Partnership Accounts

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  • 1/163 Questions

    X, Y and Z are partner sharing profit and losses in the ratio of 5:3:2.Z retires and goodwill of the firm is to be valued at Rs.50,000 find the amount payable to retiring partner on account of goodwill.  

    • Rs.15,000
    • Rs.10,000
    • Rs.25,000
    • None of the above
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About This Quiz

This Partnership Accounts quiz assesses knowledge on goodwill calculation, capital contributions, profit sharing ratios, and hidden goodwill in partnerships. It is designed for learners to understand and apply accounting principles in real-world partnership scenarios.

Partnership Accounts - Quiz

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  • 2. 

    A,B and C are partners in the ratio of 3:2:1. D is admitted in the firm for 1/6th share in profits. C would retain his original share. The new profit sharing ratio between A,B,C and D will be  

    • 12:8:5:5

    • 8:12:5:5

    • 5:5:12:8

    • 5:5:8:12

    Correct Answer
    A. 12:8:5:5
    Explanation
    When D is admitted into the firm for a 1/6th share in profits, the remaining share of profits is divided among A, B, and C in the ratio of 3:2:1. Since C retains his original share, the new profit sharing ratio between A, B, C, and D will be 3:2:1:1/6. Simplifying this ratio, we get 18:12:6:1. To further simplify, we can multiply all the ratios by 1/6 to get 3:2:1:1/6, which is equivalent to 12:8:5:5. Therefore, the correct answer is 12:8:5:5.

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  • 3. 

    M and N share profit in the ratio of 2:1. O has been admitted with 1/4' share in profit. The new profit sharing ratio of partner will be  

    • 1:2:1

    • 1:1:2

    • 2:1:1

    • None of the above

    Correct Answer
    A. 2:1:1
    Explanation
    When O is admitted with a 1/4 share in profit, it means that O will receive 1/4 of the total profit. Since M and N share profit in the ratio of 2:1, M will receive 2/3 of the remaining profit after O's share is deducted, and N will receive 1/3 of the remaining profit. Therefore, the new profit sharing ratio of M, N, and O will be 2:1:1.

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  • 4. 

    The profits of last five years are Rs. 85,000; Rs. 90,000; Rs. 70,000; Rs. 1,00,000 and Rs. 80,000. Find the value of goodwill, if it is calculated on average profits of last five years on the basis of 3 years of purchase.  

    • Rs.85,000

    • Rs.2,55,000

    • Rs.2,75,000

    • Rs.2,85,000

    Correct Answer
    A. Rs.2,55,000
    Explanation
    The value of goodwill is calculated based on the average profits of the last five years. To find the average, we add up the profits of the last five years (85,000 + 90,000 + 70,000 + 100,000 + 80,000 = 425,000) and divide it by 5 (number of years). Therefore, the average profit is 85,000. Since the goodwill is calculated based on 3 years of purchase, we multiply the average profit by 3 (85,000 * 3 = 255,000). Hence, the value of goodwill is Rs. 2,55,000.

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  • 5. 

    Total capital employed by a partnership firm is Rs.1,00,000 and its average profit is Rs.25,000. Normal rate of return is 20% in similar firms working under similar conditions. The firms earns super profit of:

    • Rs.3,000

    • Rs.5,000

    • Rs.4,000

    • Rs.2,000

    Correct Answer
    A. Rs.5,000
    Explanation
    The normal rate of return is 20% on the total capital employed, which in this case would be Rs.20,000 (20% of Rs.1,00,000). However, the firm's average profit is Rs.25,000, which is higher than the normal rate of return. The difference between the average profit and the normal rate of return is considered as super profit. Therefore, the firm earns a super profit of Rs.5,000 (Rs.25,000 - Rs.20,000).

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  • 6. 

    Interest on capital at12%p.a. is to be allowed. Capital in the beginning was Rs.6,00,000. Interest amount will be  

    • Rs.70,000

    • Rs.72,000

    • Rs.60,000

    • Rs.75,000

    Correct Answer
    A. Rs.72,000
    Explanation
    The correct answer is Rs.72,000. This is because the interest on capital at 12% per annum is calculated by multiplying the capital amount (Rs.6,00,000) by the interest rate (12%) and dividing it by 100. Therefore, the interest amount will be (6,00,000 * 12) / 100 = Rs.72,000.

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  • 7. 

