CUET UG Accountancy Test 2 Provisions of Partnership Act & Accounting Basics -

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CUET UG Accountancy Booster Test 2 Provisions of Partnership Act & Accounting Basics

⏱️ 30 Minutes

❓ 20 Questions

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

CUET UG Accountancy Booster Test 2 Provisions of Partnership Act & Accounting Basics

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QUESTION 1 OF 20

📄 Passage

Read the following passage and answer Question 1: There are two methods by which the capital accounts of partners can be maintained: fixed capital method, and fluctuating capital method. Under the fluctuating capital method, only one account, i.e. capital account is maintained for each partner. All the adjustments such as share of profit and loss, interest on capital, drawings, interest on drawings, salary or commission to partners, etc are recorded directly in the capital accounts of the partners. This makes the balance in the capital account to fluctuate from time to time.

Based on the passage, what distinguishes the fluctuating capital method from the fixed capital method?

Answer Review

📄 Passage

Based on the passage, what distinguishes the fluctuating capital method from the fixed capital method?

A It requires maintaining a separate Current Account

B Balances never change year after year

C Drawings are never recorded in the books

D All adjustments are recorded directly in a single capital account for each partner

💡 Short Explanation

Only one capital account maintained. All adjustments entered directly. Balance fluctuates continuously.

✅ Correct Answer Explanation

Under the fluctuating capital method, all items like profit, drawings, salary, and interest are recorded directly in the partner's capital account. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Separate Current Account used in fixed method.
Option B → Balances fluctuate regularly.
Option C → Drawings are recorded.

🎯 Strategy

Used

Passage-Based Extraction

Application:

�� Identify defining feature of fluctuating method.

Final Logic:

�� One account handles all adjustments.

🧠 Memory Trick

"Fluctuating = One Account for Everything"

📚 Read the following passage and answer Question 2: There are two methods by which the capital accounts of partners can be maintained: fixed capital method, and fluctuating capital method. Under the fluctuating capital method, only one account, i.e. capital account is maintained for each partner. All the adjustments such as share of profit and loss, interest on capital, drawings, interest on drawings, salary or commission to partners, etc are recorded directly in the capital accounts of the partners. This makes the balance in the capital account to fluctuate from time to time.

📄 Passage

Read the following passage and answer Question 2: There are two methods by which the capital accounts of partners can be maintained: fixed capital method, and fluctuating capital method. Under the fluctuating capital method, only one account, i.e. capital account is maintained for each partner. All the adjustments such as share of profit and loss, interest on capital, drawings, interest on drawings, salary or commission to partners, etc are recorded directly in the capital accounts of the partners. This makes the balance in the capital account to fluctuate from time to time.

According to the passage, interest on drawings is an adjustment recorded in the capital account. If the partnership deed is completely silent regarding drawings, what amount is recorded for interest on drawings?

A 6% per annum on the average balance

B 10% per annum on the total drawings

C Nil, as no interest is to be charged without a mention in the deed

D The amount equal to the partner's salary

💡 Short Explanation

Interest on drawings requires agreement. Silent deed means no charge. Default amount becomes nil.

✅ Correct Answer Explanation

If the partnership deed does not mention interest on drawings, no interest is charged. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → No default 6% rule.
Option B → No statutory 10% rule.
Option D → Salary unrelated.

🎯 Strategy

Used

Legal Provision Recall

Application:

�� Apply default rule when deed silent.

Final Logic:

�� No agreement means no interest.

🧠 Memory Trick

"Silent Deed = No Drawings Interest"

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

3 Reena and Raman have capitals of Rs. 3,00,000 and Rs. 1,00,000. Profit before paying rent to Reena (Rs. 5,000 per month) is Rs. 1,80,000. The deed is silent on profit sharing. What is Raman's calculated share of profit after charging rent (assuming no other appropriations)?

A Rs. 90,000

B Rs. 60,000

C Rs. 1,20,000

D Rs. 30,000

💡 Short Explanation

Rent deducted first. Remaining profit shared equally. Silent deed means equal sharing.

