Partnerships: appropriation account, interest on capital/drawings, partner salaries, current accounts, profit-sharing

1. Ali and Bilal share profits 3:2. Profit before appropriations was $72 000. Ali receives a salary of $12 000 and Bilal receives a salary of $8000. Interest on capital is 5% on Ali’s capital of $80 000 and Bilal’s capital of $40 000. Interest on drawings is Ali $600 and Bilal $400. What is Ali’s net increase in his current account?

A $28 200
B $43 000
C $43 600
D $44 200

2. Partners A and B share profits equally. Profit before appropriations was $38 000. A is entitled to salary $9000. Interest on capital is A $3000 and B $2000. Interest on drawings is A $700 and B $300. What is B’s share of residual profit?

A $12 000
B $12 500
C $13 000
D $14 000

3. Partners X and Y share profits 4:1. The profit before appropriations was $25 000. X’s salary was $6000 and interest on capital was X $3000 and Y $2000. There was no interest on drawings. What was Y’s total appropriation?

A $2800
B $4800
C $5600
D $7600

4. A partnership agreement gives salaries of $15 000 and interest on capital of $8000. The profit before appropriations is only $18 000. Interest on drawings is $2000. Profits and losses are shared equally. What is the residual profit or loss to be shared?

A $3000 profit
B $3000 loss
C $5000 profit
D $5000 loss

5. Partners P and Q share profits 2:1. Profit before appropriations was $60 000. P’s salary was $12 000. Q’s salary was $9000. Interest on capital was P $5000 and Q $3000. Interest on drawings was P $1000 and Q $500. What is Q’s total credit in the appropriation account before deducting interest on drawings?

A $16 833
B $18 833
C $20 833
D $21 333

6. Which item is debited in a partnership appropriation account?

A Interest on drawings
B Partner’s salary
C Partner’s drawings
D Capital introduced

7. Which item is credited in a partnership appropriation account?

A Interest on capital
B Partner’s salary
C Interest on drawings
D Profit share

8. A partner’s salary is:

A An expense deducted before calculating profit for the year
B An appropriation of profit
C Always paid in cash immediately
D Recorded only in the capital account under fixed capital method

9. A partnership has no agreement about profit-sharing. How should profit be shared?

A In capital ratio
B In drawings ratio
C Equally
D According to salaries

10. A and B share profits 3:2. A’s capital is $50 000 and B’s capital is $30 000. The agreement gives interest on capital at 10% per annum. A introduced an extra $20 000 capital halfway through the year. What is A’s interest on capital?

A $5000
B $6000
C $7000
D $8000

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

11. A and B share profits equally. A withdrew $1000 at the end of each quarter. Interest on drawings is 12% per annum. What is A’s interest on drawings for the year?

A $120
B $180
C $240
D $480

12. A partner withdrew $6000 evenly throughout the year. Interest on drawings is 10% per annum. What interest on drawings should be charged?

A $300
B $500
C $600
D $1200

13. A partner withdrew $12 000 on 1 April. The financial year ends on 31 December. Interest on drawings is 8% per annum. What interest on drawings is charged?

A $240
B $720
C $960
D $1200

14. A partner’s current account has opening credit balance $4200. During the year, salary credited was $9000, interest on capital credited was $2000, share of profit credited was $13 500, drawings debited were $14 000 and interest on drawings debited was $600. What is the closing current account balance?

A $14 100 credit
B $14 100 debit
C $28 100 credit
D $28 100 debit

15. A partner’s current account has opening debit balance $1500. During the year, salary $6000 and profit share $9000 were credited. Drawings $11 000 and interest on drawings $400 were debited. What is the closing balance?

