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28-09-2024 ACCOUNTANCY
 c) Capital Ratio d) Sacrificing Ratio
8. Assertion (A): At the time of admission of a partner, value of Goodwill of the firm is determined because new [1]
partner compensates the sacrificing partner or partners.
Reason (R): Goodwill of the firm is valued at the time of admission of a partner because the new partner is the
Gaining Partner and he will compensate the Sacrificing Partner or Partners.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

9. At the time of retirement of Ramesh, stock is given as ₹ 60,000 in the Balance Sheet of the firm. If stock is [1]
undervalued by ₹ 10,000, the Journal entry passed for the above is

a) Stock A/c Dr. ₹ 10,000 b) Stock A/c Dr. ₹ 50,000

To Revaluation A/c ₹ 10,000 To Revaluation A/c ₹ 50,000

c) Revaluation A/c Dr. ₹ 50,000 d) Revaluation A/c Dr. ₹ 10,000

To Stock A/c ₹ 50,000 To Stock A/c ₹ 10,000

10. X, Y and Z are partners sharing profits and losses in the ratio of 8 : 7 : 5. Z retires and his share was taken [1]
equally by X and Y. Find the new profit sharing ratio of remaining partners.

a) 21 : 19 b) 8 : 7

c) 7 : 5 d) 19 : 21
11. Assertion (A): In case of retirement, the retiring partner is entitled to get interest @ 6% p.a. till the amount due [1]
to him is paid off.
Reason (R): At his option, the retiring partner, instead of the interest, may take that share of profits which has
been earned by the firm by the use of the amount due to him.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

12. Assertion (A): Amount due to retiring partner is always transferred to his Loan Account. [1]
Reason (R): Amount due to retiring partner may be paid immediately or later in instalments.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

13. The net profits for the last 5 years were: 2016-17 ₹ 1,36,000; 2017-18 ₹ 1,70,000; 2018-19 ₹ 1,90,000; 2019- 20 [1]
₹ 2,00,000 and 2020-21 ₹ 2,49,000. There was an abnormal loss of ₹ 20,000 included in the. profit of 2017-18
and an abnormal gain of 10,000 included in the profit of 2019-20. Adjusted average profit will be:

a) 1,99,000 b) 1,15,000

c) 1,89,000 d) 1,91,000
14. Mahesh & Associates is a partnership firm. Ranveer is admitted as a partner. Its Goodwill is to be valued by [1]
Average Profit method. Average profit for the past 5 years is ₹ 1,50,000, and Goodwill is being valued at 3 years'

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 purchase of average profit, value of Goodwill of the firm will be

a) ₹ 6,00,000 b) ₹ 3,00,000

c) ₹ 1,50,000 d) ₹ 4,50,000
15. The net profits for the last 3 years were: 2018-19 ₹ 40,000; 2019-20 ₹ 46,000 and 2020-21 ₹ 52,000. There was [1]
an abnormal loss of ₹ 3,000 included in the profit of 2019-20. Adjusted average profit will be:

a) 46,000 b) 47,000

c) 45,000 d) 40,000
16. Profit/loss of a firm for the last 4 years is Rs. 10,000 (Loss); Rs.15,000 profit; 20,000 profit; Rs.15,000 profit. [1]
Calculate Goodwill at 1 1

2
years purchase of average profits of the last 4 years.

a) Rs.20,000 b) Rs.25,000

c) Rs.10,000 d) Rs.15,000

Question No. 17 to 20 are based on the given text. Read the text carefully and answer the questions: [4]
A, B and C are partners sharing profits and losses in the ratio of 5:3:2. Their Balance Sheet as at 31st March, 2019
stood as follows:

Liabilities Amount Assets Amount

Capital A/cs: Land and Building 3,50,000

A 2,50,000 Machinery 2,40,000

B 2,50,000 Computers 70,000

C 2,00,000 7,00,000 Investments (Market value ₹ 90,000) 1,00,000

General Reserve 60,000 Sundry Debtors 50,000

Investments
30,000 Cash in Hand 10,000
Fluctuation Reserve

Sundry Creditors 90,000 Cash at Bank 55,000

Advertisement Suspense 5,000

8,80,000 8,80,000

They decided to share profits equally w.e.f. 1st April, 2019. They also agreed that:
i. Value of Land and Building be decreased by 5%.
ii. Value of Machinery be increased by 5%.
iii. A Provision for Doubtful Debts be created @ 5% on Sundry Debtor.
iv. A Motor Cycle valued at ₹ 20,000 was unrecorded and is now to be recorded in the books.
v. Out of Sundry Creditors, ₹ 10,000 is not payable.
vi. Goodwill is to be valued at 2 years' purchase of last 3 years profits. Profits being for 2018-19 − ₹ 50,000 (Loss);
2017-18 − ₹ 2,50,000 and 2016-17 − ₹ 2,50,000.
vii. C was to carry out the work for reconstituting the firm at a remuneration (including expenses) of ₹ 5,000. Expenses
came to ₹ 3,000.

