CUET UG Accountancy Booster Test 1 Distribution of Profit and Adjustments -

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CUET UG Accountancy Booster Test 1 Distribution of Profit and Adjustments

⏱️ 30 Minutes

❓ 20 Questions

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

CUET UG Accountancy Booster Test 1 Distribution of Profit and Adjustments

1 / 20

QUESTION 1 OF 20

Arrange the steps for distributing profit when a new partner is admitted with a guaranteed profit:
1. Calculate deficiency
2. Calculate new profit sharing ratio
3. Deduct deficiency from guaranteeing partners
4. Add deficiency to new partner's share

Answer Review

1 Arrange the steps for distributing profit when a new partner is admitted with a guaranteed profit:
1. Calculate deficiency
2. Calculate new profit sharing ratio
3. Deduct deficiency from guaranteeing partners
4. Add deficiency to new partner's share

A 1, 2, 3, 4

B 2, 1, 3, 4

C 2, 3, 1, 4

D 4, 3, 1, 2

💡 Short Explanation

New ratio determined first. Deficiency calculated afterward. Guarantee adjustment made finally.

✅ Correct Answer Explanation

Correct sequence: Calculate new profit-sharing ratio Calculate deficiency Deduct deficiency from guarantors Add deficiency to new partner's share Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Ratio should come first.
Option C → Deficiency cannot deduct before calculation.
Option D → Adjustment sequence reversed.

🎯 Strategy

Used

Sequential Logic

Application:

�� Arrange guarantee adjustment process logically.

Final Logic:

�� Ratio determination must precede deficiency calculation.

🧠 Memory Trick

"Ratio → Deficiency → Deduction → Addition"

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

2 In the absence of a partnership deed, if Partner A contributes Rs. 5,00,000 and Partner B contributes Rs. 1,00,000, how will a profit of Rs. 60,000 be distributed?

A Rs. 50,000 to A, Rs. 10,000 to B

B Rs. 40,000 to A, Rs. 20,000 to B

C Rs. 60,000 to A, Rs. 0 to B

D Rs. 30,000 to A, Rs. 30,000 to B

💡 Short Explanation

No deed means equal sharing. Capital contribution ignored. Default rule applies.

✅ Correct Answer Explanation

Under the Indian Partnership Act, profits are shared equally if no ratio is specified. 60000 ÷ 2 = 30000 60000 ÷ 2 = 30000 Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Capital ratio not automatic.
Option B → Unequal sharing unsupported.
Option C → Entire profit cannot go to one partner.

🎯 Strategy

Used

Legal Provision Recall

Application:

�� Apply equal-sharing rule.

Final Logic:

�� Profits divided equally.

🧠 Memory Trick

"Silent Deed = Equal Share"

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

3 Match the interest rate rules in the absence of a partnership deed.

List 1	List 2
1. Interest on Capital	a. 6% per annum
2. Interest on Partner's Loan	b. Not provided
3. Interest on Drawings	c. Not allowed
4. Remuneration to partner	d. Not charged

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

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

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

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

💡 Short Explanation

Interest on capital not allowed. Loan interest allowed at 6%. No remuneration without agreement.

✅ Correct Answer Explanation

Correct matching: Interest on capital → Not allowed Partner's loan → 6% p.a. Interest on drawings → Not charged Remuneration → Not provided Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Interest rules mismatched.
Option C → Loan interest incorrect.
Option D → Entire sequence incorrect.

🎯 Strategy

Used

Option Grouping

Application:

�� Match statutory rules carefully.

Final Logic:

�� Partnership Act provisions determine matching.

🧠 Memory Trick

"Loan Gets 6%, Salary Gets Nothing"

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

4 A partner is entitled to a commission of Rs. 5,000, and another partner gets a salary of Rs. 1,000 per month. If net profit is Rs. 35,660 and interest on drawings is Rs. 540, what is the profit remaining for distribution (assuming no interest on capital)?

A Rs. 36,200

B Rs. 24,200

C Rs. 19,200

D Rs. 29,200

💡 Short Explanation

Add interest on drawings. Deduct commission and salary. Remaining balance distributable.

✅ Correct Answer Explanation

Calculation: Salary: 1000 × 12 = 12000 Remaining Profit: 35660 + 540 - 5000 - 12000 = 19200 35660 + 540 - 5000 - 12000 = 19200 Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Ignores deductions.
Option B → Miscalculation.
Option D → Incorrect adjustment.

🎯 Strategy

Used

Substitution

Application:

�� Add incomes and deduct appropriations.

Final Logic:

�� Final distributable profit = Rs. 19,200.

