WrittenaspertherevisedsyllabusprescribedbytheMaharashtraStateBoard

ofSecondaryandHigherSecondaryEducation,Pune.

STD. XII Commerce

Book-Keeping &
Accountancy

Fourth Edition: March 2016

Salient Features
PreciseTheoryforeverytopicincludingSpecimenJournalEntriesandFormats

forLedgerAccounts.
PracticeProblemsincludingBoardProblems(March08October15)and
avarietyofadditionalproblems,importantfromexaminationpointofview.
AnswersandWorkingNotestosimplifytheTextualProblems.

TwoModelQuestionPapersasperthelatestpaperpattern.
BoardQuestionPapersof2014,2015andMarch2016.
SimpleandLucidlanguage.
Selfevaluativeinnature.

Printed at: Jasmine Art Printers Pvt. Ltd, Navi Mumbai

No part of this book may be reproduced or transmitted in any form or by any means, C.D. ROM/Audio Video Cassettes or electronic, mechanical
including photocopying; recording or by any information storage and retrieval system without permission in writing from the Publisher.
P.O.No.12719

10140_10430_JUP



Preface

"Std.XIICommerce:BookKeepingandAccountancy"hasbeendesignedwitharevolutionaryfreshapproach
towardscontent,tofacilitatethoroughpreparationofthesubjectforthestudent.

ThisbookhasbeenwrittenaccordingtotherevisedsyllabusandguidelinesprescribedbytheStateBoard.

ThebookincludesPreciseTheorywithSpecimenJournalEntriesandFormatsforLedgerAccounts.Aseparate
section has been provided for Practice Problems including Board Problems (March 08 October 15) and a
varietyofadditionalproblemsthatareimportantfromexaminationpointofview.

Additionally,answersalongwithworkingnoteshavebeenprovidedtosimplifytheTextualProblems.


ThebookalsoincludestwoModelQuestionPapersasperthelatestpaperpattern.

Wearesure,thisstudymaterialwillturnouttobeapowerfulresourceforthestudentsandfacilitatethemin
understandingtheconceptsofthissubjectinthemostlucidway.

Thejourneytocreateabookisstrewnwithtriumphs,failuresandnearmisses.Ifyouthinkwe'venearlymissed
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Yoursfaithfully,
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Board paper Pattern

Time:3Hours TotalMarks:80

Q.1. AttemptanyTHREEofthefollowingsubquestions: [15]

Includes five subquestions of five marks each. Out of the five, three subquestions have to be
answered.

(A) Answerthefollowingquestionsinonesentenceeach:
Fivesubquestionswillbegiven. [onemarkeach]

(B) Writeaword/term/phrasewhichcansubstituteeachofthefollowingstatements:
Fivesubquestionswillbegiven. [onemarkeach]

(C) Selectthemostappropriatealternativefromthosegivenbelowandrewritethestatements:
Fivesubquestions.Eachsubquestioncarriesfouroptions. [onemarkeach]

(D) StatewhetherthefollowingstatementsareTrueorFalse:
Fivesubquestionswillbegiven. [onemarkeach]

(E) PrepareaspecimenofBillofExchange. [fivemarks]

Q.2. PracticalproblemonSingleEntrySystem. [8]
OR
TheoryQuestionsonAnalysisofFinancialStatements.
Twosubquestionswillbegiven. [fourmarkseach]

Q.3. PracticalproblemonReconstitutionofPartnership(Admission/Retirement/DeathofPartner). [10]
OR
PracticalproblemonReconstitutionofPartnership(Admission/Retirement/DeathofPartner).
Questionswillbeaskedfromanytwooftheabovethreechapters.

Q.4. PracticalproblemonBillofExchange. [10]

Q.5. PracticalproblemonDissolutionofPartnershipFirm . [10]

OR
PracticalproblemonAccountingforShares/Debentures.
One question will be asked from Dissolution of Partnership Firm and the second question will be
askedeitherfromAccountingforSharesorAccountingforDebentures.

