WrittenaspertherevisedsyllabusprescribedbytheMaharashtraStateBoard

ofSecondaryandHigherSecondaryEducation,Pune.

STD. XII Commerce

Book-Keeping &
Accountancy

Fourth Edition: March 2016

Salient Features
PreciseTheoryforeverytopicincludingSpecimenJournalEntriesandFormats
forLedgerAccounts.

PracticeProblemsincludingBoardProblems(March08October15)and

avarietyofadditionalproblems,importantfromexaminationpointofview.

AnswersandWorkingNotestosimplifytheTextualProblems.
TwoModelQuestionPapersasperthelatestpaperpattern.
BoardQuestionPapersof2014,2015andMarch2016.
SimpleandLucidlanguage.
Selfevaluativeinnature.

Printed at: Jasmine Art Printers Pvt. Ltd, Navi Mumbai

No part of this book may be reproduced or transmitted in any form or by any means, C.D. ROM/Audio Video Cassettes or electronic, mechanical
including photocopying; recording or by any information storage and retrieval system without permission in writing from the Publisher.

P.O.No.12719

10140_10430_JUP

Preface

"Std.XIICommerce:BookKeepingandAccountancy"hasbeendesignedwitharevolutionaryfreshapproach
towardscontent,tofacilitatethoroughpreparationofthesubjectforthestudent.

ThisbookhasbeenwrittenaccordingtotherevisedsyllabusandguidelinesprescribedbytheStateBoard.

ThebookincludesPreciseTheorywithSpecimenJournalEntriesandFormatsforLedgerAccounts.Aseparate
section has been provided for Practice Problems including Board Problems (March 08 October 15) and a
varietyofadditionalproblemsthatareimportantfromexaminationpointofview.

Additionally,answersalongwithworkingnoteshavebeenprovidedtosimplifytheTextualProblems.

ThebookalsoincludestwoModelQuestionPapersasperthelatestpaperpattern.

Wearesure,thisstudymaterialwillturnouttobeapowerfulresourceforthestudentsandfacilitatethemin
understandingtheconceptsofthissubjectinthemostlucidway.

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Board paper Pattern

Time:3Hours

TotalMarks:80

Q.1. AttemptanyTHREEofthefollowingsubquestions:

[15]

Includes five subquestions of five marks each. Out of the five, three subquestions have to be
answered.

(A) Answerthefollowingquestionsinonesentenceeach:

Fivesubquestionswillbegiven.

(B)

Writeaword/term/phrasewhichcansubstituteeachofthefollowingstatements:
Fivesubquestionswillbegiven.

[onemarkeach]

(C)

Selectthemostappropriatealternativefromthosegivenbelowandrewritethestatements:
Fivesubquestions.Eachsubquestioncarriesfouroptions. [onemarkeach]

(D) StatewhetherthefollowingstatementsareTrueorFalse:

Fivesubquestionswillbegiven.

[onemarkeach]

(E)

PrepareaspecimenofBillofExchange.

Q.2. PracticalproblemonSingleEntrySystem.

OR

TheoryQuestionsonAnalysisofFinancialStatements.

Twosubquestionswillbegiven.

[onemarkeach]

[fivemarks]

[8]

[fourmarkseach]

Q.3. PracticalproblemonReconstitutionofPartnership(Admission/Retirement/DeathofPartner).
OR

PracticalproblemonReconstitutionofPartnership(Admission/Retirement/DeathofPartner).

Questionswillbeaskedfromanytwooftheabovethreechapters.

[10]

Q.4. PracticalproblemonBillofExchange.

[10]

Q.5. PracticalproblemonDissolutionofPartnershipFirm .

[10]
OR

PracticalproblemonAccountingforShares/Debentures.

One question will be asked from Dissolution of Partnership Firm and the second question will be
askedeitherfromAccountingforSharesorAccountingforDebentures.

Q.6. PracticalproblemonAccountsofNotforProfitConcerns.

[12]

Q.7. PracticalproblemonPartnershipFinalAccounts.

[15]

SchemeofEvaluation

(A)
(B)

WrittenExamination
ProjectPreparation(withViva)

Total:

Marks
80
20
100

Total:

80

UnitwiseWeightage

Sr.
No.

1.

2.

3.

4.

5.

6.

