MCQ OF PARTNERSHIP ACCOUNTING

1. P joined the partnership of G and H. He brought into the business the

following assets.

non-current assets cost $25 000, valued at $38 000

inventory cost $6000, valued at $4500

cash $20 000

There was no goodwill arising when P joined the partnership.

What was the balance on P’s capital account?

A $20 000 B $49 500 C $51 000 D $62 500

2. X and Y have capital accounts of $50 000 each and share profits equally. They plan to admit
Zinto partnership.

The new profit sharing ratio will be 2 : 2 : 1. The balances on the capital accounts will also be in
this ratio.

Goodwill is valued at $20 000 and will not be retained in the books of account.

How much cash will Z need to pay to join the partnership?

A $25 000 B $26 000 C $29 000 D $30 000

3. David and Jane have been business partners for several years, sharing profits in the ratio of 2 : 1.
Jane now wishes to retire. Her capital account amounts to $15 800 and her current account
shows a debit balance of $3500.

Goodwill is valued at $6600. The book values of certain tangible assets are to be valued upwards
by $3000.

What is the amount due to Jane on her retirement from the business?

A $15 500 B $18 700 C $22 500 D $25 700

4. Which is not an appropriation of partnership profit?

A interest on capital
B interest on drawings
C interest on loan
D share of profit

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5. Why is goodwill adjusted in the books of account when a new partner is admitted?

A A more accurate value of non-current assets is shown in the statement of financial position.
B Original partners can be credited for their efforts in building up the partnership business.
C Partners can take higher drawings as a result of their share of the goodwill.
D The new partner knows how much they have to introduce as capital.

6. A partnership revalues its non-current assets upwards.

What are the ledger entries to record this?

account to debit account to credit

A non-current assets bank
B non-current assets partners’ capital accounts
C non-current assets partners’ current accounts
D non-current assets revaluation reserve

7. X and Y are in partnership. They admit Z as a new partner. The profit sharing ratio will be
2 : 1 : 1respectively. Goodwill is valued at $100 000. Goodwill is not to be retained in the books of
account.

Other assets are revalued at $40 000 in excess of their net book value.

Z introduces $250 000 cash and office equipment valued at $30 000.

What is Z’s capital account balance after his admission?

A $255 000 B $265 000 C $305 000 D $315 000

8. Which rule does not apply in the absence of a partnership agreement?

A interest on loans is charged at 6% per annum

B no interest on capital is charged
C no salaries are paid to partners
D profits and losses are shared equally between the partners

9. The partnership of Ravi and Tania, who shared profits equally, was dissolved.

The capital accounts prior to dissolution were Ravi $50 000 and Tania $60 000.

The current accounts balances prior to dissolution were Ravi $35 000 credit and Tania $35 000
credit.

The loss on disposal of partnership net assets was $10 000.

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How much money did each partner receive when the partnership was dissolved?

Ravi Tania
$ $

A 45 000 55 000
B 80 000 90 000
C 85 000 95 000
D 90 000 100 000

10. Meena was a sole trader. On 1 July 2018, Hanna entered into a partnership with her
sharingprofits equally.

Profit for the year ended 31 December 2018 was $168 000 accruing evenly over the year. An
irrecoverable debt of $8000 was incurred during March 2018 and it was agreed that this would be
paid for by Meena.

What is Hanna’s share of profit?

A $40 000 B $42 000 C $44 000 D $46 000

11. Z is admitted as a new partner in the partnership of X and Y. He brings the following into
thebusiness.

cash 20 000
inventory 6 000
vehicle 11 000

Interest on capital is calculated at 10% per annum. There is no goodwill on Z’s admission.

What is Z’s interest on capital per annum?

A $1700 B $2000 C $3100 D $3700

12. L and M are in partnership sharing the profits equally. No goodwill account is maintained
in theaccounts. N joins the partnership and pays $30 000 cash for his share of the goodwill.

Profits are to be shared equally between L, M and N.

What are the increases in the capital accounts on the admission of N into the partnership?

capital accounts
L M N
$ $ $

A 10 000 10 000 10 000

B – – 30 000 3
C 15 000 15 000 –
D – – –
 13. X and Y were in partnership sharing profits and losses equally.

Z was admitted as a partner and the profit and loss sharing ratio for X, Y and Z will be 2 : 2 : 1
respectively.

On the date of admission, the value of non-current assets was increased by $48 000.

Goodwill was valued at $30 000 but would not be retained in the books of account.

What was the effect on X’s capital account?