✅ Correct Answer Explanation

Annual Rent to Reena: 5000 × 12 = 60000 Remaining Profit: 180000 - 60000 = 120000 Raman's Share: 120000 ÷ 2 = 60000 (180000 - 60000) ÷ 2 = 60000 Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Entire profit not equally adjusted.
Option C → Impossible for equal share.
Option D → Under-calculated.

🎯 Strategy

Used

Sequential Calculation

Application:

�� Deduct rent before equal division.

Final Logic:

�� Raman receives Rs. 60,000.

🧠 Memory Trick

"Appropriations First, Sharing Next"

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

4 Match the following:

List 1	List 2
1. No agreement on profit sharing	a. 6% p.a.
2. No agreement on loan interest	b. Not entitled
3. No agreement on capital interest	c. Shared equally
4. No agreement on partner salary	d. Not payable

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

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

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

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

💡 Short Explanation

Profit shared equally by default. Loan interest allowed at 6%. Salary needs agreement.

✅ Correct Answer Explanation

Correct matching: Profit sharing → Shared equally Loan interest → 6% p.a. Capital interest → Not payable Partner salary → Not entitled Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Profit-sharing incorrect.
Option C → Loan interest mismatched.
Option D → Entire sequence incorrect.

🎯 Strategy

Used

Option Grouping

Application:

�� Match default Partnership Act rules.

Final Logic:

�� Only Option A follows statutory provisions.

🧠 Memory Trick

"Loan Gets 6%, Salary Gets Nothing"

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

5 Assertion (A): If a firm suffers a net loss, no interest on capital is allowed to partners even if the deed provides for it @ 8% p.a.
Reason (R): Interest on capital is an appropriation of profit and is allowed only when the firm has earned profit, unless stated as a charge.

A A is true but R is false

B A is false but R is true

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

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

💡 Short Explanation

Interest on capital depends on profits. It is appropriation, not expense. Reason correctly explains assertion.

✅ Correct Answer Explanation

Interest on capital is generally allowed only out of profits because it is an appropriation of profit. Hence, both Assertion and Reason are true, and Reason correctly explains Assertion.

❓ Why Other Options Are Incorrect

Option A → Reason true.
Option B → Assertion true.
Option C → Reason directly explains.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

�� Check explanatory relationship.

Final Logic:

�� No profits means no interest on capital.

🧠 Memory Trick

"Appropriation Needs Profit"

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

6 Saloni's capital on April 1 is Rs. 2,00,000. She added Rs. 50,000 on July 1, and withdrew Rs. 30,000 on October 1. Interest is 8% p.a. What is the calculated interest payable to Saloni for the year?

A Rs. 16,000

B Rs. 17,800

C Rs. 18,500

D Rs. 20,000

💡 Short Explanation

Opening capital earns full-year interest. Additional capital earns 9 months. Withdrawal reduces interest.

✅ Correct Answer Explanation

Opening Capital Interest: 200000 × 8% = 16000 Additional Capital Interest: 50000 × 8% × (9/12) = 3000 Withdrawal Reduction: 30000 × 8% × (6/12) = 1200 Net Interest: 16000 + 3000 - 1200 = 17800 16000 + 3000 - 1200 = 17800 Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Ignores additions.
Option C → Over-calculation.
Option D → Withdrawal ignored.

🎯 Strategy

Used

Stepwise Calculation

Application:

�� Add additional interest and subtract withdrawal effect.

Final Logic:

�� Total interest payable = Rs. 17,800.

🧠 Memory Trick

"Add Additions, Reduce Withdrawals"

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

7 Shahnaz withdrew the following: Apr 1 (Rs. 16,000), Jun 30 (Rs. 15,000), Oct 31 (Rs. 10,000), Dec 31 (Rs. 14,000), Mar 1 (Rs. 11,000). Interest is 7% p.a. Using the product method calculation, what is the total of products? (Year ends March 31).

A Rs. 3,50,000

B Rs. 4,00,000

C Rs. 4,30,000

D Rs. 5,00,000

💡 Short Explanation

Multiply drawings by months remaining. Sum all products together. Product method applied.

