By DeeCee – Divine Classes

Partnership Test

Class 12th

Q 1. P and S are partners sharing profits in the ratio of 3:2. R is admitted with 1/5th share and he brings
in ₹ 84,000 as his share of goodwill which is Credited to the Capital Accounts of P and S respectively with
₹ 63,000 and ₹ 21,000. New profit-sharing ratio will be: (1)

(A) 3:1:5

(B) 9:7:4

(C) 3:2:5

(D) 7:9:4

Q 2. Assertion (A): Change in profit sharing ratio of existing partners does not amount to reconstitution
of the partnership.

Reason (R): Dissolution of partnership firm leads to reconstitution of partnership.

In the context of the above two statements, which of the following is correct? (1)

Codes:

(A) Both (A) and (R) are correct and (R) is the correct reason of (A).

(B) Both (A) and (R) are correct but (R) is not the correct reason of (A).

(C) Only (R) is correct.

(D) Both (A) and (R) are wrong.

Q 3. A, B and C are partner sharing profits in the ratio of 1:2: 3. On 1-4-2019 they decided to share the
profits equally. On the date there was a credit balance of Rs 1,20,000 in their Profit and Loss Account
and a balance of Rs 1,80,000 in General Reserve Account. Instead of closing the General Reserve
Account and Profit and Loss Account, it is decided to record an adjustment entry for the same. In the
necessary adjustment entry to give effect to the above arrangement: (1)

(A) Dr. A by 50,000; Cr. B by 50,000

(B) Cr. A by 50,000; Dr. B by 50,000

(C) Dr. A by 50,000; Cr. C by 50,000

(D) Cr. A by 50,000; Dr. C by 50,000

Or

Q. A and B are partners with a profit-sharing ratio of 2: 1 and capitals of 3,00,000 and 2,00,000
respectively. They are allowed 6% p.a. interest on their capitals and are charged 10% p.a. interest on
their drawings. Their drawings during the year were A 60,000 and B 40,000. B's share of net profit as per
profit and loss appropriation account amounted to 40,000. Net Profit of the firm before any
appropriations was:

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(A) 1,22,000

(B) 1,13,000

(C) 1,17,000

(D) 1,45,000

Q 4. P and Q sharing profits in the ratio of 2: 1 have fixed capitals of 90,000 and 60,000 respectively.
After closing the accounts for the year ending 31st March, 2021 it was discovered that interest on
capitals was provided @ 6% instead of 8% p.a. In the adjusting entry: (1)

(A) P will be credited by 1,800 and Q will be credited by 1,200;

(B) P will be debited by 200 and Q will be credited by 200;

(C) P will be credited by 200 and Q will be debited by 200;

(D) P will be debited by 1,800 and Q will be debited by ₹1,200

Q 5. X, Y and Z were partners in a firm sharing profits in the ratio of 1/2, 1/3 and 1/6 respectively. Z
decided to retire from the firm. On the date of his retirement, 'Workmen Compensation Reserve' of
1,20,000 was appearing in the Balance Sheet of the firm. The claim on account of Workmen
Compensation was determined at 67,500. Excess of reserve amount over the claim will be: (1)

(A) Debited to Revaluation Account

(B) Credited to Revaluation Account

(C) Debited to Partners' Capital Accounts

(D) Credited to Partners' Capital Accounts

Or

Q. A, B and C are partners, their partnership deed provides for interest on drawings at 8% per annum. B
withdrew a fixed amount in the middle of every month and his interest on drawings amounted to 4,800
at the end of the year. What was the amount of his monthly drawings?

(A) 10,000

(B) 5,000

(C) 1,20,000

(D) 48,000

Read the following hypothetical situation, Answer Question No. 6 & 7.

Ananya and Mukti are partners in a firm. On 1st April, 2020 their fixed Capitals were 6,00,000 and
4,00,000 respectively. On 1st January, 2021, Ananya granted a loan of 2,00,000 to the firm. Mukti had
allowed the firm to use her property for business for a monthly rent of 15,000. The partnership deed
provides that interest on capital will be allowed @ 8% p.a. and Mukti is to be allowed a salary of ₹
10,000 per month.

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The firm earned a profit of 63,000 for the year ended 31st March 2021 before any of the above
adjustment is made.

