Partnership Accounts MCQs 2026

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

1. A firm's creditors ✓
2. B bank ✓
3. C guaranteeing partner ✓
4. D government ✓

The sacrificing ratio is calculated as

1. A new ratio minus old ratio ✓
2. B capital ratio ✓
3. C old ratio minus new ratio ✓
4. D equal shares ✓

The primary purpose of a partnership appropriation account is to show

1. A how the net profit is divided among the partners ✓
2. B the sale of assets ✓
3. C the firm's bank balance ✓
4. D the value of fixed assets ✓

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

1. A as a separate entity (association of persons/firm) ✓
2. B never taxed ✓
3. C only in the individual partners' names always ✓
4. D by the stock exchange ✓

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

1. A new ratio ✓
2. B sacrificing ratio ✓
3. C capital ratio ✓
4. D gaining ratio ✓

Mutual agency in a partnership means each partner is

1. A a customer of the firm ✓
2. B an employee only ✓
3. C both an agent and a principal of the firm ✓
4. D a creditor ✓

Which of the following is NOT a feature of a partnership

1. A sharing of profits ✓
2. B mutual agency ✓
3. C two or more persons ✓
4. D a separate legal entity distinct from its partners ✓

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

1. A office rent ✓
2. B new assets ✓
3. C advertising ✓
4. D partners' loans and then their capital balances ✓

Super profit equals average (actual) profit minus

1. A the normal profit ✓
2. B drawings ✓
3. C interest on loan ✓
4. D partners' salaries ✓

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

1. A capital employed ✓
2. B number of years' purchase ✓
3. C normal rate of return ✓
4. D interest on capital ✓

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

1. A capital reserve ✓
2. B a loss ✓
3. C goodwill ✓
4. D drawings ✓

In a partnership at will, the firm can be dissolved

1. A only by a court order ✓
2. B by any partner giving notice to the others ✓
3. C never ✓
4. D only on the death of a partner ✓

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

1. A the new partner only ✓
2. B creditors ✓
3. C old partners in the old profit-sharing ratio ✓
4. D the bank ✓

The revaluation account is also known as the

1. A realization account ✓
2. B appropriation account ✓
3. C capital account ✓
4. D profit and loss adjustment account ✓

In a partnership, the liability of the partners is generally

1. A unlimited, joint and several ✓
2. B limited to capital always ✓
3. C nil ✓
4. D borne by the firm only ✓

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

1. A share of losses ✓
2. B salary ✓
3. C interest on loan ✓
4. D capital or current account balance ✓

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

1. A current account ✓
2. B capital account ✓
3. C realization account ✓
4. D cash account ✓

A partnership is a business owned by

1. A two or more persons who share profits and losses ✓
2. B a single individual ✓
3. C the government ✓
4. D shareholders only ✓

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

1. A memorandum of association ✓
2. B prospectus ✓
3. C partnership deed ✓
4. D articles of association ✓

In Pakistan, partnerships are mainly governed by the

1. A Companies Act 2017 ✓
2. B Partnership Act 1932 ✓
3. C Securities Act only ✓
4. D Banking Ordinance ✓

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

1. A in the ratio of capital contributed ✓
2. B by the senior partner ✓
3. C as decided by a court ✓
4. D equally among the partners ✓

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

1. A 10 percent per annum ✓
2. B 12 percent per annum ✓
3. C no interest at all ✓
4. D 6 percent per annum ✓

Interest on partners' capital, when allowed, is

1. A an income of the firm ✓
2. B an appropriation of profit ✓
3. C a liability to outsiders ✓
4. D a drawing ✓

Interest on a partner's drawings is

1. A credited to the firm's profit and loss appropriation account ✓
2. B an expense of the firm ✓
3. C ignored in all cases ✓
4. D paid in cash to the partner ✓

The account used to distribute net profit among partners is the

1. A trading account ✓
2. B realization account ✓
3. C profit and loss appropriation account ✓
4. D balance sheet ✓

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

1. A loan account ✓
2. B cash account ✓
3. C current account ✓
4. D trading account ✓

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

1. A capital account itself ✓
2. B current account ✓
3. C realization account ✓
4. D cash account ✓

Goodwill is best described as

1. A a fixed tangible asset ✓
2. B cash in hand ✓
3. C a current liability ✓
4. D the value of a firm's reputation and future earning capacity ✓

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

1. A number of partners ✓
2. B number of years' purchase ✓
3. C capital ratio ✓
4. D interest rate ✓

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

1. A gaining ratio ✓
2. B sacrificing ratio ✓
3. C capital ratio ✓
4. D profit ratio ✓

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

1. A sacrificing ratio ✓
2. B capital ratio ✓
3. C old ratio ✓
4. D gaining ratio ✓

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

1. A realization account ✓
2. B appropriation account ✓
3. C revaluation (profit and loss adjustment) account ✓
4. D capital account only ✓

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

1. A old partners' capital accounts in the old ratio ✓
2. B new partner only ✓
3. C cash account ✓
4. D goodwill account ✓

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

1. A realization account ✓
2. B revaluation account ✓
3. C appropriation account ✓
4. D current account ✓

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

1. A debit side ✓
2. B credit side ✓
3. C both sides ✓
4. D neither 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. A profit-sharing ratio ✓
2. B gaining ratio ✓
3. C equal shares ✓
4. D last agreed capitals ✓

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

1. A 2 ✓
2. B 10 ✓
3. C 20 ✓
4. D unlimited ✓

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

1. A active partner ✓
2. B nominal partner ✓
3. C sleeping (dormant) partner ✓
4. D minor partner ✓

A nominal partner is one who

1. A invests the most capital ✓
2. B manages the firm ✓
3. C is a minor ✓
4. D lends only his name or reputation without capital or active role ✓

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

1. A an appropriation of profit, not an expense ✓
2. B a trading expense ✓
3. C drawings ✓
4. D a liability to banks ✓

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

1. A realization account ✓
2. B deceased partner's executor's (legal heir's) account ✓
3. C revaluation account ✓
4. D trading account ✓

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

1. A the new partner only ✓
2. B the revaluation account ✓
3. C cash ✓
4. D all partners' capital accounts in the old ratio ✓

A partnership is dissolved when

1. A the relationship among all the partners comes to an end ✓
2. B one partner takes leave ✓
3. C profits fall ✓
4. D a new customer is added ✓

A minor can be admitted to a partnership only

1. A as a full partner with unlimited liability ✓
2. B to the benefits of the partnership, not as a full partner ✓
3. C never under any circumstance ✓
4. D as the managing partner ✓

The gaining ratio is calculated as

1. A old ratio minus sacrificing ratio ✓
2. B new ratio minus old ratio ✓
3. C old ratio plus new ratio ✓
4. D capital ratio ✓