✅ Correct Answer Explanation

Products: 16000 × 12 = 192000 15000 × 9 = 135000 10000 × 5 = 50000 14000 × 3 = 42000 11000 × 1 = 11000 Total: 192000 + 135000 + 50000 + 42000 + 11000 = 430000 192000 + 135000 + 50000 + 42000 + 11000 = 430000 Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Under-calculated.
Option B → Missing products.
Option D → Over-calculated.

🎯 Strategy

Used

Product Method

Application:

�� Multiply drawings by applicable months.

Final Logic:

�� Total product = Rs. 4,30,000.

🧠 Memory Trick

"Drawing × Time = Product"

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

8 If a partner advances a loan to the firm, how is the concept of interest on this loan correctly treated in the financial statements?

A It is a charge against profit and debited to the Profit and Loss Account

B It is an appropriation of profit and debited to the P&L Appropriation Account

C It is credited directly to the Partner's Drawings Account

D It is ignored if the firm makes a loss

💡 Short Explanation

Loan interest treated as expense. Paid irrespective of profits. Debited to P&L Account.

✅ Correct Answer Explanation

Interest on partner's loan is a charge against profit and is debited to the Profit and Loss Account. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Not appropriation.
Option C → Drawings unrelated.
Option D → Loan interest payable even in loss.

🎯 Strategy

Used

Conceptual Distinction

Application:

�� Differentiate appropriation from charge.

Final Logic:

�� Loan interest is business expense.

🧠 Memory Trick

"Loan Interest = Expense"

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

9 Which multiple statements are true regarding the 6% statutory rate on partner loans?
1. It applies when the partnership deed is oral and silent on the rate.
2. It applies only if the firm makes a profit.
3. It is credited to the partner's loan account or capital account.

A 1 and 2 only

B 2 and 3 only

C Only 3

D 1 and 3 only

💡 Short Explanation

6% applies when deed silent. Loan interest payable even in loss. Credited to partner account.

✅ Correct Answer Explanation

Statement 1 is true because 6% applies if deed silent. Statement 2 is false because loan interest is payable regardless of profit. Statement 3 is true because interest is credited to partner account. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Statement 2 false.
Option B → Statement 1 also true.
Option C → Statement 1 omitted.

🎯 Strategy

Used

Statement Verification

Application:

�� Apply statutory loan-interest rules.

Final Logic:

�� Only statements 1 and 3 correct.

🧠 Memory Trick

"Loan Interest Paid Even in Loss"

📚 Class XII – Accountancy Part 1 – Chapter: Accounting for Partnership: Basic Concepts – Topic: 6% Statutory Rate – Page reference may vary by edition.

10 Arrange the sequence of order of distribution in the Profit and Loss Appropriation Account:
1. Transfer net profit from P&L Account.
2. Credit Interest on Drawings.
3. Distribute the final residual profit to capital accounts.
4. Debit Partner's Salary (if agreed).

A 1, 2, 4, 3

B 1, 4, 2, 3

C 4, 1, 2, 3

D 2, 1, 4, 3

💡 Short Explanation

Net profit transferred first. Interest on drawings credited next. Final profit distributed last.

✅ Correct Answer Explanation

Correct sequence: Transfer net profit Credit interest on drawings Debit partner salary Distribute residual profit Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Salary should follow drawings interest.
Option C → Net profit must begin process.
Option D → Net profit transfer cannot come second.

🎯 Strategy

Used

Sequential Logic

Application:

�� Arrange appropriation procedure.

Final Logic:

�� Profit transfer starts the account.

🧠 Memory Trick

"Profit → Drawings → Salary → Share"

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

11 For a partner to receive a commission based on net profits, what condition must be true?

A They must be the oldest partner

B There must be an express provision for it in the Partnership Deed

C They must have advanced a loan to the firm

D They must use the fluctuating capital method

💡 Short Explanation

Commission requires agreement. Deed authorization essential. No automatic entitlement exists.

✅ Correct Answer Explanation

A partner receives commission only if expressly provided in the partnership deed. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Seniority irrelevant.
Option C → Loan unrelated.
Option D → Capital method unrelated.

🎯 Strategy

Used

Legal Provision Recall

Application:

�� Identify condition for remuneration.

Final Logic:

�� Deed provision mandatory.

