Assertion and reason based MCQ for Accounts Chapter 2 – Fundamental of Partnership, Chapter 3 – Goodwill & Chapter 4 Change in Profit Sharing Ratio

Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

(i) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(ii) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(iii) Assertion (A) is true, but Reason (R) is false.
(iv) Assertion (A) is false, but Reason (R) is true.

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1. Assertion (A): Partners shares profit and losses equally.
Reason (R): Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.


2. Assertion (A): The development of business depends upon the active partners only.
Reason (R): Active partner is a person who provides his share in capital and also takes active part in the management of the business.


3. Assertion (A): Secret Partner does not participate in the affairs of the management.
Reason (R): The secret partner is not liable to pay debts of the firm.


4. Assertion :Nominal partners do not share the profits and losses of the firm.
Reason: A firm only uses the name and reputation of the nominal partners


5. Assertion (A) :A minor may become a partner with the consent of all the partners.
Reason(R) : A minor partner can share profits and losses as per the agreement but is not liable to pay the debts of the partnership firm.


6. Assertion (A): The fixed capital method is better as compared to the fluctuating capital method.
Reason (R): The capital of the partners is fixed, and all the transactions are recorded in the current account.


7. Assertion (A) : The interest on drawings is recorded in the debit side of the current account when fixed capital method is followed.
Reason (R): The capital of the partners is fixed, and all the transactions are recorded in the current account


8. Assertion (A): Profit and Loss appropriation Account shows the correct profit earned by the firm.
Reason (R): The net profit is adjusted after taking into account the interest on capital,  interest on drawings, salaries/commissions paid to the partner in the Profit and Loss Appropriation Account



9. Assertion (A): Sanjay and Mahesh entered into a partnership in the profit sharing ratio 1:2. Mahesh agree to pay Sanjay if his share of profit fall short of 50,000. The profit earned was 1,77,000. Sanjay asked him to pay 27000, but Mahesh refused to pay anything.
Reason (R): Profit is guaranteed only when the minimum amount of profit is not earned by the partner



10. Assertion (A): For calculating Interest on Drawings, product method is used.

Reason(R): Partners withdraw different amounts of money at different intervals of time



11. Assertion (A): Guarantee of minimum profit may be given to a partner.

Reason(R): It is compulsory as per Indian Partnership Act, 1932.



12. Assertion (A): When a new partner is admitted it results in the restructuring of the firm.

Reason (R): When a new partner is added it leads to the change in profit sharing ratio



13. Assertion (A): The gaining partner transfers the amount of goodwill to the sacrificing partners in proportion.
Reason (R): The gaining ratio is the share of profit gained by a partner when there is a change in the profit sharing ratio.


14. Assertion (A): The partner whose share of profit has reduced due to change in the profit sharing ratio, is called the gaining partner.
Reason (R): The gaining partner pays compensation to the sacrificing partner.


15. Assertion (A): Accumulated profits are undistributed profits and reserves of the past period.
Reason (R): Accumulated profits are reserves that are distributed among the old partners in their old ratio.