Explore topic-wise InterviewSolutions in Current Affairs.

The correct answer is : (b) Closing

The Correct option is (c) 6%

A partner can retire from the firm in three different ways. They are as follow 

(i) Retirement Through Mutual Consent A partnership firm take its shape through mutual consent of partners in the same way. A partner may retire if all the partners agree on the decision of his/her retirement. 

(ii) When There is a Provision in Partnership Deed When there is a provision for the retirement of a partner in the partnership deed in that case partner may retire from the firm by expressing his/her intention of leaving the firm though a notice to the other partners of the firm. 

(iii) Retirement Through Written Notice In case when partnership among the partners is at will, then a partner may retire by giving notice in writing to all the other partners informing them about his/her intention to retire.

The following are the various matters that need to be adjusted at the time of retirement of partners/partner 

(i) Revaluation of assets and liabilities of the new firm. 

(ii) Calculation of goodwill of the new firm and its accounting treatment. 

(iii) Calculation of new ratio of the remaining partners of the firm. 

(iv) Computation of new gaining ratio among rest of the partners. 

(v) Distribution of accumulated profits and losses and reserves among all the partners (including the retiring partner). 

(vi) Treatment of Joint Life Policy. 

(vii) Disposal of the amount due to the retiring partner 

(viii) Adjustment of capital accounts of the remaining partners in their new profit sharing ratio.

The outgoing partner’s account is settled as per the terms of partnership deed i.e., in lumpsum immediately or in various instalments with or without interest as agreed or partly in cash immediately and partly in installment at the agreed intervals. In the absence of any agreement, Section 37 of the Indian Partnership Act, 1932 is applicable, which states that the outgoing partner has an option to receive either interest @ 6% p.a. till the date of payment or such share of profits which has been earned with his/her money (i.e., based on capital ratio).

Hence, the total amount due to the retiring partner which is ascertained after all adjustments have been made is to be paid immediately to the retiring partner. In case the firm is not in a position to make the payment immediately, the amount due is transferred to the retiring Partner’s Loan Account, and as and when the amount is paid it is debited to his account.

At the time of retirement or death of a partner, it becomes inevitable to revalue the assets and liabilities of the firm for ascertaining their true and fair values. The revaluation is necessary as the value of assets and liabilities may increase or decrease with the passage of time. Further, it may be possible that there are certain assets and liabilities that remained unrecorded in the books of accounts. The retiring or the deceased partner may be benefitted or may bear loss due to change in the values of assets and liabilities. Therefore, the revaluation of the assets and liabilities is necessary in order to ascertain the true profit or loss that is to be divided among all the partners in their old profit sharing ratio.

Goodwill is an intangible asset of a firm that is earned by the efforts of all the partners of the firm. After the retirement or death of a partner, the fruits of the past performance and reputation will be shared only by the remaining partners. Thus, the remaining partners should compensate the retiring orthe deceased partner by entitling him/her a share of firm’s goodwill

(d) Profits of the business will be shared

Interest on Capital is debited to Profit and Loss Appropriation  Account.

The Correct option is  (c) 2

Interest on drawings calculated on the basis of  period for which the money remained outstanding from the partners during the course of accounting year.

Under Fixed method of capital, partner’s capital Account and partner’s Current  Account are prepared.

Under fluctuating method of capital, interest on capital is credited to partner’s capital, Account.

(b) Partnership Deed

(c) Oral or Written Agreement

(b) Unlimited

(c) Limited Liability

Salary to partner is debited  to Profit and Loss Appropriation Account.

The Correct option is (a) Equal

When drawings are of uneven amounts and made at uneven time intervals, then it is convenient to calculate interest thereon according to product method.

In case of guarantee of profit to a partner, the partner to whom guarantee has been given will get the guaranteed share of profit, while the other will have to share the remaining profits as per their agreement.

Correct option is (B) as at particular date, for a particular accounting period

Following are some of the characteristics of financial statements :

• Financial statements are called historical statements as they are related to past period.
• Figures stated in financial statements are expressed in terms of money.
• Financial statements are based on recorded facts.
• Profit and loss accounts shows profit or loss for a given period.
• Balance sheet gives an idea about the financial position of a company.
• Financial statements are prepared based on generally accepted accounting principles.

Correct option is (D) Balance sheet, statement of profit and loss

As per section-2(40) of the Companies Act 2013, ‘Financial statement’ in relation to company includes –

• A balance sheet as at the end of the financial year.
• A profit and loss account or in case of a entity carrying on any activity not for profit, an income and expenditure account for the financial year.
• Cash flow statement for the financial year.
• A statement of changes in equity, if applicable.
• Notes related to the accounts.