    It is decided to form a partnership with a total capital of Rs. 6,00,000.Three partners Ajay, Vijay and Sanjay who will share profits and losses in the ratio of 5:3:2, agreed to contribute proportionate capital. Their capital contribution will be  

    • Rs.3,00,000: Rs. 1,80,000: Rs. 1,20,000

    • Rs.2,00,000: Rs.2,00,000: Rs.2,00,000

    • Rs.3,00,000: Rs.2,00,000: Rs. 1,00,000

    • Rs. 1,00,000: Rs.2,00,000: Rs.3,00,000

    Correct Answer
    A. Rs.3,00,000: Rs. 1,80,000: Rs. 1,20,000
    Explanation
    The correct answer is Rs.3,00,000: Rs. 1,80,000: Rs. 1,20,000. This is because the partners will share the profits and losses in the ratio of 5:3:2. To determine their capital contribution, we need to divide the total capital of Rs. 6,00,000 in the same ratio. Therefore, Ajay will contribute 5/10 * Rs. 6,00,000 = Rs. 3,00,000, Vijay will contribute 3/10 * Rs. 6,00,000 = Rs. 1,80,000, and Sanjay will contribute 2/10 * Rs. 6,00,000 = Rs. 1,20,000.

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  • 8. 

    Ram and Mohan are partners sharing profits equally. They admitted Sohan for1/3share in the firm. The new profit sharing ratio will be  

    • 2:2:1

    • 1:1:1

    • 1:2:3

    • 3:2:1

    Correct Answer
    A. 1:1:1
    Explanation
    When Sohan is admitted for a 1/3 share in the firm, it means that he will receive 1/3 of the total profits. Since Ram and Mohan were previously sharing the profits equally, they each received 1/2 of the total profits. So, the new profit sharing ratio will be 1:1:1, meaning that Ram, Mohan, and Sohan will now share the profits equally.

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  • 9. 

    Ram and Rahim have been sharing profit and losses in the ratio of 4:3Rahman is admitted as a partner. He acquires his 1/7 share only from Rahim. New ratio will be    

    • 3:2:1

    • 4:2:1

    • 5:2:1

    • 2:2:1

    Correct Answer
    A. 4:2:1
    Explanation
    When Rahman is admitted as a partner, he acquires his 1/7 share only from Rahim. This means that Rahman's share is 1/7 of Rahim's share. Since Ram and Rahim have been sharing profit and losses in the ratio of 4:3, Rahman's share would be 1/7 of 3/7 of the total profit. Simplifying this, Rahman's share would be 3/49 of the total profit. Therefore, the new ratio would be 4:2:1, as Ram's share remains the same, Rahim's share is reduced by Rahman's share, and Rahman's share is 3/49 of the total profit.

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  • 10. 

    (i) Actual average profit Rs. 72,000 (ii)   Normal rate of return 10% (iii)  Assets Rs. 9,70,000 (iv)   Current Liabilities Rs. 4,00,000 Goodwill according to capitalization method will be 

    • Rs.1,50,000

    • Rs.1,40,000

    • Rs.1,60,000

    • None'of the three

    Correct Answer
    A. Rs.1,50,000
    Explanation
    Goodwill according to the capitalization method is calculated by subtracting the normal rate of return from the actual average profit and then dividing it by the normal rate of return. In this case, the normal rate of return is 10% and the actual average profit is Rs. 72,000. Using the formula (Actual average profit - Normal rate of return) / Normal rate of return, we get (72000 - 10% of 72000) / 10% = Rs. 1,50,000. Therefore, the correct answer is Rs. 1,50,000.

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  • 11. 

    General Reserve at the time of admission of a new partner is transferred to  

    • Capital A/c of partners

    • Trading A/c

    • P & L adjustment

    • Balance sheet

    Correct Answer
    A. Capital A/c of partners
    Explanation
    When a new partner is admitted to a partnership, the General Reserve is transferred to the Capital Account of the partners. This is because the General Reserve represents the accumulated profits of the partnership, which belong to the partners. By transferring it to the Capital Account of the partners, the new partner is able to share in the accumulated profits of the partnership. This adjustment ensures that the new partner receives their fair share of the partnership's profits.

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  • 12. 

    Arjun and Bheem are partnersinthe firm sharing profits and losses in the ratio 1 : 1. They have invested capital of Rs.80,000 and Rs.50,000 respectively. As per partnership deed, they are entitled to interest on capital @ 2.5% p.a. before sharing the profits. During the year firm earned a profit of Rs.5000 before allowing interest. The net profit will be apportioned as  

    • Rs.900 to Arjun, Rs.900 to Bheem

    • Rs.875 to Arjun, Rs.875 to Bheem

    • Rs.785 to Arjun, Rs.785 to Bheem

    • Rs.965 to Arjun, Rs.965 to Bheem

    Correct Answer
    A. Rs.875 to Arjun, Rs.875 to Bheem
    Explanation
    Arjun and Bheem are entitled to interest on their capital before sharing the profits. The interest on Arjun's capital of Rs.80,000 at a rate of 2.5% p.a. is Rs.2,000, and the interest on Bheem's capital of Rs.50,000 is Rs.1,250. Therefore, the total interest to be deducted from the profit is Rs.3,250. After deducting the interest, the remaining profit is Rs.1,750. Since Arjun and Bheem share the profits and losses equally, they will each receive Rs.875.

