21 Questions
What is the main objective of a partnership firm?
To earn profits
What happens in the fluctuating capital method?
The amount of capital balance changes every year
Why is a partnership deed necessary?
To outline the terms and conditions of the partnership business
What happens if the partnership deed is silent about profit-sharing?
Partners will share profits equally
What is the Fixed Capital Method?
It involves keeping the amount of capital unchanged at the end of the financial year
Why is a balance sheet prepared in a partnership?
To present a snapshot of the firm's financial position
What is the main purpose of preparing a balance sheet?
To know the financial position of an organization
Which type of income is considered as indirect income?
Interest income
What is the primary aim of a 'Not for Profit Concern'?
To provide services to members or society
Which financial statement is prepared by Not for Profit Organizations?
Income and Expenditure Account
What does the Receipts and Payments Account primarily show?
Cash and bank collections and payments
How is 'Capital Fund' defined?
Net surplus after expenses
What is the primary source of income for 'Not for Profit Concerns'?
'Subscription' paid by members
In the context of partnerships, what does 'legacy' refer to?
'Gifting' the organization as per the will of the deceased
'Surplus' in a financial context is:
Excess of income over its expenditure
What is the purpose of preparing a 'Revaluation Account' in partnerships?
To ascertain profit or loss on revaluation of assets and liabilities.
In a partnership final account, which of the following items does NOT belong to the same category as the others?
Salary
Which of the following items does NOT fit in with the rest in the Not for Profit Concern context?
Trading Account
In the context of admission of a partner, which item is not in the same category as the others?
Machinery
From the given list, which item does NOT belong to the same category as the others in terms of financial transactions?
Capital fund
Which of the following methods for admission of a partner does not match with the others?
Average profit method
Study Notes
Partnership Firm
- The main objective of a partnership firm is to carry out business with the goal of earning profits.
- A partnership deed is necessary to outline the terms and conditions of the partnership, including profit-sharing, responsibilities, and liabilities.
Capital Methods
- In the Fluctuating Capital Method, the capital of each partner is not fixed and keeps changing with the profits and losses incurred.
- In the Fixed Capital Method, the capital of each partner remains fixed and does not change with profits and losses.
Profit-Sharing
- If the partnership deed is silent about profit-sharing, profits are shared equally among partners.
- Profit-sharing is a crucial aspect of a partnership firm and is outlined in the partnership deed.
Balance Sheet
- A balance sheet is prepared in a partnership to show the financial position of the firm at a specific point in time.
- The main purpose of preparing a balance sheet is to provide a snapshot of the firm's assets, liabilities, and capital.
Not for Profit Concerns
- The primary aim of a Not for Profit Concern is to achieve a specific social or charitable objective, rather than to earn profits.
- Not for Profit Organizations prepare a Receipts and Payments Account, which primarily shows the income and expenses incurred during a specific period.
- The primary source of income for Not for Profit Concerns is usually donations, subscriptions, and grants.
Financial Terms
- Indirect income refers to income that is not directly related to the main business activities of the organization.
- Capital Fund is defined as the amount of capital invested in a Not for Profit Concern.
- Legacy, in the context of partnerships, refers to a gift or inheritance received by the firm.
- Surplus, in a financial context, refers to the excess of income over expenditure.
Partnership Accounts
- A Revaluation Account is prepared in partnerships to record the changes in the value of assets and liabilities.
- In a partnership final account, certain items such as goodwill, reserves, and capital do not belong to the same category as the others.
Admission of a Partner
- In the context of admission of a partner, certain items such as goodwill, revaluation, and capital adjustments are not in the same category as the others.
Financial Transactions
- Certain items such as receipts, payments, and surplus do not belong to the same category as the others in terms of financial transactions.
Methods of Admission
- Certain methods of admission of a partner, such as goodwill, revaluation, and capital adjustments, do not match with the others.
Test your understanding of partnership accounting with this quiz on fluctuating capital and the importance of partnership deed.
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