Partnership Accounts MCQs 2026

If one partner guarantees a minimum profit to another, any deficiency is borne by the

1. Afirm's creditors✓
2. Bbank✓
3. Cguaranteeing partner✓
4. Dgovernment✓

The sacrificing ratio is calculated as

1. Anew ratio minus old ratio✓
2. Bcapital ratio✓
3. Cold ratio minus new ratio✓
4. Dequal shares✓

The primary purpose of a partnership appropriation account is to show

1. Ahow the net profit is divided among the partners✓
2. Bthe sale of assets✓
3. Cthe firm's bank balance✓
4. Dthe value of fixed assets✓

For tax purposes in Pakistan, a partnership firm's income is assessed

1. Aas a separate entity (association of persons/firm)✓
2. Bnever taxed✓
3. Conly in the individual partners' names always✓
4. Dby the stock exchange✓

When an incoming partner brings goodwill in cash, the premium for goodwill is shared by the old partners in their

1. Anew ratio✓
2. Bsacrificing ratio✓
3. Ccapital ratio✓
4. Dgaining ratio✓

Mutual agency in a partnership means each partner is

1. Aa customer of the firm✓
2. Ban employee only✓
3. Cboth an agent and a principal of the firm✓
4. Da creditor✓

Which of the following is NOT a feature of a partnership

1. Asharing of profits✓
2. Bmutual agency✓
3. Ctwo or more persons✓
4. Da separate legal entity distinct from its partners✓

On dissolution, after paying outside liabilities, remaining cash is used to pay

1. Aoffice rent✓
2. Bnew assets✓
3. Cadvertising✓
4. Dpartners' loans and then their capital balances✓

Super profit equals average (actual) profit minus

1. Athe normal profit✓
2. Bdrawings✓
3. Cinterest on loan✓
4. Dpartners' salaries✓

Under the super profit method, goodwill equals super profit multiplied by the

1. Acapital employed✓
2. Bnumber of years' purchase✓
3. Cnormal rate of return✓
4. Dinterest on capital✓

The excess of the agreed value of a business over the net assets taken over represents

1. Acapital reserve✓
2. Ba loss✓
3. Cgoodwill✓
4. Ddrawings✓

In a partnership at will, the firm can be dissolved

1. Aonly by a court order✓
2. Bby any partner giving notice to the others✓
3. Cnever✓
4. Donly on the death of a partner✓

At the time of admission, any general reserve appearing in the books is distributed among

1. Athe new partner only✓
2. Bcreditors✓
3. Cold partners in the old profit-sharing ratio✓
4. Dthe bank✓

The revaluation account is also known as the

1. Arealization account✓
2. Bappropriation account✓
3. Ccapital account✓
4. Dprofit and loss adjustment account✓

In a partnership, the liability of the partners is generally

1. Aunlimited, joint and several✓
2. Blimited to capital always✓
3. Cnil✓
4. Dborne by the firm only✓

Drawings made by a partner during the year reduce the partner's

1. Ashare of losses✓
2. Bsalary✓
3. Cinterest on loan✓
4. Dcapital or current account balance✓

When capitals are fixed, a partner's share of profit is credited to the

1. Acurrent account✓
2. Bcapital account✓
3. Crealization account✓
4. Dcash account✓

A partnership is a business owned by

1. Atwo or more persons who share profits and losses✓
2. Ba single individual✓
3. Cthe government✓
4. Dshareholders only✓

The document that contains the terms of a partnership agreement is called the

1. Amemorandum of association✓
2. Bprospectus✓
3. Cpartnership deed✓
4. Darticles of association✓

In Pakistan, partnerships are mainly governed by the

1. ACompanies Act 2017✓
2. BPartnership Act 1932✓
3. CSecurities Act only✓
4. DBanking Ordinance✓

In the absence of a partnership deed, profits and losses are shared

1. Ain the ratio of capital contributed✓
2. Bby the senior partner✓
3. Cas decided by a court✓
4. Dequally among the partners✓

In the absence of an agreement, interest on a loan advanced by a partner to the firm is allowed at