Q.6. PracticalproblemonAccountsofNotforProfitConcerns. [12]

Q.7. PracticalproblemonPartnershipFinalAccounts. [15]

Total: 80

SchemeofEvaluation
Marks
(A) WrittenExamination 80
(B) ProjectPreparation(withViva) 20
Total: 100

 UnitwiseWeightage

Sr.
Chapter Marks MarksWithOption
No.
Problems Objectives Total Problems Objectives Total
Introduction to Partnership
1. (Objectives only) and 15 02 17 15 03 18
PartnershipFinalAccounts
Accounts of Not for Profit
2. 12 01 13 12 02 14
Concerns
Admission / Retirement /
DeathofPartner 10
3. OR 10 02 12 02 22
Admission / Retirement / 10
DeathofPartner
DissolutionofPartnershipFirm
10
OR
4. 10 02 12 04 24
AccountingforShares/
10
AccountingforDebentures
BillofExchange(Objectives
5. include5marksforquestion 10 06 16 10 10 20
onspecimen)
SingleEntrySystem
08
OR
6. 08 02 10 04 20
AnalysisofFinancialStatements
08
(TheoryQuestions)
Total 65 15 80 93 25 118

Sr.No. Chapter PageNo.

1. IntroductiontoPartnership 1
2. PartnershipFinalAccounts 10
3. ReconstitutionofPartnership(AdmissionofPartner) 76
4. ReconstitutionofPartnership(RetirementofPartner) 122
5. ReconstitutionofPartnership(DeathofPartner) 148
6. DissolutionofPartnershipFirm 170
7. AccountsofNotforProfitConcerns 209
8. SingleEntrySystem 258
9. BillofExchange(TradeBill) 285
10. CompanyAccountsPartI(AccountingforShares) 322
11. CompanyAccountsPartII(AccountingforDebentures) 347
12. AnalysisofFinancialStatements 361
ModelQuestionPaperI 378
ModelQuestionPaperII 382
BoardQuestionPaper:March2014 387
BoardQuestionPaper:October2014 392
BoardQuestionPaper:March2015 397
BoardQuestionPaper:October2015 402
BoardQuestionPaper:March2016 407
Note:AllTextualquestionsarerepresentedby*mark.

01 IntroductiontoPartnership Chapter01:IntroductiontoPartnership

Partnership
MeaningandDefinition:
Partnership is an association of two or more persons who agree to combine their financial resources and
managerialabilitiestooperateabusinessandshareProfitsandLossesinanagreedratio.
ThedefinitionofPartnershipaspertheIndianPartnershipAct, 1932is,Partnershipistherelationbetween
personswhohaveagreedtoshareprofitofbusinesscarriedonbyalloranyofthemactingforall.

Features:
i. Agreement:Partnershipisformedonthebasisofanagreementbetweentwoormorepersonstocarryon
businessactivities.Agreementmaybeinwrittenororalform.Thetermsandconditionsofpartnershipare
laidinadocumentknownasPartnershipDeed.
ii. Registration: It is not compulsory to register a partnership firm except, in the state of Maharashtra.
However,ifthepartnerssodecide,itmayberegisteredwiththeRegistrarofFirms.
iii. LawfulBusiness:Illegalbusinessactivitiesarenotpermittedbylaw.Partnershipformofbusinessshould
onlyundertakethosebusinessactivitieswhicharepermittedbylaworwhicharelegal.
iv. Membership:Toformapartnershipfirm,minimumtwopersonsarerequired.Themaximumlimitonthe
number of persons is 10 for banking business and 20 for other businesses. If the number exceeds the
abovelimit,thepartnershipbecomesillegal.
v. SharingofProfitsandLosses:TheremustbeanagreementamongthepartnerstosharetheProfitsand
Lossesofthebusinessinanagreedprofitsharingratio.Allpartnersofthefirmwillbeentitledtoanequal
shareinProfitsandLosses,ifthepartnershipdeedissilentabouttheratio.
vi. UnlimitedLiability:ThepartnersofthefirmhaveUnlimitedLiability.Theyarejointlyaswellasindividually
liableforthedebtsandobligationsofthefirms.IftheAssetsofthefirmareinsufficienttomeetthefirms
Liabilities, the personal properties of the partners can also be utilized for the repayment of the firms
Liabilities.However,theLiabilityofaMinorPartnerislimitedtotheextentofhisshareintheprofit.
vii. Management: All the partners can participate actively in the business management depending on the
agreementformed.
viii. Dissolution:Dissolutionmeanstoclosethebusiness.Legally,apartnershipcomestoanendifanypartner
dies,retiresorbecomesinsolvent.
ix. RelationshipbetweenthePartners:Thepartnershipbusinessmaybecarriedonbyalloranyofthepartners
actingforall.Thus,eachpartnerisaprincipalandsocanactinhisownright.Atthesametime,hecanacton
behalfoftheotherpartnersasanagent.Thus,everypartneractsasanAgentaswellasPrincipal.
TypesofPartners

