Partnerships (Copy)
Topic 5.2: Partnerships – Quiz
O Level and IGCSE Accounting
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course
1. What is a key advantage of forming a partnership?
A. Unlimited liability is avoided
B. Decisions are made by one person
C. Risks and responsibilities are shared
D. Tax is paid by the business
2. Which of the following is a disadvantage of a partnership?
A. More capital can be raised
B. Specialization is possible
C. Business is easy to dissolve
D. Profits must be shared
3. A partnership agreement typically contains all of the following EXCEPT:
A. Profit-sharing ratios
B. Interest rate on capital
C. Total annual revenue
D. Partner duties
4. What is the purpose of an appropriation account?
A. To calculate gross profit
B. To allocate profit between partners
C. To show financial position
D. To record capital balances
5. Which item is NOT included in a partnership appropriation account?
A. Interest on capital
B. Interest on drawings
C. Partner salaries
D. Cash purchases
6. Which of the following is added to partners’ profit in the appropriation account?
A. Interest on drawings
B. Partner salaries
C. Irrecoverable debts
D. Provision for depreciation
7. A partnership appropriation account starts with:
A. Capital balances
B. Gross profit
C. Net profit
D. Partners’ drawings
8. Interest on partners’ drawings is treated as:
A. Income for the partner
B. Deduction from profit share
C. Expense to the business
D. Capital income
9. A partner’s loan is shown as:
A. Current liability
B. Non-current asset
C. Non-current liability
D. Capital
10. Interest on partners’ loan is shown in:
A. Statement of financial position
B. Appropriation account
C. Income statement
D. Drawings account
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course
11. Which of the following is included in a capital account?
A. Partner’s salary
B. Net profit
C. Initial contribution
D. Interest on drawings
12. A partner’s current account records:
A. Initial capital only
B. Fixed assets
C. Profit/loss share, drawings, interest adjustments
D. Owner’s equity
13. In a partnership, drawings are recorded:
A. In the income statement
B. As a business expense
C. In the partner’s current account
D. In the capital account
14. If there is no agreement, profits are shared:
A. Equally
B. Based on capital
C. According to time spent
D. Based on seniority
15. Which account shows both profit allocation and drawings?
A. Loan account
B. Capital account
C. Current account
D. Trading account
16. Partner’s capital accounts are shown:
A. In the income statement
B. As part of current liabilities
C. In the statement of financial position
D. As a revenue item
17. If a partner receives a salary, it is treated as:
A. Expense in income statement
B. Appropriation of profit
C. Capital contribution
D. Expense in financial position
18. If a partner is charged interest on drawings:
A. It increases business expense
B. It is deducted from their profit share
C. It appears in the income statement
D. It reduces gross profit
19. The balance on a partner’s current account may be:
A. Only credit
B. Only debit
C. Either debit or credit
D. Not shown in final accounts
20. What is the result of interest on capital in appropriation?
A. Reduces net profit
B. Reduces partner’s share
C. Increases partner’s allocation
D. Treated as expense
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course
21. Which of the following appears in the income statement of a partnership?
A. Partner salaries
B. Interest on capital
C. Revenue and expenses
D. Profit share
22. A debit balance in a partner’s current account means:
A. Profit has increased
B. Partner owes the business
C. Business owes the partner
D. Capital has increased
23. What is the double entry for interest on drawings?
A. Dr Capital, Cr Interest income
B. Dr Drawings, Cr Interest on drawings
C. Dr Income statement, Cr Current account
D. Dr Current account, Cr Appropriation
24. The final balance of the appropriation account is:
A. Gross profit
B. Net assets
C. Profit or loss shared among partners
D. Total capital
25. Which of the following is a revenue item?
A. Partner’s capital
B. Interest on loan
C. Bank overdraft
D. Net sales
26. A partnership is formed to benefit from:
A. Single decision-maker
B. Raising less capital
C. Pooling of resources and expertise
D. Unlimited liability
27. Which statement is TRUE about partners’ capital accounts?
A. Always fluctuating
B. Remain fixed unless additional capital is introduced
C. Updated monthly
D. Appear in trading account
28. Partner’s drawings are:
A. Added to profit share
B. Treated as expense
C. Deducted from current account
D. Deducted from capital
29. A partnership appropriation account appears:
A. After capital accounts
B. After the income statement
C. Before the trial balance
D. In the trading account
30. The interest on partners’ loans is:
A. Treated in the appropriation account
B. Ignored in final accounts
C. Treated as business expense
D. Added to capital
Answer key and explanations
Topic 5.2 – Partnerships
O Level and IGCSE Accounting
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course
1. Correct Answer: C
Explanation: A major benefit of a partnership is shared responsibility and pooling of skills.
2. Correct Answer: D
Explanation: The key disadvantage of partnerships is that profits must be shared among partners.
3. Correct Answer: C
Explanation: A partnership agreement does not include total revenue — it focuses on operational rules.
4. Correct Answer: B
Explanation: The appropriation account allocates net profit among partners.
5. Correct Answer: D
Explanation: Cash purchases are recorded in the income statement, not in the appropriation account.
6. Correct Answer: B
Explanation: Partner salaries are added to appropriation account before dividing the remaining profit.
7. Correct Answer: C
Explanation: Appropriation starts with net profit brought from the income statement.
8. Correct Answer: B
Explanation: Interest on drawings is deducted from the partner’s profit share.
9. Correct Answer: C
Explanation: Partner loans are non-current liabilities if not repayable within 12 months.
10. Correct Answer: C
Explanation: Interest on partners’ loans is treated as a business expense in the income statement.
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course
11. Correct Answer: C
Explanation: Capital accounts show the partners’ long-term investment in the business.
12. Correct Answer: C
Explanation: The current account tracks variable items like profit share, interest, drawings, etc.
13. Correct Answer: C
Explanation: Drawings are typically recorded in the current account unless there is no current account maintained.
14. Correct Answer: A
Explanation: In absence of an agreement, profits are shared equally according to law.
15. Correct Answer: C
Explanation: Current account records both profit share and drawings.
16. Correct Answer: C
Explanation: Capital accounts are shown in the equity section of the statement of financial position.
17. Correct Answer: B
Explanation: Partner salaries are appropriations of profit, not business expenses.
18. Correct Answer: B
Explanation: Interest on drawings is deducted from partner’s share of profit in the appropriation account.
19. Correct Answer: C
Explanation: A partner’s current account can show a credit (business owes partner) or debit (partner owes business).
20. Correct Answer: C
Explanation: Interest on capital is an allocation of profit, not an expense, and increases partner’s share.
21. Correct Answer: C
Explanation: Only revenue and expenses are shown in the income statement; all appropriations go to a separate appropriation account.
22. Correct Answer: B
Explanation: A debit balance means the partner has withdrawn more than their entitlement — they owe the business.
23. Correct Answer: B
Explanation: Debit drawings (or current account), credit interest on drawings.
24. Correct Answer: C
Explanation: The remaining profit after interest and salaries is shared among partners.
25. Correct Answer: D
Explanation: Net sales is a revenue item and appears in the income statement.
26. Correct Answer: C
Explanation: Partnerships are formed to combine expertise and resources.
27. Correct Answer: B
Explanation: Capital accounts usually remain fixed unless extra capital is added or withdrawn.
28. Correct Answer: C
Explanation: Drawings are deducted from the current account (or capital if no current account is maintained).
29. Correct Answer: B
Explanation: Appropriation account is prepared after income statement and before capital/current accounts.
30. Correct Answer: C
Explanation: Interest on partners’ loans is a business expense shown in the income statement.
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course