes. Improve legal clarity.

✅ Correct Answer Explanation

A written deed acts as documentary evidence of agreed terms and helps avoid future conflicts. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Tax evasion illegal.
Option B → No such requirement.
Option D → Partner limits fixed by law.

🎯 Strategy

Used

Practical Legal Understanding

Application:

�� Identify importance of written deed.

Final Logic:

�� Documentation prevents disputes.

🧠 Memory Trick

"Written Proof Prevents Problems"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Importance of Written Deed – Page reference may vary by edition.

4 Partners A and B had a purely oral agreement to share profits in a 3:2 ratio. Later, B denies this and demands an equal share. Because the agreement is oral, A cannot definitively prove the 3:2 ratio in court. Under the Partnership Act, what is the default legal resolution?

A Profits are forcefully shared equally

B Partner A automatically gets 3/5ths based on initial claim

C The firm is heavily penalized for lacking documentation

D Partner B is expelled for a breach of trust

💡 Short Explanation

Unproven ratio cannot be enforced. Default rule becomes equal sharing. Partnership Act applies.

✅ Correct Answer Explanation

If no valid proof of ratio exists, profits are shared equally under default legal provisions. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Claim alone insufficient.
Option C → No automatic penalty.
Option D → Expulsion not automatic.

🎯 Strategy

Used

Legal Default Application

Application:

�� Apply equal-sharing rule when agreement unclear.

Final Logic:

�� Equal sharing resolves dispute.

🧠 Memory Trick

"No Proof = Equal Share"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Default Provisions – Page reference may vary by edition.

5 Which of the following is NOT a standard basic detail explicitly recorded in the typical Partnership Deed?

A The exact name of the firm

B The addresses of all individual partners

C The date of commencement of the partnership

D The names and occupations of the partners' extended family members

💡 Short Explanation

Deed records business-related details. Family information unnecessary. Standard clauses exclude relatives.

✅ Correct Answer Explanation

Partnership deeds include partner details, business details, and commencement date, but not family occupations. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Standard deed detail.
Option B → Essential identification detail.
Option C → Common deed clause.

🎯 Strategy

Used

Elimination

Application:

�� Identify non-business information.

Final Logic:

�� Family details irrelevant to deed.

🧠 Memory Trick

"Deed Records Business, Not Families"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Contents of Deed – Page reference may vary by edition.

6 Match the distinct scenario to the correct characteristic or outcome of a partnership:

List 1	List 2
1. X and Y buy land solely to build a personal shared home.	a. Valid and legally recognizable agreement
2. X and Y buy land systematically to sell it for commercial profit.	b. Demonstrates the critical element of Mutual Agency
3. X acts on behalf of Y, binding Y in a firm transaction.	c. Does not constitute a business partnership
4. The mutual agreement between the founders is purely oral.	d. Constitutes a true business partnership

A 1-c, 2-d, 3-b, 4-a

B 1-d, 2-c, 3-a, 4-b

C 1-b, 2-a, 3-d, 4-c

D 1-a, 2-b, 3-c, 4-d

💡 Short Explanation

Personal home implies co-ownership. Profit motive creates partnership. Oral agreement still valid legally.

✅ Correct Answer Explanation

Correct matching: Shared home → No partnership Selling for profit → Partnership business Binding another partner → Mutual agency Oral agreement → Valid agreement Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Profit motive mismatched.
Option C → Mutual agency incorrect.
Option D → Entire sequence incorrect.

🎯 Strategy

Used

Option Grouping

Application:

�� Match concepts with outcomes carefully.

Final Logic:

�� Profit and agency determine partnership.

🧠 Memory Trick

"Profit + Agency = Partnership"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Mutual Agency – Page reference may vary by edition.

7 Mansoor's capital account balance was Rs 2,00,000 on April 1. He introduced an additional capital of Rs 1,00,000 on August 1. If interest on capital is allowed at 6% p.a., what is his total interest on capital for the financial year ending March 31?

A Rs 14,000

B Rs 16,000

C Rs 12,000

D Rs 18,000

💡 Short Explanation

Opening capital earns full-year interest. Additional capital earns 8 months' interest. Both interests added.

✅ Correct Answer Explanation

Interest on Opening Capital: 200000 × 6% = 12000 Interest on Additional Capital: 100000 × 6% × (8/12) = 4000 Total Interest: 12000 + 4000 = 16000 200000 × (6/100) + 100000 × (6/100) × (8/12) = 16000 Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Under-calculated.
Option C → Ignores additional capital.
Option D → Over-calculated.

