Showing the 12 most recent of 40 on this concept.

1. CBSE 2026Set MARCH1 markMCQ
   Q.What is the interest on partner's capital for a partner?

   (a) An expense

   (b) Liability

   (c) Income

   (d) Loss

   ›Reveal solutionSolution

   From a partner's viewpoint, interest on capital is income; the correct option is (c).

   Interest on capital is calculated on the balance a partner keeps invested in the firm and is allowed only when the partnership deed permits it. In the firm's books it is an appropriation of profit (debited to the Profit and Loss Appropriation Account, not a business expense). But the question asks about the position 'for a partner' — the partner earns this interest on his own capital, so he treats it as income and it is credited to his capital/current account.

   ✓Final answer

   (c) Income.

2. CBSE 2026Set MARCH1 markMCQ
   Q.Interest on capital is credited to the ______ Account.

   (a) Profit and Loss Account

   (b) Partner's Capital Account

   (c) Profit and Loss Appropriation Account

   (d) Revaluation account

   ›Reveal solutionSolution

   Interest on capital is credited to the Partner's Capital Account — option (b).

   In a Kerala Plus Two (DHSE) Accountancy partnership problem, interest on capital is an appropriation of profit. It rewards a partner for the money he has kept invested in the firm, so it must be given to that partner. The double entry is:

   Account	Debit	Credit
   Profit and Loss Appropriation A/c	✓
   Partner's Capital A/c (or Current A/c)		✓

   Option (a) is wrong because interest on capital is charged against the Appropriation account, not the ordinary Profit and Loss Account. Option (c) is the account that is debited, not credited. Option (d), the Revaluation Account, deals with re-valuing assets and liabilities and has nothing to do with interest on capital.

   ✓Final answer

   (b) Partner's Capital Account — interest on capital is credited to the partner's account and debited to the Profit and Loss Appropriation Account.

3. CBSE 2026Set ANNUAL1 markMCQ
   Q.Which one of the following item is related to credit side of Profit and Loss Appropriation Account? A) Interest on partners' capital B) Interest on partners' loans C) Interest on partners' drawings D) Salary paid to partners

   ›Reveal solutionSolution

   Interest on partners' drawings is income FOR the firm, so it is credited to the Profit and Loss Appropriation Account — option (C) is correct.

   The Profit and Loss Appropriation Account shows how net profit is distributed among partners:

   • Debit side: interest on capital, salary/commission to partners, transfer to reserve, share of profit to partners.
   • Credit side: net profit brought down from the P&L Account and interest on partners' drawings (recovered from partners).

   Checking each option: (A) interest on capital and (D) salary to partners are debit-side appropriations; (B) interest on partners' loan is a charge against profit shown in the P&L Account itself (not the appropriation account). Only interest on partners' drawings belongs on the credit side.

   ✓Final answer

   Interest on partners' drawings — option (C).

4. CBSE 2026Set ANNUAL1 mark
   Q.Fill in the blank: The amount of interest on capital is shown in __________ side of Profit and Loss Appropriation Account. (Credit/Debit)

   ›Reveal solutionSolution

   Interest on capital is shown on the DEBIT side of the Profit and Loss Appropriation Account.

   The Profit and Loss Appropriation Account distributes the net profit. Items that give/allow amounts to partners - interest on capital, salary or commission to partners, and their share of profit - are debited, while net profit and interest on drawings are credited. Interest on capital, being an allowance to partners out of profit, is therefore recorded on the debit side.

   ✓Final answer

   Interest on capital is shown on the Debit side of the Profit and Loss Appropriation Account.

5. CBSE 2026Set ANNUAL1 mark
   Q.Why is Profit and Loss Appropriation A/c prepared?

   ›Reveal solutionSolution

   The P&L Appropriation A/c exists to distribute the firm's net profit among partners exactly as the partnership deed directs, item by item.