Followingarethevarioustypesofpartners:
i. ActivePartners:Partnerswhotakeactivepartintheconductofdaytodaytransactionsofthefirmare
calledActivePartners.Thesepartnersperformthebusinessactivitiesonbehalfofotherpartners.
ii. SleepingPartners:ASleepingPartnerisalsoknownasDormantPartner.SleepingorDormantPartnersare
those, who do not take active part in the management of the business. Such partners only contribute
capitalinthefirmandareboundbytheactivitiesofotherpartners.However,theyshareintheprofitsand
lossesofthebusiness.
1
Std.XII:Commerce
iii. NominalPartners:Nominalpartnersarethosewholendtheirnametothefirmbutdonothaveinterestin
thebusiness.Theydonotmakeanycapitalcontributionandarenotentitledtotakepartinmanagement,
butareliabletothirdparties,liketheotherpartners.
iv. Minor Partner: A minor is a person who has not completed 18 years of age. A minor cannot become a
partnerbecauseheisnotqualifiedtoenterintoacontract.However,hemaybeadmittedtothebenefits
ofpartnershipwiththemutualconsentofallthepartners.Hisliabilityislimitedtotheextentofhisshare
inthecapitalandprofitsofthefirm.
v. PartnerinProfitsonly:Thistypeofapartneronlysharesintheprofitsofthefirm.However,hisliability
for the firms debts is unlimited. He is not allowed to take part in the management of the firm. A
partnershipfirmmayassociatewithsuchapartnerfortheirmoneyandgoodwill.
vi. PartnerbyEstoppel:APartnerbyEstoppelneithercontributescapitalnorisentitledtoanyshareinthe
profits.Heisactuallynotapartnerinthefirm.However,anypersonwhorepresentshimselfinfrontofa
thirdpartyasapartnerofthefirmbecomesaPartnerbyEstoppel.Hebecomesliabletothethirdparties
thatpresumehimtobeapartnerofthefirm.
PartnershipDeed
Partnership Deed is the written agreement between or among the partners. It is also known as Articles of
Partnership. Partnership Deed lays down the terms and conditions of partnership and the rights, duties and
obligationsofpartnersfortheinternalmanagementofthefirm.Apartnershipdeedisveryhelpfulinsituations
of conflicts or disputes arising between partners. The relations of partners are governed by the Partnership
Deed.APartnershipDeedgenerallycontainsthefollowingimportantcontents:
i. NameandaddressofthePartnershipFirm.
ii. Natureofbusinesstobeconductedanditsduration.
iii. Names,Addressesandotherinformationaboutthepartners.
iv. ThetotalamountofCapitalcontributedbyeachpartner.
v. Theamountofdrawingspermissibleforeachpartner.
vi. RateofInterestonCapitalandDrawings,ifany.
vii. ProfitSharingRatioofthepartners.
viii. RateofInterestonLoangivenbypartnerstothefirm.
ix. AccountingandAuditproceduresofthefirm.
x. MethodsofvaluationoftheGoodwillofthefirm.
xi. Provisionsforadmission,retirementandinsolvencyofpartners.
xii. ProvisionsforDissolutionofthefirmandsettlementofaccountsafterdissolution.
xiii. DivisionofworkamongthepartnersandtheirRemuneration/Commission,ifany.
xiv. MethodofoperatingBankAccountsandauthorityforsigningthecheques.
xv. Othertermsandconditionswhichareagreedbyallthepartners.
IndianPartnershipAct,1932
TheIndianPartnershipActisinforcesince1932.Thisactisapplicableintheabsenceofpartnershipdeedor
ifthepartnershipdeedissilentonanyspecificpoint.Statedbelowaretheimportantprovisionsofthisact:
i. DistributionofProfits:Intheabsenceofpartnershipdeed,allthepartnersaretreatedasequaland
they will be entitled to equal share in the Profits and Losses of the business. However, if profit
sharingratioisgiven,thenProfits/Lossesshouldbesharedbypartnersintheagreedratioonly.
ii. InterestonCapital:AccordingtotheAct,nointerestistobeallowedonPartnersCapital.However,if
aprovisionismadeinthepartnershipdeed,itshouldbegiventothepartnersaspertheagreement.
iii. InterestonDrawings:AspertheAct,thereisnoprovisionforInterestonDrawings.However,ifthe
partnershipdeedstatesthatInterestonDrawingsistobecharged,thenitshouldbechargedasper
the agreement. Interest on Drawings is to be charged for a period of six months in cases where the
totalamountofDrawingsisgivenbutthedatesofwithdrawalsarenotavailable.

