Section A

1. Profit & Loss Appropriation Account is prepared to. [1]

a) Distribute the profit for the year among the b) Distribute profit and loss for the year among
partners. the partners.

c) Determine the profit remaining for the year d) Settle the dispute among the partners.
after appropriation.

2. In Fluctuating Capital Method, the capital remains . [1]

a) Maintained b) Fluctuates from time to time

c) Unchanged d) Fluctuates only at the start of the year but is

fixed at the end
3. Sacrificing Ratio: [1]

a) Old Ratio - Gaining Ratio b) Gaining Ratio - Old Ratio

c) Old Ratio - New Ratio d) New Ratio - Old Ratio

4. X and Y shared profits and losses in the ratio of 3 : 2. With effect from 1st April, 2023, they decided to share [1]
profits equally. The goodwill of the firm was valued at ₹ 60,000. The adjustment entry will be:

a) Dr. Y's Capital A/c and Cr. X's Capital A/c b) Dr. X's Capital A/c and Cr. Y's Capital A/c
by ₹ 6,000 by ₹ 600

c) Dr. Y's Capital A/c and Cr. X's Capital A/c d) Dr. X's Capital A/c and Cr. Y's Capital A/c
by ₹ 600 by ₹ 6,000

5. X and Y are sharing profits in the ratio of 5 : 3. They admit Z as a new partner. At the time of admission [1]
following information is available.
Balance sheet (Extract)

Liabilities Amount Assets Amount

Furniture 20,000

Debtors 50,000

(-) Provision for doubtful debt 5,000 45,000

Stock 10,000

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 Match the following:

(a) All debtors are good; Stock is overvalued by 3000; Furniture brought upto
(i) Revaluation Profit = 6000
150%

(b) All debtors are good; Stock is overvalued by 3000; Furniture increased to (ii) Revaluation Profit =
24000 26000

(c) All debtors are good; Stock is undervalued by 3000; Furniture brought upto (iii) Revaluation Profit =
150% 12000

(d) All debtors are good; Stock is overvalued by 3000; Furniture increased by (iv) Revaluation Profit =
24000 18000

a) (a) - (iii), (b) - (i), (c) - (iv), (d) - (ii) b) (a) - (iii), (b) - (iv), (c) - (i), (d) - (ii)

c) (a) - (ii), (b) - (iii), (c) - (iv), (d) - (i) d) (a) - (ii), (b) - (iii), (c) - (i), (d) - (iv)
6. Karan and Saran are partners in a partnership. They admitted Mohit as a new partner for 1/4th share in profits. [1]
Balance Sheet [Extract]

Liabilities (₹) Assets (₹)

Creditors 25,000

If 5% creditors are not likely to claim their dues, what amount of creditors will be shown in Balance Sheet on
Mohit’s admission:

a) ₹ 25,000 b) ₹ 23,750

c) ₹ 26,250 d) ₹ 20,000
7. If at the time of admission, the revaluation A/c shows a profit, it should be credited to: [1]

a) Old partners' capital accounts in the new b) Old partners' capital account in the old
profit sharing ratio. profit sharing ratio.

c) Old partners capital accounts in the d) All partners' capital accounts in the new
sacrificing ratio. profit sharing ratio.

8. Pooja, Nita and Anita were partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. Pooja retired and [1]
her share is taken up by Nita and Anita equally. The new profit sharing ratio of Nita and Anita will be:

a) 3 : 2 b) 1 : 1

c) 7 : 5 d) 2 : 1
9. A firm has an unrecorded liability for workmen compensation of ₹ 10,000. The firm was not prudent enough to [1]
create a workmen compensation reserve. How will this liability be treated in the books of the firm at the time of
retirement of a partner?

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 a) By debiting it to Workmen Compensation b) By debiting it to the capital accounts of all

Reserve A/c the partners.

c) By crediting it to Revaluation A/c d) By debiting it to Revaluation A/c

10. The old profit sharing ratio among Rajendra, satish and Tejpal were 2 : 2 : 1. The new profit sharing ratio after [1]
Satish's retirement is 3 : 2 The gaining ratio is:

a) 1 : 1 b) 2 : 2

c) 2 : 1 d) 3 : 2
11. At the time of dissolution of a firm, firm's total assets were ₹ 5,00,000, creditors were ₹ 1,00,000. Realisation [1]
expenses amounted to ₹ 10,000. Assets realised 20% more than the book value and creditors were paid 5% less.
Gain/loss on realisation will be