   An ordinary Profit and Loss Account only determines the firm's overall net profit (or loss) for the year from its trading and other operations — it does not concern itself with how that profit is to be shared among the partners. But in a partnership, the deed often entitles individual partners to specific extra benefits before the residual profit is shared, such as:

   • Interest on partners' capital
   • Salary or commission to working partners
   • Interest charged on partners' drawings (this reduces the amount available, since it is added back as income to the firm)
   • The remaining (residual) profit shared in the agreed profit-sharing ratio

   The Profit and Loss Appropriation Account is prepared, immediately after the P&L Account, specifically to carry out this distribution — it is credited with the net profit (brought down from the P&L A/c) and interest on drawings, and debited with interest on capital, partners' salary/commission, and finally the balance (residual profit) transferred to the partners' capital/current accounts in their profit-sharing ratio.

   In short, it exists because a partnership's "profit" and each partner's actual "entitlement" are two different things, and the Appropriation Account is the formal link between them, fully consistent with the partnership deed.

   ✓Final answer

   The Profit and Loss Appropriation Account is prepared to show how the firm's net profit is distributed among the partners as per the partnership deed — covering interest on capital, partners' salary/commission, interest on drawings, and the residual profit shared in the agreed profit-sharing ratio.

6. CBSE 2025Set ANNUAL1 markMCQ
   Q.Profit & Loss Appropriation Account is a (A) Nominal A/c (B) Personal A/c (C) Real A/c (D) Capital A/c.

   ›Reveal solutionSolution

   The Profit & Loss Appropriation Account is a Nominal Account — option (A).

   Accounts are classified as Personal (relating to persons/firms), Real (relating to assets) or Nominal (relating to incomes, expenses, gains and losses). The Profit and Loss Appropriation Account is an extension of the Profit and Loss Account prepared by a partnership firm to show how the year's net profit is appropriated — interest on capital, partners' salary/commission, transfer to reserve and the final share of profit. Because it deals with the distribution of profit and not with any person or asset, it falls under the Nominal class of accounts.

   ✓Final answer

   The correct answer is (A) Nominal A/c.

7. CBSE 2025Set ANNUAL1 markMCQ
   Q.A partnership firm earned net profit of Rs. 4,20,000 and partner X is entitled to get commission @ 5% on net profit (after charging his commission), then the amount of commission to X is (A) Rs. 20,500 (B) Rs. 21,000 (C) Rs. 20,000 (D) None of these.

   ›Reveal solutionSolution

   X's commission is Rs. 20,000 — option (C).

   When commission is given at a rate on net profit after charging such commission, the commission base is the profit left after the commission itself is deducted. The formula is:

   Commission = Net Profit x Rate / (100 + Rate)

   Substituting the figures:

   Commission = 4,20,000 x 5 / (100 + 5) = 4,20,000 x 5 / 105 = Rs. 20,000.

   Check: Profit after commission = 4,20,000 - 20,000 = 4,00,000; 5% of 4,00,000 = 20,000. Correct.

   ✓Final answer

   The correct answer is (C) Rs. 20,000.

8. CBSE 2024Set ANNUAL1 markMCQ
   Q.Interest on Capital of a partnership firm is

   (a) an expense.

   (b) an income.

   (c) an asset.

   (d) None of these.

   ›Reveal solutionSolution

   Interest on capital is an appropriation of profit, not an expense/income/asset — so option (d) None of these is correct.

   Interest on partners' capital is allowed only when the partnership deed provides for it, and it is given out of profits. It is therefore debited to the Profit & Loss Appropriation Account (a distribution of profit among partners), not to the Profit & Loss Account as a business expense.

   • It is not 'an expense' — a true charge against profit (like rent or interest on loan) is debited to the P&L Account; interest on capital is not.
   • It is not 'an income' of the firm — for the firm it is an outflow to partners.
   • It is not 'an asset'.

   Its correct classification is an appropriation of profit, which is not among the options; hence 'None of these' is the right answer. This is a frequently asked WBCHSE HS Accountancy one-mark question.

   ✓Final answer

   (d) None of these.

9. CBSE 2024Set ANNUAL1 markMCQ
   Q.Which one of the following items is not entered in the Profit & Loss Appropriation Account?

   (a) Interest on Partners' Capital.

   (b) Interest on Partners' Drawings.

   (c) Rent paid to partners.

   (d) Salary paid to partners.

   ›Reveal solutionSolution

   Rent paid to a partner is a charge against profit shown in the P&L Account, not in the Appropriation Account — option (c).

   The Profit & Loss Appropriation Account shows how the net profit is divided/appropriated among the partners. Items entered there include:

   • Interest on partners' capital (appropriation),
   • Interest on partners' drawings (credited, an appropriation),
   • Salary/commission paid to partners (appropriation).

   Rent paid to a partner for using his premises, however, is a business expense — a charge against profit — and is debited to the Profit & Loss Account (before arriving at net profit), exactly like rent paid to any outsider. It is never an appropriation of profit.

   Therefore, among the options, Rent paid to partners is the item NOT entered in the P&L Appropriation Account.

   ✓Final answer

   (c) Rent paid to partners.

10. CBSE 2024Set ANNUAL1 mark
    Q.X, Y and Z are partners sharing profits and losses as 3 : 2 : 1. As per partnership deed, X is entitled to receive commission @ 10% on net profit after charging such commission. Net profit before charging commission is ₹ 30,800. Find out commission payable to X.

    ›Reveal solutionSolution

    X's commission (10% after charging such commission) = ₹2,800.

    When commission is a percentage of profit ‘after charging such commission’, it is computed on the profit that remains after the commission itself has been deducted. The formula is:

    Commission = Net profit before commission × Rate ÷ (100 + Rate)

    Item	Working	Amount (₹)
    Net profit before commission		30,800
    Commission = 30,800 × 10/(100+10)	30,800 × 10/110	2,800

    Check: Profit after commission = 30,800 − 2,800 = 28,000; 10% of 28,000 = 2,800. Correct.

    ✓Final answer

    Commission payable to X = ₹2,800.

11. CBSE 2024Set ANNUAL1 markMCQ
    Q.Which one of the following items is not related to profit and Loss Appropriation A/c? A) Interest on Partners Capital B) Salary Payable to a Partner C) Interest on Partners Loan (Debt) D) Interest on Partners Drawings

    ›Reveal solutionSolution

    Interest on a partner's loan is a charge against profit (debited to Profit & Loss A/c), so it is NOT shown in the Profit and Loss Appropriation Account. Correct option: (C).

    The Profit and Loss Appropriation Account is prepared after the Profit and Loss Account and shows how the net profit is distributed (appropriated) among the partners. Items appearing in it include:

    Item	Shown in Appropriation A/c?
    Interest on Partners' Capital	Yes (debit)
    Salary payable to a partner	Yes (debit)
    Interest on Partners' Drawings	Yes (credit)
    Interest on Partner's Loan	No — charge against profit, shown in P&L A/c

    Interest on a partner's loan to the firm is a liability/expense of the business regardless of whether there is profit (payable @ 6% p.a. if the deed is silent), hence it is a charge debited to the Profit and Loss Account, not an appropriation.

    ✓Final answer

    (C) Interest on Partners Loan (Debt) — it is a charge against profit shown in the Profit & Loss Account, not the Appropriation Account.

12. CBSE 2024Set ANNUAL1 mark
    Q.Why is Profit & Loss Appropriation A/c prepared?

    ›Reveal solutionSolution

    The Profit & Loss Appropriation Account is prepared to distribute the firm's net profit among the partners as per the terms of the partnership deed.

    Unlike a sole proprietorship, a partnership firm's net profit cannot be left as it is — the partnership deed typically provides for several items to be adjusted before the balance is actually divided between the partners:

    • Interest on partners' capital
    • Salary or commission payable to working partners
    • Interest on partners' drawings (added back, since it reduces what the partner is entitled to)
    • Transfer to reserve, if agreed
    • Finally, the residual profit is divided among the partners in their profit-sharing ratio

    The Profit & Loss Appropriation Account is an extension of the Profit & Loss Account, prepared specifically to record all of this — it starts with the net profit brought down from the P&L A/c and ends with each partner's final share of profit, which is then transferred to their Capital/Current Accounts. This keeps a clean, visible trail of exactly how the firm's distributable profit was shared, as required by the partnership agreement.

    ✓Final answer

    It is prepared to show the distribution of the firm's net profit among the partners after making the deed-based adjustments (interest on capital/drawings, salary, commission, reserve) and dividing the balance in the profit-sharing ratio.