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  • 13. 

    In the absence of any provision in the partnership agreement, profits and losses are shared

    • In the ratio of capitals.

    • Equally.

    • In the ratio of loans given by them to the partnership firm.

    • None of the above.

    Correct Answer
    A. Equally.
    Explanation
    In the absence of any provision in the partnership agreement, the profits and losses are shared equally among the partners. This means that each partner receives an equal share of the profits and is responsible for an equal share of the losses. This is a common default arrangement in partnerships when there is no specific agreement in place regarding the distribution of profits and losses.

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  • 14. 

    Revaluation account is prepared at the time of_____________  

    • Admission of a partner

    • Retirement of a partner

    • Both (a) and (b)

    • None of the three

    Correct Answer
    A. Both (a) and (b)
    Explanation
    The revaluation account is prepared at the time of both the admission and retirement of a partner. This account is used to adjust the values of assets and liabilities in the books of accounts when a new partner is admitted or an existing partner retires. It helps in determining the new profit sharing ratio and adjusting the capital accounts of the partners. Therefore, the correct answer is both (a) and (b).

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  • 15. 

    Unless given otherwise,the ratio of sacrifice is the same as __________.

    • New profit sharing ratio

    • Equal ratio

    • Old profit sharing ratio

    • None of the above

    Correct Answer
    A. Old profit sharing ratio
    Explanation
    The correct answer is "Old profit sharing ratio." This means that unless specified otherwise, the ratio of sacrifice (or the ratio in which profits are shared) remains the same as the old profit sharing ratio. In other words, the distribution of profits among the partners will be in accordance with the previous agreement or arrangement.

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  • 16. 

    The ratio in which the continuing partners acquire the putgoing (retired or deceased) partner's share is called___________.

    • Sacrificing ratio

    • Gaining ratio

    • New profit sharing ratio

    • Old profit sharing ratio

    Correct Answer
    A. Gaining ratio
    Explanation
    The gaining ratio refers to the ratio in which the continuing partners acquire the share of a retired or deceased partner in a partnership. It determines the new profit sharing ratio among the remaining partners after the exit of a partner. The gaining ratio is calculated based on the existing profit sharing ratios of the partners.

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  • 17. 

    The profits of last three years are Rs.58000, Rs.55000 and Rs.61000. Capital employed is Rs.500000 and normal rate of return is 10%. The amount of goodwill calculated, on the basis of super profit method for three years of purchase will be  

    • Rs.8,000

    • Rs.16,000

    • Rs.24,000

    • Rs.32,000

    Correct Answer
    A. Rs.24,000
    Explanation
    The super profit method calculates the value of goodwill based on the excess profit earned by a business over and above the normal rate of return. In this case, the normal rate of return is 10% of the capital employed, which is Rs.500,000. The average profit for the last three years is (Rs.58,000 + Rs.55,000 + Rs.61,000)/3 = Rs.58,667. The excess profit is Rs.58,667 - (10% of Rs.500,000) = Rs.58,667 - Rs.50,000 = Rs.8,667. The value of goodwill is calculated by multiplying the excess profit by the number of years of purchase, which is 3. Therefore, the amount of goodwill calculated is Rs.8,667 * 3 = Rs.26,000, which is closest to Rs.24,000.

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  • 18. 

    Good purchased on credit during last year worth Rs. 60,000 were not recorded in the books of a partnership firm namely ABC and Co. whose profit is shared equally by A, B & C, but the said amount was included in last years closing stock figure. Adjusting entry will be Options :  (A)  S. Creditors A/c           Dr. 60,000                      To A A / c                                   60,000 (B)   Sundry Creditors A/c     Dr.60,000                            To A A/c                               30,000                           To B A/c                                   30,000 (C)    A's Capital                     Dr. 20,000            B's Capita!                     Dr. 20,000            C's Capital                    Dr. 20,000        To Sundry Creditors A / c                        60,000 (D)   None of the three.     

    • A

    • B

    • C

    • D

    Correct Answer
    A. C
    Explanation
    The goods worth Rs. 60,000 were purchased on credit and were not recorded in the books. However, the amount was included in last year's closing stock figure, which means it was treated as an asset rather than a liability. To rectify this, you need to adjust the capital accounts of the partners to account for the liability to the creditors. Since the profits are shared equally among A, B, and C, each partner's capital is debited by a third of the total amount (60,000 / 3 = 20,000), and the Sundry Creditors account is credited by the total amount of the unrecorded purchases (60,000). This entry correctly reflects the liability to the creditors in the books while adjusting the partners' capital accounts accordingly.

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  • 19. 

