GOODWILL Commerce Coaching

PARTNERSHIP SET 01
Class 12 - Accountancy
Time Allowed: 3 hours Maximum Marks: 80

1. Anil and Rahul are partners in a firm sharing profits and losses in the ratio of 5 : 1. [1]
Balance Sheet (Extract)

Liabilities Amount (₹) Assets Amount (₹)

Machinery 40,000

If value of machinery in the balance sheet is undervalued by 20%, then at what value will machinery be shown
in new balance sheet?

a) ₹ 44,000 b) ₹ 48,000

c) ₹ 32,000 d) ₹ 50,000
2. Mohit and Govind were partners in a firm in the ratio of 1 : 2. They admitted Ravi for 1/5th share in profits. He [1]
brought ₹ 2,50,000 for capital but could not bring goodwill. The goodwill of the firm was valued at ₹ 3,00,000.
What Journal Entry will be passed for the treatment of goodwill?

a) Asset A/c Dr. 60,000 b) Cash A/c Dr. 60,000

To Ravi's Capital A/c 60,000 To Goodwill A/c 60,000

c) Ravi's Capital A/c Dr. 60,000 d) Mohit's Capital A/c Dr. 20,000
To Mohit's Capital A/c 20,000 Govind's Capital A/c Dr. 40,000
To Govind's Capital A/c 40,000 To Ravi's Capital A/c 60,000
3. Gaining ratio is: [1]

a) New Profit-sharing Ratio. b) Old Profit-sharing Ratio.

c) Old Profit-sharing Ratio less New Profit- d) New Profit-sharing Ratio less Old Profit-
sharing Ratio. sharing Ratio.

4. P, Q and R were partners in a firm sharing profits and losses in the ratio of 4 : 3 : 1. P died on 1st September, [1]

2022. On the date of P's death, the profits of the firm were calculated as ₹ 80,000. P's share of profit will be
adjusted by:

a) Debiting Profit and Loss Account with ₹ b) Debiting Profit and Loss Suspense Account
40,000. with ₹ 80,000.

c) Debiting Profit and Loss Suspense Account d) Debiting Profit and Loss Appropriation
with ₹ 40,000. Account by ₹ 40,000.
5. At the time of dissolution of a partnership firm, a creditor worth ₹ 90,500 took away stock worth ₹ 77,775 in full [1]
settlement. Which of the following will be the accounting entry for the same?

a) Particulars L.F. Dr. (₹) Cr. (₹) b) Particulars L.F. Dr. (₹) Cr. (₹)

Creditor A/c Dr. 77,775 Realisation A/c Dr. 77,775

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 To Bank A/c 77,775 To Bank A/c 77,775

c) Particulars L.F. Dr. (₹) Cr. (₹) d) No Entry

Realisation A/c Dr. 90,500

To Bank A/C 90,500

6. In which of the following cases is the business of a firm not dissolved compulsorily? [1]

a) When a partner who is a citizen of a country b) When there is a change in profit sharing
becomes an alien enemy because of the ratio between existing partners.
declaration of war with his country and
India.

c) When all but one partner becomes insolvent. d) When the business of the firm becomes
illegal.
7. Assertion (A): If the partnership deed is silent, profits and losses are shared equally by partners. [1]
Reason (R): If partnership deed is silent, interest @ 6% p.a. will be charged on drawings made by 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.

8. Assertion (A): In the absence of a deed, a sleeping partner who contributed 75% of total capital would get 75% [1]
of the profit earned.
Reason (R): A sleeping partner, in the absence of a deed, gets an equal share of profit, irrespective of his capital
share.

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. Assertion (A): Admission of a partner is one of the modes of reconstitution of the partnership whereby old [1]
partnership ceases to exist and a new partnership comes into existence.
Reason (R): In case of admission of a partner number of partners increase and as a result profit sharing ratio
also changes. But, the firm continues. As such, it is reconstitution of partnership.

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.