A $2100 credit
B $2100 debit
C $5100 credit
D $5100 debit

16. Under the fixed capital method, which account records a partner’s share of profit?

A Capital account
B Current account
C Bank account
D Purchases account

17. Under the fluctuating capital method, which item is usually recorded in the capital account?

A Only original capital
B Only non-current assets
C Profit share, drawings, salaries and capital introduced
D Only trade payables

18. Which transaction would increase a partner’s current account balance under the fixed capital method?

A Drawings
B Interest on drawings
C Share of profit
D Cash withdrawn for private use

19. Which transaction would decrease a partner’s current account balance under the fixed capital method?

A Partner’s salary
B Interest on capital
C Share of profit
D Interest on drawings

20. A partner has a debit balance on his current account. What does this usually mean?

A The partner is owed money by the partnership
B The partner owes money to the partnership
C The partner has introduced additional capital
D The partner has earned salary only

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

21. A and B share profits 5:3. Profit before appropriations was $96 000. A’s salary was $18 000. Interest on capital was A $6000 and B $3000. Interest on drawings was A $1200 and B $800. What is B’s share of residual profit?

A $26 250
B $26 625
C $27 375
D $29 625

22. A and B share profits 2:3. The appropriation account showed profit before appropriations $80 000, interest on drawings $2000, salaries $20 000 and interest on capital $12 000. What is A’s share of residual profit?

A $18 400
B $19 200
C $20 000
D $22 000

23. A and B share profits equally. Profit before appropriations was $30 000. A receives salary $20 000 and B receives salary $15 000. Interest on drawings is A $1000 and B $500. There is no interest on capital. What is A’s total net credit or debit after appropriations?

A $16 750 credit
B $17 750 credit
C $20 000 credit
D $250 debit

24. Profit before appropriations was $50 000. Partner salaries were $12 000 and $8000. Interest on capital was $6000. Interest on drawings was $1500. Residual profit was shared 3:2. What was the residual profit?

A $23 500
B $25 500
C $27 500
D $32 500

25. Profit before appropriations was $14 000. Interest on drawings was $1000. Salaries were $12 000. Interest on capital was $6000. Partners share profits and losses equally. What is each partner’s share of residual profit/loss?

A $3500 profit
B $1500 loss
C $3000 loss
D $6500 loss

26. Which statement about interest on drawings is correct?

A It is an expense of the partnership
B It reduces the profit before appropriation
C It is charged to partners and increases profit available for appropriation
D It is credited to partners’ current accounts

27. Which statement about interest on capital is correct?

A It is credited to partners and debited to the appropriation account
B It is charged only if there is a loss
C It is an operating expense in the income statement
D It reduces drawings directly

28. A partnership agreement states interest on capital is 6% per annum. A’s capital was $40 000 all year. B’s capital was $30 000 all year. Profit before appropriations was $10 000 and there was no interest on drawings. Salaries were $7000. What is residual profit or loss?

A $1200 profit
B $1200 loss
C $4700 profit
D $4700 loss

29. A and B share profits 3:1. A has capital $80 000 and B has capital $40 000. Interest on capital is 5%. Profit before appropriations is $9000. No salaries or interest on drawings. What is A’s total appropriation?

A $4750
B $6250
C $6750
D $8000

30. If a partnership has a loss before appropriations, interest on drawings will:

A Increase the loss before sharing
B Reduce the loss before sharing
C Have no effect on the residual loss
D Be treated as drawings only

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

31. A and B share profits 2:1. Their current account opening balances were A $3000 credit and B $1000 debit. Profit share was A $16 000 and B $8000. Salaries were A $6000 and B nil. Interest on drawings was A $500 and B $300. Drawings were A $12 000 and B $7000. What is B’s closing current account balance?

A $300 debit
B $300 credit
C $700 debit
D $1700 debit

32. A and B are partners. A’s capital account has a credit balance of $50 000. A’s current account has a debit balance of $4000. What is A’s total equity in the partnership?

A $46 000
B $50 000
C $54 000
D $4000

33. A and B share profits 4:3. Profit available for sharing after salaries, interest on capital and interest on drawings was $56 000. What was B’s share?

A $21 000
B $24 000
C $28 000
D $32 000

34. A and B share profits 4:3. The partnership makes a residual loss of $21 000 after appropriations. How much is charged to B?