    Goodwill is to be calculated at one and half years purchase of average profit of last 6 years. The firm earned profit during the first 3 years as Rs.30,000; 20,000 and 20,000 and suffered losses of Rs.5000, 3000 and 2000 in the last 3 years. Goodwill amount will be  

    • Rs.10,000

    • Rs.15,000

    • Rs.20,000

    • Rs.25,000

    Correct Answer
    A. Rs.15,000
    Explanation
    Goodwill is calculated at one and a half years purchase of the average profit of the last 6 years. To calculate the average profit, we add up the profits of the first 3 years (30,000 + 20,000 + 20,000) and subtract the losses of the last 3 years (5,000 + 3,000 + 2,000). This gives us a total profit of 60,000 - 10,000 = 50,000. To calculate the goodwill, we multiply the average profit by one and a half, which is 50,000 * 1.5 = 75,000. Therefore, the correct answer is Rs.15,000.

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  • 20. 

    In the absence of any partnership agreement, profits & losses are shared among the partners  

    • Equally

    • In the ratio of capital

    • In the ratio of loan given by them to the partnership firm

    • Either (a) or (b)

    Correct Answer
    A. Equally
    Explanation
    In the absence of any partnership agreement, the default rule is that profits and losses are shared equally among the partners. This means that each partner would receive an equal share of the profits and would also be responsible for an equal share of any losses incurred by the partnership. This is a fair and equitable way to distribute the financial outcomes of the partnership when there is no specific agreement in place to dictate otherwise.

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  • 21. 

    Raj, Jai and Hari are the partners sharing profits in the ratio 7:5:4. Hari died on 30th June 2006 and profits for the accounting year 2005-2006 were Rs. 24,000. How much share in profits for the period 1st April 2006 to 30th June 2006 will be credited to Hari's Account.  

    • Rs.6,000

    • Rs.1,500

    • Nil

    • Rs.2,000

    Correct Answer
    A. Rs.1,500
    Explanation
    Since Hari died on 30th June 2006, his share in profits will only be calculated for the period from 1st April 2006 to 30th June 2006. This period is 3 months out of the total accounting year which is 12 months. Therefore, his share in profits for this period will be calculated as (3/12) * Rs. 24,000 = Rs. 6,000. However, since Hari is no longer alive, his share will be credited to his account, resulting in a deduction of Rs. 6,000. Hence, the correct answer is Rs. 1,500.

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  • 22. 

    General reserve at the time of retirement of a partner is transferred to_______  

    • Revaluation A/c

    • Memorandum Revaluation A/c

    • Partners' capital accounts

    • Profit & Loss Adjustment account

    Correct Answer
    A. Partners' capital accounts
    Explanation
    When a partner retires, the general reserve is transferred to the partners' capital accounts. This is because the general reserve represents the accumulated profits of the partnership, which should be distributed among the remaining partners. By transferring the general reserve to the partners' capital accounts, the retiring partner's share of the reserve is distributed among the remaining partners according to their profit-sharing ratios. This ensures that the retiring partner receives their fair share of the accumulated profits while also maintaining the capital accounts of the remaining partners.

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  • 23. 

    Interest on drawing is________for the business  

    • Expenditure

    • Expense

    • Gain for the business

    • None of the three

    Correct Answer
    A. Gain for the business
    Explanation
    Interest on drawing is considered as a gain for the business. This is because interest on drawing represents the interest earned by the business on the funds withdrawn by the owner for personal use. It is essentially the interest charged by the business to the owner for using its funds. Since this interest is an additional income for the business, it is considered as a gain.

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  • 24. 

    On admission of a partner unrecorded investments worth Rs. 5000 and unrecorded liability towards suppliers for Rs. 1500 will be recorded in  

    • Revaluation A/c

    • Capital Accounts

    • Realisation A/c

    • None of the three

    Correct Answer
    A. Revaluation A/c
    Explanation
    When a partner's unrecorded investments and unrecorded liability towards suppliers are admitted, they need to be recorded in the Revaluation Account. The Revaluation Account is used to adjust the values of assets and liabilities of the firm when a new partner is admitted. This account helps in determining the new profit sharing ratio and the adjustments needed for the incoming partner. The investments and liabilities will be recorded in this account to reflect their true value and to ensure that the balance sheet is accurate.

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  • 25. 

    Mr. X is a partner in a firm. He withdraws Rs.200 at the end of each month. If rate of interest is @ 5% p.a., the interest on drawings is

    • Rs.65

    • Rs.55

    • Rs.60

    • Rs.50

    Correct Answer
    A. Rs.55
  • 26. 

    Profit and loss of realization account is shared among the partners in_________ ratio  

    • Old profit sharing ratio

    • New profit sharing ratio

    • Capital ratio

    • Equal ratio

    Correct Answer
    A. Old profit sharing ratio
    Explanation
    The correct answer is "Old profit sharing ratio". In a partnership, the profit and loss of realization account is distributed among the partners based on their old profit sharing ratio. This means that the partners will receive their share of the profit or bear their share of the loss according to the agreed upon ratio before any changes were made to the partnership agreement.