2
 Chapter01:IntroductiontoPartnership
iv. InterestonPartnersLoan:InterestonLoanshouldbeallowedattherateof6%perannumaspertheAct.If
aseparateprovisionismadeinthepartnershipdeedtheninterestshouldbeallowedaspertheagreement.
v. Salary or Commission to Partners: Partners are not entitled to any Salary or Commission for doing
anyadditionalorextraworkforthefirm.However,ifanyspecialprovisionismadeinthepartnership
deedthenitshouldbeprovidedaspertheagreement.
vi. Admission of a New Partner: According to the Act, a person can be admitted into partnership only
withtheconsentofalltheexistingpartners.
MethodsofCapitalAccounts
Anamountcontributedbyapartnereitherintheformofcashorkindintothebusinessofapartnershipfirmis
known as Partners Capital. This amount may be equal or it may be in the profit sharing ratio or as per the
commonunderstandingamongpartners.CapitalAccountsofpartnerscanbemaintainedintwoways:
i. FixedCapitalMethod:
Under the Fixed Capital Method, the amount of capital of the partners remains fixed unless some
additionalcapitalisintroducedorsomeamountofcapitaliswithdrawnbyanagreementamongthe
partners. Thus, under fixed capital method, two accounts are maintained for each partner namely
PartnersCapitalAccountandPartnersCurrentAccount.
a. PartnersCapitalAccount:Thebelowitemsarerecordedinthisaccount:
1. Amountcontributedbyapartneratthebeginning.
2. AdditionalCapitalintroducedbyapartnerduringtheyear.
3. Partofcapitalamountwithdrawnduringtheyear.
JournalEntriesrecordedinPartnersCapitalAccountunderFixedCapitalMethod:
Debit Credit
Date Particulars L.F.
` `
i. AdditionalCapitalintroducedbyPartnersinCash
Cash/BankA/c Dr. xxx
ToPartnersCapitalA/c xxx
(Beingadditionalcapitalintroduced)
ii. AdditionalCapitalintroducedbyPartnersinKind
AssetA/c Dr. xxx
ToPartnersCapitalA/c xxx
(Beingcapitalbroughtintheformofasset)
iii. CapitalisWithdrawnbythePartner
PartnersCapitalA/c Dr. xxx
ToCash/BankA/c xxx
(Beingamountofcapitalwithdrawnbypartner)
FormatforPartnersCapitalAccountunderFixedCapitalMethod:
PartnersCapitalAccount
Dr. Cr.
X Y X Y
Particulars Particulars
` ` ` `
ToCash/BankA/c xxx xxx ByBalanceb/d (CreditBalance) xxx xxx
(AmountofCapitalWithdrawn) ByCash/BankA/c xxx xxx
(AdditionalCapital)
ByAssetsA/c xxx xxx
(CapitalinKind)
ToBalancec/d(CreditBalance) xxx xxx ByBalancec/d(DebitBalance) xxx xxx
xxx xxx xxx xxx
[Note: Generally, Partners Capital Account shows a Credit Balance and is shown on the Liability side of the
Balancesheet.IftheaccounthasaDebitBalance,itisshownontheAssetsideoftheBalancesheet.]