Financial statements are statements presenting accounting information in brief at the end of accounting process for an accounting period.

Following are some of the objectives of preparation of financial statements :

• To know about true and fair view of financial performance of a company.
• To know the true and fair view of financial position of a company.
• To comply with legal requirements.
• To communicate financial information of the company to various interested parties.

The ratio in which the new partner (who has joined a partnership firm) is given the share by the existing partners of the firm is called sacrificing ratio. So, it is the ratio in which the existing partners sacrifice their share of profit in favour of the new partner. Algebraically, it is expressed as:

Sacrifice ratio = Old ratio – New ratio

When a new partner joins the firm with the consent of all the other partners, then a new agreement needs to be prepared. Such a procedure of admitting a new partner into a partnership firm is termed as admission of partner.

It refers to the flow of accounting data, in the course of accounting during the period of accounting.

Assets = Capital + Liability Assets = 60,000 + 90,000 Assets = 1,50,000.

Capital = Assets – Liability 

capital = 2,00,000 – 70,000 

capital = 1,30,000.

This statement is True.

A bill of exchange is signed by the person who draws or makes it, and the person on whom it is drawn accepts it.

The following are the four basic requirements of a Database Application: 

a. Front-end Interface- It acts as an interactive connecting link between the user and the database oriented software through which the user communicates or interacts to the backend database.

b. Back-end Database- It is the data storage system that is hidden from the users. It responds to the requirement of the users to the extent the user is authorised to access.

c. Data Processing- It is a sequence of actions that are taken to transform the input data into useful information for taking various decisions.

d. Reporting System- It is an integrated set of objects that includes all the relevant information that constitutes a report.

Name the various categories of Accounting Package. 

The Accounting Packages are classified into the following categories: 

a. Ready-to-use or Readymade Software 

b. Customised Software 

c. Tailored or Tailor-made Software

List the various advantages of Computerised Accounting Systems. 

The mentioned below are the various advantages of Computerised Accounting Systems:

a. Speed 

b. Accuracy 

c. Reliability 

d. Up-to-Date Information 

e. Real Time User Interface 

f. Automated Document Production 

g. Scalability 

h. Legibility

Give two examples each of the organisations where ‘ready-to-use’, ‘customised’, and ‘tailored’ accounting packages respectively suitable to perform the accounting activity.

‘Ready-to-use’ accounting packages are basically used by the smallsized enterprises. For example, grocery stores, medical stores, etc.

On the other hand, ‘Customised’ accounting packages are basically used by the medium and large business. For example, shopping malls, hospitals, etc.

Whereas, ‘Tailored’ accounting packages are basically used by the geographically scattered businesses. For example, MNC’s, Communication Industries, etc.

(i) First of all, Rs. 20,000 will be paid to Mrs. A’s loan. 

(ii) B’s loan will be paid only Rs. 5,000 i.e. the money available for payment (sec. 48)

Gaining Ratio

Explanation: The proportion in which the continuing partners benefit due to retirement of a partner is called gaining ratio. It is calculated on the retirement or death of a partner for adjusting the retiring/deceased partner’s share of goodwill.

Dissolution of partnership refers to change in the existing agreement among the partners while dissolution of firm refers to complete close down of the business. 

Partner’s wife loan is a part of outside liability o it is credited to Realistion a/c  and is paid . Partner’loan a/c  is not a part of outside liability  so it is not transferred to Realistion a/c . A separate partner”s loan is opened . Partner’s loan is paid only  if surplus remains after payment of outside liability. 

Debts due to third parties are paid first. 

Unrecorded liability.

False

Explanation: Revaluation Profit is credited to All Partners’ Capital Accounts (including the retiring partners) in their old profit sharing ratio.

An accounting report must fulfill; 

• Relevance 

• Timeliness 

• Accuracy 

• Summarisation

False

Explanation: Revaluation Account is different from Realisation Account. Revaluation Account is prepared at the time of admission, retirement or death of a partner, which records the effect of changes in the value of assets and liabilities, whereas, Realisation Account is prepared at the time of dissolution of a firm to record the realisation of assets and settlement of liabilities.

Realisation   Dr.   2000             

To Cash a/c                    1500                   

Ravi                                500 

( firm paid 1500 as realization expenses and 500 due to Ravi)