Chapter

Marks

Problems
Introduction to Partnership
(Objectives
only)
and
15
PartnershipFinalAccounts
Accounts of Not for Profit
12
Concerns
Admission / Retirement /
DeathofPartner
OR
10
Admission / Retirement /
DeathofPartner
DissolutionofPartnershipFirm
OR
10
AccountingforShares/
AccountingforDebentures
BillofExchange(Objectives
include5marksforquestion
10
onspecimen)
SingleEntrySystem
OR
08
AnalysisofFinancialStatements
(TheoryQuestions)
Total
65

Sr.No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

MarksWithOption

Objectives

Total

02

17

15

03

18

01

13

12

02

14

12

10

10

02

22

02

12

10

10

04

24

06

16

10

10

20

02

10

08

08

04

20

15

80

93

25

118

02

Problems Objectives

Chapter
IntroductiontoPartnership
PartnershipFinalAccounts
ReconstitutionofPartnership(AdmissionofPartner)
ReconstitutionofPartnership(RetirementofPartner)
ReconstitutionofPartnership(DeathofPartner)
DissolutionofPartnershipFirm
AccountsofNotforProfitConcerns
SingleEntrySystem
BillofExchange(TradeBill)
CompanyAccountsPartI(AccountingforShares)
CompanyAccountsPartII(AccountingforDebentures)
AnalysisofFinancialStatements
ModelQuestionPaperI
ModelQuestionPaperII
BoardQuestionPaper:March2014
BoardQuestionPaper:October2014
BoardQuestionPaper:March2015
BoardQuestionPaper:October2015
BoardQuestionPaper:March2016

Note:AllTextualquestionsarerepresentedby*mark.

PageNo.
1
10
76
122
148
170
209
258
285
322
347
361
378
382
387
392
397
402
407

Total

01

IntroductiontoPartnership

Chapter01:IntroductiontoPartnership

Partnership
MeaningandDefinition:
Partnership is an association of two or more persons who agree to combine their financial resources and
managerialabilitiestooperateabusinessandshareProfitsandLossesinanagreedratio.
ThedefinitionofPartnershipaspertheIndianPartnershipAct, 1932is,Partnershipistherelationbetween
personswhohaveagreedtoshareprofitofbusinesscarriedonbyalloranyofthemactingforall.
Features:
i.
Agreement:Partnershipisformedonthebasisofanagreementbetweentwoormorepersonstocarryon
businessactivities.Agreementmaybeinwrittenororalform.Thetermsandconditionsofpartnershipare
laidinadocumentknownasPartnershipDeed.
ii.
Registration: It is not compulsory to register a partnership firm except, in the state of Maharashtra.
However,ifthepartnerssodecide,itmayberegisteredwiththeRegistrarofFirms.
iii. LawfulBusiness:Illegalbusinessactivitiesarenotpermittedbylaw.Partnershipformofbusinessshould
onlyundertakethosebusinessactivitieswhicharepermittedbylaworwhicharelegal.
iv. Membership:Toformapartnershipfirm,minimumtwopersonsarerequired.Themaximumlimitonthe
number of persons is 10 for banking business and 20 for other businesses. If the number exceeds the
abovelimit,thepartnershipbecomesillegal.
v.
SharingofProfitsandLosses:TheremustbeanagreementamongthepartnerstosharetheProfitsand
Lossesofthebusinessinanagreedprofitsharingratio.Allpartnersofthefirmwillbeentitledtoanequal
shareinProfitsandLosses,ifthepartnershipdeedissilentabouttheratio.
vi. UnlimitedLiability:ThepartnersofthefirmhaveUnlimitedLiability.Theyarejointlyaswellasindividually
liableforthedebtsandobligationsofthefirms.IftheAssetsofthefirmareinsufficienttomeetthefirms
Liabilities, the personal properties of the partners can also be utilized for the repayment of the firms
Liabilities.However,theLiabilityofaMinorPartnerislimitedtotheextentofhisshareintheprofit.
vii. Management: All the partners can participate actively in the business management depending on the
agreementformed.
viii. Dissolution:Dissolutionmeanstoclosethebusiness.Legally,apartnershipcomestoanendifanypartner
dies,retiresorbecomesinsolvent.
ix. RelationshipbetweenthePartners:Thepartnershipbusinessmaybecarriedonbyalloranyofthepartners
actingforall.Thus,eachpartnerisaprincipalandsocanactinhisownright.Atthesametime,hecanacton
behalfoftheotherpartnersasanagent.Thus,everypartneractsasanAgentaswellasPrincipal.

