MCQ Interest on loan by firm to partner - Partnership accounts
This quiz on the interest on loan by firm to partner with 20 practice questions. Test your knowledge about the meaning and accounting of interest on loan by firm to partner with this MCQ practice test. This quiz contains questions 1-20 covering what is loan by partner, how is interest charged in such loan and he accounting treatment. Answer all questions and get instant feedback with detailed explanations. The quiz suits well for conceptual clarity for your board exams
CBSE MCQ class 12 accounts
The below MCQ test is designed as per the latest syllabus prescribed by CBSE board. With the rise in weightage of MVQ 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
When firm gives loan to a partner, interest on loan is:
A
Correct Answer: Charged at agreed rate, otherwise not charged
Interest on loan by the firm to a partner is charged at the agreed rate of interest, otherwise it is not charged.
Question 2
What does Partnership Act, 1932 provide for interest on loan to partner?
C
Correct Answer: Does not provide for charging interest on loan to partner
The Partnership Act, 1932 does not provide for charging interest on loan to partners by the firm.
Question 3
In absence of agreement, interest on loan to partner is:
C
Correct Answer: Not charged
Interest on loan to partner is charged at agreed rate, otherwise not charged. Partnership Act does not provide for it.
Question 4
Interest charged on loan to partner is transferred to:
B
Correct Answer: Credit of P&L Account
Interest charged on loan to partner is transferred to the credit of Profit & Loss Account, it being an income for the firm.
Question 5
Interest on loan to partner is debited to:
A
Correct Answer: Partner's Capital/Current Account
Interest charged on loan to partner is debited to Partner's Capital Account (Fluctuating) or Partner's Current Account (Fixed).
Question 6
The nature of interest on loan to partner for the firm is:
A
Correct Answer: An income
Interest charged on loan to partner is an income for the firm and is transferred to credit of Profit & Loss Account.
Question 7
When rate of interest on loan to partner is agreed, it is:
A
Correct Answer: Charged at that agreed rate
When rate of interest is agreed by the partners, interest on loan to partner is charged at that agreed rate.
Question 8
Interest on loan to partner is recorded in which account with Fixed Capital Method?
A
Correct Answer: Partner's Current Account
With Fixed Capital Method, interest on loan to partner is debited to Partner's Current Account.
Question 9
Interest on loan to partner is recorded in which account with Fluctuating Capital Method?
B
Correct Answer: Partner's Capital Account
With Fluctuating Capital Method, interest on loan to partner is debited to Partner's Capital Account.
Question 10
When firm gives loan to partner without agreement on interest:
C
Correct Answer: No interest is charged
In absence of agreement, interest on loan to partner is not charged as Partnership Act does not provide for it.
Question 11
The journal entry for charging interest on loan to partner is:
A
Correct Answer: Dr. Partner's Capital/Current Ac, Cr. Interest on Loan to Partner Ac
For charging interest on loan to partner, Partner's Capital/Current Account is debited and Interest on Loan to Partner Account is credited.
Question 12
When interest on loan to partner is received in cash, the journal entry is:
A
Correct Answer: Dr. Cash/Bank Ac, Cr. Partner's Capital/Current Ac
If interest on loan to partner is received in cash or by cheque, Cash/Bank Account is debited and Partner's Capital/Current Account is credited.
Question 13
Transfer/Closing entry for interest on loan to partner is:
B
Correct Answer: Dr. Interest on Loan to Partner Ac, Cr. P&L Ac
For transfer, Interest on Loan to Partner Account is debited and Profit & Loss Account is credited as it's income for firm.
Question 14
If Partnership Deed is silent on interest on loan to partner:
C
Correct Answer: No interest is charged
If Partnership Deed is silent and partners have not agreed, no interest is charged on loan to partner.
Question 15
Difference between interest on loan by partner and interest on loan to partner:
A
Correct Answer: First is expense and second is income for the firm
Interest on loan by partner is an expense for the firm. Interest on loan to partner is an income for firm
Question 16
Can firm charge interest on loan to partner @ 10% when Partnership Deed specifically mentions this clause?
B
Correct Answer: Yes, at 10% p.a.
If partnership deed specifically mentions the interest rate then the same can be charged
Question 17
Interest on loan to partner affects firm's net profit by:
A
Correct Answer: Increasing it
Interest on loan to partner is an income for the firm, so it increases the net profit when charged and received.
Question 18
When firm incurs loss, interest on loan to partner:
A
Correct Answer: Is still charged if agreed
Interest on loan to partner is income for firm. If agreed, it is charged whether firm earns profit or incurs loss.
Question 19
Interest on loan to partner is different from interest on drawings because:
