MCQ Quiz
Question 1
Which of the following closely resembles a charge against profits
B
Correct Answer: Deduction from revenue to determine net profit/loss
A charge against profits is an expense that is deducted from the revenue to arrive at the net profit or loss of the firm.
Question 2
Which of the following fits into the definition of appropriation of profits
B
Correct Answer: Distribution of net profit among the partners
Appropriation of profits involves how the net profit (after all charges) is distributed or allocated among the partners.
Question 3
Is a charge against profits paid if the firm incurs a loss?
A
Correct Answer: Yes
Charges against profits are obligations that must be met whether the firm earns a profit or suffers a loss.
Question 4
Is an appropriation of profits made if the firm incurs a loss?
B
Correct Answer: No
Appropriation of profits, being the distribution of profit, can only occur when the firm has earned a net profit.
Question 5
Where is a charge against profits typically recorded?
C
Correct Answer: Profit and Loss Account
Items that are a charge against profits are debited to the Profit and Loss Account to determine the net profit or loss.
Question 6
Where is an appropriation of profits typically recorded?
C
Correct Answer: Profit and Loss Appropriation Account
The distribution of profits among partners is recorded in the Profit and Loss Appropriation Account.
Question 7
Which of the following is first priority for payment for a partnership firm
B
Correct Answer: Charge against profits
Charges against profits are accounted for before any appropriation of profits is made.
Question 8
Rent paid to a partner is an example of
B
Correct Answer: Charge against profits
Rent paid to a partner is considered a charge against profits, as it is an expense of the firm.
Question 9
Salary paid to a partner is an example of
B
Correct Answer: Appropriation of profits
Salary to partners is a way of distributing the profit and is therefore an appropriation of profits.
Question 10
Interest on a partner's loan to the firm is an example of
B
Correct Answer: Charge against profits
Interest on a loan from a partner to the firm is treated as a charge against profits.
Question 11
Interest on drawings by partners is an example of
B
Correct Answer: Appropriation of profits
Interest on drawings coms in profit and loss appropriation A/c and thus an appropriation of profits.
Question 12
Manager's commission is an example of
B
Correct Answer: Charge against profits
A manager is an employee, and their commission is an expense that is charged against the firm's profits.
Question 13
Transfer to general reserve is an example of
B
Correct Answer: Appropriation of profits
Transferring a portion of the profit to a general reserve is a form of appropriation of profits.
Question 14
Interest on capital is generally treated as an appropriation of profits, unless
C
Correct Answer: The question specifically states it is a charge
Interest on capital is usually an appropriation, but it can be treated as a charge if the partnership agreement specifies it.
Question 15
Interest on a loan taken by a partner from the firm is
B
Correct Answer: Charge against profits
Interest on a loan by the firm to a partner is income for the firm and shown in profit and loss A/c
Question 16
To which account are charge against profits debited ?
C
Correct Answer: Profit and Loss Account
All charges against profits are debited to the Profit and Loss Account.
Question 17
Which account is debited for an appropriation of profits?
C
Correct Answer: Profit and Loss Appropriation Account
Appropriations of profits are debited to the Profit and Loss Appropriation Account.
Question 18
Nature of a charge against profits
B
Correct Answer: Expense
A charge against profits represents an expense that the firm must incur, regardless of its profitability.
Question 19
Nature of an appropriation of profits
B
Correct Answer: Distribution of earnings
Appropriation of profits involves distributing the firm's net earnings among the partners in various forms.
Question 20
Net profit or loss transferred to profit and loss appropriation A/c is
A
Correct Answer: Profit after all charges
Net profit or loss transferred to profit and loss appropriation A/c is the net profit after adjusting all the charges against profits