TypesofPartners
Followingarethevarioustypesofpartners:
i.
ActivePartners:Partnerswhotakeactivepartintheconductofdaytodaytransactionsofthefirmare
calledActivePartners.Thesepartnersperformthebusinessactivitiesonbehalfofotherpartners.
ii.
SleepingPartners:ASleepingPartnerisalsoknownasDormantPartner.SleepingorDormantPartnersare
those, who do not take active part in the management of the business. Such partners only contribute
capitalinthefirmandareboundbytheactivitiesofotherpartners.However,theyshareintheprofitsand
lossesofthebusiness.
1

Std.XII:Commerce
iii.

iv.

v.

vi.

NominalPartners:Nominalpartnersarethosewholendtheirnametothefirmbutdonothaveinterestin
thebusiness.Theydonotmakeanycapitalcontributionandarenotentitledtotakepartinmanagement,
butareliabletothirdparties,liketheotherpartners.
Minor Partner: A minor is a person who has not completed 18 years of age. A minor cannot become a
partnerbecauseheisnotqualifiedtoenterintoacontract.However,hemaybeadmittedtothebenefits
ofpartnershipwiththemutualconsentofallthepartners.Hisliabilityislimitedtotheextentofhisshare
inthecapitalandprofitsofthefirm.
PartnerinProfitsonly:Thistypeofapartneronlysharesintheprofitsofthefirm.However,hisliability
for the firms debts is unlimited. He is not allowed to take part in the management of the firm. A
partnershipfirmmayassociatewithsuchapartnerfortheirmoneyandgoodwill.
PartnerbyEstoppel:APartnerbyEstoppelneithercontributescapitalnorisentitledtoanyshareinthe
profits.Heisactuallynotapartnerinthefirm.However,anypersonwhorepresentshimselfinfrontofa
thirdpartyasapartnerofthefirmbecomesaPartnerbyEstoppel.Hebecomesliabletothethirdparties
thatpresumehimtobeapartnerofthefirm.

PartnershipDeed
Partnership Deed is the written agreement between or among the partners. It is also known as Articles of
Partnership. Partnership Deed lays down the terms and conditions of partnership and the rights, duties and
obligationsofpartnersfortheinternalmanagementofthefirm.Apartnershipdeedisveryhelpfulinsituations
of conflicts or disputes arising between partners. The relations of partners are governed by the Partnership
Deed.APartnershipDeedgenerallycontainsthefollowingimportantcontents:
i.
NameandaddressofthePartnershipFirm.
ii.
Natureofbusinesstobeconductedanditsduration.
iii. Names,Addressesandotherinformationaboutthepartners.
iv. ThetotalamountofCapitalcontributedbyeachpartner.

v.
Theamountofdrawingspermissibleforeachpartner.
vi. RateofInterestonCapitalandDrawings,ifany.
vii. ProfitSharingRatioofthepartners.
viii. RateofInterestonLoangivenbypartnerstothefirm.
ix. AccountingandAuditproceduresofthefirm.
x.
MethodsofvaluationoftheGoodwillofthefirm.
xi. Provisionsforadmission,retirementandinsolvencyofpartners.
xii. ProvisionsforDissolutionofthefirmandsettlementofaccountsafterdissolution.
xiii. DivisionofworkamongthepartnersandtheirRemuneration/Commission,ifany.
xiv. MethodofoperatingBankAccountsandauthorityforsigningthecheques.
xv. Othertermsandconditionswhichareagreedbyallthepartners.

IndianPartnershipAct,1932
TheIndianPartnershipActisinforcesince1932.Thisactisapplicableintheabsenceofpartnershipdeedor
ifthepartnershipdeedissilentonanyspecificpoint.Statedbelowaretheimportantprovisionsofthisact:
i.
DistributionofProfits:Intheabsenceofpartnershipdeed,allthepartnersaretreatedasequaland
they will be entitled to equal share in the Profits and Losses of the business. However, if profit
sharingratioisgiven,thenProfits/Lossesshouldbesharedbypartnersintheagreedratioonly.
ii. InterestonCapital:AccordingtotheAct,nointerestistobeallowedonPartnersCapital.However,if
aprovisionismadeinthepartnershipdeed,itshouldbegiventothepartnersaspertheagreement.
iii. InterestonDrawings:AspertheAct,thereisnoprovisionforInterestonDrawings.However,ifthe
partnershipdeedstatesthatInterestonDrawingsistobecharged,thenitshouldbechargedasper
the agreement. Interest on Drawings is to be charged for a period of six months in cases where the
totalamountofDrawingsisgivenbutthedatesofwithdrawalsarenotavailable.
2

Chapter01:IntroductiontoPartnership
iv.
v.

vi.

InterestonPartnersLoan:InterestonLoanshouldbeallowedattherateof6%perannumaspertheAct.If
aseparateprovisionismadeinthepartnershipdeedtheninterestshouldbeallowedaspertheagreement.
Salary or Commission to Partners: Partners are not entitled to any Salary or Commission for doing
anyadditionalorextraworkforthefirm.However,ifanyspecialprovisionismadeinthepartnership
deedthenitshouldbeprovidedaspertheagreement.
Admission of a New Partner: According to the Act, a person can be admitted into partnership only
withtheconsentofalltheexistingpartners.

MethodsofCapitalAccounts
Anamountcontributedbyapartnereitherintheformofcashorkindintothebusinessofapartnershipfirmis
known as Partners Capital. This amount may be equal or it may be in the profit sharing ratio or as per the
commonunderstandingamongpartners.CapitalAccountsofpartnerscanbemaintainedintwoways:
i.
FixedCapitalMethod:

Under the Fixed Capital Method, the amount of capital of the partners remains fixed unless some
additionalcapitalisintroducedorsomeamountofcapitaliswithdrawnbyanagreementamongthe
partners. Thus, under fixed capital method, two accounts are maintained for each partner namely
PartnersCapitalAccountandPartnersCurrentAccount.

a. PartnersCapitalAccount:Thebelowitemsarerecordedinthisaccount:

1. Amountcontributedbyapartneratthebeginning.

2. AdditionalCapitalintroducedbyapartnerduringtheyear.

3. Partofcapitalamountwithdrawnduringtheyear.
JournalEntriesrecordedinPartnersCapitalAccountunderFixedCapitalMethod:
Debit
Credit
Date
Particulars
L.F.
`
`
i.
AdditionalCapitalintroducedbyPartnersinCash

Cash/BankA/c
Dr.

xxx
ToPartnersCapitalA/c
xxx
(Beingadditionalcapitalintroduced)
ii.
AdditionalCapitalintroducedbyPartnersinKind

AssetA/c
Dr.
xxx
ToPartnersCapitalA/c
xxx
(Beingcapitalbroughtintheformofasset)
iii.
CapitalisWithdrawnbythePartner

PartnersCapitalA/c
Dr.

xxx
ToCash/BankA/c
xxx
(Beingamountofcapitalwithdrawnbypartner)

FormatforPartnersCapitalAccountunderFixedCapitalMethod:
PartnersCapitalAccount
Dr.

Cr.
X
Y
X
Y
Particulars
Particulars
`
`
`
`
ToCash/BankA/c
xxx
xxx ByBalanceb/d (CreditBalance)
xxx
xxx
(AmountofCapitalWithdrawn)
ByCash/BankA/c
xxx
xxx

(AdditionalCapital)

ByAssetsA/c
xxx
xxx

(CapitalinKind)
ToBalancec/d(CreditBalance)
xxx
xxx ByBalancec/d(DebitBalance)
xxx
xxx

xxx
xxx
xxx
xxx
[Note: Generally, Partners Capital Account shows a Credit Balance and is shown on the Liability side of the
Balancesheet.IftheaccounthasaDebitBalance,itisshownontheAssetsideoftheBalancesheet.]
3

Std.XII:Commerce

b.

Partners Current Account: This account is maintained when partners adopt the Fixed Capital
Method.Belowitemsarerecordedinthisaccount:

1. Amountwithdrawnbypartnersfortheirpersonaluse.

2. Goodswithdrawnbypartnersfortheirpersonaluse.

3. InterestonPartnersCapital.

4. InterestonPartnersDrawings.

5. SalaryorCommissiontoPartners.

6. DistributionofProfitorLossoftheFirm.
JournalEntriesrecordedinPartners,CurrentAccountunderFixedCapitalMethod:
Date
i.

ii.

iii.

iv.

v.

vi.

vii.

viii.

ix.