A increased by $19 200

B increased by $24 000
C increased by $27 000
D increased by $31 200

14. Which items would appear in a partnership’s appropriation account, in the absence of a
partnership agreement?

1 profit for the year

2 partners’ interest on drawings
3 partners’ salaries
4 partners’ share of profits

A 1 and 4 B 1 only C 2 and 3 D 4 only

15. Annie and Bernie have been in partnership for some years, sharing profits and losses in the
ratio2 : 1. On 1 January 2020, they decided to introduce interest on drawings. The annual
interest ondrawings for the year ended 31 December 2020 was $1300 for Annie and $800 for
Bernie.

Which effect did this change have on the balance on Annie’s current account at 31 December 2020?

A decreaseof $100
B decreaseof$500
C increase of $100
D increase of $500

16. X and Y are in partnership sharing profit and losses equally.

Y’s opening current account balance was $1350 debit.

The residual profit for the year was $23 500.

Y was entitled to the following.

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 $

interest on capital 1 200

salary 14 500

Y’s drawings during the year were $25 000.

What is the closing balance of Y’s current account at the year end?

A $1100 credit
B $1100 debit
C $3800 credit
D $3800 debit

17. F and P are in business sharing profits and losses in the ratio 3 : 1.

Their capital account balances are:

$

F 90 000
P 60 000

B is introduced as a new partner and invests $50 000 as capital.

Goodwill is valued at $20 000 and is not to be retained in the books of account.

The new profit sharing ratio will be 2 : 2 : 1 for F, P and B respectively.

What is the new capital account balance of F following B’s admission?

A $57 000 B $83 000 C $97 000 D $105 000

18. L and M are in partnership, sharing profits and losses in proportion to their capital invested.
Thefollowing information is available:
$

capital: L 68 000
M 102 000
profit for the year before appropriation 28 900
drawings: L 8 000
M 12 000

No interest is charged on drawings up to $10 000 for each partner.

Interest at a rate of 5% is charged on any drawings in excess of $10 000.

What was L’s share of residual profit?

A $11 520 B $11 600 C $11 800 D $11 960

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19. X and Y were in partnership sharing profit and losses equally. They then admitted Z into
thepartnership and profits and losses were still shared equally.

The following transactions took place.

1 Z introduced capital of $50 000.

2 Goodwill was valued at $30 000. No goodwill account is kept in the books of
account.
3 X took a computer from the business at a value of $3000.

After these transactions had taken place, the balance on X’s capital account was $60 000.

What was the opening balance on X’s capital account?

A $55 000 B $58 000 C $65 000 D $75 000

20. A and B were in partnership sharing profits and losses equally when they decided to
retire.Details of the realisation are shown in the table.

book value realised value

$000 $000

non-current assets 50 65
current assets excluding cash and bank 25 23
cash and bank balances 4 –
current liabilities 18 14
costs of realisation 1 –

How much profit was each partner entitled to on realisation?

A $8000 B $10 000 C $12 000 D $16 000

21. Which item is not taken into account when a partner joins a partnership?

A balances on the partners’ current accounts

B capital introduced by the new partner
C changes in the profit sharing ratio
D goodwill

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22. Ali, Bharti and Chan were in partnership sharing profit and losses in the ratio 3 : 2 : 1. Bharti
retiredfrom the partnership on 30 June 2016.

The following were the balances available at 30 June 2016.

Ali ($) Bharti ($) Chan ($)

capital accounts 60 000 Cr 40 000 Cr 20 000 Cr
current accounts 18 650 Cr 6 100 Dr 8 950 Cr

On her retirement, Bharti retained a partnership motor vehicle at an agreed valuation of $4000.

Goodwill was valued at $39 000.

How much was payable to Bharti on her retirement?

A $33 900 B $42 900 C $46 900 D $50 900

23. A partnership maintains both capital and current accounts for its partners.

What is the correct accounting entry for recording interest on capital for partner X?

account to account to
be debited be credited

A appropriation X’s capital

B appropriation X’s current
C X’s capital appropriation
D X’s current appropriation

24. X and Y are in partnership sharing profits and losses in the ratio 2 : 1.

Z will be admitted with the following new arrangements.

Profit and loss sharing ratio will be 2 : 1 : 2 respectively.

Goodwill is valued at $90 000. Z will pay the partners for his share of the goodwill.

How much will Z pay X?

A $18 000 B $24 000 C $45 000 D $60 000

25. D, E and F are in partnership, sharing profits in the ratio 2 : 2 : 1.

D is allowed an annual salary of $10 000.