A $9000
B $12 000
C $10 500
D $21 000

35. A’s current account opening balance was $2200 credit. A’s salary was $12 000, interest on capital $3000, drawings $10 500, interest on drawings $700 and profit share $16 000. What was the closing current account balance?

A $22 000 credit
B $22 000 debit
C $24 900 credit
D $24 900 debit

36. Partners A and B share profits 3:2. A’s salary is $10 000. B’s salary is $16 000. Interest on capital is A $4000 and B $3000. Interest on drawings is A $500 and B $900. Profit before appropriations is $70 000. What is B’s total net increase in current account before drawings?

A $29 560
B $30 460
C $31 360
D $32 260

37. A partner’s drawings were $1200 on 1 January, $1800 on 1 April, $2400 on 1 July and $3000 on 1 October. The year ends 31 December. Interest on drawings is 10% per annum. What is total interest on drawings?

A $390
B $435
C $480
D $840

38. A partner withdrew $500 at the beginning of each month for 12 months. Interest on drawings is 12% per annum. What is interest on drawings?

A $330
B $360
C $390
D $720

39. A partner withdrew $500 at the end of each month for 12 months. Interest on drawings is 12% per annum. What is interest on drawings?

A $300
B $330
C $360
D $390

40. A partner withdrew $24 000 evenly during the year. Interest on drawings is 8% per annum. What is interest on drawings?

A $960
B $1920
C $2400
D $480

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

41. A and B share profits equally. A introduced additional capital of $12 000 on 1 July. Interest on capital is 10% per annum. What interest is allowed on this additional capital for a year ending 31 December?

A $600
B $1200
C $1800
D nil

42. A and B share profits 3:2. A’s fixed capital is $60 000 and B’s fixed capital is $40 000. A’s current account is $5000 credit and B’s current account is $3000 debit. Interest on capital is 5%. What total interest on capital is credited?

A $4850
B $5000
C $5200
D $5400

43. If there is no partnership agreement, which of the following is normally true?

A Partners receive interest on capital automatically
B Partners receive salaries automatically
C Partners share profits equally
D Partners receive interest on drawings automatically

44. Partner A’s capital account was credited with $10 000 cash introduced into the business, although the partnership uses fixed capital accounts. What is the effect?

A Correct treatment
B Current account understated
C Capital account overstated only if capital is fixed and extra capital should go to current account
D Profit overstated

45. Which item would be shown in the appropriation account but not in the income statement?

A Rent expense
B Depreciation
C Partner’s salary
D Carriage outwards

46. Partnership profit before appropriations is $40 000. Partner salaries are $18 000. Interest on capital is $9000. Interest on drawings is $3000. Residual profits are shared 1:2. What total amount is credited to partners’ current accounts for profit share only?

A $10 000
B $16 000
C $22 000
D $34 000

47. A and B share residual profits 2:3. A receives salary $12 000. B receives salary $9000. Interest on capital is A $4000 and B $6000. Profit before appropriations plus interest on drawings totals $61 000. What is B’s total appropriation before deducting drawings and interest on drawings?

A $24 000
B $27 000
C $30 000
D $33 000

48. A partner’s current account shows opening credit balance $6000. At year-end, after recording salary, interest on capital, profit share, drawings and interest on drawings, the current account has a closing debit balance $2000. Which statement is correct?

A The partner’s claim on the business increased by $8000
B The partner owes the business $2000 on current account
C The partner’s capital account must be nil
D The partnership made a loss equal to $8000

49. A and B share profits 4:1. Profit before appropriation was $100 000. A’s salary was $15 000. B’s salary was $10 000. Interest on capital was A $8000 and B $4000. Interest on drawings was A $1000 and B $2000. What was A’s total net credit to current account before drawings?

A $52 800
B $55 800
C $56 800
D $57 800

50. Which statement is most accurate?

A Interest on capital, partners’ salaries and profit shares are appropriations of profit
B Interest on capital is always a business expense
C Drawings are deducted before calculating gross profit
D Interest on drawings is credited to the drawings account only

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.