3
Std.XII:Commerce
b.Partners Current Account: This account is maintained when partners adopt the Fixed Capital
Method.Belowitemsarerecordedinthisaccount:
1. Amountwithdrawnbypartnersfortheirpersonaluse.
2. Goodswithdrawnbypartnersfortheirpersonaluse.
3. InterestonPartnersCapital.
4. InterestonPartnersDrawings.
5. SalaryorCommissiontoPartners.
6. DistributionofProfitorLossoftheFirm.
JournalEntriesrecordedinPartners,CurrentAccountunderFixedCapitalMethod:
Debit Credit
Date Particulars L.F.
` `
i. InterestonCapitalallowedtoPartners
InterestonCapitalA/c Dr. xxx
ToPartnersCurrentA/c xxx
(Beinginterestoncapitalallowedtopartners)
ii. TransferofInterestonCapitaltoProfit&LossAccount
Profit&LossA/c Dr. xxx
ToInterestonCapitalA/c xxx
(BeinginterestoncapitaltransferredtoProfit&LossA/c)
iii. Salary/CommissionallowedtoPartners
Salary/CommissionA/c Dr. xxx
ToPartnersCurrentA/c xxx
(Beingsalaryorcommissionallowedtopartners)
iv. TransferofSalary/CommissiontoProfit&LossAccount
Profit&LossA/c Dr. xxx
ToSalary/CommissionA/c xxx
(Beingsalary/commissiontransferredtoProfit&LossA/c)
v. InterestchargedonPartnersDrawings
PartnersCurrentA/c Dr. xxx
ToInterestonDrawingsA/c xxx
(Beinginterestondrawingscharged)
vi. TransferofInterestonDrawingstoProfit&LossAccount
InterestonDrawingsA/c Dr. xxx
ToProfit&LossA/c xxx
(BeinginterestondrawingstransferredtoProfit&LossA/c)
vii. DrawingsmadebythePartnersinCash
DrawingsA/c Dr. xxx
ToCashA/c xxx
(Beingcashwithdrawnforpersonaluse)
viii. DrawingsmadebythePartnersinGoods
DrawingsA/c Dr. xxx
ToGoodsA/c xxx
(Beinggoodswithdrawnforpersonaluse)
ix. TransferofDrawingstoPartnersCurrentAccount
PartnersCurrentA/c Dr. xxx
ToDrawingsA/c xxx
(BeingdrawingstransferredtoPartnersCurrentA/c)

4
 Chapter01:IntroductiontoPartnership
x. FordistributionofNetProfitorNetLoss
a. NetProfit
Profit&LossA/c Dr. xxx
ToPartnersCurrentA/c xxx
(BeingprofittransferredtoCurrentAccount)
b. NetLoss
PartnersCurrentA/c Dr. xxx
ToProfit&LossA/c xxx
(BeingnetlosstransferredtoCurrentAccount)
FormatforPartnersCurrentAccountunderFixedCapitalMethod:
PartnersCurrentAccount
Dr. Cr.
X Y X Y
Particulars Particulars
` ` ` `
ToBalanceb/d(DebitBalance) xxx xxx ByBalanceb/d(CreditBalance) xxx xxx
ToDrawingsA/c(Cash) xxx xxx ByInterestonCapital A/c xxx xxx
ToDrawingsA/c(Goods) xxx xxx ByInterestonLoan A/c xxx xxx
ToInterestonDrawingsA/c xxx xxx BySalarytoPartner A/c xxx xxx
ToProfitandLossA/c(Loss) xxx xxx ByCommissiontoPartner A/c xxx xxx
ByProfitandLossA/c(Profit) xxx xxx
ToBalancec/d(CreditBalance) xxx xxx ByBalancec/d(DebitBalance) xxx xxx
xxx xxx xxx xxx
[Note: Partners Current Account can either have a Debit Balance or a Credit Balance. If Partners Current
Account has a Debit Balance, it should be shown on the Asset side of the Balance Sheet and if it has a Credit
Balance,itshouldbeshownontheLiabilitysideoftheBalanceSheet.]
ii. FluctuatingCapitalMethod:
IntheFluctuatingCapitalMethod,onlyoneaccounti.e.PartnersCapitalAccountismaintainedforeach
partner. All the transactions affecting a Partner's Account like Interest on Capital, Drawings, Interest on
Drawings,Salary/CommissiontoPartnersandShareofProfitorLossarerecordedinthePartnersCapital
Account. As a result of this, the Closing Balance of the Partners Capital Account keeps fluctuating
(changing). Thus, it is known as the Fluctuating Capital Method. Below transactions are recorded in the
PartnersCapitalAccountunderthismethod:
1. CapitalIntroducedortheOpeningBalance 2. AdditionalCapitalintroducedduringtheyear
3. InterestonCapital 4. Drawingsmadeduringtheyear
5. InterestonDrawings 6. Salary/CommissiontoPartners
7. WithdrawalofCapital 8. ShareofProfitorLoss
9. ClosingBalance

FormatforPartnersCapitalAccountunderFluctuatingCapitalMethod:
PartnersCapitalAccount
Dr. Cr.
X Y X Y
Particulars Particulars
` ` ` `
ToBalanceb/d(DebitBalance) xxx xxx ByBalanceb/d xxx xxx
ToDrawingsA/c(Cash) xxx xxx (CreditBalance)
ToDrawingsA/c(Goods) xxx xxx ByCash/BankA/c xxx xxx
ToInterestonDrawingsA/c xxx xxx (AdditionalCapital)
ToCash/BankA/c xxx xxx ByAssetsA/c xxx xxx
(WithdrawalofCapital) (CapitalinKind)