🎯 Strategy

Used

Substitution

Application:

�� Separate calculation by time period.

Final Logic:

�� Total interest equals Rs. 16,000.

🧠 Memory Trick

"Separate Time, Separate Interest"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Interest on Capital – Page reference may vary by edition.

8 Arrange the chronological sequence of steps required to calculate interest on capital when there are additions and withdrawals during the accounting period:
1. Calculate interest on the opening balance for the whole year
2. Ascertain the closing capital at year-end
3. Calculate interest on additional capital from date of introduction to year-end
4. Calculate interest reduction on withdrawn capital for the remaining period

A 1, 2, 3, 4

B 4, 3, 2, 1

C 1, 3, 4, 2

D 3, 2, 4, 1

💡 Short Explanation

Opening capital calculated first. Additions handled next. Withdrawals adjusted before final balance.

✅ Correct Answer Explanation

Correct sequence: Interest on opening balance Interest on additional capital Reduction for withdrawals Closing capital ascertainment Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Closing capital should come last.
Option B → Sequence reversed.
Option D → Opening balance should be first.

🎯 Strategy

Used

Sequential Logic

Application:

�� Arrange calculation procedure.

Final Logic:

�� Interest adjustments precede closing balance.

🧠 Memory Trick

"Opening → Addition → Withdrawal → Closing"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Capital Contribution Details – Page reference may vary by edition.

9 A partnership deed strictly states that all bank accounts must be operated jointly by Partner X and Partner Y. Partner X bypasses this and withdraws funds unilaterally. This specific act is:

A Fully valid under the general Partnership Act

B Valid if X is the senior-most capital contributor

C A normal implied operational right of mutual agency

D A direct violation of the specific operational rules of their Deed

💡 Short Explanation

Deed provisions override general assumptions. Joint operation required specifically. Unilateral action violates deed.

✅ Correct Answer Explanation

The deed specifically required joint operation, so unilateral withdrawal breaches the agreed operational rules. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Specific deed clause prevails.
Option B → Seniority irrelevant.
Option C → Mutual agency limited by agreement.

🎯 Strategy

Used

Conceptual Application

Application:

�� Compare deed rules with actions.

Final Logic:

�� Deed terms must be followed strictly.

🧠 Memory Trick

"Specific Deed Rules Prevail"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Bank Operation Rules – Page reference may vary by edition.

10 Consider the following regarding the commencement of a partnership:
I. The date of commencement signifies the legal start of the partnership's operations as per their agreement.
II. The commencement date must inherently be the exact same date the firm registers with the government.

A Both I and II are correct

B Only I is correct

C Only II is correct

D Neither I nor II is correct

💡 Short Explanation

Commencement date marks business start. Registration date may differ. Only statement I valid.

✅ Correct Answer Explanation

Statement I is correct because commencement date indicates operational beginning. Statement II is incorrect because registration may occur later. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Statement II false.
Option C → Statement I true.
Option D → Statement I correct.

🎯 Strategy

Used

Statement Verification

Application:

�� Distinguish commencement from registration.

Final Logic:

�� Both dates need not coincide.

🧠 Memory Trick

"Start Date ≠ Registration Date"

📚 Passage 3 (NCERT text on Implied Elements) "Another important element of partnership is that, the agreement between partners must be to share profits and losses of a business. Though the definition contained in the Partnership Act describes partnership as relation between people who agree to share the profits of a business, the sharing of loss is implied. Thus, sharing of profits and losses is important. If some persons join hands for the purpose of some charitable activity, it will not be termed as partnership."

11 Based on the passage, why would an association formed explicitly for a charitable activity fail to be recognized as a partnership under the Act?

A Because charitable activities are illegal

B Because it usually involves more than the maximum limit of people

C Because it fundamentally lacks the core element of sharing business profits

D Because charitable trusts cannot have written deeds

💡 Short Explanation

Profit motive essential for partnership. Charitable activity lacks business profits. Core element absent.

✅ Correct Answer Explanation

Partnership requires sharing business profits. Charitable associations lack this essential element. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Charitable activity legal.
Option B → Number irrelevant.
Option D → Written deed unrelated.

🎯 Strategy

Used

Passage-Based Extraction

Application:

�� Identify essential partnership requirement.

Final Logic:

�� No business profit means no partnership.