17. Remuneration expenses will be:

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 a) ₹ 5000 Debited to Revaluation A/c b) ₹ 3000 Shown on Liability side of the
Balance Sheet

c) ₹ 3000 Debited to Revaluation A/c d) ₹ 3000 Shown on Asset side of the Balance
Sheet
18. What journal entry will be passed for Investment Fluctuation Reserve?
i. Dr. Investment Fluctuation Reserve A/c ₹ 30,000, Cr. Investment ₹ 10,000; Cr. A’s Capital A/c ₹ 10,000; Cr. B’s
Capital A/c ₹ 6,000; Cr. C’s Capital A/c ₹ 4,000
ii. Dr. Investment Fluctuation Reserve A/c ₹ 30,000, Cr. A’s Capital A/c ₹ 10,000; Cr. B’s Capital A/c ₹ 10,000; Cr. C’s
Capital A/c ₹ 10,000
iii. Dr. A’s Capital A/c ₹ 10,000; Dr. B’s Capital A/c ₹ 10,000; Dr. Investment ₹ 10,000; Cr. Workmen’s Compensation
Reserve A/c ₹ 30,000
iv. Dr. Revaluation ₹ 10,000; Cr. Investment ₹ 10,000

a) Option (i) b) Option (ii)

c) Option (iv) d) Option (iii)

19. What journal entry is passed for goodwill?
i. B’s Capital A/c Dr. 10,000; C’s Capital A/c Dr.40,000; A’s Capital A/c Cr. 50,000
ii. Dr. Goodwill A/c ₹ 3,00,000; Cr. A’s Capital A/c ₹ 1,50,000; Cr. B’s Capital A/c ₹ 90,000; Cr. C’s Capital A/c ₹
60,000
iii. A’s Capital A/c Cr. 50,000; B’s Capital A/c Cr. 10,000; C’s Capital A/c Dr. 60,000;
iv. Dr. Goodwill A/c ₹ 50,000; Cr. Revaluation A/c ₹ 50,000

a) Option (iii) b) Option (iv)

c) Option (ii) d) Option (i)

20. Profit (gain) on Revaluation of Assets and Reassessment of Liabilities is:

a) ₹ 57,000 b) ₹ 2,000

c) ₹ 22,000 d) ₹ 17,000

21. X, Y and Z are partners. During the year ended 31st March, 2023, each of the partners withdrew ₹ 5,000 [3]

regularly. X withdrew in the beginning of the first 6 months of the year, Y withdrew in the middle of the month
for the first 6 months of the year and Z withdrew at the end of the month for the first 6 months.

Calculate interest on drawings @ 6 % p.a. for the year ended 31st March, 2023.

22. Ram and Ravi are partners sharing profits equally. Ravi has given his property on rent to the firm on 1st April, [3]

2022 at a monthly rent of ₹ 5,000. The firm paid him rent from April, 2023 to February, 2023 by cheque on 1st
March, 2023. Rent for the month of March was yet to be paid.
Pass the Journal entries for the above transactions.
23. A, B, C and D were partners in a firm sharing profits and losses equally. E was admitted as a new partner for [3]
rd share in the profits of the firm which he acquires equally from C and D. On E’s admission the goodwill of
1

the firm was valued at ₹ 3,00,000.

Calculate the new profit-sharing ratio on E’s admission. Also pass necessary journal entry on E's admission,
assuming that he failed to bring his share of goodwill in cash.
24. You are given the Balance Sheet of Mohit, Sohan and Rahul who are partners sharing profits in the ratio of 2 : 2 [3]

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 : 1 as at March 31, 2017.

Books of Mohit, Sohan and Rahul Balance Sheet as on March 31, 2017.