10. Rohit and Raja were partners in a firm with no partnership deed. Their drawings during the year ended 31st [1]
March, 2023 amounted to ₹ 5,00,000 and ₹ 2,00,000 respectively. Raja was of the opinion that the firm should
charge interest on drawings @6 % p.a. However, Rohit disagreed to it. Rohit convinced Raja that interest cannot
be charged on drawings. What argument must have been put forward by Rohit that convinced Raja?
11. The partnership deed is silent on payment of salary to partners. Asha, a partner, claimed that, since she managed [1]
the business, she should get a monthly salary of ₹ 10,000. Is she entitled for the salary? Give reason.
12. State the two financial rights acquired by a new Partner? [1]
13. Under what circumstances the premium for goodwill paid by the incoming Partner will not recorded in the book [1]

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 of A/C?
14. P, Q and R are in partnership sharing profits and losses as 1

2
, 2

6
and 1

6
respectively. R retires and his share is [1]
taken by P and Q in the ratio of 2 : 1. Immediately, S is admitted for 1

4
th share of profit, 1

3
rd of which was given
by P and the remaining share was taken equally from P and Q. Calculate new profit-sharing ratio after S’s
admission.
15. A, B and C are partners sharing profits in the ratio of 1

2
:
1

4
:
1

4
. What will be the new ratio on the retirement of [1]
B?
16. On dissolution of a firm, its Balance Sheet revealed capital ₹ 5,00,000; General Reserve ₹ 2,00,000, Creditors ₹ [1]
1,00,000 and cash balance ₹ 20,000. Assets were realised at 60%. What will be loss on realisation?
17. Pass the necessary journal entry for treatment of Partner’s loan appearing on the asset side of the Balance Sheet [1]
in case of dissolution of a partnership firm.
Question No. 18 to 20 are based on the given text. Read the text carefully and answer the questions: [3]
Saakshi and Shivani are partners, who shared profits and losses in the ratio of 2 : 1.
From the 1st January 2021, the partners decided to change their profit-sharing ratio to 3 : 2 and agreed upon the
following:
i. Goodwill of the firm valued at ₹ 45,000.
ii. Creditors of ₹ 8,000 is not likely to be claimed hence should be written off.
iii. Land and Building is overvalued by 10%.
iv. Provision for doubtful debts to be reduced to ₹ 3,000
The partners neither want to record the goodwill nor to distribute the general reserve.
18. Saakshi gain or sacrifice in the profit sharing ratio is:

a) Sacrifice 1

3
b) Gain 1

15

c) Sacrifice 1

15
d) Gain 1

19. Shivani's gain or sacrifice in the profit sharing ratio is:

a) Gain 1

3
b) Sacrifice 1

c) Gain 1

15
d) Sacrifice 1

15

20. Who will give the amount of goodwill to whom in what amount?

a) Saakshi will give ₹ 3,000 to Shivani b) Saakshi will give ₹ 4,500 to Shivani

c) Shivani will give ₹ 3,000 to Saakshi d) Shivani will give ₹ 4,500 to Saakshi
21. A partner draws ₹ 10,000 per month. Under the Partnership Deed, interest on drawings is to be charged @ 15% [3]
p.a. Calculate interest if the drawings are made regularly:
i. in the beginning of the month,
ii. in the middle of the month, or
iii. at the end of the month.

22. The partners of a firm distributed the profits for the year ended 31st March, 2023, ₹ 1,50,000 in the ratio of 2 : 2 [3]
: 1 without providing for the following adjustments:
i. A and B were entitled to a salary of ₹ 1,500 per quarter.
ii. C was entitled to a commission of ₹ 18,000.
iii. A and C had guaranteed a minimum profit of ₹ 50,000 p.a. to B.

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 iv. Profits were to be shared in the ratio of 3 : 3 : 2.
Pass necessary journal entry for the above adjustments in the books of the firm.
23. X, Y and Z are partners sharing profits in the ratio of 5 : 4 : 1. It is now agreed that they will share future profits [3]
in the ratio of 3 : 3 : 4. Goodwill is valued at ₹ 1,00,000. You are required to pass a single journal entry for the
treatment of goodwill.
24. A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. C is admitted into partnership. A [3]
sacrifices 1

3
of his share and B sacrifices 1

10
from his share in favour of C. Determine the sacrificing ratio and
the new profit sharing ratio.
25. How would you calculate the amount payable to the representative of a deceased partner? [3]