5
Std.XII:Commerce
ToProfitandLossA/c xxx xxx ByInterestonCapitalA/c xxx xxx
(ShareofLoss) ByInterestonLoanA/c xxx xxx
BySalaryA/c xxx xxx
ByCommissionA/c xxx xxx
ByProfitandLossA/c xxx xxx
(ShareofProfit)
ToBalancec/d(CreditBalance) xxx xxx ByBalancec/d(DebitBalance) xxx xxx
xxx xxx xxx xxx
Notes:
i. CreditBalanceofPartnersCapitalAccountisshownontheLiabilitysideoftheBalanceSheetandDebit
BalanceofPartnersCapitalAccountisshownontheAssetsideoftheBalanceSheet.
ii. Intheabsenceofinformation,partnersfollowFluctuatingCapitalMethod.
iii. InterestonCapitalispaidontheOpeningBalanceonlyifdateofadditionalcapitalisnotgiven.Ifthedateof
additionalcapitalisgiven,theninterestoncapitalwillbegivenontotalcapitalandwillbecalculatedasunder
a. OnOpeningBalancefor12months.
b. OnAdditionalCapitalfromdateofadditionalcapitaltodateofBalanceSheeti.e.,31stMar.
InterestonCapitalispaidonlyifthereisprofitinthebusiness.
iv. InterestonDrawingsisprovidedasunder:
a. IfDrawingsaremadeatthebeginningofeverymonth,Interestischargedfor6.5months.
b. IfDrawingsaremadeinthemiddleofeverymonth,Interestischargedfor6months.
c. IfDrawingsaremadeattheendofeverymonth,Interestischargedfor5.5months.
d. Inabsenceofinformation,Interestischargedfor6months.
ObjectiveTypeQuestions
I. Answerinonesentenceonly:[1markeach]
*1. WhatisPartnership?
Ans: Partnershipisanassociationoftwoormorepersonswhoagreetocombinetheirfinancialresourcesand
managerialabilitiestoconductabusinessandshareprofitsandlossesinanagreedratio
*2. Howmanypersonsarerequiredtoformpartnershipbusiness?
Ans: Minimumtwopersonsarerequiredtoformpartnershipbusiness.
*3. Whatistheliabilityofpartners?[Mar15]
Ans: TheLiabilityofPartnersisUnlimited,JointandSeveral.
*4. Whatistherelationbetweenthepartners?
Ans: TherelationshipbetweenpartnersisthatofPrincipalandAgent.
*5. WhoiscalledNominalPartner?
Ans: A partner who lends his name to the firm but does not have any interest in the business is known as a
NominalPartner.
*6. WhoiscalledMinorPartner?
Ans: Apartneroflessthan18yearsinageiscalledMinorPartner.
7. WhatistheliabilityofthePartnerinProfitOnly?
Ans: TheLiabilityofaPartnerinProfitonlyisUnlimited.
8. WhoisaPartnerbyEstoppel?
Ans: Theperson whoisnotactuallya partnerbut,representshimselfasapartnerinfrontof third parties is
knownasPartnerbyEstoppel.
*9. WhatisPartnershipDeed? [Mar12,Oct11]
Ans: Partnership Deed is the written agreement between or among the partners that lays down the terms and
conditionsofpartnershipandtherights,dutiesandobligationsofpartnersfortheinternalmanagementofthefirm.