Particulars
InterestonCapitalallowedtoPartners
InterestonCapitalA/c
ToPartnersCurrentA/c
(Beinginterestoncapitalallowedtopartners)
TransferofInterestonCapitaltoProfit&LossAccount
Profit&LossA/c
ToInterestonCapitalA/c
(BeinginterestoncapitaltransferredtoProfit&LossA/c)
Salary/CommissionallowedtoPartners
Salary/CommissionA/c
ToPartnersCurrentA/c
(Beingsalaryorcommissionallowedtopartners)
TransferofSalary/CommissiontoProfit&LossAccount
Profit&LossA/c
ToSalary/CommissionA/c
(Beingsalary/commissiontransferredtoProfit&LossA/c)
InterestchargedonPartnersDrawings
PartnersCurrentA/c
ToInterestonDrawingsA/c
(Beinginterestondrawingscharged)
TransferofInterestonDrawingstoProfit&LossAccount
InterestonDrawingsA/c
ToProfit&LossA/c
(BeinginterestondrawingstransferredtoProfit&LossA/c)
DrawingsmadebythePartnersinCash
DrawingsA/c
ToCashA/c
(Beingcashwithdrawnforpersonaluse)
DrawingsmadebythePartnersinGoods
DrawingsA/c
ToGoodsA/c
(Beinggoodswithdrawnforpersonaluse)
TransferofDrawingstoPartnersCurrentAccount
PartnersCurrentA/c
ToDrawingsA/c
(BeingdrawingstransferredtoPartnersCurrentA/c)

L.F.

Dr.

Debit
`

xxx

Credit
`

xxx

Dr.

xxx
xxx

Dr.

xxx
xxx

Dr.

xxx
xxx

Dr.

xxx
xxx

Dr.

xxx
xxx

Dr.

xxx
xxx

Dr.

xxx
xxx

Dr.

xxx
xxx

Chapter01:IntroductiontoPartnership
x.

FordistributionofNetProfitorNetLoss
a. NetProfit
Profit&LossA/c
ToPartnersCurrentA/c
(BeingprofittransferredtoCurrentAccount)
b. NetLoss
PartnersCurrentA/c
ToProfit&LossA/c
(BeingnetlosstransferredtoCurrentAccount)

Dr.

xxx
xxx

Dr.

xxx
xxx

FormatforPartnersCurrentAccountunderFixedCapitalMethod:
PartnersCurrentAccount
Dr.

X
Y
Particulars
Particulars
`
`
ToBalanceb/d(DebitBalance)
xxx
xxx ByBalanceb/d(CreditBalance)
ToDrawingsA/c(Cash)
xxx
xxx ByInterestonCapital A/c
ToDrawingsA/c(Goods)
xxx
xxx ByInterestonLoan A/c
ToInterestonDrawingsA/c
xxx
xxx BySalarytoPartner A/c
ToProfitandLossA/c(Loss)
xxx
xxx ByCommissiontoPartner A/c

ByProfitandLossA/c(Profit)
ToBalancec/d(CreditBalance)
xxx
xxx ByBalancec/d(DebitBalance)

Cr.
X
`
xxx
xxx
xxx
xxx
xxx
xxx
xxx

Y
`
xxx
xxx
xxx
xxx
xxx
xxx
xxx

xxx
xxx
xxx
xxx
[Note: Partners Current Account can either have a Debit Balance or a Credit Balance. If Partners Current
Account has a Debit Balance, it should be shown on the Asset side of the Balance Sheet and if it has a Credit
Balance,itshouldbeshownontheLiabilitysideoftheBalanceSheet.]

ii.

FluctuatingCapitalMethod:
IntheFluctuatingCapitalMethod,onlyoneaccounti.e.PartnersCapitalAccountismaintainedforeach
partner. All the transactions affecting a Partner's Account like Interest on Capital, Drawings, Interest on
Drawings,Salary/CommissiontoPartnersandShareofProfitorLossarerecordedinthePartnersCapital
Account. As a result of this, the Closing Balance of the Partners Capital Account keeps fluctuating
(changing). Thus, it is known as the Fluctuating Capital Method. Below transactions are recorded in the
PartnersCapitalAccountunderthismethod:
1. CapitalIntroducedortheOpeningBalance 2.
AdditionalCapitalintroducedduringtheyear
3. InterestonCapital

4.
Drawingsmadeduringtheyear
5. InterestonDrawings
6.
Salary/CommissiontoPartners
7. WithdrawalofCapital
8.
ShareofProfitorLoss
9. ClosingBalance

FormatforPartnersCapitalAccountunderFluctuatingCapitalMethod:
PartnersCapitalAccount
Dr.