Liabilities ₹ Assets ₹

Creditors 40,000 Goodwill 30,000

General Reserve 25,000 Fixed Assets 60,000

Capitals: Stock 10,000

Mohit 30,000 Sundry Debtors 20,000

Sohan 25,000 Cash at Bank 15,000

Rahul 15,000 70,000

1,35,000 1,35,000

Sohan died on June 15, 2017. According to the Deed, his legal representatives are entitled to:
i. Balance in Capital Account;
ii. Share of goodwill valued on the basis of thrice the average of the past 4 year’s profits;
iii. Share in profits up to the date of death on the basis of average profits for the past 4 years;
iv. Interest on capital account @ 12% p.a.
v. New Profit sharing ratio of the firm will be 3:2 among Mohit and Rahul respectively.
Profits for the years ending on March 31 of 2014, 2015, 2016, 2017 respectively were ₹ 15,000, ₹ 17,000, ₹
19,000 and ₹ 13,000.
Sohan's legal representatives were to be paid the amount due. Mohit and Rahul continued as partners by taking
over Sohan’s share equally. Work out the amount payable to Sohan's legal representatives.

25. Neha, Priyanka and Kavita are partners in a business. Balances in their Capital and Current Accounts as on 31st [3]

March, 2023 were:

Capital Account Current Account

₹ ₹

Neha 6,00,000 60,000 (Dr.)

Priyanka 5,00,000 30,000 (Dr.)

Kavita 5,00,000 10,000 (Cr.)

The firm earned an average profit of ₹ 2,40,000. If the normal rate of return is 12%, find the value of goodwill
by Capitalisation of Average Profit Method.
26. Sahil, Himanshu, and Sunil are partners sharing profits and losses equally. They agree to admit Danish for an [3]
equal share of profit. For this purpose, the value of goodwill is to be calculated on the basis of four years'

purchase of the average profit of the last five years. These profits for the year ended 31st March were:

Year 2019 2020 2021 2022 2023

Profit/(Loss) (₹) 1,50,000 3,50,000 5,00,000 7,10,000 (5,90,000)

On 1st April 2022, a car for ₹ 1,00,000 was purchased and debited to Travelling Expenses Account, on which
depreciation is to be charged @ 25% p.a. The interest of ₹ 10,000 on Non-trade Investments is a credit to income

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 for the year ended 31st March 2022 and 2023.
Calculate the value of goodwill after adjusting the above.
27. Charulata is a partner in a firm. She withdrew the following amounts during the year ended on 31st March, 2023 [4]
:-

May 1 20,000

July 31 10,000

September 30 30,000

November 30 40,000

January 1 20,000

March 31 25,000

Interest on drawings is to be charged @ 9% p.a. Calculate interest on drawings.

28. Samiksha, Ash and Divya were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. With effect [4]

from 1st April 2019, they agreed to share future profits and losses in the ratio of 2 : 5 : 3. Their Balance Sheet
showed a debit balance of ₹ 50,000 in the Profit and Loss Account and a balance of ₹ 40,000 in the Investment
Fluctuation Fund. For this purpose, it was agreed that:
i. Goodwill of the firm is valued at ₹ 3,00,000.
ii. Investments of book value of ₹ 5,00,000 be valued at ₹ 4,80,000.
Pass the necessary journal entries to record the above transactions in the books of the firm.
29. A, B and C were partners sharing P & L in the ratio 5 : 3 : 2. A died on 30th June, 2022. Entry for treatment of [4]
goodwill after his death was passed as follows:

Date Particulars L.F. Dr. (₹) Cr. (₹)

B's Capital A/c Dr. 1,80,000

C's Capital A/c Dr. 1,20,000

To A's Capital A/c

3,00,000
(Entry for goodwill treatment passed at the time of death of partner)

A’s profit till date of death was estimated as ₹ 1,20,000, based on the average profits of past three years. Final
dues payable to A’s executors on the date of death was calculated as ₹ 8,40,000 out of which ₹ 2,40,000 was paid
immediately by giving him Furniture valued for the same and balance was to be paid in three equal annual
instalments starting from 30th June, 2023, together with interest rate as specified in Section 37 of Indian
Partnership Act, 1932.
Pass necessary entry for profit share to be credited to A’s Capital and also prepare A’s executors account till final
settlement.

30. Ravi, Rani and Preeti are three partners. On 1st April, 2022, their Capitals stood as: Ravi ₹ 1,00,000, Rani ₹ [6]
2,00,000 and Preeti ₹ 3,00,000. It was decided that:
i. they would receive interest on Capital @ 5% p.a.,
ii. Ravi would get a salary of ₹ 10,000 per month,
iii. Rani would receive commission @ 5% of net profit after deduction of commission, and

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 iv. 10% of the net profit would be transferred to the General Reserve.