🧠 Memory Trick

"Add Drawings Interest, Deduct Appropriations"

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

5 Why is a Profit and Loss Appropriation Account prepared exclusively in partnerships and not typically in sole proprietorships?

A Because sole proprietorships do not earn profits.

B Because partnerships have limited liability.

C Because the Indian Partnership Act explicitly mandates this exact account name.

D Because partnership profits must be adjusted for partner-specific items like interest on capital and salary before distribution.

💡 Short Explanation

Partnership needs profit adjustments. Partner-specific appropriations exist. Sole proprietorship lacks such division.

✅ Correct Answer Explanation

Partnership firms require appropriation accounts to adjust items such as salary, commission, and interest before final distribution. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Sole proprietorships earn profits.
Option B → Partnerships do not have limited liability generally.
Option C → Exact account name not legally mandatory.

🎯 Strategy

Used

Conceptual Understanding

Application:

�� Identify need for appropriation account.

Final Logic:

�� Multiple partners require adjustments before distribution.

🧠 Memory Trick

"Appropriation Means Partner Adjustments"

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

6 Assertion (A): The Profit and Loss Appropriation Account shows how profits are distributed among partners.
Reason (R): It starts with the net profit or net loss brought down from the Profit and Loss Account.

A Both A and R are true, and R explains A.

B Both A and R are true, but R does not explain A.

C A is true, R is false.

D A is false, R is true.

💡 Short Explanation

Both statements are correct. Reason does not explain distribution purpose. Only starting balance described.

✅ Correct Answer Explanation

Assertion is true because appropriation account distributes profits. Reason is also true because it begins with net profit/loss from P&L Account. However, Reason does not directly explain Assertion. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Reason incomplete explanation.
Option C → Reason true.
Option D → Assertion true.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

�� Check explanatory relationship carefully.

Final Logic:

�� Both true but not explanatory.

🧠 Memory Trick

"True but Not Explaining"

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

7 Which equation correctly represents the divisible profit in the P&L Appropriation Account?

A Divisible Profit = Net Profit + Interest on Drawings - (Interest on Capital + Salary + Commission)

B Divisible Profit = Net Profit - Interest on Drawings + Interest on Capital

C Divisible Profit = Net Profit + Salary - Commission

D Divisible Profit = Net Loss + Interest on Drawings + Salary

💡 Short Explanation

Drawings interest increases profit. Appropriations reduce profit. Final balance becomes divisible profit.

✅ Correct Answer Explanation

Formula: Divisible Profit = Net Profit + Interest on Drawings − (Interest on Capital + Salary + Commission) Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Interest on capital should reduce profit.
Option C → Incomplete formula.
Option D → Net loss formula incorrect.

🎯 Strategy

Used

Formula Recognition

Application:

�� Recall divisible profit structure.

Final Logic:

�� Add incomes, deduct appropriations.

🧠 Memory Trick

"Add Drawings Interest, Deduct Appropriations"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: Starting with Net Profit – Page reference may vary by edition.

8 Consider the journal entries for past adjustments:
I. Debit the partner's capital account who received a short credit.
II. Credit the partner's capital account who received a short credit.
Which statement is true regarding rectification of errors?

A Only I is true

B Both I and II are true

C Only II is true

D Both I and II are false

💡 Short Explanation

Short credit means partner received less. Rectification requires crediting partner. Debit would worsen shortage.

✅ Correct Answer Explanation

A partner who received a short credit must be credited during rectification. Hence, Statement II is correct.

❓ Why Other Options Are Incorrect

Option A → Debit treatment incorrect.
Option B → Both cannot be correct.
Option D → Statement II true.

🎯 Strategy

Used

Logical Accounting Analysis

Application:

�� Identify corrective entry.

Final Logic:

�� Short credit requires additional credit.

🧠 Memory Trick

"Short Credit Needs More Credit"

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

📄 Passage

"When there are both addition and withdrawal of capital by the partners during a financial year, the interest on capital is calculated as follows: On the opening balance of the capital accounts of partners, interest is calculated for the whole year. On the additional capital brought in by any partner during the year, interest is calculated from the date of introduction to the last day of the financial year."

Based on the passage, if a partner introduces additional capital on October 1st (financial year ends March 31st), for how many months will interest be calculated on this addition?

A 12 months

B 3 months

C 9 months

D 6 months

💡 Short Explanation

Interest calculated from introduction date. October to March equals six months. Time basis used.

✅ Correct Answer Explanation

Additional capital introduced on October 1 earns interest from October to March. Total period = 6 months. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Full year incorrect.
Option B → Too short.
Option C → Incorrect count.

