Partnerships

Question 1

Goodwill account not opened
Before E one third 10000 After two fifths 12000 Gain 2000
Before F one third 10000 After two fifths 12000 gain 2000
Before G one third 10000 After one fifth 6000 Loss 400

What happens to the capital accounts

Answer 1

E capital account - debit
F capital account - debit
G capital account - credited

The partner who gained the goodwill needs to be charged for it and this is done by having his capital account debited.
The partner who has lost his goodwill must be compensated for it by having his goodwill account credited

Question 2

In normal trading circumstances which of the following would not be found in a partners current account

a) Interest on drawings
b) Salaries
c) Drawings
d) Goodwill

Answer 2

d) Goodwill

Question 3

IF Goodwill is to be created and immediately written off, the correct method of entering this in the accounts would be:
A) DB Current in previous profit Ratio
CR Current in new profit ration
B) Debit Capital in previous profit ratio
Credit Capital in new profit ratio
C) Debit Current in new profit ratio
Credit Current in previous profit ratio
D) Debit Capital in new profit ratio
Credit Capital in previous profit ratio

Answer 3

D) Debit capital in new profit Ratio

Credit capital in previous profit ratio

Question 4

What is referred to as a realisation account in partnerships

Answer 4

Realisation account is opened when a partnership is dissolved to ascertain the net gain or loss on realisation of the assets and to apportion the balance between the partners in their profit sharing ratio.

Question 5

What would have to happen to a partnership profits if the provisions of the Partnership Act 1980 had to apply

Answer 5

All profits would have to be shared equally

Question 6

“Which of the following statements is factually correct
In a partnership each partners liability for the debts of the business will be:
a) Limited to the extent of his/her current account balance
b) limited to the extent of his/her capital account balance

Answer 6

Only one item c) is factually correct. It is not legally possible for the partners of a partnership to limit their personal liability for the business debts

Question 7

If partners maintain both fixed capital and current accounts, which of the following would normally be credited to a partners capital account

a) Losses on revaluation
b) goodwill being written off
c) Interest on capital
d) Profits on revaluation

Answer 7

D) Profits on revaluation

Question 8

The correct entry for recording losses on revaluation would be

a) debit revaluation credit Partners capital
b) debit partners current credit revaluation
c) Debit partners capital account credit revaluation
d) debit revaluation credit partners current accounts

Answer 8

c) Debit Partners Capital Accounts and credit revaluation