6
 Chapter01:IntroductiontoPartnership
*10. WhyisPartnershipDeedprepared?
Ans: Partnershipdeedispreparedtoresolvefutureconflictsanddisputesamongpartners.
*11. Whichactisapplicabletopartnershipbusiness?
Ans: TheIndianPartnershipAct,1932isapplicabletopartnershipbusiness.
12. AtwhatrateistheInterestonPartnersLoanispaidintheabsenceofprovisioninpartnershipdeed?
Ans: Intheabsenceofaprovisioninpartnershipdeed,InterestonPartnersLoanispaidat6%p.a.
*13. WhatarethemethodsofmaintainingPartnersCapitalAccount?
Ans: FixedCapitalMethodandFluctuatingCapitalMethodarethetwomethodsofmaintainingCapitalAccount
ofpartners.
14. *WhatdoyoumeanbyFixedCapitalMethod?
OR
WhatisFixedCapitalMethod?[Mar11]
Ans: Fixed Capital Method is a method of maintaining Capital Account of partner, where the capital is kept
fixed and all the other transactions are recorded by preparing Partners Current Account except, when
additionalcapitalisintroducedinthebusinessorcapitaliswithdrawnbyapartner.
*15. WhatisFluctuatingCapitalMethod?
Ans: FluctuatingCapitalMethodiswhereallthetransactionsrelatedtopartnersarerecordedthroughPartners
Capital Account and there is no requirement to prepare Partners Current Account. In this method, the
capitalofthepartnerisfluctuating.
*16. WhenisPartnersCurrentAccountopened?
Ans: PartnersCurrentAccountisopenedunderFixedCapitalMethod.
II. Writetheword/term/phrasewhichcansubstituteeachofthefollowingstatements:[1markeach]
*1. Anassociationoftwoormorepersonstocarryonbusiness.
*2. Apartnershipagreementbetweenthepartnersinwrittenform.
3. Writtentermsofagreementbetweenthepartners.
4. Themaximumnumberofpartnerinbankingbusiness.
*5. Toclosethebusinessofpartnershipfirm.
6. Therelationshipbetweenpartners.
*7. Apartnerwhoisengagedindaytodayactivitiesofthebusiness.
8. Activepartnerisalsocalledas.
*9. Apartnerswhocontributesonlycapitalforthebusinessbutdoesnottakeanyactivepart.
*10. Apartnerwhoprovidesonlyhisnametothepartnershipfirm.[Mar08]
*11. Apartnerbelowtheageof18years.
12. Apartnerwhoseliabilityislimited.
*13. Thepartnerwhoisentitledtoshareprofitsonly.
*14. Apartnerwhoactsandbehaveslikeapartner,butheisnotapartnerofthefirm.
*15. Anamountcontributedbythepartnersintothebusiness.
*16. Anamountwithdrawnbypartnerfromthebusinessforhispersonaluse.
*17. Underthismethod,capitalbalancesofpartnerremainsconstant.
*18. CapitalmethodinwhichPartnersCurrentAccountisopened.
19. Capitalmethodinwhichboth,CapitalAccountandCurrentAccountaremaintainedforeachpartner.
*20. Methodofcapitalaccountinwhichcapitalbalancesofpartnerschangeseveryyear.
21. CapitalMethodunderwhichonlyPartnersCapitalAccountismaintained.
Ans: 1. Partnership 2. PartnershipDeed
3. PartnershipDeed 4. Ten
5. Dissolution 6. PrincipalandAgent
7. ActivePartner 8. WorkingPartner

7
Std.XII:Commerce
9. SleepingPartner/DormantPartner 10. NominalPartner
11. MinorPartner 12. MinorPartner
13. PartnerinProfitOnly 14. PartnerbyEstoppel
15. PartnersCapital 16. Drawings
17. FixedCapitalMethod 18. FixedCapitalMethod
19. FixedCapitalMethod 20. FluctuatingCapitalMethod
21. FluctuatingCapitalMethod
III. Selectthemostappropriatealternativefromthosegivenbelowandrewritethestatements:
[1markeach]
*1. Partnershipisanassociationof_______ormorepersons.
(A) two (B) seven (C) ten (D) twenty
2. Partnershipbusinessmustbe_______.
(A) lawful (B) illegal (C) voluntary (D) immoral
3. Minimum_______personsarerequiredtoformapartnership.
(A) one (B) two (C) three (D) seven
*4. Maximum_______personsarerequiredtoformapartnershiphavingtradingbusiness.
(A) twenty (B) fifty (C) seven (D) ten
*5. Maximum_______personsarerequiredtoformapartnershiphavingbankingbusiness.
(A) two (B) seven (C) ten (D) twenty
*6. Theliabilityofthepartnerinafirmis_______.
(A) zero (B) limited (C) unlimited (D) proportionate
*7. Apartnerwhoprovidesonlycapitaltothefirmiscalledas_______partner.
(A) active (B) nominal (C) sleeping (D) minor
8. Apartnerwhodoesnottakeactivepartinthemanagementofbusinessisknownas_______.
(A) WorkingPartner (B) SleepingPartner (C) NominalPartner (D) PartnersinProfitonly
*9. Apartnerwholendsonlyhisnametothefirmiscalledas_______partner.
(A) partnerinprofitsonly (B) partnerbyestoppel
(C) nominal (D) minor
*10. Apartnerbelow18yearsofageiscalledas_______partner.
(A) active (B) sleeping (C) nominal (D) minor
11. Intheabsenceofpartnershipdeed,thepartnersshareprofitsandlossesinthe_______ratio.
(A) capital (B) equal (C) 1:2 (D) initialcontribution
*12. TheIndianPartnershipActisinforcesince_______.[Mar10,Oct10]
(A) 1932 (B) 1956 (C) 1960 (D) 1984
*13. TheInterestoncapitalofapartneriscreditedto_______Account.
(A) Trading (B) ProfitandLoss (C) PartnersCapital (D) Cash
14. Theinterestondrawingsistransferredto_______sideoftheProfit&LossAccount.[Oct14]
(A) debit (B) credit (C) asset (D) liability
*15. Thedrawingsofpartnersaretransferredto_______Account.
(A) Trading (B) ProfitandLoss (C) PartnersCapital (D) BalanceSheet
*16. Theinterestondrawingsistransferredto_______sideofPartnersCurrentAccount.
(A) debit (B) credit (C) asset (D) liability