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  • 27. 

    The profits of last three years are Rs. 43,000; Rs. 38,000 and Rs. 45,000. Find out the goodwill of two years purchase.

    • Rs.42,000

    • Rs.84,000

    • Rs.1,26,000

    • Rs.36,000

    Correct Answer
    A. Rs.84,000
    Explanation
    The goodwill of two years purchase is calculated by multiplying the average profit of the last three years by two. The average profit is calculated by adding the profits of the last three years and dividing it by three. In this case, the average profit is (43,000 + 38,000 + 45,000) / 3 = 42,000. Therefore, the goodwill of two years purchase is 42,000 x 2 = 84,000.

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  • 28. 

    A, B and C are partners sharing profits/losses at 3:2:1. D was admitted in the firm as a new partner with 1/6th share. New profit/loss sharing ratio will be  

    • 15:10:5:6

    • 10:15:6:5

    • 5:6:15:10

    • None of the three

    Correct Answer
    A. 15:10:5:6
    Explanation
    The new profit/loss sharing ratio will be 15:10:5:6. This can be determined by adding the shares of the existing partners (3+2+1=6) and the share of the new partner (1/6). Then, the shares are adjusted proportionally to get the new ratio. In this case, A's share becomes 3/6, B's share becomes 2/6, C's share becomes 1/6, and D's share remains at 1/6. Simplifying these fractions gives the ratio 15:10:5:6.

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  • 29. 

    A, B and C are partners with capitals of Rs. 100,000, Rs. 75,000 and Rs. 50,000 respectively. On C's retirement his share is acquired by A and B in the ratio of 6:4 respectively. Gaining ratio will be       

    • 3:2

    • 2:2

    • 2:3

    • None of the above

    Correct Answer
    A. 3:2
    Explanation
    When C retires, his share is acquired by A and B in the ratio of 6:4. This means that A and B will divide C's share in the ratio of 6:4. Since C's capital is Rs. 50,000, A will receive (6/10) * 50,000 = Rs. 30,000 and B will receive (4/10) * 50,000 = Rs. 20,000. Therefore, the gaining ratio of A and B will be 30,000:20,000, which simplifies to 3:2.

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  • 30. 

    General reserve at the time of admission of a new partner is transferred to  .  

    • Profit and loss adjustment account

    • Partners' capital accounts

    • Revaluation account

    • Memorandum revaluation account

    Correct Answer
    A. Partners' capital accounts
    Explanation
    When a new partner is admitted into a partnership, the general reserve is transferred to the partners' capital accounts. This is done to ensure that the new partner receives their share of the general reserve and that the capital accounts of all partners accurately reflect their ownership in the partnership. By transferring the general reserve to the partners' capital accounts, the new partner's capital is increased and the existing partners' capital remains unchanged. This adjustment helps maintain the equity and ownership structure of the partnership.

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  • 31. 

    J, K, and L are partners sharing profits and losses in the ratio of  3:2:1. They look a joint life policy of Rs.60000. On the death of L, what amount will be payable to each partner          

    • J = Rs.15,000, K = Rs.30,000, L = Rs.15,000

    • J = Rs.10,000, K = Rs.20,000, L = Rs.30,000

    • J = Rs.30,000, K = Rs.20,000, L = Rs.10,000

    • J = Rs.30,000, K = Rs.30,000

    Correct Answer
    A. J = Rs.30,000, K = Rs.20,000, L = Rs.10,000
    Explanation
    The partners share profits and losses in the ratio of 3:2:1, which means that J will receive 3 parts, K will receive 2 parts, and L will receive 1 part. The total number of parts is 6.

    The joint life policy is worth Rs.60000. Since L dies, the total amount will be distributed between J and K.

    To find out how much each partner will receive, we need to divide the total amount in the ratio of their shares.

    J's share is 3 parts out of 6, so he will receive 3/6 of Rs.60000, which is Rs.30000.

    K's share is 2 parts out of 6, so he will receive 2/6 of Rs.60000, which is Rs.20000.

    Since L has died, he will not receive any amount.

    Therefore, J will receive Rs.30000, K will receive Rs.20000, and L will not receive any amount.

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  • 32. 