26. Ravi, Shankar and Madhur were partners in a firm sharing profits in the ratio of 7 : 2 : 1. On 31st March, 2023, [3]

the firm was dissolved, after transferring sundry assets (other than cash in hand and cash at bank) and third party
liabilities in the realization account the following transactions took place.
i. Debtors amounting to ₹ 1,40,000 were handed over to a debt collection agency which charged 5%
commission. The remaining debtors were ₹ 47,000, out of which debtors of ₹ 17,000 could not be recovered
because the same became insolvent.
ii. Creditors amounting to ₹ 5,000 were paid ₹ 3,500 in full settlement of their claim and balance creditors were
handed over stock of ₹ 90,000 in full settlement of their claim of ₹ 95,000.
iii. A bills receivable ₹ 2,000 discounted with the bank was dishonoured by its acceptor and the same had to be
met by the firm.
iv. Profit on realisation amounted to ₹ 6,000.
Pass necessary journal entries for the above transactions in the books of Ravi, Shankar and Madhur.

27. Saurav, Narendra and Prakash are partners sharing profits and losses in an agreed ratio. With effect from 1st [4]

April, 2023, they agreed to share profits equally. On that date, their Balance Sheet showed:
i. Profit & Loss A/c (Cr.) ₹ 1,75,000
ii. Advertisement Suspense Account ₹ 25,000
Following Journal entry is recorded in the books to give effect to the adjustment for accumulated profits, losses
and reserve:
JOURNAL

Date Particulars L.F. Dr.(₹) Cr.(₹)

2023

April 1 Prakash's Capital A/c 25,000

To Saurav's Capital A/c 25,000

(Adjustment made for accumulated profits, losses and reserve)

Calculate each partner's gain or sacrifice due to change in profit-sharing ratio and old profit-sharing ratio.
28. Sunil and Dilip are partners in a firm sharing profits and losses in the ratio 3 : 1. Sachin is admitted in the firm [4]
for 1

5
th share of profits. He brings in ₹ 30,000 as capital and ₹ 4,000 as his share of goodwill by cheque. Pass
necessary journal entries in following cases :-
a. When partners decided to retain goodwill in business.
b. When the amount of goodwill is fully withdrawn.
c. When 40% of the amount of goodwill is withdrawn.

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29. Riya, Siya and Diya were partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. Riya died on 1st Ju [4]

the time of her death was to be calculated on the basis of average profits of past 5 years.
The Profits of the firm for the last five years were:

2016-17 60,000

2017-18 50,000

2018-19 90,000

2019-20 80,000

2020-21 1,20,000

Calculate Riya's share of profit till the time of her death and pass necessary journal entry for the same.
Question No. 30 to 35 are based on the given text. Read the text carefully and answer the questions: [6]
Govind and Julee are partners in a firm for the last 2 years. On 1st April,2020 their capitals are Rs 4,00,000 and ₹
7,00,000 respectively. On 1st Sep 2020, they decided to keep their capitals Fixed at ₹ 5,00,000 each. On 1st Oct,2020
they took loan of ₹ 4,00,000 from Axis Bank @ 9% p.a. On 1st Jan,2021 firm gave a loan to Julee of ₹ 2,00,000 @ 6%
p.a.
Govind is to be given a monthly salary of ₹ 3,500 and Juhi is to be given a quarterly salary of ₹ 4,000. Govind
withdrew ₹ 24,000 at the beginning of every quarter and Julee withdrew ₹ ₹ 5,500 at the end of every month for
personal use against the anticipated profits.
Partners are to be allowed interest on capital of @6% per annum and Interest on Drawings is to be charged @10 % p.a
Govind is entitled to commission @ 8% on the profit (after considering all charge items, appropriations, and interest on
drawings) before charging such commission. Julee is entitled to commission @ 8% on the final profit (after considering
charge items, appropriations, interest on drawings, and Govind's commission) after charging such commission. The
profit was calculated at ₹ 5,04,475 (before considering charge items).
30. Calculate the amount of Net profit to be transferred to Profit and loss Appropriation Account?

a) ₹ 498,475 b) ₹ 5,07,475

c) ₹ 4,86,475 d) ₹ 4,89,475
31. Calculate the total amount of Interest on Drawings to be shown in the Profit and loss Appropriation Account?

a) ₹ 6,000 b) ₹ 9,025

c) ₹ 9,600 d) ₹ 6,600
32. Calculate the total amount of Interest on Capital to be shown in the Profit and loss Appropriation Account?

