In partnership accounts, interest on drawings is charged when: MCQ with Answer and Explanation

Question
In partnership accounts, interest on drawings is charged when:
A. The partners have equal capital
B. It is mandatory as per Partnership Act 1932
C. The firm makes a profit
D. It is agreed upon in the partnership deed
Answer: Option D
Solution (By JKSSB Mock Tests)
Interest on drawings is only charged if it is explicitly mentioned and agreed upon in the partnership deed.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
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Question #1
The 'Going Concern' assessment: If management concludes that the entity is not a going concern, the financial statements should be prepared on:
A. Accrual basis
B. Cash basis
C. Break-up basis (liquidation basis)
D. Going concern basis
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Correct Answer: Option C

Explanation:
If not going concern, financial statements are prepared on a break-up basis.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #2
In the absence of a partnership deed, interest on partners' capital is allowed at:
A. 12% p.a.
B. 5% p.a.
C. 6% p.a.
D. No interest
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Correct Answer: Option D

Explanation:
According to the Indian Partnership Act, no interest on capital is allowed unless there is an agreement.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #3
A credit balance in the bank column of a cash book signifies:
A. Error in accounting
B. Bank overdraft
C. Fixed deposit
D. Cash at bank
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Correct Answer: Option B

Explanation:
Since bank is an asset (usually debit balance), a credit balance means the business has withdrawn more than deposited, creating an overdraft liability.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
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