X
Y
Particulars
Particulars
`
`
ToBalanceb/d(DebitBalance)
xxx
xxx ByBalanceb/d
ToDrawingsA/c(Cash)
xxx
xxx (CreditBalance)
ToDrawingsA/c(Goods)
xxx
xxx ByCash/BankA/c
ToInterestonDrawingsA/c
xxx
xxx (AdditionalCapital)
ToCash/BankA/c
xxx
xxx ByAssetsA/c
(WithdrawalofCapital)
(CapitalinKind)

Cr.
X
`
xxx

Y
`
xxx

xxx

xxx

xxx

xxx

Std.XII:Commerce
ToProfitandLossA/c
(ShareofLoss)

ToBalancec/d(CreditBalance)

xxx

xxx

xxx

xxx

ByInterestonCapitalA/c
ByInterestonLoanA/c
BySalaryA/c
ByCommissionA/c
ByProfitandLossA/c
(ShareofProfit)
ByBalancec/d(DebitBalance)

xxx
xxx
xxx
xxx
xxx

xxx
xxx
xxx
xxx
xxx

xxx

xxx

xxx
xxx
xxx
xxx
Notes:
i.
CreditBalanceofPartnersCapitalAccountisshownontheLiabilitysideoftheBalanceSheetandDebit
BalanceofPartnersCapitalAccountisshownontheAssetsideoftheBalanceSheet.
ii.
Intheabsenceofinformation,partnersfollowFluctuatingCapitalMethod.
iii. InterestonCapitalispaidontheOpeningBalanceonlyifdateofadditionalcapitalisnotgiven.Ifthedateof
additionalcapitalisgiven,theninterestoncapitalwillbegivenontotalcapitalandwillbecalculatedasunder

a. OnOpeningBalancefor12months.

b. OnAdditionalCapitalfromdateofadditionalcapitaltodateofBalanceSheeti.e.,31stMar.

InterestonCapitalispaidonlyifthereisprofitinthebusiness.
iv. InterestonDrawingsisprovidedasunder:

a. IfDrawingsaremadeatthebeginningofeverymonth,Interestischargedfor6.5months.

b. IfDrawingsaremadeinthemiddleofeverymonth,Interestischargedfor6months.

c.
IfDrawingsaremadeattheendofeverymonth,Interestischargedfor5.5months.

d. Inabsenceofinformation,Interestischargedfor6months.

ObjectiveTypeQuestions

I.

Answerinonesentenceonly:[1markeach]

*1. WhatisPartnership?
Ans: Partnershipisanassociationoftwoormorepersonswhoagreetocombinetheirfinancialresourcesand
managerialabilitiestoconductabusinessandshareprofitsandlossesinanagreedratio
*2. Howmanypersonsarerequiredtoformpartnershipbusiness?
Ans: Minimumtwopersonsarerequiredtoformpartnershipbusiness.
*3. Whatistheliabilityofpartners?[Mar15]
Ans: TheLiabilityofPartnersisUnlimited,JointandSeveral.
*4. Whatistherelationbetweenthepartners?
Ans: TherelationshipbetweenpartnersisthatofPrincipalandAgent.
*5. WhoiscalledNominalPartner?
Ans: A partner who lends his name to the firm but does not have any interest in the business is known as a
NominalPartner.
*6. WhoiscalledMinorPartner?
Ans: Apartneroflessthan18yearsinageiscalledMinorPartner.
7. WhatistheliabilityofthePartnerinProfitOnly?
Ans: TheLiabilityofaPartnerinProfitonlyisUnlimited.
8. WhoisaPartnerbyEstoppel?
Ans: Theperson whoisnotactuallya partnerbut,representshimselfasapartnerinfrontof third parties is
knownasPartnerbyEstoppel.
*9. WhatisPartnershipDeed? [Mar12,Oct11]
Ans: Partnership Deed is the written agreement between or among the partners that lays down the terms and
conditionsofpartnershipandtherights,dutiesandobligationsofpartnersfortheinternalmanagementofthefirm.
6

Chapter01:IntroductiontoPartnership
*10. WhyisPartnershipDeedprepared?
Ans: Partnershipdeedispreparedtoresolvefutureconflictsanddisputesamongpartners.
*11. Whichactisapplicabletopartnershipbusiness?
Ans: TheIndianPartnershipAct,1932isapplicabletopartnershipbusiness.
12. AtwhatrateistheInterestonPartnersLoanispaidintheabsenceofprovisioninpartnershipdeed?
Ans: Intheabsenceofaprovisioninpartnershipdeed,InterestonPartnersLoanispaidat6%p.a.
*13. WhatarethemethodsofmaintainingPartnersCapitalAccount?
Ans: FixedCapitalMethodandFluctuatingCapitalMethodarethetwomethodsofmaintainingCapitalAccount
ofpartners.
14.

Ans:

*WhatdoyoumeanbyFixedCapitalMethod?

