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Objective Assessment on Partnership Accounts

by Ken Delaney-Moore, Sheffield Hallam University

This assessment covers the following material:

  • Partnerships and the Deed of Partnership
  • Profit-sharing in a partnership
  • Appropriation accounts
  • Partners capital and current accounts
  • Accounting for Goodwill and the re-valuation of assets upon changes in the profit-sharing ratio

If you are unsure about attempting the assessment, it may be advisable to have a look at the worksheets first. When you are done, please fill in the on-line evaluation form in order for us to monitor the quality of the materials we provide for you. Tell us what we're doing right and wrong. It takes very little time, and your opinions are valued - thank you. The assessment starts here. No-one except you will see your score; Biz/ed does not keep a record.

Note that in some of these questions there is only one correct answer, but for other questions there may be more than one answer. You will be told this information in advance, so read carefully:

For questions 1 to 10 there is only ONE correct answer. Each correct answer is worth two marks. You are allowed two attempts for each question.

Q1. Which of the following is the minimum necessary for a partnership agreement to be legally binding?

(Select one answer)

(a) Verbal agreement
(b) Written agreement
(c) Signed Deed of Partnership
(d) Deed of Partnership signed in the presence of a solicitor
Q2. Which of the following is NOT normally a clause in a Deed of Partnership?

(Select one answer)

(a) Amount of capital to be contributed by each partner
(b) Rate of interest to be allowed on partners capital
(c) Ratio of profit (and loss) sharing
(d) Salaries payable to employees
Q3. In the Appropriation account, which of the following is normally ADDED onto the profit available for distribution?

(Select one answer)

(a) Interest on capital
(b) Interest charged on partners drawings
(c) Balance on partners capital accounts
(d) Balance on partners current accounts
Q4. The Gant partnership makes an 8% per annum charge against partners who make drawings. Its financial year-end is 31st June. If interest is charged on a monthly basis, the charge against a partner who draws out £4,000 on 1st October should be:

(Select one answer)

(a) £320
(b) £80
(c) £360
(d) £240
Q5. In the Heyward Partnership, the total interest on partners capitals amounted to £4,300. The interest charged on partners' drawings was £1,250. A salary of £5,000 was payable and the balance of profits to be shared out was £8,150. The net profit for distribution must therefore be:

(Select one answer)

(a) £16,200
(b) £10,100
(c) £17,450
(d) £18,700
Q6. Prew and Whyte have a partnership whose financial year-end was 31st December. Last year they shared profits equally until 30th June. King joined the partnership on 1st July, and from this point profits were shared in the ratio 2:2:1 respectively. There were no salaries. Interest on capitals was not paid and interest on drawings was not charged. Calculate the total income of Prew for last year, given that the partnership made £48,000 profit and that this accrued evenly throughout the year.

(Select one answer)

(a) £16,800
(b) £20,000
(c) £21,600
(d) £12,000

Use the following information to answer questions 7,8, 9 & 10:

B.R. Salticon and J.B. Salticon are the only senior partners in a firm where there are also seven junior partners. Under the Deed of Partnership, senior partners receive twice as much of the balance of profits than their junior counterparts. To compensate for this, the juniors also receive a salary of £10,000 each whereas the seniors do not receive any salary. No interest is charged on drawings, and no interest is given on capitals. Last year the net profit was £312,000.

Q7. The total amount received by each senior partner last year was:

(Select one answer)

(a) £53,778
(b) £44,000
(c) £56,727
(d) £42,000
Q8. Osborne, a junior partner in Salticon & Salticon had an opening balance on his current account of £3,100 credit. His closing balance was £1,900 debit. His drawings for the year must have been:

(Select one answer)

(a) £37,000
(b) £33,200
(c) £49,000
(d) £27,000
Q9. A year later Osborne is allowed to become a senior partner. If Goodwill is valued (at that date) at £132,000, what entries need to be made in Osbornes capital account (if no goodwill a/c is to be used)?

(Select one answer)

(a) Debit £12,000 and credit £22,000
(b) Debit £12,000 and credit £11,000
(c) Debit £11,000 and credit £12,000
(d) Debit £22,000 and credit £12,000
Q10. If Osborne DOES become a senior partner, how much net profit would the firm have to make this year (in total) in order for Osborne to earn what he was earning as a junior partner last year (£32,000)?

(Select one answer)

(a) £252,000
(b) £192,000
(c) £262,000
(d) £352,000

For the last five questions there may be more than one correct answer. Each question carries a total of four marks.

All partners should receive as salary equivalent to 10% of the capital they have agreed to contribute.

Q11. In the absence of a written agreement, which of the following should apply, according to the Partnership Act 1890?

(Select one or more answers)

(a) An interest rate of 5% should be paid on partners capitals
(b) An interest rate of 5% should be paid on partners capitals in excess of that which they have agreed to contribute
(c) Interest of 5% should be charged on drawings
(d) Profits and losses shall be shared equally



Q12. Which of the following items might be found in a Partnership Appropriation account?

(Select one or more answers)

(a) Interest on capitals
(b) Partners drawings
(c) Salaries payable
(d) Current account balances



Q13. Which of the following are advantages of using separate capital and current accounts for each partner?

(Select one or more answers)

(a) It allows each partner to make more drawings over the year
(b) It allows for more profits to be distributed
(c) Each partners short-term entitlement is separated from their long-term commitment
(d) Overdrawn partners will show up as having debit balances on current account



14. On 30th June A and B allow C to join their long-established partnership. At the same date Goodwill is valued at £12,000, but NO goodwill account is to be opened. Profits and losses have always been shared equally, and it is the intention that this remains the case under the new agreement. Which of the following statements are true:

(Select one or more answers)

(a) Goodwill should appear in the Balance Sheet of A, B and C as a fixed asset.
(b) A should receive value from the goodwill adjustment
(c) B's Capital account should be credited with £6,000 and debited with £4,000
(d) C's Current account should be debited with £4,000



Q15. On 31st March, E and F were joined in partnership by G. On that day, part of the original premises with a book value of £30,000 were re-valued at £45,000. Profits and losses were shared equally prior to and after the admission of G. Which of the following are true:

(Select one or more answers)

(a) F should receive a share of the revaluation
(b) G should receive a share of the revaluation
(c) The balance sheets should still show the original valuation for premises of £30,000
(d) The capital accounts of the original partners will be credited with £7,500



Click to view your total score for all the above questions that you have attempted.
Now please fill-in the on-line evaluation form in order for us to monitor the quality of the materials we provide for you. Tell us what we're doing right and wrong. It takes very little time, and your opinions are valued - thank you.

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