CHAPTER 2 –ACCOUNTING FOR PARTNERSHIP: FUNDAMENTALS

ASSERTION REASONING QUESTIONS

Sr.No Question

1. Assertion: Ram spends thrice the time that Yami devoted to business. Ram claims that he
should get salary of Rs.5,000/- p.m. for extra time spent.
Reason: As there is no partnership deed Partnership Act 1932 applies and as per the Act
partners will not be allowed any salary or remuneration.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true

2. Assertion: In case of losses interest on capital will not be provided.

Reason: As interest on capital is treated as the appropriation of the profits and there are
no profits but interest on capital can be provided in case of losses if it is to be treated as
charge.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true

3. Assertion: Y wants that profits should be distributed in the ratio of capitals as he has
invested more capital than X this dispute arises as the partnership deed was not there.
Reason: As there is no partnership deed Indian Partnership Act, 1932 applies and as per
the Act, Profits are to be distributed equally.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true

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BHUBANESWAR
4. Assertion: Average Normal Profit as Calculated is multiplied by number of years' purchase
to determine the value of goodwill.

Reason: Number of years' purchase means the number of years for which the firm is likely
to earn same amount of profit after change in ownership becomes of the efforts put in the
past.

(A) Both A and R true and R is the correct explanation of A.

(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true

5. Assertion: Rent paid to the partner is not to be shown in Profit & Loss Appropriation A/c .
Reason: Rent paid to the partner is treated as the charge against profit and not the
appropriation of the profits.

(A) Both A and R true and R is the correct explanation of A.

(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true

6 Assertion(A): Goodwill is the good name or reputation of the Business which brings benefit
to the business.

Reason(R): It is an intangible asset as it has no physical existence.

(a) Both A and R are true and R is the Correct explanation of A

(b) Both A and R are true and R is not the correct explanation of A

(c) A is true but R is false

(d) A is false but R is true

7 Assertion (A) : In order to compensate a partner for contributing capital to the firm in excess
of the profit sharing ratio , firm pays such interest on Partners’ Capital. Reason (R) :
 Interest on Capital is treated as a charge against profits.

(a) Both A and R are true and R is the Correct explanation of A

(b) Both A and R are true and R is not the correct explanation of A

(c) A is true but R is false

(d) A is false but R is true

8 Assertion (A) : Fixed Capital Accounts of a partner never shows a debit balance inspite of
regular and consistent losses year after year.

Reason (R) : When Capital Accounts are fixed , losses are recorded in Partners’ Current
Account.

(a) Both A and R are true and R is the Correct explanation of A

(b) Both A and R are true and R is not the correct explanation of A

(c) A is true but R is false

(d) A is false but R is true

9 Assertion(A): Both purchase and shelf generated goodwill are accounted in the books of
account
Reason( R ): According to AS-26 only purchase goodwill is accounted in the books of
account. Shelf generated goodwill is not accounted in the books of account (

(a) Both A and R are true and R is the Correct explanation of A

(b) Both A and R are true and R is not the correct explanation of A

(c) A is true but R is false

(d) A is false but R is true

10 Assertion (A): A Firm should have a Partnership Deed.

Reason (R) : In case of dispute or any misunderstanding among partners , partnership deed
acts as an evidence in the court of law.

(a) Both A and R are true and R is the Correct explanation of A

(b) Both A and R are true and R is not the correct explanation of A

(c) A is true but R is false

 (d) A is false but R is true

Read the following statements – Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:

(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A).
(c) Assertion (A) is true and Reason (R) is false
(d) Assertion (A) is false and Reason (R) is true

11. Assertion (A): In the absence of Partnership deed profits and losses are divided equally
among the partners.
Reason (B) : This rule is applicable according to Indian Partnership Act,1932

Assertion (A) :Personal properties of a partner may also be used to pay off the firms debts.
12. Reason (R) : All partner are limited liability in the firm.

Assertion (A) : Partnership firm is a form of Organization where two or more persons carry
13. on business activity on the basis of agreement among them.
Reason (R ) : The profit or loss arising from the partnership business is shared by the
partners in the agreed ratio.

Assertion(A): Maximum number of partners in a partnership firm is 50.

Reason (R ) : Maximum number of partner in a partnership firm is prescribed in Companies
14. Act,2013.