OR
WhatisFixedCapitalMethod?[Mar11]
Fixed Capital Method is a method of maintaining Capital Account of partner, where the capital is kept
fixed and all the other transactions are recorded by preparing Partners Current Account except, when
additionalcapitalisintroducedinthebusinessorcapitaliswithdrawnbyapartner.

*15. WhatisFluctuatingCapitalMethod?
Ans: FluctuatingCapitalMethodiswhereallthetransactionsrelatedtopartnersarerecordedthroughPartners
Capital Account and there is no requirement to prepare Partners Current Account. In this method, the
capitalofthepartnerisfluctuating.
*16. WhenisPartnersCurrentAccountopened?
Ans: PartnersCurrentAccountisopenedunderFixedCapitalMethod.
II.

Writetheword/term/phrasewhichcansubstituteeachofthefollowingstatements:[1markeach]

*1.
*2.
3.
4.
*5.
6.
*7.
8.
*9.
*10.
*11.
12.
*13.
*14.
*15.
*16.
*17.
*18.
19.
*20.
21.
Ans:

Anassociationoftwoormorepersonstocarryonbusiness.
Apartnershipagreementbetweenthepartnersinwrittenform.
Writtentermsofagreementbetweenthepartners.
Themaximumnumberofpartnerinbankingbusiness.
Toclosethebusinessofpartnershipfirm.
Therelationshipbetweenpartners.
Apartnerwhoisengagedindaytodayactivitiesofthebusiness.
Activepartnerisalsocalledas.
Apartnerswhocontributesonlycapitalforthebusinessbutdoesnottakeanyactivepart.
Apartnerwhoprovidesonlyhisnametothepartnershipfirm.[Mar08]
Apartnerbelowtheageof18years.
Apartnerwhoseliabilityislimited.
Thepartnerwhoisentitledtoshareprofitsonly.
Apartnerwhoactsandbehaveslikeapartner,butheisnotapartnerofthefirm.
Anamountcontributedbythepartnersintothebusiness.
Anamountwithdrawnbypartnerfromthebusinessforhispersonaluse.
Underthismethod,capitalbalancesofpartnerremainsconstant.
CapitalmethodinwhichPartnersCurrentAccountisopened.
Capitalmethodinwhichboth,CapitalAccountandCurrentAccountaremaintainedforeachpartner.
Methodofcapitalaccountinwhichcapitalbalancesofpartnerschangeseveryyear.
CapitalMethodunderwhichonlyPartnersCapitalAccountismaintained.
1. Partnership

2.
PartnershipDeed
3. PartnershipDeed

4.
Ten
5. Dissolution

6.
PrincipalandAgent
7. ActivePartner

8.
WorkingPartner
7

Std.XII:Commerce

9.
11.
13.
15.
17.
19.
21.

SleepingPartner/DormantPartner
MinorPartner

PartnerinProfitOnly
PartnersCapital

FixedCapitalMethod
FixedCapitalMethod
FluctuatingCapitalMethod

10.
12.
14.
16.
18.
20.

III.
*1.

Selectthemostappropriatealternativefromthosegivenbelowandrewritethestatements:
[1markeach]
Partnershipisanassociationof_______ormorepersons.
(A) two
(B) seven
(C) ten
(D) twenty

2.

Partnershipbusinessmustbe_______.
(A) lawful
(B) illegal

3.

Minimum_______personsarerequiredtoformapartnership.
(A) one
(B) two
(C) three

*4.

Maximum_______personsarerequiredtoformapartnershiphavingtradingbusiness.
(A) twenty
(B) fifty
(C) seven
(D) ten

*5.

Maximum_______personsarerequiredtoformapartnershiphavingbankingbusiness.
(A) two
(B) seven
(C) ten
(D) twenty

*6.

Theliabilityofthepartnerinafirmis_______.
(A) zero
(B) limited

*7.

Apartnerwhoprovidesonlycapitaltothefirmiscalledas_______partner.
(A) active
(B) nominal
(C) sleeping
(D)

8.

Apartnerwhodoesnottakeactivepartinthemanagementofbusinessisknownas_______.
(A) WorkingPartner (B) SleepingPartner (C) NominalPartner (D) PartnersinProfitonly

*9.

Apartnerwholendsonlyhisnametothefirmiscalledas_______partner.
(A) partnerinprofitsonly
(B) partnerbyestoppel
(C) nominal

(D) minor

(C)

(C)

NominalPartner
MinorPartner
PartnerbyEstoppel
Drawings
FixedCapitalMethod
FluctuatingCapitalMethod

voluntary

unlimited

*10. Apartnerbelow18yearsofageiscalledas_______partner.