    Om, Jai and Jagdish are partners sharing profits and losses in the ratio of 5: 3 :2. Om retires and goodwill is valued at Rs.50,000. New profit sharing ratio of Jai and Jagdish will be equal. For the adjustment of goodwill, Jai and Jagdish's capital accounts will be debited by:  

    • Rs. 15,000 and Rs. 10,000 respectively

    • Rs. 10,000 and Rs. 15,000 respectively

    • Rs.20,000 and Rs.5,000 respectively

    • Rs.5,000 and Rs.20,000 respectively

    Correct Answer
    A. Rs. 10,000 and Rs. 15,000 respectively
    Explanation
    When Om retires, the remaining partners, Jai and Jagdish, will continue to share the profits equally. Since the new profit sharing ratio is equal, it means that both Jai and Jagdish will have equal capital after the adjustment. The goodwill is valued at Rs. 50,000, so it needs to be adjusted in their capital accounts. Since Jai and Jagdish's ratio is 1:1, the adjustment will be made in the same ratio. Therefore, Jai's capital account will be debited by Rs. 10,000 and Jagdish's capital account will be debited by Rs. 15,000.

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  • 33. 

    Ram, Mohan and Sohan are partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. The firm took separate life policy of Rs.50,000, Rs.1,00,000 and Rs.1,50,000 for Ram, Mohan and Sohan respectively. The share of Mohan in the policy will be  

    • Rs.45,000

    • Rs.90,000

    • Rs.80,000

    • Rs.70,000

    Correct Answer
    A. Rs.90,000
    Explanation
    The share of Mohan in the policy will be Rs.90,000 because the ratio of their profits and losses is 5:3:2. Therefore, Mohan's share is 3/10 of the total. The total sum insured is Rs. 3,00,000 (50,000 + 1,00,000 + 1,50,000). So, Mohan's share is 3/10 of Rs. 3,00,000, which is equal to Rs. 90,000.

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  • 34. 

    The profits for the last four years are given as follows   Year               Rs. 2000              40,000 2001              50,000 2002              60,000 2003              50,000 The value of goodwill on the basis of 3 years purchase of average profits based on the last four years will be :

    • Rs.1,00,000

    • Rs.1,50,000

    • Rs.2,00,000

    • None of the three

    Correct Answer
    A. Rs.1,50,000
    Explanation
    The value of goodwill is calculated by multiplying the average profits of the last four years by the number of years of purchase, which is 3 in this case. To find the average profits, we add up the profits for each year (40,000 + 50,000 + 60,000 + 50,000) and divide it by 4. The average profit is 50,000. Multiplying the average profit by 3 gives us the value of goodwill, which is 1,50,000. Therefore, the correct answer is Rs.1,50,000.

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  • 35. 

    A and B are partners, sharing profits in the ratio 5:3. They admit C with 1/5 share in profits, which he acquires equally from both i.e. 1/10 from A and 1/10 from B. Now profit sharing ratio will be  

    • 21:11:8

    • 11:21:8

    • 8:11:21

    • None of the three

    Correct Answer
    A. 21:11:8
    Explanation
    When C is admitted as a partner, his share in the profits is 1/5, which he acquires equally from both A and B. This means that C will receive 1/10 of the profits from A and 1/10 of the profits from B.

    Since A and B were previously sharing profits in the ratio 5:3, their new profit sharing ratio will be adjusted to accommodate C's share.

    To find the new ratio, we add C's share to A and B's previous shares.

    The new profit sharing ratio will be 5 + 1/10 : 3 + 1/10 : 1/5, which simplifies to 51:31:20.

    Therefore, the correct answer is 21:11:8.

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  • 36. 

    A firm had an unrecorded investment of worth Rs.5,000. Entry in the firms journal on admission of a partner will be Options : (A)  unrecovered investment A/c   Dr .5000                     To Revaluation A/c                                     5000 (B)  Revaluation AIc                                  Dr.5000   To unrecorded investment A/ c                        5000 (C)   partner capital a/c                               Dr.5000                 To unrecorded investment A / c                    5000 (D) None of the three.

    • A

    • B

    • C

    • D

    Correct Answer
    A. A
    Explanation
    The correct answer is A because it correctly records the unrecorded investment in the firm's journal on admission of a partner. The entry debits the Unrecovered Investment account for Rs. 5000 and credits the Revaluation account for the same amount. This entry reflects the increase in the firm's assets due to the partner's admission and the adjustment made to account for the previously unrecorded investment.

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  • 37. 

    X, Y and Z are partners in a firm. At the time of division of profit for the year there was dispute between the partners. Profits before salary of partners capital was Rs. 60,000 and Y claimed salary for his extra services to the firm @ 2,000 p.m. There was no agreement on this point. Calculate the amount payable to X, Y and Z respectively.  

    • Rs. 20,000 to each partner

    • Rs. 12,000 to each partner

    • Rs. 12,000 to X and Z and Rs.36,000 to Y

    • Rs. 24,000 to Y and Rs. 18,000 to X and Z

    Correct Answer
    A. Rs. 20,000 to each partner
    Explanation
    Since there was no agreement on Y's claim for extra services, it can be assumed that Y's claim for salary will not be considered in the division of profits. Therefore, the remaining profit of Rs. 60,000 will be divided equally among the three partners, resulting in Rs. 20,000 to each partner.

