Book- Keeping and Accountancy
STANDARD XII
Chapter 1. Introduction to Partnership and Partnership Final Accounts
Page No. in book (52 - 53)
Answer in one sentence only :
1) What is fluctuating capital?
Ans. Fluctuating capital means when the capitals of partners are fluctuating, all adjustments with regards to the interest on capitals, interest on drawings, partners salaries etc. are passed through the capital accounts of the partners.
2) Why is Partnership Deed necessary?
Ans. Partnership deed is a very importanmt document becuase it is written agreement which contains all the terms and conditions of the partnership business. It forms the basis of mutul relationship among the partner.
3) If the Partnership Deed is silent, in which ratio the partners will share the profit or loss?
Ans. If the partnership deed is silent on sharing of profit or losses among the partners of a firm, then according to the Partnership Act of 1932, profits and losses are to be shared equally by all the partners of the firm.
4) What is the Fixed Capital Method?
Ans. In this method of capital of a partner remains the same at the end od that financila year. There is no addition or subraction from capital during the year.
5) How many partners are required to form a Partnership Firm?
Ans. A partnership requires 2 or more individuals as part of the partnership.
6) What is Partnership Deed?
Ans. A partnership deed also called as a partnership agreement, is a record that outlines in detail the rights and functionalities of all parties to a business operation. It has the force of law and is designed to guide the partners in the conduct of the business.
7) What are the objectives of the Partnership firm?
8) What rate of interest is allowed on partner's loan in the absence of an agreement?
Ans. According to Indian Prartnership act 1932, in the absence of agerememt, only 6% of interest is allowed on apartner's loan and no interest will be incureed in partner's capital.
9) What is the minimum number of Partners in a Partnership firm according to Indian Partneship Act, 1932.
Ans. Any two or more persons may form a partnership. There is no limit imposed on the minimum and the maximum number of partners under the Partnership Act,1932.
10) What is liability of a partner?
Ans. In a general partnership, each partner has unlimited personal liability. Partnership rules usually dictate that whatever debts are incurred by the business, it is the legal responsibility of all partners to pay them off
11) In the absence of Partnership Deed what is the rate of interest on loan advanced by partner to the firm is allowed?
Ans. It is provided irrespective of profit or loss . It will also be provided in the absence of partnership deed @ 6% per annum. Interest on partners loan to the firm is a charge against profit .
12) What do you mean by pre-received income?
Ans. Income Received in Advance. Sometimes earned revenue that belongs to a future accounting period is received in the current accounting period, such income is considered as income received in advance.
13) What is the effect of the adjustment of provision for discount on debtors in the final accounts of partnership?
Ans. It is shown as deduction from Debtors in Balance Sheet. But remember the amount of Provision is calculated only after deducting the amount of additional Bad Debts.
14) When is partners Current Account opened ?
Ans. When partnership form adopts fixed capital method, it opens partners' current accounts to record dealing of partners with partnership firm.
15) As per which principle of accounting closing stock is valued at cost price or at market price which ever is less?
Ans. It is valued atr Cost price or Realisable Value, whichever is less. It is based on the principle of Conservatism or prudence.
16) What is the provision of Indian Partnership Act with regard to Interest on capital ?
Ans. According to Provision of Indian Partnership Act, "If the partnership deed is silent about interest on capital then interest is not allowed".
17) Why is Balance Sheet prepared?
Ans. The balance sheet is prepared in order to report an organization's financial position at the end of an accounting period.
18) Why wages paid for installation of Machinery are not shown in Trading Account?
Ans. The 'machinery account' is debited since the machine has to be put to use. The expenses are done to start the 'working of machinery'. Therefore the wages for the 'installation of machinery' are added to the cost of machinery since without spending the amount for the installation, the machine will not be operational.
19) What do you mean by indirect incomes?
Ans. Indirect income is one which is earned by way of non-business activities. For example, sale of old newspapers, sale of carton boxes, etc.
20) Why partners capital is treated as long term liability of business?
Ans. Partner capital is treated as long term liability of business because it represents the amount owing to the owner’s of the business by the business and will not be repaid until the business is sold or closed.