Answer in one sentence only
1) What is Fluctuating Capital?
Ans: When the capital balances of the partners go on changing every year due to transactions of partners with the firm, it is known as Fluctuating Capital.
2) Why is Partnership Deed necessary
Ans: Partnership Deed is necessary to prevent disputes or misunderstandings among the partners in future.
3) If the Partnership Deed is silent, in which ratio, the partners will share the profit or loss?
Ans: If the Partnership Deed is silent, partners will share profits and losses in equal ratio.
4) What is the Fixed Capital Method?
Ans: Fixed Capital Method is one in which capital balances of the partners remains same at the end of every financial year unless any amount of additional capital is introduced or part of the capital is withdrawn by the partner from the business.
5) How many partners are required to form a partnership firm?
Ans: Minimum two persons are required to form a partnership firm.
6) What is Partnership Deed?
Ans: A partnership deed is a written agreement duly stamped and signed document containing the terms and condition of the partnership.
7) What are the objectives of the Partnership Firm?
Ans: To earn maximum profit is the main objective of the partnership firm.
8) What rate of interest is allowed on partner’s loan in the absence of an agreement?
Ans: 6 % is the rate of interest to be allowed on partner’s loan in the absence of an agreement.
9) What is the minimum number of partners in a partnership firm according to Indian Partnership Act 1932?
Ans: Minimum two persons are required number of partners in a partnership firm according to Indian Partnership Act 1932.
10) What is liability of a partner?
Ans: Liability of a partner (except minor partner) is unlimited.
11) In the absence of Partnership Deed, what is the rate of interest on loan advanced by a partner to the firm is allowed?
Ans: In the absence of Partnership Deed, 6 % is the rate of interest on loan advanced by partner to the firm
12) What do you mean by pre-received income?
Ans: Income which is received by the partnership firm before it is due is called pre received income.
13) What is the effect of the adjustment of provision for discount on debtors in the final accounts of partnership?
Ans: The effects of the adjustment of provision for discount on debtors in the final accounts of partnership are as follows : Debit Profit and Loss A/c and deduct the amount of provision for discount on debtors from the amount of debtors.
14) When is Partners Current Account is opened ?
Ans: When Fixed Capital Method is adopted by the firm, Partners Current Account is opened.
15) As per which principle of accounting, closing stock is valued at cost price or at market price whichever is less?
Ans: As per Conservatism principle of accounting, closing stock is valued at cost price or at market price whichever is less.
16) What is the provision of Indian Partnership Act with regard to Interest on Capital?
Ans: As per provision of Indian Partnership Act, Interest on Capital is not to be allowed.
17) Why is Balance Sheet prepared?
Ans: Balance Sheet is prepared to know the financial position of the business in the form of its assets and liabilities on a particular date.
18) Why wages paid for installation of machinery are not shown in Trading Account?
Ans: Wages paid for installation of machinery is a capital expenditure and it is not to be recorded in Trading Account.
19) What do you mean by indirect incomes?
Ans: All incomes other than direct incomes are called indirect incomes. [e.g. Interest received on investments, Incomes like discount, commission, dividend, rent etc. received].
20) Why partners’ capital is treated as long-term liability of business?
Ans: Partner’s Capital is not refunded during the existence of partnership firm unless partner is retired or expired.