10 Questions
What is the main purpose of the Profit and Loss Appropriation account in a partnership firm?
To divide profits among partners and make adjustments for interest on capital and drawings
What is the purpose of calculating the sacrificing ratio in a partnership firm?
To adjust the change in profit sharing ratio among existing partners
In a partnership, when is the interest on partner's loan treated as a charge against profits?
When it is not mentioned in the Partnership Deed
What is the main factor affecting the valuation of goodwill in a partnership firm?
Average profit
When does a revaluation account and balance sheet need to be prepared in a partnership firm?
When there is a change in profit sharing ratio among existing partners
What is the significance of the provision of Partnership Act in the absence of a partnership deed?
It provides a default set of rules for the management and operation of the partnership.
What is the meaning of sacrificing ratio in the context of partnership?
The ratio at which existing partners agree to reduce their profit sharing ratios to accommodate a new partner.
What is the treatment of goodwill as per AS 26 when a new partner is admitted?
Goodwill is transferred to the old partners' capital accounts in their old profit sharing ratio.
What does the term 'fluctuating capital' refer to in a partnership?
Capital contributed by partners with varying profit sharing ratios.
What is meant by revaluation of assets and reassessment of liabilities in a partnership context?
It refers to updating the values of assets and liabilities based on their market prices.
Test your understanding of the features of partnership, Partnership Deed, provisions of the Indian Partnership Act 1932, preparation of Profit and Loss Appropriation account, and past adjustments related to interest on capital, drawing, salary and profit share.
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