🧠 Memory Trick

"No Deed Clause, No Commission"

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

12 If a partner makes a secret profit of Rs. P from a firm transaction, and the firm's unadjusted net profit is Rs. N, what is the formulated total net profit available for distribution to all partners?

A N - P

B N × P

C N + P

D P / N

💡 Short Explanation

Secret profit belongs to firm. Added back to business profit. Distributed among partners.

✅ Correct Answer Explanation

Since secret profit belongs to the firm, total distributable profit becomes: N + P Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Profit not deducted.
Option B → Multiplication meaningless.
Option D → Division irrelevant.

🎯 Strategy

Used

Formula Interpretation

Application:

�� Add recoverable secret profit.

Final Logic:

�� Secret profit increases firm profit.

🧠 Memory Trick

"Secret Profit Returns to Firm"

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

13 The Indian Partnership Act implies that a partner cannot use the firm's property for personal profit because:

A The property belongs to the government

B It violates the Companies Act 2013

C A partner has no right to enter the firm's premises

D There exists a relationship of mutual agency and trust among partners

💡 Short Explanation

Partnership based on trust. Partners must act honestly. Personal misuse prohibited.

✅ Correct Answer Explanation

Partnership involves fiduciary trust and mutual agency, preventing personal misuse of firm property. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Property belongs to firm.
Option B → Companies Act unrelated.
Option C → Partners have access rights.

🎯 Strategy

Used

Conceptual Understanding

Application:

�� Identify ethical basis of rule.

Final Logic:

�� Trust relationship restricts misuse.

🧠 Memory Trick

"Trust Prevents Personal Gain"

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

14 A partner operates a competing business and earns Rs. 50,000 profit. Later, the business incurs a Rs. 20,000 loss. Under the standard rules of concept correctness, what must the partner account for to the firm?

A Only the profits made (Rs. 50,000), while bearing the loss personally

B The net amount of Rs. 30,000

C The firm must cover the Rs. 20,000 loss

D Nothing, as the businesses are separate

💡 Short Explanation

Competing profits belong to firm. Personal losses remain personal. Netting not allowed.

✅ Correct Answer Explanation

A partner must hand over competing business profits to the firm, but personal losses are borne individually. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Loss cannot offset liability.
Option C → Firm not responsible.
Option D → Competing business restricted.

🎯 Strategy

Used

Legal Duty Application

Application:

�� Apply competing-business rule.

Final Logic:

�� Profit transferred, loss personal.

🧠 Memory Trick

"Firm Gets Profit, Partner Bears Loss"

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

15 If a partner fails to account for profits made from a competing business, they are primarily violating:

A The Stamp Act rules

B The maximum partner limit of 50

C The implied provisions of the Indian Partnership Act, 1932 regarding partner duties

D The rules regarding fixed capital accounts

💡 Short Explanation

Partner duties arise under Act. Competing profits must be disclosed. Fiduciary obligation breached.

✅ Correct Answer Explanation

Failure to disclose competing profits violates partner duties under the Indian Partnership Act. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Stamp Act unrelated.
Option B → Partner limit irrelevant.
Option D → Capital accounts unrelated.

🎯 Strategy

Used

Legal Principle Recall

Application:

�� Identify breached duty.

Final Logic:

�� Competing profit concealment violates Act.

🧠 Memory Trick

"Hidden Competing Profit = Duty Violation"

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

16 Mohit, Rohan, and Rahul are partners (2:1:1). Rahul is guaranteed a minimum profit of Rs. 50,000. Net profit is Rs. 1,60,000. How much calculation of deficiency will Mohit bear if Mohit and Rohan bear it in their mutual ratio (2:1)?

A Rs. 10,000

B Rs. 6,667

C Rs. 3,333

D Rs. 5,000

💡 Short Explanation

Rahul's normal share calculated first. Deficiency shared by Mohit and Rohan. Ratio 2:1 applied.

✅ Correct Answer Explanation

Rahul's Normal Share: 160000 × (1/4) = 40000 Deficiency: 50000 - 40000 = 10000 Mohit's Share: 10000 × (2/3) = 6667 10000 × (2/3) ≈ 6667 Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Entire deficiency incorrect.
Option C → Rohan's share.
Option D → Equal division not applicable.

