MCQ Quiz
Question 1
If a partner takes a loan from the firm for personal use, what is this treated as?
C
Correct Answer: Loan by firm to partner
When a partner borrows money from the firm for personal expenses, it is considered a loan by the firm to the partner.
Question 2
For the firm, a loan given to a partner is what type of account?
D
Correct Answer: Asset
A loan given by the firm to a partner is an asset for the firm until it is repaid.
Question 3
In the absence of an agreement, is interest payable on a loan taken by a partner from the firm?
C
Correct Answer: No interest is payable
In the absence of an agreement, interest is not payable on a loan taken by a partner from the firm.
Question 4
If a partner gives money to the firm over and above their capital contribution, what is this called?
C
Correct Answer: Loan by partner to firm
When a partner provides funds to the firm beyond their capital, it is considered a loan by the partner to the firm.
Question 5
For the firm, a loan taken from a partner is what type of account?
D
Correct Answer: Liability
A loan taken by the firm from a partner represents a liability for the firm that needs to be repaid.
Question 6
In the absence of an agreement, what is the rate of interest payable by the firm on a loan taken from a partner?
C
Correct Answer: 6% per annum
In the absence of an agreement, the firm pays interest on a loan taken from a partner at a rate of 6% per annum.
Question 7
What is the nature of Interest on a loan taken by a partner from the firm ?
A
Correct Answer: Income
Interest on a loan by the firm to a partner is an income for the firm.
Question 8
What is the nature of Interest on a loan given by a partner to the firm ?
C
Correct Answer: Expense
Interest on a loan by a partner to the firm is an expense for the firm.
Question 9
On what amount is interest calculated for a loan?
C
Correct Answer: Amount outstanding (unpaid)
Interest is calculated on the amount unpaid of the loan.
Question 10
For what period is interest calculated on a loan?
C
Correct Answer: For the period the money is used
Interest is calculated for the period for which the money is used by the borrower (either the partner or the firm).
Question 11
When a firm gives a loan to a partner, which account is debited?
B
Correct Answer: Loan to Partner A/c
When a loan is given by the firm to a partner, Loan to Partner A/c is debited as it is an asset increase.
Question 12
When interest is charged on a loan given to a partner by the firm, which account is credited?
D
Correct Answer: Interest on Loan to Partner A/c
When interest is charged, Interest on Loan to Partner is credited as it is an increase in income for the firm.
Question 13
When the firm receives interest on a loan given to a partner, which account is debited?
B
Correct Answer: Cash/Bank A/c
When interest on a loan to a partner is received, Cash/Bank A/c is debited as it is an asset increase.
Question 14
When a firm takes a loan from a partner, which account is credited?
C
Correct Answer: Loan by Partner A/c
When a loan is taken from a partner, Loan by Partner A/c is credited as it is a liability increase.
Question 15
When a firm allows interest on a loan from a partner, which account is credited?
C
Correct Answer: Loan by Partner A/c
When interest is allowed (due) on a loan from a partner, Loan by Partner A/c is credited, increasing the liability.
Question 16
At the time of payment of interest on a loan taken from a partner, which account is debited?
B
Correct Answer: Loan by Partner A/c
Interest on loan was already debited when interest was made due and a liability created. Now on payment Liabbility will reduce.
Question 17
What is the nature of interest on a loan by a firm to a partner?
C
Correct Answer: Charge against profits
Interest on a loan by a firm to a partner is a charge against profits.
Question 18
What is the nature of interest on a loan by a partner to a firm?
C
Correct Answer: Charge against profits
Interest on a loan by a partner to the firm is a charge against profits.
Question 19
Where will 'Loan by firm to partner' be shown in the firm's balance sheet?
C
Correct Answer: Assets side
Loan by the firm to a partner is an asset and will be shown on the assets side of the balance sheet.
Question 20
Where will 'Loan by partner to firm' be shown in the firm's balance sheet?
C
Correct Answer: Liabilities side
Loan by a partner to the firm is a liability and will be shown on the liabilities side of the balance sheet.
To improve your understanding about the difference between charge against profit and appropriation of profit, click here
