This MCQ Test on the guarantee of profits has 15 practice questions. Test your knowledge about the partnership accounts - Fundamentals , concepts of guarantee of profits, meaning of guarantor and guaranteed partners, journal entries for guarantee etc. The quiz suits well for conceptual clarity for your board exams
CBSE class 12 accountancy MCQ questions
The below MCQ test is designed as per the latest syllabus prescribed by CBSE board. With the rise in weightage of MCQ questions, the practice of MCQ questions becomes very important. The quiz is equally useful for students of CUET exams.
How to attempt the quiz
One by one go through the below questions and select the right option. Do all the questions and in the end press submit. Instantly you will get your score and the explanation against each question. Go through your mistakes and reattempt the quiz any number of times as needed.
MCQ Quiz - Practice Questions
MCQ Quiz
Question 1
Guarantee of profit to a partner means:
A
Correct Answer: Partner is assured a minimum amount of profit
Guarantee of profit means a partner is assured a minimum amount of profit irrespective of actual share as per profit-sharing ratio.
Question 2
Guarantee of minimum profit can be given by:
B
Correct Answer: One partner, some partners, or all remaining partners
Guarantee can be given by one partner, some partners in agreed ratio, or all remaining partners collectively.
Question 3
When Guarantee of Profit is given to a partner , the guaranteed partner will get:
B
Correct Answer: Higher of actual share or guaranteed amount
Guaranteed partner gets whichever is higher - actual share of profit as per ratio or the guaranteed minimum amount.
Question 4
If guaranteed partner's actual profit share is less than guaranteed amount of profit, the difference is:
C
Correct Answer: Borne by guarantor partner(s) in agreed ratio
Deficiency (guaranteed amount minus actual share) is borne by guarantor partner(s) in the agreed ratio.
Question 5
Deficiency in guaranteed profit is:
A
Correct Answer: Debited to guarantor(s) Capital/Current Account
Deficiency is debited to guarantor partner(s) Capital/Current Account and credited to guaranteed partner's account.
Question 6
When Guarantee of Profit is given to a aprtner then profit is first distributed:
B
Correct Answer: In profit-sharing ratio to all partners, then deficiency adjusted
Profit is first distributed in profit-sharing ratio to all partners, then deficiency in guaranteed partner's share is adjusted.
Question 7
When Guarantee of Profit is given to some partner and firm follows Fixed Capital Method, deficiency borne by guarantor is recorded in:
B
Correct Answer: Guarantor Current Account
In Fixed Capital Method, deficiency borne by guarantor is debited to their Current Account.
Question 8
When Guarantee of Profit is given to some partner and firm follows Fluctuating Capital Method, deficiency borne by guarantor is recorded in:
C
Correct Answer: Guarantor Capital Account
In Fluctuating Capital Method, deficiency is debited to guarantor's Capital Account and credited to guaranteed partner's Capital Account.
Question 9
When Guarantee of Profit is given to some partner by All remaining Partners
C
Correct Answer: Deficiency is borne in their profit-sharing ratio or agreed ratio
When all remaining partners give guarantee, deficiency is borne by them in their profit-sharing ratio or agreed ratio.
Question 10
When guarantee of profits if given by one specific partner
A
Correct Answer: Entire deficiency is borne by that partner alone
When one specific partner gives guarantee, entire deficiency in guaranteed profit is borne by that partner alone.
Question 11
If firm incurs a loss and Guarantee of Profit is given by some partners
D
Correct Answer: Guarantor partners still need to pay the deficiency amount in the same year
Whether there is a loss or profit is earned by the firm, guaranteed profits are to be paid to the partner who is given guarantee in the same year
Question 12
The journal Entry, for deficiency of profits in case of guarantee is:
A
Correct Answer: Dr. Guarantor(s) Capital/Current Ac, Cr. Guaranteed Partner's Capital/Current Ac
Journal entry: Dr. Guarantor(s) Capital/Current Account(s) and Cr. Guaranteed Partner's Capital/Current Account.
Question 13
In cas of Guarantee of Profit if firm earns adequate Profit , and guaranteed partner's share exceeds guaranteed profit:
B
Correct Answer: Guaranteed partner gets actual higher share
If guaranteed partner's actual share exceeds guarantee, they get their actual higher share (no adjustment needed).
Question 14
In case of Guarantee of Profit , if firm's distributable profit is less than guaranteed amount:
B
Correct Answer: Guaranteed partner still gets guaranteed amount, deficiency borne by guarantor(s)
Even if firm's profit is insufficient, guaranteed partner gets guaranteed amount and deficiency is borne by guarantor(s).
Question 15
Profit guarantee can be given
C
Correct Answer: No limit on numbers of partners given guarantee
Guarantee of profits can be given to any number of partners in the firm
Question 16
When Guarantee of profit given by Firm, then guarantee given by 'firm' means:
B
Correct Answer: Deficiency is borne by all partners other than guaranteed partner in agreed ratio
When guarantee is given by 'firm', deficiency is ultimately borne by all partners other than guaranteed partner in agreed ratio.
Question 17
Guarantee of Profit can be given
C
Correct Answer: For profits including or excluding other appropriations like salary, interest on capital
Guaranteed minimum profit is can be either before or after allowing all appropriations like interest on capital, salary, etc. depending upon the terms of the deed
Question 18
Guaranteed profit deficiency adjustment is shown in P&L Appropriation Account by
A
Correct Answer: Reducing guarantor's share and increasing guaranteed partner's share
In P&L Appropriation Account, deficiency is shown by reducing guarantor(s) share and increasing guaranteed partner's share.
Question 19
If guaranteed partner's actual share equals or exceeds guarantee:
B
Correct Answer: No adjustment entry is required
If guaranteed partner's actual share equals or exceeds guarantee, no adjustment or deficiency entry is required.
Question 20
Guarantee of Profit can convert guaranteeing partners profit share into a loss
D
Correct Answer: Possible
To fulfill guarantee obligation,profit share of partners can become a loss share for the year