🎯 Strategy

Used

Sequential Ratio Calculation

Application:

�� Compute deficiency then distribute.

Final Logic:

�� Mohit bears Rs. 6,667.

🧠 Memory Trick

"Guarantee Deficiency Shared Separately"

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

17 Rameez and Zaheer (equal partners) omitted 6% p.a. interest on capitals of Rs. 50,000 and Rs. 1,00,000. What is the calculated net adjustment entry required?

A Debit Rameez Rs. 3,000, Credit Zaheer Rs. 3,000

B Debit Zaheer Rs. 1,500, Credit Rameez Rs. 1,500

C Debit Rameez Rs. 1,500, Credit Zaheer Rs. 1,500

D Debit P&L Adj Rs. 9,000, Credit Zaheer Rs. 9,000

💡 Short Explanation

Interest omitted on capitals. Zaheer entitled to larger amount. Net adjustment required.

✅ Correct Answer Explanation

Interest on Capitals: Rameez: 50000 × 6% = 3000 Zaheer: 100000 × 6% = 6000 Difference: 6000 - 3000 = 3000 Equal sharing means net adjustment = Rs. 1,500. Hence, Rameez is debited and Zaheer credited Rs. 1,500.

❓ Why Other Options Are Incorrect

Option A → Over-adjustment.
Option B → Reverse entry.
Option D → Incorrect treatment.

🎯 Strategy

Used

Past Adjustment Logic

Application:

�� Calculate omitted entitlement.

Final Logic:

�� Net adjustment favors Zaheer.

🧠 Memory Trick

"Higher Capital Gets Higher Adjustment"

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

18 When a firm guarantees a minimum profit to an incoming partner during admission, this is a feature of which broader conceptual accounting aspect?

A Dissolution of the firm

B Valuation of sole proprietorship

C Preparation of a trial balance

D Reconstitution of the Partnership Firm

💡 Short Explanation

Admission changes partnership structure. Guarantee linked with new partner admission. Reconstitution occurs.

✅ Correct Answer Explanation

Guaranteeing minimum profit to an incoming partner arises during reconstitution of the partnership firm. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Firm continues.
Option B → Sole proprietorship unrelated.
Option C → Trial balance unrelated.

🎯 Strategy

Used

Concept Classification

Application:

�� Identify broader accounting area.

Final Logic:

�� Admission belongs to reconstitution.

🧠 Memory Trick

"Admission = Reconstitution"

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

19 While reconstitution changes the relationship among partners but the business continues, what term implies the complete closure of the firm's business operations?

A Dissolution of Partnership Firm

B Admission of a new partner

C Fluctuation of capital accounts

D Rectification of past errors

💡 Short Explanation

Dissolution ends business completely. Reconstitution continues business. Final closure occurs.

✅ Correct Answer Explanation

Dissolution of partnership firm means complete closure of business operations. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Business continues.
Option C → Accounting method only.
Option D → Correction process unrelated.

🎯 Strategy

Used

Conceptual Distinction

Application:

�� Differentiate reconstitution and dissolution.

Final Logic:

�� Dissolution ends the firm entirely.

🧠 Memory Trick

"Dissolution = Business Ends"

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

20 Assertion (A): Accounting for partnership firms has its own peculiarities compared to a sole proprietary concern.
Reason (R): A variety of adjustments are required for situations like distribution of profits, interest on capital, reconstitution, and dissolution.

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

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

C A is true but R is false

D A is false but R is true

💡 Short Explanation

Partnership accounting has special adjustments. Multiple partner-related transactions exist. Reason explains assertion correctly.

✅ Correct Answer Explanation

Partnership accounting differs because it requires special adjustments for profit distribution, capital interest, admission, retirement, and dissolution. Hence, both Assertion and Reason are true, and Reason correctly explains Assertion.

❓ Why Other Options Are Incorrect

Option A → Reason directly explains.
Option C → Reason true.
Option D → Assertion true.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

�� Check explanatory relationship.

Final Logic:

�� Partnership accounting involves unique adjustments.

🧠 Memory Trick

"More Partners = More Adjustments"

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

CUET UG Accountancy Booster Test 2 Provisions of Partnership Act & Accounting Basics

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