a) ₹ 62,500 b) ₹ 63,500

c) ₹ 35,000 d) ₹ 63,000
33. Calculate the total amount of partners Salary to be shown in the Profit and loss Appropriation Account?

a) ₹ 42,000 b) ₹ 90,000

c) ₹ 58,000 d) ₹ 48,000
34. Calculate the total partners commission to be shown in the Profit and loss Appropriation Account?

a) ₹ 27,821 b) ₹ 59,758

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 c) ₹ 56,000 d) ₹ 30,240
35. Calculate the divisible profit?

a) ₹ 2,21,100 b) ₹ 2,15,100

c) ₹ 3,22,000 d) ₹ 2,24,125
36. Following was the Balance Sheet of A and B who sharing profits in 2:1 as at 31st March, 2021 [6]
Balance Sheet

Liabilities Rs. Assets Rs.

Creditors 32,950 Cash 600

Capitals: Debtors 4850

A 15,000 Stock 10,000

B 10,000 25,000 Machinery 17,500

Building 25,000

57,950 57,950

C admitted as a partner on the following terms:

a. C was to bring in Rs.7,500 as capital and Rs. 3,000 as his 1/4th share of goodwill.
b. Stock and Machinery were to be reduced by 5%.
c. A provision was to be created in respect of Debtors Rs. 375.
d. Building was to be appreciated by 10%.
Prepare Revaluation Account, Capital Account and Balance Sheet after admission.
37. Geeta, Meena and Manisha were partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1. On 31st [6]
March, 2023, their Balance Sheet was as follows:

Liabilities ₹ Assets ₹

Trade Creditors 1,60,000 Land and Building 10,00,000

Bills Payable 2,44,000 Machinery 12,00,000

Employees' Provident Fund 76,000 Stock 10,00,000

Capitals: Sundry Debtors 4,00,000

Geeta 14,00,000 Bank 40,000

Meena 14,00,000

Manisha 3,60,000 31,60,000

36,40,000 36,40,000

On 31st March, 2023, Meena retired from the firm and the remaining partners decided to carry on the business. It
was agreed that:
i. Land and building be appreciated by ₹ 2,40,000 and machinery be depreciated by 10%.
ii. 50% of the stock was taken over by the retiring partner at book value.
iii. Provision for doubtful debts was to be made at 5% on debtors.

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 iv. Goodwill of the firm be valued at ₹ 3,00,000 and Meena's share of goodwill be adjusted in the accounts of
Geeta and Manisha.
v. The total capital of the new firm be fixed at ₹ 27,00,000 which will be in the proportion of the new profit-
sharing ratio of Geeta and Manisha. For this purpose, Current Accounts of the partners were to be opened.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm on
Meena's retirement.
38. Give journal entries for the following transactions: [6]
i. To record the realisation of various assets and liabilities,
ii. A Firm has a Stock of ₹ 1,60,000. Aziz, a partner took over 50% of the Stock at a discount of 20%,
iii. Remaining Stock was sold at a profit of 30% on cost,
iv. Land and Buildging (book value ₹ 1,60,000) sold for ₹ 3,00,000 through a broker who charged 2%,
commission on the deal,
v. Plant and Machinery (book value ₹ 60,000) was handed over to a Creditor at an agreed valuation of 10% less
than the book value,
vi. Investment whose face value was ₹ 4,000 was realised at 50%
39. Ashu and Harish are partners sharing profit and losses as 3:2. They decided to dissolve the firm on December [6]
31, 2017. Their balance sheet on the above date was:

Balance Sheet of Ashu and Harish as on March 31, 2017

Liabilities Amount ₹ Assets Amount ₹

Capitals: Building 80,000

Ashu 1,08,000 Machinery 70,000

Harish 54,000 1,62,000 Furniture 14,000

Creditors 88,000 Stock 20,000

Bank overdraft 50,000 Investments 60,000

Debtors 48,000

Cash in hand 8,000

3,00,000 3,00,000

Ashu is to take over the building at ₹ 95,000 and Machinery and Furniture is take over by Harish at value of ₹
80,000. Ashu agreed to pay Creditor and Harish agreed to meet Bank overdraft. Stock and Investments are taken
by both partner in profit sharing ratio. Debtors realised for ₹ 46,000, expenses of Realisation amounted to ₹
3,000. Prepare necessary ledger Account.

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