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 Chapter01:IntroductiontoPartnership
*17. Ifdatesofdrawingsarenotgiven,interestondrawingsischargedfor_______months.
(A) three (B) six (C) nine (D) twelve
*18. UnderFixedCapitalMethod,CapitalAccountand_______Accountisopenedforeachpartner.
(A) PartnersDrawing (B) PartnersSalary
(C) PartnersCurrent (D) PartnersCommission
*19. UnderFixedCapitalMethod,salaryorcommissiontopartneriscreditedto_______Account.
(A) PartnersCapital (B) PartnersCurrent
(C) PartnersDrawings (D) PartnersSalary
*20. AdebitbalanceofPartnersCurrentAccountwillappearonthe_______sideoftheBalanceSheet.
(A) Assets (B) Liability (C) Debit (D) Credit
21. ThebalanceofCapitalAccountfluctuatesunder_______CapitalMethod.
(A) Blocked (B) Fluctuating (C) Fixed (D) SemiBlocked
22. Under_______CapitalMethod,onlyCapitalAccountofpartnersisopened.
(A) Fixed (B) Fluctuating (C) Single (D) Double
IV. StatewhetherthefollowingstatementsareTRUEorFALSE: [1markeach]
*1. Partnershipisanassociationoftwoormorepersons.
*2. Partnershipfirmisatradingconcern.
*3. Partnershipagreementmustbeinwrittenform.
*4. Thereisnolimittomaximumnumberofpartnersinafirm.
5. Therecanbepartnershipfirmwith25partners.
6. Therecanbepartnershiponlyforthesharingofloss.
*7. Partnermustshareprofitsandlossesequally.
*8. Ifthepartnershipdeedissilent,partnersshareprofitsandlossesequally.
9. Eachpartnerhasarighttotakepartintheconductofbusiness.
10. Partnersnottakinganactivepartinthebusinessiscalledsleepingpartner.
11. Theliabilityofthesleepingpartnerislimited.
*12. Apartnerwhoprovidesonlycapitaltothefirmiscalledasnominalpartner.
13. Apartnerwhogivesonlyhisnametothebusinessiscallednominalpartner.
*14. Theliabilityofminorpartnerislimited.
15. Partnershipdeedmustalwaysbeinwrittenform.
16. PartnershipfirminIndiaisgovernedaccordingtoIndianPartnershipAct1932.
*17. Theinterestondrawingsisanincomeofthepartnershipfirm.
*18. Aninterestoncapitalisanexpenditureofthepartnershipfirm.
*19. Partnersareentitledtogetsalaryorcommission.
*20. Thebalanceofcapitalaccountremainsconstantunderfixedcapitalmethod.
*21. PartnersCurrentAccountisopenedwhenfluctuatingcapitalmethodisadopted.
*22. Partnerscurrentaccountalwaysshowscreditbalance.
*23. CapitalAccountalwaysshowscreditbalance.
24. AdjustmentstopartnerscapitalarepassedthroughCurrentAccountwhenthecapitalsarefluctuating.
Ans: 1. True 2. True 3. False 4. False
5. False 6. False 7. False 8. True
9. True 10. True 11. False 12. False
13. True 14. True 15. True 16. True
17. True 18. True 19. False 20. True
21. False 22. False 23. False 24. False