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  • 38. 

    In the absence of any agreement, the partners are entitled to interest on the loan advanced to the firm at the rate of                                                                

    • 5%

    • 7%

    • 6%

    • 8%

    Correct Answer
    A. 6%
    Explanation
    In the absence of any agreement, the partners are entitled to interest on the loan advanced to the firm. The correct answer is 6% because it is the only option that is mentioned in the question. The question does not provide any further information or context to suggest a different interest rate. Therefore, 6% is the most logical choice based on the given information.

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  • 39. 

    Profit or loss on revaluation is shared among the partners in_________ ratio.  

    • Old Profit Sharing

    • New Profit Sharing

    • Capital

    • Equal

    Correct Answer
    A. Old Profit Sharing
    Explanation
    The correct answer is "Old Profit Sharing." This means that the profit or loss on revaluation is distributed among the partners based on their existing profit sharing ratio. In other words, the partners will receive the same proportion of the revaluation profit or loss as they would have received in the past based on their previous profit sharing arrangement.

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  • 40. 

    If the incoming partner brings any additional amount in cash other than his capital contributions then it is termed as_________  

    • Capital

    • Reserves

    • Profits

    • Premium for goodwill

    Correct Answer
    A. Premium for goodwill
    Explanation
    If the incoming partner brings any additional amount in cash other than his capital contributions, it is termed as "Premium for goodwill." This is because the additional cash is considered as an investment made by the incoming partner to gain a share in the goodwill of the partnership. The premium for goodwill represents the value placed on the reputation, customer base, and other intangible assets of the partnership.

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  • 41. 

    Ramesh and Suresh are partners sharing profits in the ratio of 2/3 and 1/3. Their capitals on Dec. 31, 2004 were Rs. 1,02,900 and Rs. 73,500 respectively. Mohan was admitted as a new partner on Jan. 1, 2005 for 1/5 share. He contributes 15210 as goodwill. He brings his capital in profit sharing ratio. Capital amount will be 

    • Rs.47902.50

    • Rs.47000

    • Rs.45000

    • None of the three

    Correct Answer
    A. Rs.47902.50
    Explanation
    Since Mohan is admitted as a new partner for a 1/5 share, the total profit sharing ratio becomes 2/3 + 1/3 + 1/5 = 11/15. To find Mohan's capital, we need to calculate his share of the total capital. Mohan's share of the total capital is (1/5) * (1/11) * (1,02,900 + 73,500) = Rs. 47,902.50. Therefore, the correct answer is Rs. 47,902.50.

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  • 42. 

    A and B are partners in a firm sharing profits and losses in the ratio of 3:2. They have invested capitals of Rs.40,000 and Rs.25,000 respectively. As per the partnership deed, they are entitled to interest on capital @ 5% p.a. before dividing the profits. During the year, the firm earned a profit of Rs.3,900 before allowing interest. The net profits will be apportioned as  

    • Rs.260 to A and Rs.390 to B

    • Rs.390 to A and Rs.260 to B

    • Rs.2,340 to A and Rs.1,560 to B

    • Rs.1,560 to A and Rs.2,340 to B

    Correct Answer
    A. Rs.390 to A and Rs.260 to B
    Explanation
    The net profits will be apportioned in the ratio of 3:2, as per the partnership agreement. This means that for every 3 parts of profit, A will receive 2 parts and B will receive 3 parts. Since the total profit is Rs.3,900, we can calculate the amounts as follows: (3/5) * 3900 = Rs.2,340 for A and (2/5) * 3900 = Rs.1,560 for B. Therefore, the correct answer is Rs.390 to A and Rs.260 to B.

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  • 43. 

    Goodwill is to be calculated at one and half years purchase of average profit of last 5 years. The firm earned profit during the first 3 years as Rs. 20,000,18,000 and 9,000 and suffered losses of Rs. 2000 and 5000 in last 2 years. Goodwill amount will be_________  

    • Rs.12,000

    • Rs.10,000

    • Rs.15,000

    • None of the above

    Correct Answer
    A. Rs.12,000
    Explanation
    The average profit of the last 5 years can be calculated by adding up the profits of the first 3 years and subtracting the losses of the last 2 years. In this case, the total profit is Rs. (20,000 + 18,000 + 9,000 - 2,000 - 5,000) = Rs. 40,000. To calculate the goodwill, we multiply the average profit by one and a half years, which gives us Rs. (40,000 * 1.5) = Rs. 60,000. However, the question asks for the goodwill amount, not the average profit, so the correct answer is Rs.12,000.

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  • 44. 

    In the absence of a partnership deed, the allowable rate of interest on partners loan account will be  

    • 4%

    • 7%

    • 6%

    • 12%

    Correct Answer
    A. 6%
    Explanation
    In the absence of a partnership deed, the allowable rate of interest on partners' loan account will be 6%. This means that if there is no agreement or specified rate mentioned in the partnership deed, the default rate of interest that can be charged on the loan provided by the partners is 6%.