Based on the above information you are required to answer the following questions:

Q 6. Interest allowed on Capital will be: (1)

(A) Ananya 48,000 and Mukti 32,000

(B) Ananya 37,800 and Mukti 25,200

(C) Ananya 36,000 and Mukti 24,000

(D) No Interest will be allowed

Q 7. Mukti's share of net loss will be: (1)

(A) 24,000

(B) 64,000

(C) 1,60,000

(D) 60,000

Q 8. A firm does not have a Partnership Deed. Based on this fact, Match the following: (1)

(i) Interest will be allowed @6% p.a. (a) Drawings of partners

(ii) Interest will not be allowed (b) Net loss of the firm for an accounting year
(iii) No interest will be charged (c) Capitals partners contributed by the
partners
(iv) Partners shall share equally (d) Loan given by a partner to the firm.

Q 9. Angle and Circle were partners in a firm. Their Balance Sheet showed Furniture at 2,00,000; Stock at
1,40,000; Debtors at ₹ 1,62,000 and Creditors at 60,000. Square was admitted and new profit-sharing
ratio was agreed at 2:3:5. Stock was revalued at 1,00,000, Creditors of 15,000 are not likely to be
claimed, Debtors for 2,000 have become irrecoverable and Provision for doubtful debts to be provided
@ 10%. (1)

Angle's share in loss on revaluation amounted to ₹ 30,000. Revalued value of Furniture will be:

(A) 2,17,000

(B) 1,03,000

(C) 3,03,000

(D) 1,83,000

Q 10. A and B contribute 1,00,000 and 60,000 respectively in a partnership firm by way of capital on
which they agree to allow interest @ 8% p.a. Their profit or loss sharing ratio is 3:2. The profit at the end

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of the year was 2,800 before allowing interest on capital. If there is a clear agreement that interest on
capital will be paid even in case of loss, then B's share will be: (1)

(A) Profit 6,000

(B) Profit 4,000

(C) Loss 6,000

(D) Loss 4,000

Or

Z is a partner in a firm. He withdrew regularly 2,000 every month for the six months ending 31st March,
2021. If interest on drawings is charged @ 8% p.a. the interest charged will be:

(A) 480

(B) 280

(C) 200

(D) 240

Q 11. X, Y and Z are partners in a firm in the ratio of 4:3: 2. On firm's dissolution, firm's total assets are ₹
70,000, creditors are 15,000. Realisation expenses are ₹ 2,100. Assets realised 15% more than the book-
value. Creditors were paid 2% more. For profit/loss on realisation, Y's capital account will be
debited/credited with: (1)

(A) Credit 8,100

(B) Credit 2,700

(C) Debit 2,700

(D) Debit 2,400

Q 12. X, Y and Z were partners in a firm sharing profits and losses in the ratio of 2:2:1. The firm closes its
books on 31st March every year. Y died on 24th June, 2018. Y's share in the profits of the firm till the
date of death from the last Balance Sheet was to be calculated on the basis of sales. Sales during the
year 2017-18 was 15,00,000 and profit earned during the year was 3,00,000. Sales from 1st April, 2018
to 24th June, 2018 were 2,00,000. On Y's death goodwill of the firm was valued at 1,20,000. The total
amount payable to Y's executors on his death was 1,75,000. This amount was paid to them on 15-7-
2018.

Pass the necessary journal entries for the above transactions in the books of the firm. (3)

Q 13. D, E and F were partners in a firm sharing profits in the ratio of 5:7:8. Their fixed capitals on 1st
April, 2015 were D 5,00,000, E 7,00,000 and F 8,00,000. Their partnership Deed provided for the
following:

(i) Interest on capital @ 10% p.a.

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(ii) Salary of 10,000 per month to F.

(iii) Interest on drawing @12% p.a.

D withdrew 40,000 on 30th April, 2015; E withdrew 50,000 on 30th June, 2015 and F withdrew 30,000
on 31st March, 2016.

During the year ended 31st March, 2016 the firm earned a profit of ₹ 3,50,000. Prepare the Profit and
Loss Appropriation Account for the year ended 31st March, 2016. (3)

Or

Q. The partners of a firm, Alia, Bhanu and Chand distributed the profits for the year ended 31st March,
2017, 80,000 in the ratio of 3:3:2 without providing for the following adjustments:

(a) Alia and Chand were entitled to a salary of 1,500 each p.m.

