top of page

Multiple Choice Questions

Partnership accounting

A level and AS level


How should interest charged on a partners 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

Answer: A

Interest on drawings is debited in current account and
credited to appropriation account (added into profit
for the year).


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 $18000
B $24000
C $45000
D $60000



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 the books 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 $20000
B decreased by $60 000
C increased by $20000
D increased by $60000



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



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

Profit for the year ended 31 December 2018 was $168000 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 $40000
B $42000
C $44000
D $46000



J and K shared profits equally.

Their capital account balances were J $400000 and K $160000.

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 $210000. L paid in capital equal to the average new capital balances of J and K.

What was the capital paid in by L?

A $175000
B $280000
C $350000
D $385000



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



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 $100000 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 the business.

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

A $20000
B $40000
C $60000
D $80000



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 1and2
B 1and4
C 2and3
D 3and4



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

D is allowed an annual salary of $10000.

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.

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

A $27000
B $28000
C $29000
D $30000



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



A partnership maintains capital accounts and current accounts.

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 1and2
B 1and3
C 2only
D 3only


bottom of page