1. A10 percent per annum✓
2. B12 percent per annum✓
3. Cno interest at all✓
4. D6 percent per annum✓

Interest on partners' capital, when allowed, is

1. Aan income of the firm✓
2. Ban appropriation of profit✓
3. Ca liability to outsiders✓
4. Da drawing✓

Interest on a partner's drawings is

1. Acredited to the firm's profit and loss appropriation account✓
2. Ban expense of the firm✓
3. Cignored in all cases✓
4. Dpaid in cash to the partner✓

The account used to distribute net profit among partners is the

1. Atrading account✓
2. Brealization account✓
3. Cprofit and loss appropriation account✓
4. Dbalance sheet✓

Under the fixed capital method, each partner maintains a capital account and a separate

1. Aloan account✓
2. Bcash account✓
3. Ccurrent account✓
4. Dtrading account✓

Under the fluctuating capital method, all adjustments are made in the

1. Acapital account itself✓
2. Bcurrent account✓
3. Crealization account✓
4. Dcash account✓

Goodwill is best described as

1. Aa fixed tangible asset✓
2. Bcash in hand✓
3. Ca current liability✓
4. Dthe value of a firm's reputation and future earning capacity✓

Under the average profit method, goodwill equals average profit multiplied by the

1. Anumber of partners✓
2. Bnumber of years' purchase✓
3. Ccapital ratio✓
4. Dinterest rate✓

When a new partner is admitted, the ratio in which the old partners give up their share is called the

1. Againing ratio✓
2. Bsacrificing ratio✓
3. Ccapital ratio✓
4. Dprofit ratio✓

When a partner retires, the ratio in which the remaining partners acquire the outgoing partner's share is the

1. Asacrificing ratio✓
2. Bcapital ratio✓
3. Cold ratio✓
4. Dgaining ratio✓

On admission of a partner, assets and liabilities are revalued through the

1. Arealization account✓
2. Bappropriation account✓
3. Crevaluation (profit and loss adjustment) account✓
4. Dcapital account only✓

A profit on revaluation of assets at admission is credited to the

1. Aold partners' capital accounts in the old ratio✓
2. Bnew partner only✓
3. Ccash account✓
4. Dgoodwill account✓

On dissolution of a partnership, the account opened to close the books and record the sale of assets is the

1. Arealization account✓
2. Brevaluation account✓
3. Cappropriation account✓
4. Dcurrent account✓

In the realization account, the sale proceeds of assets are recorded on the

1. Adebit side✓
2. Bcredit side✓
3. Cboth sides✓
4. Dneither side✓

According to the rule in Garner versus Murray, a deficiency of an insolvent partner is borne by the solvent partners in the ratio of their

1. Aprofit-sharing ratio✓
2. Bgaining ratio✓
3. Cequal shares✓
4. Dlast agreed capitals✓

The maximum number of partners in an ordinary partnership firm under Pakistani law is generally

1. A2✓
2. B10✓
3. C20✓
4. Dunlimited✓

A partner who contributes capital and shares profits but takes no active part in management is a

1. Aactive partner✓
2. Bnominal partner✓
3. Csleeping (dormant) partner✓
4. Dminor partner✓

A nominal partner is one who

1. Ainvests the most capital✓
2. Bmanages the firm✓
3. Cis a minor✓
4. Dlends only his name or reputation without capital or active role✓

Partners' salaries, where provided in the deed, are treated as

1. Aan appropriation of profit, not an expense✓
2. Ba trading expense✓
3. Cdrawings✓
4. Da liability to banks✓

On the death of a partner, the amount due is usually transferred to the

1. Arealization account✓
2. Bdeceased partner's executor's (legal heir's) account✓
3. Crevaluation account✓
4. Dtrading account✓

When goodwill already appears in the books at admission and is to be written off, it is debited to

1. Athe new partner only✓
2. Bthe revaluation account✓
3. Ccash✓
4. Dall partners' capital accounts in the old ratio✓

A partnership is dissolved when

1. Athe relationship among all the partners comes to an end✓
2. Bone partner takes leave✓
3. Cprofits fall✓
4. Da new customer is added✓

A minor can be admitted to a partnership only

1. Aas a full partner with unlimited liability✓
2. Bto the benefits of the partnership, not as a full partner✓
3. Cnever under any circumstance✓
4. Das the managing partner✓

The gaining ratio is calculated as

1. Aold ratio minus sacrificing ratio✓
2. Bnew ratio minus old ratio✓
3. Cold ratio plus new ratio✓
4. Dcapital ratio✓