(b) Bhanu was entitled for a salary of 4,000 p.a.

Pass the necessary Journal entry for the above adjustments in the books of the firm. Show workings
clearly.

Q 14. A, B and C were partners in a firm sharing profits in the ratio of 1:3:2. They decided that with
effect from 1st April, 2016, they will share profits in the ratio of 4:6:5. For this purpose the goodwill of
the firm is valued at the total of preceding three year's profits. The profits were:

2011-12 40,000

2012-13 10,000 (Loss)

2013-14 80,000 (Loss)

2014-15 1,20,000

2015-16 1,40,000

Reserves and Profits appeared in the balance sheet at 40,000 and 30,000 respectively. Partners do not
want to distribute the reserves and profits appearing in the balance sheet. Pass a single journal entry to
record the change. (3)

Q 15. Gaurav, Saurabh and Vaibhav were partners in a firm sharing profits and losses in the ratio of 2:2:
1. They decided to dissolve the firm on 31st March, 2018. After transferring Sundry assets (other than
cash in hand and cash at Bank) and third-party liabilities to realisation account, the assets were realized
and liabilities were paid off as follows:

(i) A machinery with a book value of ₹ 6,00,000 was taken over by Gaurav at 50% and stock worth ₹
5,000 was taken over by a creditor of ₹ 9,000 in full settlement of his claim.

(ii) Land and building (book value ₹ 3,00,000) was sold for ₹ 4,00,000 through a broker who charged 2%
commission.

(iii) The remaining creditors were paid ₹ 76,000 in full settlement of their claim and the remaining assets
were taken over by Vaibhav for ₹ 17,000.

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(iv) Bank loan of ₹ 3,00,000 was paid along with interest of ₹ 21,000.

Pass necessary journal entries for the above transactions in the books of the firm. (4)

Q 16. A and B are partners sharing profits in the proportion of 3:2. Their Balance Sheet as at 31st March,
2018 was as follows:

Liabilities Rs Assets Rs
Sundry Creditors 63,000 Cash at Bank 5,000
Outstanding Salaries 4,000 Sundry Debtors 30,000
General Reserve 10,000 Less: Provision 1,000 29,000
Capitals: A 50,000 Stock 40,000
B 30,000 Trade Marks 8,000
Building 75,000
1,57,000 1,57,000
They agree to admit C as a new partners on the following terms:

(i) C will be given 2/9th share of profit and he will bring Rs 50,000 for his share of capital and
goodwill.
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(ii) Goodwill of the firm will be calculated at 22 years’ purchase of the average super profits of
last four years. Profits of the last four years are Rs 40,000; Rs 40,000; Rs 55,000 and Rs
65,000 respectively. Normal profits that can be earned with the capital employed are
14,000.
(iii) Half the amount of goodwill is withdrawn by old partners.
(iv) 15% of the general reserve is to remain as a provision against doubtful debts.
(v) Outstanding salaries be increased to 16,000, Stock is overvalued by 25% and Building is
undervalued by 25%. Trade Marks be written off by 50%.
(vi) New profit sharing ratio of partners will be 4:3:2 and the capital accounts of A and B will be
adjusted on the basis of C's capital by bringing in or withdrawing cash, as the case may be.

You are required to prepare revaluation account and partners’ capital account. (6)

Or

Q. Kushal, Kumar and Kavita were partners in a firm sharing profits in the ratio of 3:1:1. On 1st April,
2012 their Balance Sheet was as follows:

Balance Sheet of Kushal, Kumar and Kavita

as at 1st April, 2012

Liabilities Rs Assets Rs
Creditors 1,20,000 Cash 70,000
Bills Payable 1,80,000 Debtors 2,00,000
General Reserve 1,20,000 Less: Provision 10,000 1,90,000
Capitals: Stock 2,20,000
Kushal 3,00,000 Furniture 1,20,000
Kumar 2,80,000 Building 3,00,000
Kavita 3,00,000 8,80,000 Land 4,00,000

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13,00,000 13,00,000
On the above date Kavita retired and the following was agreed:

(i) Goodwill of the firm was valued at 40,000.