🧠 Memory Trick

"No Profit = No Partnership"

12 According to the passage, how does the Act interpret the sharing of losses, even if the strict legal definition only explicitly mentions "sharing the profits"?

A The sharing of loss is legally implied

B Losses are explicitly ignored by the law

C Only actively working partners bear the losses

D Losses are absorbed by the state

💡 Short Explanation

Profit sharing implies loss sharing. Loss clause not mandatory separately. Legal implication exists.

✅ Correct Answer Explanation

Although the Act explicitly mentions profit sharing, sharing of losses is legally implied. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Losses not ignored.
Option C → All partners share losses.
Option D → State not responsible.

🎯 Strategy

Used

Passage-Based Extraction

Application:

�� Interpret implied legal provision.

Final Logic:

�� Loss sharing follows partnership relation.

🧠 Memory Trick

"Profit Share Implies Loss Share"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Loss Sharing Rules – Page reference may vary by edition.

13 A firm earned a profit of Rs 14,000 for the year. The interest on capital explicitly due to Anupam is Rs 12,000 and Abhishek is Rs 16,000 (total due = Rs 28,000). Since profits are insufficient, how is the available Rs 14,000 profit distributed?

A Anupam gets Rs 12,000, Abhishek gets Rs 2,000

B Anupam gets Rs 7,000, Abhishek gets Rs 7,000

C The profit is held back until next year

D Anupam gets Rs 6,000, Abhishek gets Rs 8,000

💡 Short Explanation

Available profit insufficient. Distribution proportional to claims. Ratio = 12,000 : 16,000.

✅ Correct Answer Explanation

Interest Claim Ratio: 12000 : 16000 = 3 : 4 Anupam's Share: 14000 × (3/7) = 6000 Abhishek's Share: 14000 × (4/7) = 8000 14000 × (3/7) = 6000 Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Disproportionate distribution.
Option B → Equal sharing incorrect.
Option C → Profit distributed immediately.

🎯 Strategy

Used

Ratio Substitution

Application:

�� Allocate proportionately to claims.

Final Logic:

�� Profit shared in 3:4 ratio.

🧠 Memory Trick

"Insufficient Profit = Proportionate Distribution"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Interest on Capital – Page reference may vary by edition.

14 What is the rule regarding a partner's salary if the firm suffers a net loss for the year, assuming the deed provides for a salary but not explicitly as a charge against profit?

A The full agreed salary is still paid out of capital

B Half of the agreed salary is paid

C No salary or remuneration is allowed to the partners

D The salary is converted into a partner's loan

💡 Short Explanation

Salary is appropriation of profit. Loss situation prevents appropriation. No remuneration allowed.

✅ Correct Answer Explanation

If salary is not specifically treated as a charge against profit, it cannot be paid during a loss year. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Capital cannot automatically fund salary.
Option B → No half-payment rule exists.
Option D → Salary not converted automatically.

🎯 Strategy

Used

Conceptual Understanding

Application:

�� Distinguish appropriation from expense.

Final Logic:

�� No profits means no appropriation.

🧠 Memory Trick

"No Profit = No Partner Salary"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Salary and Commission – Page reference may vary by edition.

15 Assertion (A): A partner inherently has the right to an equal share of the firm's profits if the deed is completely silent on the matter.
Reason (R): The Indian Partnership Act 1932 strictly enforces equal distribution of profits among partners in the absence of a contrary explicit agreement.

A Both A and R are true and R is the correct explanation of A

B Both A and R are true but R is not the correct explanation

C A is true, R is false

D A is false, R is true

💡 Short Explanation

Equal sharing applies by default. Partnership Act provides rule. Reason explains assertion fully.

✅ Correct Answer Explanation

In absence of agreement, the Partnership Act mandates equal sharing of profits. Hence, both Assertion and Reason are true, and Reason correctly explains Assertion.

❓ Why Other Options Are Incorrect

Option B → Reason directly explains assertion.
Option C → Reason true.
Option D → Assertion true.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

�� Check explanation relationship.

Final Logic:

�� Equal sharing is statutory default.

🧠 Memory Trick

"Silent Deed = Equal Share"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Default Provisions Applicability – Page reference may vary by edition.

16 Partner A unilaterally derives a secret profit of Rs 10,000 by utilizing the firm's property and business connections for a personal transaction. Under the Act, what is his strict liability regarding this profit?