E has made a loan to the partnership on which the partnership pays interest of $5000 each year.

Profit for the year before appropriation was $150 000.

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What was F’s total share of profit for the year?

A $27 000 B $28 000 C $29 000 D $30 000

26. L and M had been in partnership sharing profits and losses equally. P was admitted to the
partnership and the partners continued to share profits and losses equally. Goodwill was valued
at $48 000 but the partners agreed that no goodwill account would be retained in the books of
account.

What were the accounting entries to record the goodwill?

A debit L capital account $16 000, debit M capital account $16 000, credit P capital account
$32 000
B debit P capital account $32 000, credit L capital account $16 000, credit M capital account
$16 000
C debit L capital account $8000, debit M capital account $8000, credit P capital account
$16 000
D debit P capital account $16 000, credit L capital account $8000, credit M capital account
$8000

27. How should interest charged on a partner’s drawings account be treated?

A credited to the appropriation account

B credited to the income statement
C debited to the appropriation account
D debited to the income statement

28. X, Y and Z were in partnership, sharing profits equally. When Z retired from the business
theassets were revalued. Goodwill was also valued but was not retained in the books of accounts.

Which statement about Z’s retirement is correct?

A Only X and Y’s capital accounts will be adjusted for the revaluation.
B Only X and Y’s capital accounts will be adjusted for goodwill.
C The balance on Z’s current account will form part of her retirement settlement.
D Z may only be paid in cash for her share on retirement.

29. L and M are in partnership, sharing profits and losses in the ratio of 3 : 2. They have the
followingcurrent account balances.

L M
$ $

31 March 2019 3 000 credit 4500 debit

31 March 2020 14 200 credit 6200 debit
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The balances at 31 March 2020 are after taking into account the following.

L M
$ $

interest on drawings 1 000 1 500

interest on capital 3 000 2 000
drawings 10 000 15 000

What was the residual profit to be shared between L and M for the year ended 31 March 2020?

A $24 000 B $27 000 C $29 000 D $32 000

30. L and M are partners sharing profits and losses equally. This year M’s share of the profit
is $18 000. Next year they plan to change the partnership agreement so that L has an annual
salary of $10 000 and a one-third share of any profits or losses.

What does the total partnership profit for next year need to be for M to receive the same amount
of profit as this year?

A $22 000 B $34 000 C $37 000 D $42 000

31. V and E are in partnership, sharing profits and losses equally.

Their capital accounts showed the following credit balances at 31 March 2021.

V 80 000
E 40 000

Z was admitted as a partner on 1 April 2021. At that date the following items were taken into
account.

1 Non-current assets were revalued downwards by $20 000.

2 Goodwill was valued at $80 000, but will not remain in the books of account after Z is
admitted.

The new profit-sharing ratio will be V 40%, E 30% and Z 30%.

What was the balance on E’s capital account after the admission of Z?

A $30 000 B $46 000 C $56 000 D $70 000

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32. Which account is used to calculate the profit or loss on the dissolution of a partnership?

A appropriation account
B capital account
C realisation account
D revaluation account

34. X, Y and Z are in partnership sharing the profits and losses in the ratio of 2 : 2 : 1.

At 31 December the following information is available.

X Y Z
$ $ $

capital account balances 100 000 100 000 50 000

current account balances 20 000 15 000 (5 000)
On 31 December Z retires from the partnership. Total assets are revalued upwards by $45000.There
is no goodwill.

How much will Z be paid on his retirement?

A $54 000 B $59 000 C $60 000 D $65 000

34. The following information relates to a partnership.

profit from operation 90 000

loan interest 3 200
interest on drawings 6 000
drawings 40 000
interest on capital 11 000
What is the residual profit to be appropriated amongst the partners?

A $41 800 B $69 800 C $81 800 D $91 800

35. A partnership maintains capital accounts and current accounts.

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Which statements are correct?

1 The capital accounts show the total amount owed to each partner.
2 The capital accounts represent the retained earnings of the business.
3 The capital and current accounts equal the net assets.

A 1 and 2 B 1 and 3 C 2 only D 3 only

36. X, Y and Z had been in partnership, sharing profits and losses in the ratio of 2 : 2 : 1.

On 1 January 2017, Y retired. The balances of his capital and current accounts were as shown.

capital account current account

$50 000 $6400 debit

Y took over a motor van at an agreed value of $3800. The net book value of the motor van was
$4800. Goodwill was valued at $30 000.