(ii) Land was to be appreciated by 30% and building was to be depreciated by 1,00,000.
(iii) Value of furniture was to be reduced by 20,000.
(iv) Bad debts provision is to be increased to 15,000.
(v) 10% of the amount payable to Kavita was paid in cash and the balance was transferred to
her Loan Account.
(vi) Capitals of Kushal and Kumar will be in proportion to their new profit-sharing ratio. The
surplus/deficit, if any in their Capital Accounts will be adjusted through Current Accounts.

Prepare Revaluation Account, Partner's Capital Account.

Q 17. A, B and C were partners in a firm sharing profits in the ratio of 5:3:2. On 31st March, 2019 their
Balance Sheet was as under: (6)

Liabilities Rs Assets Rs
Creditors 7,000 Buildings 20,000
Reserves 10,000 Machinery 30,000
A's Capital 30,000 Stock 10,000
B's Capital 25,000 Patents 6,000
C's Capital 15,000 70,000 Cash 21,000
87,000 87,000

C died on 1st October, 2019. It was agreed between his executors and the remaining partners that:

(a) Goodwill be valued at 2 years' purchase of the average profits of the previous five years, which were
2015: 15,000; 2016: 13,000; 2017: 12,000; 2018: 15,000 and 2019: 20,000.

(b) Patents be valued at 8,000; Machinery at 28,000; Buildings at 30,000.

(c) Profit for the year 2019-20 be taken as having accrued at the same rate as the previous year.

(d) Interest on capital be provided at 10% p.a.

(e) A sum of 7,750 was paid to his executor's immediately.

Prepare C's Capital Account and his executor's account at the time of his death.

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Answer Key

Ans 1. (B) 9:7:4

Ans 2. (D) Both (A) and (R) are wrong.

Ans 3. (C) Dr. A by 50,000; Cr. C by 50,000

Or

Ans. (D) 1,45,000

Ans 4. (B) P will be debited by 200 and Q will be credited by 200;

Ans 5. (D) Credited to Partners' Capital Accounts

Or

Ans. (A) 10,000

Ans 6. (D) No Interest will be allowed

Ans 7. (D) 60,000

Ans 8. (i) d; (ii) c; (iii) a; (iv) b

Ans 9. (D) 1,83,000

Ans 10. (D) Loss 4,000

Or

Ans. (D) 240

Ans 11. (B) Credit 2,700

Ans 12. JOURNAL

Date Particulars L.F. Dr. (Rs) Cr. (Rs)

2018 Profit and Loss Suspense A/c Dr. 16,000
June 24 To Y's Capital A/c 16,000
(Y's share of profit till the date of death)
June 24 X's Capital A/c Dr. 32,000
Z's Capital A/c Dr. 16,000
To Y's Capital A/c 48,000
( Y's share of goodwill adjusted into the
Capital A/cs of X and Z in their gaining ratio of
2:1)
June 24 Y's Capital A/c Dr. 1,75,000
To Y's Executor's A/c 1,75,000
(Y's Capital A/c transferred to his Executor's
A/c)
July 15 Y's Executor's A/c Dr. 1,75,000
To Bank A/c 1,75,000

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(Amount paid to Y's Executors)

Working Notes:

(1) Calculation of Y's Share of Profit:

(i) Ratio of Profit to Sales = Profit (Last Year)/ Sales (Last Year) x 100

= 3,00,000/15,00,000 x 100 = 20%

(ii) Profit upto the date of death = 2,00,000 x 20/100 = 40,000

(iii) Y's Share of Profit = 40,000 x 2/5 = 16,000

Ans 13. PROFIT AND LOSS APPROPRIATION ACCOUNT

Dr. for the year ended 31st March, 2016 Cr.

Particulars Rs Particulars Rs
To Interest on Capital: By Profit & Loss A/c 3,50,000
D 50,000 By Interest on Drawings:
E 70,000 D 4,400
F 80,000 2,00,000 E 4,500 8,900
To Salary to F 1,20,000
To Profit transferred to:
D's Capital A/c 5/20 9,725
E's Capital A/c 7/20 13,615
F's Capital A/c 8/20 15,560 38,900
3,58,900 3,58,900

Or

Ans. TABLE SHOWING ADJUSTMENT

Alia (Rs) Bhanu (Rs) Chand (Rs) Total (Rs)

