Important Questions and Answers for Class 12 Accountancy Chapter 1 Accounting for Partnership Basic Concepts 2025-26

1. Multiple choice questions.

Q1. Which of the following is not an essential feature of a partnership?

• (a) Two or more persons
• (b) Agreement between partners
• (c) Sharing of profits
• (d) Compulsory registration

Answer: (d) Compulsory registration.

Q2. When is interest on capital allowed to partners?

• (a) When partnership deed provides for it
• (b) Always allowed
• (c) Only in case of loss
• (d) Never allowed

Answer: (a) When partnership deed provides for it.

Q3. If profit-sharing ratio is not specified in the partnership deed, profits and losses are shared:

• (a) In capital ratio
• (b) Equally
• (c) Based on seniority
• (d) As decided by audit

Answer: (b) Equally.

Q4. Which account is prepared to distribute profits among the partners?

• (a) Profit and Loss Account
• (b) Profit and Loss Appropriation Account
• (c) Capital Account
• (d) Partners' Current Account

Answer: (b) Profit and Loss Appropriation Account.

2. Very Short Answer (VSA).

Q5. Define 'Partnership' as per the Indian Partnership Act 1932.

Answer: Partnership is a relationship between persons who have agreed to share the profits of a business carried on by all or any of them acting for all, as per Section 4 of the Indian Partnership Act 1932.

Q6. What is a Partnership Deed?

Answer: A Partnership Deed is a legal document containing the terms and conditions of partnership, including rights, duties, and obligations of partners. It may be written or oral.

Q7. What does mutual agency mean in partnership?

Answer: Mutual agency means every partner is both an agent and principal of the firm. Each can bind the others by their actions in firm’s business.

Q8. State any one important feature of 'Fixed Capital Method'.

Answer: In Fixed Capital Method, each partner maintains two accounts—Capital Account and Current Account. Capital Account remains unchanged except for additional capital.

3. Short Answer Questions.

Q9. Explain the main provisions of the Indian Partnership Act 1932 that are applicable in the absence of partnership deed.

Answer: When the partnership deed is silent, the following provisions apply: profits and losses are shared equally; interest on capital and drawings is not allowed or charged; partners aren't allowed remuneration; and loans by partners fetch 6% p.a. interest. These help prevent disputes among partners.

Q10. What are the main points generally included in a partnership deed?

Answer: Main points are: name and address of firm and partners, capital contribution, profit-sharing ratio, interest provisions, salaries, rules for operations, rights and duties, and rules for dissolution and conflict resolution. This clarifies roles and minimizes misunderstandings between partners.

Q11. Distinguish between Fixed Capital Method and Fluctuating Capital Method.

Answer: In Fixed Capital Method, each partner keeps two accounts—capital and current—where capital remains unchanged. Under Fluctuating Capital Method, all adjustments like profit, drawings, or interest are recorded in a single capital account, causing the balance to fluctuate each year.

Q12. How is profit distributed among partners when a guarantee is given to a particular partner?

Answer: When a partner is guaranteed a minimum profit, if their actual share is less, the deficiency is borne by other partners as per agreement. After distributing the guaranteed amount, remaining profits are shared as per the ratio.

4. True or False Questions.

Q13. It is compulsory to register a partnership firm in India.

Answer: False.

Q14. If the partnership deed does not mention the profit-sharing ratio, profits are shared equally.

Answer: True.

Q15. Partners’ liability is limited only up to their capital contribution.

Answer: False.

Q16. Interest on partner’s loan is to be paid at 6% p.a. if no other rate is agreed upon.

Answer: True.

3. Fill in the Blanks Questions.

Q17. The relationship between partners is based on __________ .

Answer: agreement

Q18. The agreement containing the terms of partnership is called __________ .

Answer: partnership deed

Q19. Interest on drawings is __________ unless otherwise agreed.

Answer: not charged

Q20. In Fluctuating Capital Method, only __________ account is maintained for each partner.

Answer: one (capital)

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