The value of all other assets at 1 January 2017 would remain unchanged.

How much cash was Y entitled to when he retired?

A $51 400 B $51 800 C $55 200 D $64 200

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37. S and T are in partnership, sharing profits and losses in the ratio 2 : 1. The balances on
theircapital accounts at 31 March 2017 were:

capital account S 40 000

capital account T 20 000
60 000

On 1 April 2017 the partners decide to change the profit-sharing ratio to 3 : 2. Goodwill is to be
valued at $30 000 and is not to be retained in the books of account.

What is the new balance of T’s capital account?

A $18 000 B $20 000 C $22 000 D $30 000

38. A partnership provides the following financial information for the year ended 30 June 2017.

profit from operations 240 000

bank interest payable 21 000
interest on capital 15 000
drawings 50 000
partnership salaries 45 000

What is the residual balance of profits to be appropriated between the partners?

A $109 000 B $154 000 C $159 000 D $204 000

39. Which items would not be in the appropriation account for a partnership?

1 interest on capital
2 interest on a partner’s loan
3 share of profit on revaluation of assets
4 share of residual profit

A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

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40. X and Y had been in partnership sharing profit and losses in the ratio of 1 : 2 respectively.

Z was later admitted to the partnership. It was agreed that the goodwill is valued at $120 000. No
goodwill account is to be retained in thebooks of account.

Profit and losses were to be shared between X, Y and Z in the ratio of 2 : 1 : 1 respectively.

What was the effect of the goodwill adjustment in X’s capital account?

A decreased by $20 000

B decreased by $60 000
C increased by $20 000
D increased by $60 000

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41. J and K shared profits equally.

Their capital account balances were J $400 000 and K $160 000.

L was admitted as a partner. The three partners then shared profits equally.

On admission of L as a partner, assets were increased in value by $210 000. L paid in

capitalequal to the average new capital balances of J and K.

What was the capital paid in by L?

A $175 000 B $280 000 C $350 000 D $385 000

42. P and Q are in partnership. R was admitted as a partner on 1 July 2018, and the
profit and losssharing ratio among P, Q and R was 2 : 2 : 1 respectively.

For the purpose of R’s admission, the partners agreed:

goodwill would be valued at $20 000, but not retained in the books of
accountR would introduce cash, $40 000, and motor vehicle, $10 000
R would be entitled to an annual salary, $5000.

What was R’s capital account balance immediately after his admission?

A $36 000 B $46 000 C $51 000 D $54 000

43. Hilary and Lee commenced in partnership on 1 January 2018. There was no
partnershipagreement. They provided the following information.

Hilary Lee
$ $

capital contributions 5000 6000

loan to partnership – 1000

Profit for the year ended 31 December 2018 before the loan interest

was $8850.What was Lee’s share of the profit?

A $4400 B $4425 C $4800 D $4827

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44. L, M and N are in partnership sharing profits and losses equally.

L retired when the credit balances on her capital and current accounts were $100
000 and $40 000.

Partnership assets were revalued upwards by $60 000.

L took half of the amount due to her on retirement. The other half was left as a
loan to thebusiness.

How much was L paid from the partnership bank account on her retirement?

A $20 000 B $40 000 C $60 000 D $80 000

45. Adil and Bashir were in partnership sharing profits and losses in the ratio 2 : 1.

Chandra joins the partnership and profits and losses are now to be shared between Adil,
Bashir and Chandra in the ratio 3 : 2 : 1.

The balances of the partners’ capital accounts prior to Chandra joining the partnership
are asfollows:

Adil 20 000
Bashir 10 000

Goodwill is to be valued at $36 000 and is not to be retained in the books of

account.What is the balance on Adil’s capital account after Chandra joined

the partnership?

A $20 000 B $26 000 C $38 000 D $44 000

46. How is a loss on realisation recorded when a partnership is dissolved?

A Credit each partner’s capital account equally.

B Debit each partner’s capital account equally.
C Credit each partner’s capital account in the profit-sharing ratio.
D Debit each partner’s capital account in the profit-sharing ratio.

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47. John and Brian are in partnership sharing profits and losses equally. John receives
a salary of $2000 per annum. Brian loaned the business $5000. He is entitled to interest
of 5% per annum.

The profit for the year before appropriation was $24 000. During the year John took
drawings of $3000.

What will be the amount of residual profit Brian will receive for the year?

A $9375 B $10 875 C $11 000 D $11 250

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