Salary (Cr.) 18,000 4,000 18,000 40,000
Division of 40,000 in 3:3:2 (Dr.) 15,000 15,000 10,000 40,000
Difference Cr. 3,000 Dr. 11,000 Cr. 8,000

RECTIFYING JOURNAL ENTRY

Date Particulars L.F. Dr. (Rs) Cr. (Rs)

2017 Bhanu's Capital A/c Dr. 11,000
April 1 To Alia's Capital A/c 3,000
To Chand's Capital A/c 8,000
(Adjustment for omission of partner's salaries)

Ans 14. Goodwill (-) 80,000 (+) 1,20,000 (+) 1,40,000 = 1,80,000

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Reserves 40,000

Profits 30,000

2,50,000

Old Ratio of A, B and C = 1:3:2

New Ratio of A, B and C = 4:6:5

Sacrifice or Gain =

A = 1/6 – 4/15 = 3/30 (Gain)

B = 3/6 – 6/15 = 3/30 (Sacrifice)

C = 2/6 – 5/15 = 0

JOURNAL

Date Particulars L.F. Dr. (Rs) Cr. (Rs)

2016 A's Capital A/c (3/30 of 2,50,000) Dr. 25,000
April 1 To B's Capital A/c (3/30 of 2,50,000) 25,000
(Adjustment for goodwill due to change in profit
sharing ratio)

Ans 15. JOURNAL

Date Particulars L.F. Dr. (Rs) Cr. (Rs)

(i) (a) Gaurav's Capital A/c Dr. 3,00,000
To Realisation A/c 3,00,000
(Machinery taken over by Gaurav)
(b) No entry for stock taken over by a Creditor
(ii) Bank A/c Dr. 3,92,000
To Realisation A/c 3,92,000
(Land and Building sold)
(iii) (a) Realisation A/c Dr. 76,000
To Bank A/c 76,000
(Payment made to creditors)
(b) Vaibhav's Capital A/c Dr. 17,000
To Realisation A/c 17,000
(Assets taken over by Vaibhav)
(iv) Realisation A/c Dr. 3,21,000
To Bank A/c 3,21,000
(Bank loan paid along with interest)

Ans 16.

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Dr. REVALUATION ACCOUNT Cr.

Particulars Rs Particulars Rs
To Outstanding Salaries A/c 12,000 By Building A/c 25,000
To Stock A/c (1,00,000-75,000)
(40,000-32,000) 8,000
To Trade Marks A/c 4,000
To Profit transferred to:
A's Capital A/c 600
B's Capital A/c 400 1,000
25,000 25,000

Dr. CAPITAL ACCOUNTS Cr.

Particulars A B C Particulars A B C
To Bank A/c 7,000 3,000 By Bal. b/d 50,000 30,000
To Bal. c/d 62,700 36,800 30,000 By General Res. A/c 5,100 3,400
By Revaluation A/c 600 400
By Bank A/c 30,000
By Premium for
Goodwill A/c 14,000 6,000
69,700 39,800 30,000 69,700 39,800 30,000
To Bank A/c 2,700 By Bal. b/d 62,700 36,800 30,000
(Balancing Figure) By Bank A/c 8,200
To Bal. c/d 60,000 45,000 30,000 (Balancing Figure)
62,700 45,000 30,000 62,700 45,000 30,000

Working Notes:

(1) Actual value of Stock = 40,000 x 100/125 = 32,000

(2) Actual value of Building = 75,000 x 100/75 = 1,00,000

(3) Calculation of Goodwill:

Total Profits = 40,000 + 40,000 + 55,000 + 65,000 = 2,00,000

Average Profits = 2,00,000/4 = 50,000

Super Profits = Average Profit s -Normal Profits

= 50,000 - 14,000 = 36,000

Goodwill = 36,000 X 5/2 = 90,000

Goodwill brought in by C in cash = 90,000 × 2/9 = 20,000.

(4) Calculation of Sacrificing Ratios for distributing Goodwill:

Sacrifice made by A = 3/5 - 4/9 = 7/45

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Sacrifice made by B = = 2/5 - 3/9 = 3/45

Sacrifice Ratio = 7:3

(5) C brings in 30,000 as his Capital for his 2/9TH share.

