Maximize Your Partnership Accounting Knowledge
with These Expert Tips on Joint Life Policy,
Admission, Retirement, and More - CBSE Class 12
Accountancy
Q1. What is a Partnership?
A partnership is a type of business organization in which two or more individuals manage and operate a business together. The partners share the profits and losses of the business.
Q2. What is the Partnership Deed?
The partnership deed is a legal document that outlines the terms and conditions of the partnership. It includes information such as the name of the partnership, the names of the partners, the capital contributed by each partner, the profit-sharing ratio, etc.
Q3. What is meant by the term ‘Goodwill’ in Partnership?
Goodwill is an intangible asset that arises when a business is sold for a price that is higher than its net tangible assets. In the context of a partnership, goodwill refers to the reputation and customer base that a partnership has built up over time.
Q4. What is the meaning of ‘Interest in Capital’?
Interest on Capital refers to the interest paid by the partnership firm to the partners on the capital invested by them in the business. It is usually calculated at a pre-determined rate and is paid out of the profits earned by the firm.
Q5. What is the ‘Sacrificing Ratio’ in Partnership?
Sacrificing Ratio is the ratio in which the partners agree to surrender a portion of their share in the profits of the firm to adjust for a change in the profit-sharing ratio. It is used when a new partner is admitted to the partnership, or when there is a change in the profit-sharing ratio due to some other reason.
Q6. What is meant by ‘Gaining Ratio’?
The gaining Ratio is the ratio in which the partners agree to receive an increased share in the profits of the firm due to a change in the profit-sharing ratio. It is used when a partner retires from the partnership or when there is a change in the profit-sharing ratio due to some other reason.
Q7. What is a ‘Revaluation Account’ in Partnership?
Revaluation Account is a nominal account that is prepared to adjust the values of the assets and liabilities of the partnership in the event of a change in the profit-sharing ratio. It is used to revalue the assets and liabilities of the partnership and to distribute any gains or losses resulting from the revaluation among the partners.
Q8. What is a ‘Partner’s Loan Account’ in Partnership?
Partner’s Loan Account is a personal account that is maintained for each partner to record any loans made by the partner to the partnership firm. The account is credited when the partner makes a loan to the firm and is debited when the loan is repaid.
Q9. What is meant by ‘Partner’s Capital Account’ in Partnership?
Partner’s Capital Account is a personal account that is maintained for each partner to record the amount of capital contributed by the partner to the partnership firm. The account is credited when the partner makes a capital contribution to the firm and is debited when the partner withdraws capital from the firm.
Q10. What is the purpose of the ‘Profit and Loss Appropriation Account’ in Partnership?
A profit and Loss Appropriation Account is prepared to distribute the profits of the partnership among the partners according to their profit-sharing ratio. The account is used to record the distribution of profits as well as any appropriations made from the profits, such as interest on capital, salaries, bonuses, etc.
Q11. What is a ‘Joint Life Policy’ in Partnership?
Joint Life Policy is an insurance policy taken by the partners to provide financial security to the surviving partner(s) in the event of the death of a partner. The policy pays out a lump sum amount to the surviving partner(s) which can be used to buy out the deceased partner’s share in the business.
Q12. What is the ‘Admission of a Partner’ in Partnership?
Admission of a Partner refers to the process of bringing in a new partner to an existing partnership firm. The new partner may contribute capital, bring in new skills or expertise, or help to expand the business.
Q13. What is the ‘Retirement of a Partner’ in Partnership?
Retirement of a Partner refers to the process of a partner leaving the partnership firm. This may be due to retirement, death, or voluntary resignation. The retiring partner may be entitled to receive a share of the profits of the firm or a lump sum payment for their share in the business.
Q14. What is ‘Dissolution of Partnership’?
Dissolution of Partnership refers to the process of ending a partnership firm. This may be due to mutual agreement between the partners, the expiry of the partnership term, or the occurrence of a specified event such as the death or bankruptcy of a partner.
Q15. What is a ‘Realization Account’ in Partnership?
A realization Account is a nominal account that is prepared during the process of dissolution of a partnership firm. The account is used to record the sale of assets and settlement of liabilities of the partnership and to distribute any gains or losses resulting from the liquidation of the partnership among the partners.
Q16. What is a ‘Guarantee of Profits’ in Partnership?
Guarantee of Profits is a clause included in the partnership deed that guarantees a minimum level of profits to the partners. This clause is usually used to provide financial security to the partners, especially in the initial stages of the partnership when the business may not be profitable.
Q17. What is ‘Minor as a Partner’ in Partnership?
Minor as a Partner refers to a situation where a person below the age of 18 years is admitted as a partner in a partnership firm. In such cases, the minor’s share in the profits of the firm is held in trust until they attain the majority.
Q18. What is ‘Partner’s Salary’ in Partnership?
Partner’s Salary refers to the remuneration paid to the partners for their services rendered to the partnership firm. The amount of the salary is usually determined by the partnership deed and is based on factors such as the nature of the services rendered, the experience and qualifications of the partner, etc.
Q19. What is a ‘Partner’s Commission’ in Partnership?
Partner’s Commission refers to the commission paid to the partners for their services in procuring business for the partnership firm. The amount of commission is usually determined by the partnership deed and is based on factors such as the volume of business procured, the nature of the business, etc.
Q20. What is a ‘Bonus to Partners’ in Partnership?
Bonus to Partners refers to an additional payment made to the partners as a reward for their contribution to the profits of the partnership firm. The amount of the bonus is usually determined by the partnership deed and is based on factors such as the level of profits earned by the firm, the capital contributed by the partners, etc.
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