🎯 Strategy

Used

Passage-Based Calculation

Application:

�� Count months from introduction date.

Final Logic:

�� October–March = 6 months.

🧠 Memory Trick

"October to March = 6"

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

📄 Passage

How is interest calculated on the opening balance according to the passage?

A From the date of addition of capital

B For the whole year

C Only for 6 months

D It is not calculated at all

💡 Short Explanation

Opening capital exists throughout year. Full-year interest applicable. Standard accounting treatment.

✅ Correct Answer Explanation

The passage states clearly that opening capital earns interest for the whole year. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Applies to additional capital only.
Option C → Incorrect duration.
Option D → Interest is calculated.

🎯 Strategy

Used

Passage-Based Extraction

Application:

�� Identify direct statement.

Final Logic:

�� Opening balance gets full-year interest.

🧠 Memory Trick

"Opening Capital = Full Year Interest"

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

11 Charging interest on drawings is primarily meant to:

A Increase the partners' fixed capital balances.

B Reward partners for frequent withdrawals.

C Discourage excessive amounts of drawings by the partners.

D Ensure compliance with the Stamp Act.

💡 Short Explanation

Drawings reduce firm funds. Interest discourages over-withdrawals. Protects business liquidity.

✅ Correct Answer Explanation

Interest on drawings discourages partners from withdrawing excessive business funds for personal use. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Drawings reduce balances.
Option B → Opposite objective.
Option D → Stamp Act unrelated.

🎯 Strategy

Used

Conceptual Understanding

Application:

�� Identify purpose behind charging interest.

Final Logic:

�� Interest acts as deterrent.

🧠 Memory Trick

"Interest Discourages Drawings"

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

12 If a partner withdraws Rs. 30,000 at the beginning of each quarter, what is the total interest on drawings at 8% p.a. for the year? (Use the average period method)

A Rs. 6,000

B Rs. 3,600

C Rs. 4,800

D Rs. 2,400

💡 Short Explanation

Beginning-quarter withdrawals use 7.5 months. Interest calculated on total drawings. Average period method applied.

✅ Correct Answer Explanation

Total Drawings: 30000 × 4 = 120000 Interest: 120000 × 8% × (7.5/12) = 6000 120000 × (8/100) × (7.5/12) = 6000 Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Incorrect average period.
Option C → Miscalculation.
Option D → Understated interest.

🎯 Strategy

Used

Substitution

Application:

�� Use average-period method.

Final Logic:

�� Beginning-quarter drawings produce Rs. 6,000 interest.

🧠 Memory Trick

"Quarter Beginning = 7.5 Months"

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

13 A and B are partners. A is to be paid a salary of Rs. 10,000 per month. Net profit before this salary is Rs. 1,50,000. Assuming no other appropriations, what is the divisible profit remaining?

A Rs. 1,50,000

B Rs. 1,40,000

C Rs. 30,000

D Rs. 1,20,000

💡 Short Explanation

Annual salary deducted first. Remaining amount becomes divisible profit. Salary is appropriation.

✅ Correct Answer Explanation

Annual Salary: 10000 × 12 = 120000 Divisible Profit: 150000 - 120000 = 30000 150000 - (10000 × 12) = 30000 Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Salary ignored.
Option B → Incorrect deduction.
Option D → Miscalculation.

🎯 Strategy

Used

Substitution

Application:

�� Deduct annual salary from profit.

Final Logic:

�� Remaining divisible profit = Rs. 30,000.

🧠 Memory Trick

"Profit Minus Salary = Divisible Profit"

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

14 Arrange the steps for adjusting a partner's salary in the books:
1. Transfer the salary to Profit and Loss Appropriation Account.
2. Calculate the total annual salary.
3. Check if the partnership deed allows for salary.
4. Credit the Partner's Capital/Current Account.

A 2, 3, 1, 4

B 3, 4, 1, 2

C 1, 2, 3, 4

D 3, 2, 4, 1

💡 Short Explanation

Check deed first. Salary calculated next. Partner credited before appropriation transfer.

✅ Correct Answer Explanation

Correct sequence: Verify deed provision Calculate annual salary Credit partner account Transfer through appropriation account Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Deed should be checked first.
Option B → Credit cannot occur before calculation.
Option C → Entire order incorrect.

🎯 Strategy

Used

Sequential Logic

Application:

�� Arrange accounting treatment logically.

Final Logic:

�� Authorization precedes calculation.

🧠 Memory Trick

"Check → Calculate → Credit → Transfer"

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

15 A partner's commission is considered a:

A Charge against profit

B Appropriation of profit

C Liability to third parties

D Direct business expense in the Trading Account

💡 Short Explanation

Commission distributed from profit. It is not normal business expense. Partner-related appropriation.