a) Loss = ₹ 75,000 b) Loss = ₹ 1,00,000

c) Gain = ₹ 4,95,000 d) Gain = ₹ 95,000

12. In which of the following cases is the business of a firm not dissolved by court? [1]

a) When a partner is guilty of misconduct b) When a partner becomes permanently

which is likely to adversely affect the incapable of performing his duties as a
business of the firm partner

c) When a partner becomes insane d) With the consent of all the partners
13. Where it is agreed that a partner will be paid a lump sum amount for dissolution, if the payment is made by the [1]
firm, the payment is debited to:

a) Realisation Account b) All Partners' Capital Accounts

c) Bank Account d) Concerned Partner's Capital Account

14. X and Y are partners. They have provided following information on the admission of a new partner Z. capital = [1]
10,00,000; Reserves & surplus = 3,00,000; Outside liabilities = 3,00,000; Total asset = 16,00,000 (Including
Miscellaneous expenditure of ₹ 1,00,000). Capital employed of the firm is:

a) 16,00,000 b) 12,00,000

c) 13,00,000 d) 10,00,000
15. The goodwill of the firm is not affected by [1]

a) reputation of firm b) None of these

c) better customer service d) location of the firm

16. Total capital employed in the firm is ₹ 8,00,000, Normal Rate of Return is 15% and Profit for the year is ₹ [1]
12,00,000. The value of goodwill of the firm as per the capitalisation method would be

a) ₹ 12,00,000 b) ₹ 82,00,000 17. A

4

c) ₹ 42,00,000 d) ₹ 72,00 000 s

s
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ertion (A): Sanjana and Naresh are partners sharing profits equally. They admit Hena for 1 th share in future
profits. On the date of admission, Workmen Compensation Reserve existed in the books at ₹ 1,00,000. A claim
of ₹ 1,50,000 was made by a worker and was to be accounted. The existing reserve of ₹ 1,00,000 will be
distributed between Sanjana and Naresh and ₹ 1,50,000 being the claim amount will be transferred to the debit [1]

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 of Revaluation Account.
Reason (R): Workmen Compensation Reserve of ₹ 1,00,000 will be transferred to Workmen's Compensation
Claim Account. In addition, ₹ 50,000 be debited to Revaluation Account and credited to Workmen's
Compensation Claim Account.

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.

18. Assertion (A): Partnership comes to an end with the death of a partner but the firm may continue its business [1]
with new partnership agreement.
Reason (R): Death of a partner leads to the restructuring of the firm and not to the dissolution of the partnership
firm.

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.

19. Assertion (A): Sonu and Monu, who share the profit and losses in the ratio 2 : 3, are dissolving the firm. There [1]
is general reserve of ₹ 60,000 in the balance sheet. The accountant transferred ₹ 24,000 in Sonu's Capital and ₹
36,000 in Monu's Capital Accounts.
Reason (R): The undistributed profits and losses and reserves are always transferred to partners' capital accounts
in their profit sharing ratio and not to the realisation account.

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.

20. Assertion (A): Goodwill is shown in the books of accounts only when it is purchased. Self generated Goodwill [1]
is not recorded in the books of accounts.
Reason (R): Accounting Standard-26 (AS 26) prescribes that goodwill should not be recognized in the books of
accounts unless some money or money's worth is paid for it.

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.

Section B
21. Sudha, Naresh and Geeta were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Their fixed capitals were
₹ 6,00,000; ₹ 4,00,000 and ₹ 2,00,000 respectively. Besides her capital, Geeta had given a loan of ₹ 75,000 to
the firm. Their partnership deed provided for the following:
i. Interest on capital @ 9% p.a.
ii. Interest on partners’ drawings @ 12% p.a.

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 Salary to Sudha ₹ 30,000 per month and to Naresh ₹ 40,000 per quarter.
iii. Interest on Geeta’s loan @ 9% p.a.
[3]
During the year Sudha withdrew ₹ 50,000 at the end of each quarter; Naresh withdrew ₹ 50,000 at the beginning
of each half-year and Geeta withdrew ₹ 70,000 at the end of each half-year. The profit of the firm for the year

