CBSE Class 12 Accountancy Chapter 2 Accounting for Partnership Firms — Fundamentals — 20 MCQs with Answers

The Profit and Loss Appropriation Account is prepared after the ordinary Profit and Loss Account to allocate distributable profit among partners. It debits items like interest on capital, partner salary, commission, and transfer to reserves, then credits interest on drawings and divides the residual profit in the profit-sharing ratio. Understanding the sequence and treatment of each item is critical. The 2024 CBSE sample paper included a case-based MCQ on adjusting partner salary and interest, so drill these fundamentals until they become second nature. Questions here test recall of debit-credit rules and application of the partnership deed provisions.

Goodwill represents the value of a firm's reputation and is recorded only when there is a change in the profit-sharing ratio, admission, retirement, or death of a partner. NCERT prescribes Average Profits Method, Super Profits Method, and Capitalisation Method. The Average Profits Method multiplies average maintainable profits by a given number of years. Super Profits Method first calculates normal profits (capital employed × normal rate of return), then super profits (actual average profits minus normal profits), and multiplies by the number of years of purchase. These methods appear frequently in both MCQs and numerical problems; clarity on formula and sequence is essential.

The Capitalisation Method values goodwill by first capitalising average profits at the normal rate (Capitalised Value of Business = Average Profits ÷ Normal Rate × 100), then subtracting actual capital employed. Alternatively, capitalise super profits. The Weighted Average Profits Method assigns weights to profits of different years to reflect trends, then divides total weighted profits by sum of weights. Both methods demand careful arithmetic and conceptual clarity. The 2023 CBSE topper from Delhi Public School R. K. Puram credited daily MCQ practice on goodwill for securing full marks in this section. Use these drills to sharpen calculation speed and avoid sign errors.

Under the Fixed Capital Method, partners maintain two accounts: a Capital Account (fixed balance, changes only on introduction or withdrawal of capital) and a Current Account (records all profit shares, interest, drawings, salary). Under the Fluctuating Capital Method, only one Capital Account exists; all adjustments are made directly in it, so the balance fluctuates year to year. The choice of method is specified in the partnership deed. CBSE often sets assertion-reason MCQs contrasting the two methods or asks you to identify which items appear in which account. Mastering this distinction prevents silly errors in journal entries and ledger posting questions that follow in Chapters 3 and 4.

Interest on capital compensates partners for the funds they have locked into the firm and is allowed only if the deed permits it. It is calculated on the opening capital (or time-weighted average if there are fresh capital introductions mid-year). Interest on drawings penalises partners for withdrawing funds and is calculated using the product method or average period method. The partnership deed specifies the rates. A common Board exam trap is mixing up the two or forgetting to pro-rate for part-year capital. Practice these MCQs to avoid such pitfalls. In the 2024 CBSE Class 12 Board paper, one MCQ directly tested the formula for interest on drawings using the product method, and many students lost a mark by choosing the simple-interest option.

The 2025 CBSE Class 12 Accountancy paper allocates roughly 16–20 marks to one-mark MCQs, including standalone, assertion-reason, and case-based clusters. Speed and accuracy are paramount. First, read each MCQ stem carefully; underline keywords like 'debit,' 'credit,' 'Fixed Capital,' 'Appropriation.' Eliminate obviously wrong options to narrow your choice. If a calculation is needed, jot quick working in the margin rather than doing mental math — this prevents silly arithmetic slips. Assertion-reason questions demand that you evaluate both statements independently before checking the linkage. Never leave an MCQ blank; there is no negative marking, so an educated guess beats zero. Allocate about 20–25 minutes to the MCQ section, leaving ample time for long numericals. At CBSETUTOR.ai, our AI tutor offers unlimited MCQ drills on every chapter, tracks your weak zones, and provides instant explanations when you upload a photo of any question — all for a flat ₹999/month across Classes 6–12, with a 3-day free trial to experience the difference.

Mistakes in this chapter often stem from confusion between P&L Account and P&L Appropriation Account, misapplying interest formulas, or mixing Fixed and Fluctuating Capital rules. Many students credit interest on capital to the Capital Account under both methods, forgetting that Fixed Capital requires a Current Account. Another frequent error is calculating interest on drawings on total annual drawings without considering the timing — the product method and average period method yield different results. Assertion-reason questions trip up those who do not read both statements independently. Additionally, forgetting to convert percentages (writing 0.06 instead of 6/100 in manual calculations) leads to incorrect final answers. Regular timed practice and reviewing worked solutions after each set of MCQs will iron out these issues. CBSETUTOR.ai's AI tutor flags such recurring mistakes in your practice history and suggests targeted drills, ensuring you do not repeat errors in the Board exam.

NCERT Class 12 Accountancy Part I dedicates Exercises 2.1 through 2.5 to P&L Appropriation, Goodwill, and Capital Accounts. Questions 1–5 in Exercise 2.3 ask you to compute goodwill by different methods; these form the blueprint for Board MCQs. The 2023 CBSE Board paper carried two case-based MCQs (four sub-questions) on a partnership scenario involving interest on capital, partner salary, and goodwill by Super Profits Method. In 2024, a standalone MCQ tested the treatment of interest on drawings under Fixed Capital. Solving all NCERT exercises, then attempting previous years' MCQs from 2020–2024, gives you a 360-degree view of the question styles. Mark schemes published by CBSE reveal that examiners award zero if you choose an option without showing elimination steps in OMR-based or objective sections, so precision in the first attempt is critical.