Month: April 2020

John and Mary, the only two partners in a firm, invested capital of £40,000 and £60,000 respectively and agreed their entitlements to be:

• John = Annual salary: £14,000; Interest on capital (per annum): 10%; Share of remaining profit or loss: 40%
• Mary = Annual salary: £20,000; Interest on capital (per annum): 10%; Share of remaining profit or loss: 60%

If the profit for the year was £80,000, how much, in total, would John be entitled to receive?

Select ONE answer:

1. £14,400
2. £18,000
3. £21,600
4. £32,400

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct

• Profit for the year £80,000
• John & Mary
• Salary: £14,000 & £20,000 = £34,000
• Interest on capital (10%): £4,000 & £6,000 =£10,000
• Profit remaining: £36,000
• Share of profit (40% : 60%): £14,400 & £21,600 £36,000
• Totals receivable: £32,400 & £47,600 = £80,000

 

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In the absence of a partnership agreement, the Partnership Act. 1890, among other things requires that . . .?

Select ONE answer:

1. partners share profits equally and interest on capital is paid at the rate of 5% per annum.
2. partners share profits in relation to the balances on their capital accounts and interest on capital is paid at the rate of 5% per annum.
3. partners share profits equally and interest on capital is not paid.
4. partners share profits in relation to the balances on their capital accounts and interest on capital is not paid.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct – In the absence of a partnership agreement, the main provisions of the Partnership Act, 1890 are:
   – That partners share profits and losses equally.
   – Interest on capital is not paid to partners.
   – Interest is not charged on partners“ drawings.
   – Partners are not paid salaries.
   – Interest is paid to partners at the rate of 5% per annum on advances made by them to the partnership in excess of the capital they have agreed to contribute.
4. Not correct

 

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In order for partners’ capitals to remain fixed, their respective shares of profits must be . . .?

Select ONE answer:

1. debited to their capital accounts.
2. credited to their capital accounts.
3. debited to their current accounts.
4. credited to their current accounts.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct – By debiting a partner‘s share of profits to his / her capital account the balance on the account will decline (not remain fixed).
2. Not correct – By crediting a partner‘s share of profits to his / her capital account the balance on the account will increase (not remain fixed).
3. Not correct – By debiting a partner‘s share of profits to his her current account the balance on that account will decline, indicating that the firm owes less to the partner as a result of making a profit!
4. Correct

 

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The minimum number of general partners which a limited partnership must have is?

Select ONE answer:

1. 1
2. 2
3. 3
4. 7

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – Someone must always be responsible for the debts of the firm. This is a major disadvantage of partnerships relative to companies. However, once one person accepts this responsibility, all other partners can be limited partners.
2. Not correct
3. Not correct
4. Not correct

 

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The rights and liabilities of partners among themselves . . .?

Select ONE answer:

1. may be freely agreed.
2. must be agreed with the partnership’s creditors.
3. are governed by the Partnership Act, 1890.
4. None of the above.

 

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct
2. Not correct – The creditors of the firm have no say in the matter (the partnership wouldn‘t have any creditors until after it has been formed anyway).
3. Not correct – The Partnership Act 1890 governs the rights and liabilities of partners among themselves only in the absence of verbal or written agreement.
4. Not correct

 

This work is licensed under a Creative Commons Attribution 4.0 International License.