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ended 31-3-2019 before allowing interest on Geeta’s loan was ₹ 7,06,750. Prepare Profit
and Loss Appropriation Account.
22. Sheetal and Basanti shared profits and losses in the ratio of 3 : 2. With effect from 1st April, 2022, they decide to [3]
share profits equally. Goodwill of the firm was valued at ₹ 50,000. Pass necessary Journal entry for
compensating the sacrificing partner by the gaining partner due to change in profit-sharing ratio.
23. A and B are partners sharing profits in the ratio of 2 : 1. They admit C for 14th share in profits. C brings in ₹ [3]
30,000 for his capital and ₹ 8,000 out of his share of ₹ 10,000 for goodwill. Before admission, goodwill
appeared in books at ₹ 18,000. Give Journal entries to give effect to the above arrangement.
24. P, Q, and R are partners sharing profits in the ratio of 4: 3: 1. P retires and his share is taken over by Q and R [3]
equally. Find the new profit sharing ratio of Q and R.
25. L and M were partners in a firm sharing profits in the ratio of 2 : 3. On 28th February, 2023 the firm was [3]
dissolved. After transferring assets (other than cash) and outsiders' liabilities to Realisation Account you are
given the following information:
i. A creditor for ₹ 1,40,000 accepted building valued at ₹ 1,80,000 and paid to the firm ₹ 40,000.
ii. A second creditor for ₹ 30,000 accepted machinery valued at ₹ 28,000 in full settlement of his claim.
iii. A third creditor amounting to ₹ 70,000 accepted ₹ 30,000 in cash and investments of the book value of ₹
45,000 in full settlement of his claim.
iv. Loss on dissolution was ₹ 4,000.
Pass necessary Journal entries for the above transactions in the books of the firm assuming that all payments
were made by cheque.
26. Calculate the value of firm's goodwill on the basis of one and half years' purchase of the average profit of the last [3]
three years. The profit for first year was ₹ 1,00,000, profit for the second year was twice the profit of the first
year and for the third year profit was one and half times of the profit of the second year.
Section C
27. X, Y and Z are partners sharing profits and losses in the ratio of 3 : 2 : 1. Y retires selling his share to X and Z [4]
for ₹ 1,60,000, ₹ 1,00,000 being paid by X and ₹ 60,000 by Z. The profit for the year after Y's retirement is ₹
2,40,000. Pass entries to (i) record the sale of Y's share to X and Z, and (ii) distribute the profit between X and
Z.
28. P and Q were partners in a firm. Pass journal entries for the following transactions on dissolution of the firm [4]
after various assets and external liabilities have been transferred to Realisation A/c:
i. X, an unrecorded creditor of ₹ 10,000 was paid by partner P at a discount of 20%.
ii. Y, an unrecorded creditor of ₹ 25,000, took over Computer at ₹ 30,000. Balance was paid by him in Cash.
iii. Computer of ₹ 25,000 and goodwill of ₹10,000 were appearing in the Balance Sheet but no other additional
information was given regarding these items.
iv. A creditor to whom ₹ 10,000 were to be paid accepted an unrecorded asset of ₹ 15,000 in full settlement of
his claim.
v. An unrecorded asset of ₹ 35,000 was given to an unrecorded creditor of ₹ 50,000 in settlement of his claim
of ₹ 30,000 and the balance was paid to him in cash.
vi. P’s loan was appearing on the liabilities side of the Balance Sheet at ₹ 50,000. He accepted an unrecorded
asset of ₹ 40,000 at ₹ 35,000 and the balance was paid to him in Cash.
29. Balance Sheet of Grand Sales as at 31st March, 2019 was as follows: [4]

Liabilities ₹ Assets ₹

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 Capital A/cs. Furniture 1,00,000

Kanchan 2,500,000 Computers 3,00,000

Karuna 2,50,000 5,00,000 Investment (Trade) 1,50,000

Sundry Creditors 2,50,000 Stock 1,50,000

Bills Payable 50,000 Sundry Debtors 2,00,000

Bank Overdraft 2,00,000 Bills receivable 20,000

Cash In Hand 80,000

10,00,000 10,00,000

The average profit of the firm for the year was ₹1,75,000. Calculate the value of goodwill of the firm by Super
Profit Method at 2 years' purchase of Super Profit, if the Normal Rate of Return is 20%.
Section D
30. The partners of a firm distributed the profits for the year ended 31st March, 2011, Rs 1,20,000 in the ratio of 2 : [6]
2 : 1 without providing for the following adjustments :
a. A and B were entitled to a salary of Rs 1,500 per quarter.
b. C was entitled to a commission of Rs 6,000.
c. A and C had guaranteed a minimum profit of Rs 48,000 p.a. to B.
d. Profits were to be shared in the ratio of 4 : 3 : 2.
Pass necessary journal entry for the above adjustments in the books of the firms .