Hence, the total Capital of the new firm will be ₹ 30,000 x 9/7 = 1,35,000

Since the new profit sharing ratio is 4:3:2

A's Capital in the new firm = 1,35,000 x 4/9 = 60,000

B's Capital in the new firm = 1,35,000 × 3/9 = 45,000

C's Capital in the new firm = 1,35,000 x 2/9 = 30,000

As such, A will withdraw 62,700 - 60,000 = 2,700

B will bring in 45,000 - 36,800 = 8,200

(6) Bank Balance = R 5,000 + 50,000 - 10,000 - 2,700 + 8,200 = 50,500

Or

Ans.

Dr. REVALUATION ACCOUNT Cr.

Particulars Rs Particulars Rs
To Building A/c 1,00,000 By Land A/c 1,20,000
To Furniture A/c 20,000 By Loss transferred to:
To Provision for Doubtful Debts 5,000 Kushal's Capital A/c 3,000
A/c Kumar's Capital A/c 1,000
Kavita's Capital A/c 1,000 5,000
1,25,000 1,25,000

Dr. CAPITAL ACCOUNTS Cr.

Particulars Kushal Kumar Kavita

Particulars Kushal Kumar Kavita
To Revaluation 3,000 1,000 1,000By Balance b/d 3,00,000 2,80,000 3,00,000
A/c By General 72,000 24,000 24,000
To Kavita's Reserve A/c
Capital A/c 6,000 2,000 By Kushal's 6,000
(Goodwill) Capital A/c
To Cash A/c 33,100 (Goodwill)
To Kavita's Loan 2,97,900 By Kumar's 2,000
A/c Capital A/c
To Balance c/d 3,63,000 3,01,000 (Goodwill)
3,72,000 3,04,000 3,32,000 3,72,000 3,04,000 3,32,000
To Kumar's By Balance b/d 3,63,000 3,01,000
Current A/c 1,35,000 By Kushal's 1,35,000
To Balance c/d 4,98,000 1,66,000 Current A/c

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4,98,000 3,01,000 4,98,000 3,01,000

Working Notes:

Adjustment of Capital:

Total Capital of Kushal and Kumar = 3,63,000 + 3,01,000 = 6,64,000

Kushal's Capital should be = 6,64,000 x 3/4 = 4,98,000

Kumar's Capital should be 6,64,000 x 1/4 = 1,66,000

Kushal Kumar

Capital required in the new firm 4,98,000 1,66,000

Less: Existing balance in Capital Accounts 3,63,000 3,01,000

Amount transferred to Current Accounts 1,35,000 (Dr.) 1,35,000 (Cr.)

Ans 17. (i) Valuation of Goodwill:

Total Profit 15,000+ 13,000+12,000+ 15,000+20,000 = 75,000

Average Profit 75,000/5 = 15,000.

Hence, Goodwill at 2 year's purchase = 15,000 x 2 = 30,000.

C's share of Goodwill = 30,000 x 2/10 = 6,000

It will be adjusted into the Capital Accounts of A and B in the gaining ratio of 5:3.

(ii) Share of Profit payable to C (upto the date of death):

20,000 x 6/12 x 2/10 = 2,000

(iii)

Dr. REVALUATION ACCOUNT Cr.

Particulars Rs Particulars Rs
To Machinery A/c 2,000 By Patents A/c 2,000
To Profit on Revaluation By Buildings A/c 10,000
transferred to:
A's Capital A/c 5,000
B's Capital A/c 3,000
C's Capital A/c 2,000 10,000
12,000 12,000

Dr. C’S CAPITAL ACCOUNT Cr.

Particulars Rs Particulars Rs
To C's Executor's A/c 27,750 By Balance b/d 15,000

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By Reserves (10,000 x 2/10) 2,000

By Revaluation A/c 2,000
By A's Capital A/c (Goodwill) 3,750
(6,000 × 5/8)
By B's Capital A/c (Goodwill) 2,250
(6,000 x 3/8)
By Profit & Loss Suspense A/c 2,000
(Share of Profit)
By Interest on Capital 750
(15,000 x 10/100 x 6/12)
27,750 27,750

Dr. C'S EXECUTOR'S ACCOUNT Cr.

Particulars Rs Particulars Rs
To Bank A/c 7,750 By C's Capital A/c 27,750
To Balance c/d 20,000
27,750 27,750

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