Partnership Deed

Correct answer: A. Deficiency under guarantee

The difference between guaranteed minimum and actual share is deficiency. It is borne by the guarantor as per deed.

Correct answer: A. From A's profit share

A guarantee is a personal obligation of the guaranteeing partner — the guarantor must make good the shortfall. Therefore the deficiency is met from A's share of profit (or ultimately from A's capital if profit share is insufficient). It is not met from the firm's reserves or any government source, and it cannot be taken from B's drawings because drawings are B's personal withdrawals, not funds available to meet a guarantee. Exam tip: record the adjustment in Profit & Loss Appropriation — adjust by debiting A's Capital and crediting B's Capital for the deficiency.

Correct answer: A. In profit sharing ratio of remaining partners

When no special ratio is given, deficiency is generally borne by guaranteeing partners in their profit ratio. This is an important exam rule.

Correct answer: A. Profit and Loss Appropriation Account

Partner related profit appropriations are shown in this account. Salary and interest on capital are common items in it.

Correct answer: A. To establish identity and for service/receipt of legal notices

Recording the firm's name and principal office fixes the firm's official identity. The address is required for serving and receiving notices, bank and government correspondence, contracts and for identifying jurisdiction in disputes. It therefore ensures clear legal communication and enforceability. Option C is misleading: restrictions on drawings are set by specific deed clauses, not simply by stating name/address. Exam tip: remember — name and address = identity + service of notices (legal communication).

Correct answer: A. Who contributed how much capital

Clear capital contribution reduces disputes on capital accounts. It also helps in calculating interest and withdrawals.

Correct answer: A. They will remain equal as per deed

Management rights are decided by deed and agreement, not only by capital. More capital does not automatically give more rights.

Correct answer: A. Fiduciary use of firm property

The direct answer is option A: fiduciary use of firm property. A partner is not merely a private owner of every firm asset. The property belongs to the firm, and the partner must use it honestly and for the firm’s business or benefit. Step by step, the asset is identified as firm property; a partner wants to use it privately; the deed requires consent; therefore private use without permission is not allowed. Option A best expresses the duty of trust and proper use connected with partnership property. Option B concerns calculating a return on capital and has nothing to do with permission to use an asset. Option C concerns tax imposed on profit by authorities, not control of property. Option D means goods returned by a customer, which is unrelated. The wording ‘fiduciary use’ is somewhat specialized, but among the options it clearly represents the partner’s duty to act in the firm’s interest. Memory cue: firm property is held for firm purposes, not personal use without consent.

Correct answer: A. Basis of profit share from admission date

For mid-year admission, the time basis of profit is important. Use the deed to clarify old and new ratios.

Correct answer: A. Six months

For equal monthly drawings with no dates, the usual average period is six months. Always check special information in the question first.

Correct answer: A. Rs 18000

The reserve is 20% of profit. So Reserve = \(90000 \times \frac{20}{100} = 18000\). Option C (Rs 20000) is incorrect because it represents 20% of Rs 100000, not of Rs 90000. Exam tip: convert the percentage to a fraction and multiply by the base amount, or directly apply the % operator to avoid calculation errors.

Correct answer: A. Rs 70000

After salary, remaining profit is Rs 60000 and As two third share is Rs 40000. Total share is Rs 70000.

Correct answer: A. When profit is insufficient

When profit is insufficient, the limit and order of appropriations may depend on the deed. With enough profit, order usually does not change the result.

Correct answer: A. To give the firm time for orderly settlement

Retirement affects settlement of capital and profit. Notice period gives the firm time to prepare.

Correct answer: A. The special clause in the deed will prevail over the general/default rule

A partnership deed is the primary evidence of partners' agreement on profit appropriation. When the deed clearly states profit will be shared before interest on capital, that specific clause governs and overrides any general/default practice. The general rules apply only in the absence of an express term in the deed. Option B is incorrect because payment order (interest first) is not absolute — it depends on partner agreement. Options C and D are incorrect because such a clause is not inherently illegal or invalid unless it breaches a specific law. Exam tip: Always check the deed first; if it contains an express provision on appropriation, follow it rather than default rules.

Correct answer: A. Partners current accounts

Under fixed capital method, adjustments like profit salary and interest are recorded in current accounts. In exams, carefully distinguish capital account from current account.

Correct answer: A. Three to two

The direct answer is option A: profit will be shared in the ratio three to two. In partnership accounting, the profit-sharing ratio written in the deed normally controls distribution of profit. Equal capitals do not replace that agreed ratio. Step by step, the deed specifies 3:2; the year-end profit is determined; three parts go to one partner and two parts go to the other, after any required adjustments. For example, if distributable profit were Rs 5,000, the total would be five parts, so the shares would be Rs 3,000 and Rs 2,000. Option A is correct because it follows the express agreement. Option B is wrong because equal sharing applies only when that is agreed or when the relevant rule requires it. Option C is wrong because capital ratio is not the stated profit ratio. Option D is wrong because drawings ratio does not determine profit sharing unless expressly provided. Memory cue: profit follows the deed, not automatically the amount of capital.

Correct answer: A. When a clear rate is given in the deed

Clear agreement of partners applies before the general rule. So the rate stated in the deed will be used.

Correct answer: A. Rs 10000

Total capital is Rs 100000 and ten percent interest is Rs 10000. In exams calculate each interest and add them.

Correct answer: A. Rs 18000

Monthly salary is multiplied by the working period. For six months Rs 3000 multiplied by six equals Rs 18000.

Correct answer: A. Good faith and loyalty towards the firm

A partner should account for private profit connected with firm business. This is a basic rule of trust based partnership.

Correct answer: A. Internal control over assets

Requiring two partners' signatures is meant to safeguard firm assets and prevent unilateral disposal — a classic internal control over assets. The clause enforces dual authorization, reducing the risk of unauthorized sale. Option B (restriction on a single partner’s authority) is related because it limits binding power, but the primary control objective here is protecting assets, not merely altering representation rules. Exam tip: when the stem mentions 'sell', 'assets' or 'signatures', think of asset protection/authorization controls.

Correct answer: A. Capital accounts

Under fluctuating capital method, adjustments like profit and drawings are made in capital accounts. A separate current account is not necessary.

Correct answer: A. Bs current or drawings account

Under fixed capital method, personal withdrawals are not directly recorded in capital account. They are shown in current or drawings account.

Correct answer: A. Goodwill valuation clause

The method of goodwill calculation may be written in the deed beforehand. It is very useful in admission and retirement.