31. R, S and T were partners in a firm sharing profits in 3 : 2 : 1 ratio. Their balance sheet as at 31st March, 2023 [6]
was as follows

Balance Sheet
as at 31st March, 2023

Liabilities Amounts (₹) Assets Amount (₹)

Creditors 50,000 Land 50,000

Bills payable 20,000 Building 50,000

General Reserve 30,000 Plant 1,00,000

Capital A/c's Stock 40,000

R 1,00,000 Debtors 30,000

S 50,000 Bank 5,000

T 25,000 1,75,000

2,75,000 2,75,000

From 1st April. 2023 R, S and T decided to share the future profits equally. For this purpose it was decided that
i. Goodwill of the firm be valued at ₹ 1,50,000.
ii. Land be revalued at ₹ 80,000 and building be depreciated by 6%.
iii. Creditors of ₹ 6,000 were not likely to be claimed and hence be written-off.
Prepare revaluation account, partners’ capital accounts and the balance sheet of the reconstituted firm.

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32. The following is the balance sheet of A, B and C sharing profits and losses in proportion of 6 : 5 : 3 [6]
respectively:-

Liabilities ₹ Assets ₹

Creditors 18,900 Cash 1,890

Bills Payable 6,300 Debtors 26,460

General Reserve 10,500 Stock 29,400

Capitals:- Furniture 7,350

A 35,400 Land & Building 45,150

B 29,850 Goodwill 5,250

C 14,550 79,800

1,15,500 1,15,500

They agreed to take D into partnership and give him 18 th share on the following terms:-

i. That Furniture be depreciated by ₹ 2,920.

ii. An Old Customer, whose account was written off as bad, has promised to pay ₹ 2,000 in full settlement of
his full debt.
iii. That a provision of ₹ 1,320 be made for outstanding repair bills.
iv. That the value of land and building having appreciated be brought upto ₹ 56,910.
v. That D should bring in ₹ 14,700 as his capital.
vi. That D should bring in ₹ 14,070 as his share of goodwill.
vii. That after making the above adjustments, the capital accounts of old partners be adjusted on the basis of the
proportion of D’s Capital to his share in business, i.e., actual cash to be paid off or brought in by the old
partners, as the case may be.
Pass the necessary journal entries and prepare the balance sheet of the new firm.
1 1 1
33. Narang, Suri, and Bajaj are partners in the firm sharing profits and losses in the proportion of , and [6]
2 6 3
respectively. The Balance Sheet of the firm as at 31st March 2023 was as follows :
Balance Sheet

as at 31st March 2023

Liabilities (₹) Assets (₹)

Capital Accounts: Freehold Premises 40,000

Narang 30,000 Machinery 30,000

Suri 30,000 Furniture 12,000

Bajaj 28,000 88,000 Stock 22,000

Bills Payable 12,000 Sundry Debtors 20,000

Sundry Creditors 18,000 Less: Provision for Bad Debts (1,000) 19,000

General reserve 12,000 Cash 7,000

1,30,000 1,30,000

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 Bajaj retires from the business on the above date and the partners agree to the following:
a. Freehold premises and stock were to be appreciated by 20% and 15% respectively.
b. Machinery and furniture were to be depreciated by 10% and 7% respectively.
c. Provision for Bad debts was to be increased by ₹ 1,500.
d. On Bajaj's retirement goodwill of the firm was valued at ₹ 21,000.
e. The continuing partners decided to adjust their capitals in their new profit-sharing ratio after
the retirement of Bajaj. The surplus/deficit, if any, in their capital accounts was to be adjusted
through their current accounts.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the
reconstituted firm.
34. Calculate the goodwill of a firm on the basis of three years purchase of the weighted average
profit of the last four years. The appropriate weights to be used and profits are-

Year 2015-16 2016-17 2017-18 2018-19

Profits (₹) 1,01,000 1,24,000 1,00,000 1,40,000

Weights 1 2 3 4

On a scrutiny of the accounts, the following matters are revealed-

i. On 1st December 2017, a major repair was made in respect of the plant incurring ₹30,000
which was charged to revenue. The said sum is agreed to be capitalised for goodwill
calculation subject to adjustment of depreciation of 10% p.a. on reducing balance method.
ii. The closing stock for the year 2016-17 was overvalued by ₹12,000.
iii. To cover management cost, an annual charge of ₹24,000 should be made for the
purchase of goodwill valuation.
iv. On 1st April 2016, a machine having a book value of ₹10,000 was sold for ₹11,000 but
proceeds were wrongly credited to Profit and Loss Account. No effect has been given to
rectify the same. Depreciation is charged on machine @ 10% p.a. on reducing balance
method.

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