If a partner's loan is interest-free, what is the treatment? MCQ with Answer and Explanation

Question
If a partner's loan is interest-free, what is the treatment?
A. Interest is charged at the bank rate
B. Interest is charged at 9%
C. Interest is charged at 6%
D. No interest is charged
Answer: Option D
Solution (By JKSSB Mock Tests)
If the partnership deed is silent on interest on a partner's loan, it is not provided. If it is a loan, it's treated as a liability, but interest is only paid if agreed.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
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Practice More Accountancy and Book Keeping Questions

Question #1
The 'Capital Redemption Reserve' is created when preference shares are redeemed out of:
A. Profits
B. Proceeds of fresh issue
C. Securities premium
D. General reserve
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Correct Answer: Option A

Explanation:
When redemption is out of profits, an equivalent amount is transferred to Capital Redemption Reserve.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #2
A Value Added Statement is an important component of:
A. Cash Flow Statement
B. Cost Sheet
C. Bank Reconciliation
D. Social Accounting
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Correct Answer: Option D

Explanation:
A Value Added Statement shows how much wealth the company has created and how it is distributed among employees, government, providers of capital, and retained earnings.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #3
If a Trial Balance tallies, it indicates:
A. No errors exist
B. Books are complete
C. Only arithmetical accuracy, errors may still exist
D. All transactions are recorded correctly
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Correct Answer: Option C

Explanation:
Agreed trial balance is not conclusive proof of accuracy; errors of principle, omission, commission may still be present.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
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