(A) active
(B) sleeping
(C) nominal
11.

*12.

(D)

immoral

(D)

seven

(D)

proportionate
minor

(D) minor

Intheabsenceofpartnershipdeed,thepartnersshareprofitsandlossesinthe_______ratio.
(A) capital
(B) equal
(C) 1:2
(D) initialcontribution
TheIndianPartnershipActisinforcesince_______.[Mar10,Oct10]
(A) 1932
(B) 1956
(C) 1960
(D) 1984

*13. TheInterestoncapitalofapartneriscreditedto_______Account.

(A) Trading
(B) ProfitandLoss
(C) PartnersCapital (D)

Cash

14. Theinterestondrawingsistransferredto_______sideoftheProfit&LossAccount.[Oct14]

(A) debit
(B) credit
(C) asset
(D) liability
*15. Thedrawingsofpartnersaretransferredto_______Account.

(A) Trading
(B) ProfitandLoss
(C) PartnersCapital (D)

BalanceSheet

*16. Theinterestondrawingsistransferredto_______sideofPartnersCurrentAccount.

(A) debit
(B) credit
(C) asset
(D) liability
8

Chapter01:IntroductiontoPartnership
*17. Ifdatesofdrawingsarenotgiven,interestondrawingsischargedfor_______months.

(A) three
(B) six
(C) nine
(D) twelve
*18. UnderFixedCapitalMethod,CapitalAccountand_______Accountisopenedforeachpartner.

(A) PartnersDrawing

(B) PartnersSalary

(C) PartnersCurrent

(D) PartnersCommission
*19. UnderFixedCapitalMethod,salaryorcommissiontopartneriscreditedto_______Account.

(A) PartnersCapital

(B) PartnersCurrent

(C) PartnersDrawings

(D) PartnersSalary
*20. AdebitbalanceofPartnersCurrentAccountwillappearonthe_______sideoftheBalanceSheet.

(A) Assets
(B) Liability
(C) Debit
(D) Credit
21. ThebalanceofCapitalAccountfluctuatesunder_______CapitalMethod.

(A) Blocked
(B) Fluctuating
(C) Fixed
(D)

SemiBlocked

22. Under_______CapitalMethod,onlyCapitalAccountofpartnersisopened.

(A) Fixed
(B) Fluctuating
(C) Single
(D)

Double

IV.

StatewhetherthefollowingstatementsareTRUEorFALSE:

[1markeach]

*1.
*2.
*3.
*4.
5.
6.
*7.
*8.
9.
10.
11.
*12.
13.
*14.
15.
16.
*17.
*18.
*19.
*20.
*21.
*22.
*23.
24.
Ans:

Partnershipisanassociationoftwoormorepersons.
Partnershipfirmisatradingconcern.
Partnershipagreementmustbeinwrittenform.
Thereisnolimittomaximumnumberofpartnersinafirm.
Therecanbepartnershipfirmwith25partners.
Therecanbepartnershiponlyforthesharingofloss.
Partnermustshareprofitsandlossesequally.
Ifthepartnershipdeedissilent,partnersshareprofitsandlossesequally.
Eachpartnerhasarighttotakepartintheconductofbusiness.
Partnersnottakinganactivepartinthebusinessiscalledsleepingpartner.
Theliabilityofthesleepingpartnerislimited.
Apartnerwhoprovidesonlycapitaltothefirmiscalledasnominalpartner.
Apartnerwhogivesonlyhisnametothebusinessiscallednominalpartner.
Theliabilityofminorpartnerislimited.
Partnershipdeedmustalwaysbeinwrittenform.
PartnershipfirminIndiaisgovernedaccordingtoIndianPartnershipAct1932.
Theinterestondrawingsisanincomeofthepartnershipfirm.
Aninterestoncapitalisanexpenditureofthepartnershipfirm.
Partnersareentitledtogetsalaryorcommission.
Thebalanceofcapitalaccountremainsconstantunderfixedcapitalmethod.
PartnersCurrentAccountisopenedwhenfluctuatingcapitalmethodisadopted.
Partnerscurrentaccountalwaysshowscreditbalance.
CapitalAccountalwaysshowscreditbalance.
AdjustmentstopartnerscapitalarepassedthroughCurrentAccountwhenthecapitalsarefluctuating.
1. True
2. True
3.
False
4. False
5. False
6. False
7.
False
8. True
9. True
10. True
11. False
12. False
13. True
14. True
15. True
16. True
17. True
18. True
19. False
20. True
21. False
22. False
23. False
24. False