A He is legally allowed to keep it as personal gain

B He must account for the profit and pay the entire amount to the firm

C He only pays 50% to the firm and keeps the rest

D He must distribute it evenly to local charities

💡 Short Explanation

Secret profit belongs to firm. Partner cannot misuse firm property. Entire amount recoverable.

✅ Correct Answer Explanation

A partner must account to the firm for any personal gain earned through firm property or business connections. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Illegal enrichment.
Option C → Entire profit recoverable.
Option D → Charity unrelated.

🎯 Strategy

Used

Legal Principle Recall

Application:

�� Apply fiduciary duty principle.

Final Logic:

�� Firm property profits belong to firm.

🧠 Memory Trick

"Firm Profit Cannot Become Personal"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Rights and Duties – Page reference may vary by edition.

17 Regarding the admission of a new partner under normal circumstances:
I. A new partner can be easily admitted without anyone else's consent if they bring massive capital.
II. A new partner is generally admitted only following the rules laid down in the deed, which normally requires the consent of existing partners.

A Both statements are true

B Only statement I is true

C Only statement II is true

D Neither statement is true

💡 Short Explanation

Consent of existing partners required. Capital contribution alone insufficient. Deed provisions apply.

✅ Correct Answer Explanation

Statement I is false because admission requires partner consent. Statement II is true because admission follows deed provisions. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Statement I false.
Option B → Statement II true.
Option D → Statement II valid.

🎯 Strategy

Used

Statement Verification

Application:

�� Evaluate admission rules carefully.

Final Logic:

�� Consent governs admission.

🧠 Memory Trick

"No Admission Without Permission"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Admission Rules – Page reference may vary by edition.

18 The specific provision detailing the "Method of settlement of disputes among partners" in a deed essentially serves as a:

A Tax evasion mechanism

B Profit maximization strategy

C Guarantee against business insolvency

D Pre-agreed conflict resolution framework to avoid litigation

💡 Short Explanation

Deed provides dispute mechanisms. Helps avoid court litigation. Promotes smooth operations.

✅ Correct Answer Explanation

Dispute settlement clauses create pre-agreed procedures for resolving conflicts efficiently. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Illegal purpose.
Option B → Not profit strategy.
Option C → Insolvency unrelated.

🎯 Strategy

Used

Conceptual Understanding

Application:

�� Identify purpose of dispute clause.

Final Logic:

�� Clause avoids legal conflicts.

🧠 Memory Trick

"Dispute Clause Prevents Litigation"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Dispute Settlement – Page reference may vary by edition.

19 A partner steadily withdraws a fixed amount of Rs 10,000 uniformly at the end of each month. If the deed dictates an interest rate of 12% p.a., what is the total interest on his drawings for the year?

A Rs 7,200

B Rs 6,600

C Rs 7,800

D Rs 6,000

💡 Short Explanation

End-month drawings use 5.5 months. Total annual drawings calculated first. Average-period method applied.

✅ Correct Answer Explanation

Total Drawings: 10000 × 12 = 120000 Interest: 120000 × 12% × (5.5/12) = 6600 120000 × (12/100) × (5.5/12) = 6600 Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Incorrect average period.
Option C → Over-calculation.
Option D → Under-calculation.

🎯 Strategy

Used

Substitution

Application:

�� Use average-period formula.

Final Logic:

�� Interest on drawings = Rs. 6,600.

🧠 Memory Trick

"End-Month Drawings = 5.5 Months"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Interest on Drawings – Page reference may vary by edition.

20 To legally alter the core clauses of a standing partnership deed, what level of consensus is strictly required among the existing partners?

A The explicit consent of all the partners

B A simple majority vote

C The sole binding decision of the managing partner

D No consent is required; it can be changed arbitrarily

💡 Short Explanation

Partnership based on mutual agreement. Core changes require unanimous consent. Majority alone insufficient.

✅ Correct Answer Explanation

Since partnership arises from agreement, alteration of core deed clauses requires consent of all partners. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Majority rule insufficient.
Option C → Managing partner cannot decide alone.
Option D → Arbitrary changes invalid.

🎯 Strategy

Used

Legal Principle Recall

Application:

�� Apply mutual consent principle.

Final Logic:

�� All partners must agree.

🧠 Memory Trick

"Agreement Changes Need Agreement"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Registration and Alteration – Page reference may vary by edition.

CUET UG Accountancy Booster Test 2 Partnership Deed and Legal Provisions

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