Before the above items were taken into account, profit for the year ended 31st March, 2023 was ₹ 5,00,000.
Prepare Profit and Loss Appropriation Account and the Capital Accounts of the Partners.
31. Pankaj, Rakesh and Neha are partners in a firm manufacturing Bulb. They have been sharing profits and losses [6]
in the ratio of 5 : 3 : 2. From 1st April, 2023 they decided to share future profits and losses in the ratio of 2 : 5 :
3. Their Balance Sheet showed a debit balance of ₹ 4,000 in Profit and Loss Account; balance of ₹ 36,000 in
General Reserve and a balance of ₹ 12,000 in Workmen's Compensation Reserve. It was agreed that:
i. The goodwill of the firm be valued at ₹ 76,000.
ii. The Stock (book value of ₹ 40,000) was to be depreciated by 8%.
iii. Creditors amounting to ₹ 900 were not likely to be claimed.
iv. Claim on account of Workmen's Compensation amounted to ₹ 20,000.
v. Investments (book value ₹ 38,000) were revalued at ₹ 40,000.
Pass necessary Journal entries for the above.
32. Following is the Balance Sheet of Laxmi and Megha sharing profits as 3 : 2. [6]

Liabilities ₹ Assets ₹

Creditors 1,80,000 Debtors 2,20,000

General Reserve 2,50,000 Less: Provision for Doubtful Debts 10,000 2,10,000

Workmen’s Compensation Reserve 1,50,000 Land & Building 1,80,000

Capital: Laxmi 1,50,000 Plants & Machinery 1,20,000

Megha 1,00,000 Stock 1,10,000

Bank 2,10,000

8,30,000 8,30,000

On admission of Surbhi for 1

6
th share in the profits it was decided that:
i. Provision for doubtful debts to be increased by ₹ 15,000.
ii. Value of land and building to be increased to ₹ 2,10,000.
iii. Value of stock to be increased by ₹ 25,000.
iv. The liability of workmen’s compensation claim was determined to be ₹ 1,20,000.
v. Surbhi brought in as her share of goodwill ₹ 1,00,000 in cash.
vi. Surbhi was to bring further cash of ₹ 1,50,000 for her capital.
Prepare Revaluation A/c, Capital A/cs and Balance Sheet of the new firm.
33. Khanna, Seth and Mehta were partners in a firm sharing profits in the ratio of 3 : 2 : 5. On 31st December, 2010 [6]
the balance sheet of Khanna, Seth and Mehta was as follows:
Balance Sheet

as at 31st December, 2010

Amount Amount
Liabilities Assets
( Rs) ( Rs)

General Reserve 1,00,000 Goodwill 3,00,000

Loan from Seth 50,000 Land and Building 5,00,000

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 Creditors 75,000 Machinery 1,70,000

Capital A/cs Stock 30,000

Khanna 3,00,000 Debtors 1,20,000

Seth 2,00,000 Cash 45,000

Mehta 5,00,000 10,00,000 Profit and Loss A/c 60,000

12,25,000 12,25,000
======== =======

On 14th March, 2011 Seth died. The partnership deed provided that on the death of a partner the executor of the
deceased partner is entitled to:
i. Balance in capital account.
ii. Share in profits upto the date of death on the basis of last year's profit.
iii. His share in profit/loss on revaluation of assets and re-assessment of liabilities which were as follows
a. Land and building was to be appreciated by Rs 1,20,000.
b. Machinery was to be depreciated to Rs 1,35,000 and stock to Rs 25,000.
c. A provision of 2.5% for bad and doubtful debts was to be created on debtors.
iv. The net amount payable to Seth’s executors was transferred to his loan account which was to be paid later.
Prepare revaluation account, partners’ capital account, Seth’s executor’s account and balance sheet of Khanna
and Mehta who decided to continue the business keeping their capital balances in their new profit sharing ratio.
Any surplus or deficit to be transferred to current accounts of the partners.
34. P, Q and R are partners in a firm. R retires from the firm. On the date of retirement, ₹ 3,00,000 is due to him. It is [6]
agreed to pay him in instalments every year at the end of the year. Prepare R’s Loan Account in the following
cases:
i. Five yearly instalments plus interest @ 15% p.a.
ii. Instalments of ₹ 1,00,000 which already includes interest @ 15% p.a. on the outstanding balance for the first
four years and the balance including interest in the fifth year.

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