15 Assertion (A): Average Normal Profit as Calculated is multiplied by number of years'

purchase to determine the value of goodwill.
Reason (R): Number of years' purchase means the number of years for which the firm is
likely to earn same amount of profit after change in ownership becomes of the efforts put in
the past
(a) R is correct but A is not correct
(b) Both A and R are incorrect
(c) A is correct R is not correct
(d) Both A and R are correct
Ans (d) Both A and R are correct
16 Assertion (A): Goodwill is the good name or reputation of the business which brings
benefit to the business.
Reason (R): It is an intangible asset as it has no physical existence.
(a) Both (A) and (R) are true and (R) is the correct explanation of (A)

(b) Both (A) and (R) are true and (R) is not the correct explanation of (A).

(c) (A) is true, but (R) is false

(d) (A) is false, but (R) is true

Ans:- (b) Both (A) and (R) are true and (R) is not the correct explanation of (A).

17 Assertion(A): any abnormal gain is excluded by deducting from and any abnormal loss is
included by adding to the pasts
Reason(R): Normal business profits earned by the business for the specified number of
years are considered
(a) Both A and R are true and R is not correct explanation
(b) Both A and R are not Correct

(c) R is true but A is not true

(d) Both A and R are true and R is correct explanation of A

Ans:- (d) Both A and R are true and R is correct explanation of A

18 Assertion (A): large customer base results in higher valuation of Goodwill

Reason(R): If a customer is large in size then they demand more of goods and ultimately
goodwill of that product increases

(a) Both A and R are true and R is correct explanation of A

(b) Both A and R are true and R is not correct explanation of A

(c) A is true but R is not correct

(d) R is true but A is not true

Ans:- (a) Both A and R are true and R is correct explanation of A

19 Assertion: Partnership is the relation between persons who have agreed to share the
profit of a business carried on by all or any one of them acting for all.

Reason: It is defined in the Partnership act 1932.

Alternatives:

a) Both assertion(A) and reason(R) are true and reason (R) Is the correct
explanation of Assertion(A)
b) Both assertion(A) and reason(R) are true and reason (R) Is not the
correct explanation of Assertion(A)
 c) Assertion(A) is true but Reasoning(R) is false
d) Both Assertion(A) is true but Reasons(R) is not correct

20 Assertion: In a partnership when profit sharing ratio is agreed, partners share the losses
also in the same ratio.

Reason: Although in the definition it is written that profit will be shared, it include losses
also

Alternatives:

a) Both assertion(A) and reason(R) are true and reason (R) Is the correct
explanation of Assertion(A)
b) Both assertion(A) and reason(R) are true and reason (R) Is not the correct
explanation of Assertion(A)
c) Only Assertion(A) is correct
d) Only Reasoning(R) is correct
21 Assertion: Rent to a partner is transferred to debit of profit and loss account but not
transferred to profit and loss appropriation account

Reason: Rent to partner is a charge against profit, not an appropriation of profit. Hence it is
transferred to debit of profit and loss account

Alternatives:

a) Both assertion(A) and reason(R) are true and reason (R) Is the correct
explanation of Assertion(A)
b) Both assertion(A) and reason(R) are true and reason (R) Is not the
correct explanation of Assertion(A)
c) Assertion(A) is correct but reason(R) is false
d) Assertion(A) is false but reason(R) is correct
22 Assertion: Only capital account is maintained for each partner under fluctuating capital
account method.

Reason: Interest on capital. Salary, commission and profit transferred to the credit of
partners capital account while interest on drawings and share of losses are transferred to the
debit.

Alternatives:

a) Both assertion(A) and reason(R) are true and reason (R) Is the correct
explanation of Assertion(A)
b) Both assertion(A) and reason(R) are true and reason (R) Is not the
correct explanation of Assertion(A)
c) Assertion(A) is correct but reason(R) is false
d) Assertion(A) is false but reason(R) is correct
 ANSWER KEY
Q.NO. ANSWER

1. D
2. A
3. D
4. D
5. A
6 D
7 C
8 B
9 B
10 D
11 A
12 B
13 C
14 D
15 D
16 B
17 D
18 A
19 B
20 B
21 B
22 A

PREPARED BY THE PGTs ( COMMERCE ) OF BHUBANESWAR,

GUWAHATI, KOLKATA, RANCHI, SILCHAR AND TINSUKIA REGIONS.