✅ Correct Answer Explanation

Partner's commission is an appropriation of profit because it is paid after determining business profit. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Charge against profit applies to loan interest.
Option C → Third-party liability unrelated.
Option D → Trading account not involved.

🎯 Strategy

Used

Conceptual Understanding

Application:

�� Distinguish appropriations from expenses.

Final Logic:

�� Partner commission appropriates profit.

🧠 Memory Trick

"Commission Comes From Profit"

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

16 Match the transactions with their correct entry in the P&L Appropriation Account.

List 1	List 2
1. Interest on Drawings	a. Credited
2. Interest on Capital	b. Debited
3. Net Loss from P&L A/c	c. Debited
4. Partner's Salary	d. Debited

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

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

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

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

💡 Short Explanation

Interest on drawings increases profit. Other items reduce distributable profit. Correct debit-credit classification required.

✅ Correct Answer Explanation

Correct matching: Interest on Drawings → Credited Interest on Capital → Debited Net Loss → Debited Partner Salary → Debited Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Interest on drawings incorrectly debited.
Option C → Net loss incorrectly credited.
Option D → Entire sequence incorrect.

🎯 Strategy

Used

Option Grouping

Application:

�� Match account treatment carefully.

Final Logic:

�� Only drawings interest appears on credit side.

🧠 Memory Trick

"Drawings Interest Adds Profit"

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

17 The formula for distributing a final divisible profit to Partner X in a ratio of X:Y is:

A Divisible Profit × (Y / (X+Y))

B Divisible Profit × (X / (X+Y))

C Divisible Profit × X

D Divisible Profit / X

💡 Short Explanation

Ratio share based on total parts. X receives proportional fraction. Standard ratio formula used.

✅ Correct Answer Explanation

Formula: Partner X Share = Divisible Profit × (X / (X + Y)) Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Gives Y's share.
Option C → Incomplete formula.
Option D → Incorrect method.

🎯 Strategy

Used

Formula Recognition

Application:

�� Apply ratio-sharing formula.

Final Logic:

�� Share determined proportionately.

🧠 Memory Trick

"Own Ratio Over Total Ratio"

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

18 Which of the following statements about loss sharing are true?
I. Losses are shared in the capital ratio automatically.
II. If a deed is silent, losses are shared equally.

A Only I

B Neither I nor II

C Both I and II

D Only II

💡 Short Explanation

Capital ratio not automatic. Silent deed means equal sharing. Default law applies.

✅ Correct Answer Explanation

Statement I is false because losses are not automatically shared in capital ratio. Statement II is true because equal sharing applies when deed is silent. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Statement I false.
Option B → Statement II true.
Option C → Statement I incorrect.

🎯 Strategy

Used

Statement Verification

Application:

�� Evaluate each statement separately.

Final Logic:

�� Equal sharing rule governs silent deeds.

🧠 Memory Trick

"No Ratio = Equal Loss"

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

19 Assertion (A): If a firm suffers a net loss, interest on capital is not allowed.
Reason (R): Interest on capital is an appropriation of profits and can only be provided out of available profits.

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 of A.

C A is true, but R is false.

D A is false, but R is true.

💡 Short Explanation

Interest on capital needs profits. Loss situation restricts appropriations. Reason correctly explains assertion.

✅ Correct Answer Explanation

Interest on capital is an appropriation of profit and is generally allowed only when sufficient profit exists. 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 also true.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

�� Verify explanatory connection.

Final Logic:

�� Profit appropriations require available profits.

🧠 Memory Trick

"No Profit = No Interest on Capital"

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

20 Profit is Rs. 14,000. Interest on capital due to A is Rs. 12,000 and to B is Rs. 16,000. How much interest will A receive?

A Rs. 12,000

B Rs. 8,000

C Rs. 6,000

D Rs. 7,000

💡 Short Explanation

Available profit insufficient. Interest distributed proportionately. A receives proportional share.

✅ Correct Answer Explanation

Total Interest Due: 12000 + 16000 = 28000 A's Share: 14000 × (12000 / 28000) = 6000 14000 × (12000 / 28000) = 6000 Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Full amount unavailable.
Option B → Incorrect ratio.
Option D → Miscalculation.

🎯 Strategy

Used

Ratio Substitution

Application:

�� Distribute available profit proportionately.

Final Logic:

�� A receives Rs. 6,000 proportionately.

🧠 Memory Trick

"Insufficient Profit = Proportionate Interest"

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

CUET UG Accountancy Booster Test 1 Distribution of Profit and Adjustments

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