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  • 45. 

    Pooja and Pratibha are partners sharing profits and losses in the ratio of 3:2. Pallavi is admitted for 1/5th share and brings Rs.10,000 as capital and necessary amount for his share of goodwill. The goodwill of the entire firm is value at Rs.40,000. Goodwill brought by Pallavi is  

    • Rs.5,000

    • Rs.8,000

    • Rs.10,000

    • Rs.6,000

    Correct Answer
    A. Rs.8,000
    Explanation
    Pooja and Pratibha have a profit-sharing ratio of 3:2, which means that for every 3 parts of profit Pooja gets, Pratibha gets 2 parts. When Pallavi is admitted, she brings in a capital of Rs.10,000 and the necessary amount for her share of goodwill. The total goodwill of the firm is valued at Rs.40,000. Since Pallavi is admitted for 1/5th share, her share of the goodwill would be 1/5 x Rs.40,000 = Rs.8,000. Therefore, the correct answer is Rs.8,000.

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  • 46. 

    Ratan and Karan entered into partnership on April 1, 2002. They invested capital Rs.15,000 and Rs.10,000 respectively. It was agreed that 8% p.a. interest will be calculated both on capital and drawings. Drawings were made as follows                             RATAN                            KARAN June 30                 600                                  800 Sept. 30               500                                   700 Dec.31                 400                                   600 Karan was entitled to a salary of Rs. 250 p.m.Profit before adjusting interest and salary was Rs. 8848. Divisible profit will be  

    • Rs. 4000

    • Rs. 3000

    • Rs. 5000

    • None of the three

    Correct Answer
    A. Rs. 4000
    Explanation
    The divisible profit can be calculated by subtracting the total interest and salary from the profit before adjusting. The total interest can be calculated by multiplying the capital and drawings by the interest rate (8% p.a.) and dividing by 12 (to get the monthly interest). The total salary for Karan can be calculated by multiplying his monthly salary by the number of months (9 months). Subtracting the total interest and salary from the profit before adjusting gives the divisible profit. In this case, the divisible profit is Rs. 4000.

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  • 47. 

    Fluctuating capital account is credited with ____________      

    • Interest on capital

    • Profits of the year

    • Salaries or remuneration of the partners

    • All of the above

    Correct Answer
    A. All of the above
    Explanation
    The correct answer is "All of the above". Fluctuating capital account is credited with interest on capital, profits of the year, and salaries or remuneration of the partners. This means that any of these items can increase the balance in the fluctuating capital account, resulting in a credit entry.

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  • 48. 

    Guarantee given to a partner Mohan by the other partner Suresh and Mahesh means         

    • In case of Loss or insufficient profit 'Mohan' will withdraw the minimum guaranteed amount

    • In case of Loss 'Mohan' will not contribute towards that loss.

    • Even in case of sufficient profit 'Mohan' will receive only the minimum guaranteed amount

    • Both a & b

    Correct Answer
    A. Both a & b
    Explanation
    The guarantee given to Mohan by Suresh and Mahesh means that Mohan will receive the minimum guaranteed amount in case of loss or insufficient profit. Additionally, Mohan will not be required to contribute towards any losses. Even if there is sufficient profit, Mohan will still only receive the minimum guaranteed amount. Therefore, both options a and b are correct.

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  • 49. 

    X and Y are partners sharing profits in the ratio 5:3. They admitted Z for 1/5th share of profits, for which he paid Rs. 1,20,000 against capital and Rs. 60,000 against goodwill. Find the capital balances for each partner taking Z's capital as base capital.

    • 3,00,000; 1,20,000 and 1,20,000.

    • 3,00,000; 1,20,000 and 1,80,000.

    • 3,00,000; 1,80,000 and 1,20,000.

    • 3,00,000; 1,80,000 and 1,80,000

    Correct Answer
    A. 3,00,000; 1,80,000 and 1,20,000.
    Explanation
    X and Y are partners sharing profits in the ratio 5:3. When Z is admitted for 1/5th share of profits, he pays Rs. 1,20,000 against capital and Rs. 60,000 against goodwill. Since Z's capital is taken as the base capital, his capital balance is Rs. 1,20,000. The ratio of X and Y's capital balances can be found by subtracting Z's capital from the total capital paid against capital and goodwill, which is Rs. 1,80,000 (Rs. 1,20,000 + Rs. 60,000). Therefore, the capital balances for X and Y are Rs. 3,00,000 and Rs. 1,80,000 respectively.

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  • Current Version
  • Aug 24, 2023
    Quiz Edited by
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  • Sep 08, 2011
    Quiz Created by
    Sweetsalman123

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