Kendriya Vidyalaya Sangathan

(Ahmedabad Region)

Class: XII
Multiple Choice Questions
ACCOUNTANCY (055)
(2024-25)

CHIEF PATRON: MS SHRUTI BHARGAVA

Deputy Commissioner, KVS RO Ahmedabad

PATRON: (1) MR VENKTESWAR PRASAD B.

Assistant Commissioner, KVS RO Ahmedabad
(2) MS MEENA JOSHI
Assistant Commissioner, KVS RO Ahmedabad

CONVENOR: MR SHEKHAR JAKHORIA

Principal, KV- PM SHRI WADSAR

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 KENDRIYA VIDYALAYA SANGATHAN, AHMEDABAD REGION

SUBJECT: ACCOUNTANCY CLASS: XII

CHAPTER : ACCOUNTING FOR PARTNERSHIP FIRMS - FUNDAMENTALS

Q
1 Assertion(A): Only capital account is maintained for each partner under
fluctuating capital account method.
Reason(R): Interest on capital, Salary, commission and profit transferred
to the credit of partners’ capital account while interest on drawings and
share of losses are transferred to the debit.
A Both assertion(A) and reason(R) are true and reason (R) is the correct
explanation of Assertion(A).
B Both assertion(A) and reason(R) are true and reason (R) Is not the
correct explanation of Assertion(A).
C Assertion(A) is correct but reason(R) is false.

D Assertion(A) is false but reason(R) is correct.

2 Assertion (A) : Personal properties of a partner may also be used to pay

off the firms debts.
Reason (R) : All partner have limited liability in the firm.
A Both assertion(A) and reason(R) are true and reason (R) is the correct
explanation of Assertion(A).
B Both assertion(A) and reason(R) are true and reason (R) Is not the
correct explanation of Assertion(A).
C Assertion(A) is correct but reason(R) is false.

D Assertion(A) is false but reason(R) is correct.

3 Assertion(A): Rent paid to the partner is not to be shown in Profit & Loss
Appropriation A/c.
Reason(R): Rent paid to the partner is treated as the charge against
profit and not the appropriation of the profits.
A Both assertion(A) and reason(R) are true and reason (R) is the correct
explanation of Assertion(A).
B Both assertion(A) and reason(R) are true and reason (R) Is not the
correct explanation of Assertion(A).
C Assertion(A) is correct but reason(R) is false.

D Assertion(A) is false but reason(R) is correct.

4 Assertion (A) : Fixed Capital Accounts of a partner never shows a debit

balance inspite of regular and consistent losses year after year.
Reason (R) : When Capital Accounts are fixed , losses are recorded in
Partners’ Current Account.

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 A Both assertion (A) and reason (R) are true and reason (R) is the correct
explanation of Assertion (A).
B Both assertion (A) and reason (R) are true and reason (R) is not the
correct explanation of Assertion (A).
C Assertion (A) is correct but reason (R) is false.

D Assertion (A) is false but reason (R) is correct.

5 Statement I:- Commission provided to partner is shown in Profit

and Loss A/c.
Statement II:- Commission provided to partner is charge against
profits and is to be provided at fixed rate.
Choose the correct option from the following:
A Both Statement I and Statement II are correct.

B Both Statement I and Statement II are incorrect.

C Statement I is incorrect and statement II is correct.

D Statement I is correct and statement II is incorrect.

6 Statement I: Rajesh spends thrice the time that Radha devoted to

business. Rajesh claims that he should get salary of ₹ 5,000/- p.m. for
extra time spent.
Statement II:- As there is no partnership deed and as per Partnership
Act 1932, partners will not be allowed any salary or remuneration.
A Both Statement I and Statement II are correct

B Both Statement I and Statement II are incorrect

C Statement I is incorrect and statement II is correct.

D Statement I is correct and statement II is incorrect.

7 Statement I:- : In case of losses interest on capital will not be

provided.
Statement II:- As interest on capital is treated as the appropriation of
the profits. It can be provided in case of losses if it is to be treated as
charge.
A Both Statement I and Statement II are correct

B Both Statement I and Statement II are incorrect

C Statement I is incorrect and statement II is correct.

D Statement I is correct and statement II is incorrect.

8 Statement I:- Only capital account is maintained for each partner under
fluctuating capital account method.

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 Statement II:- Interest on capital, Salary, commission and profit
transferred to the credit of partners’ capital account while interest on
drawings and share of losses are transferred to the debit of partner’s
capital account.
A Both Statement I and Statement II are correct

B Both Statement I and Statement II are incorrect

C Statement I is incorrect and statement II is correct.

D Statement I is correct and statement II is incorrect.

9 Match the following:

Statement I Statement II
1. Assurance of profit a. Rectifying the past error
2. Manager’s commission b. Calculated on opening capital
3. Past Adjustment c. Guarantee of profit
4. Interest on capital d. Debited to profit & loss A/c
A 1-b, 2- d, 3 – c, 4 – a

B 1-c, 2- b , 3 – a , 4 – d

C 1-a, 2-c, 3-b, 4-d

D 1-c, 2- d , 3 – a , 4 – b

10 Match the following:

Column I(in absence of partnership Column II (Provision)
deed)
A. Interest on capital i. Allowed
B. Interest on Partner’s loan ii. 1:1
C. Profit/Losses iii. 6% p.a.
D. Partners allowed to withdraw iv. Not allowed

A A-i, B-ii, C-iii, D-iv

B A-i, B-iv, C-ii, D-iii

C A-ii, B- iii, C-iv, D-i

D A-iv, B- iii, C-ii, D- i

11 Pick the odd one out of the following:

A Rent to Partner

B Manager’s Commission

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 C Interest on Partner’s Loan

D Interest on Partner’s Capital

12 Match the following:

Column I Column II
A. Interest on drawings i. Credit side of Profit & loss a/c
B. Commission to a partner ii. Credit side of Profit & loss App. a/c
C. Interest on partner’s loan iii. Debit side of Profit & loss App. a/c
D. Sale of goods iv. Debit side of Profit & loss a/c
A A-i, B-ii, C-iii, D-iv

B A-i, B-iv, C-ii, D-iii

C A-ii, B- iii, C-iv, D-i

D A-iv, B- iii, C-ii, D- i

QUESTION NO.13-14:
Read the passage given below and answer the following questions:
Arun and Barun are partners in a firm sharing profits and losses. Their
capitals on 1 April, 2023 were ₹ 4,80,000 and ₹ 5,40,000. On 1 October,
2023, they decided that the total capital of the firm should be ₹ 10,00,000
to be contributed equally by both of them. According to the Partnership
Deed, interest on capital is allowed to the partners @ 6% p.a.
13 You are required to compute interest on capital for the year ending 31
March, 2024.
A ₹ 29,400, ₹ 31,200.

B ₹ 14,400, ₹ 16,200.

C ₹ 15,000, ₹ 15,000.

D None of these.

14 What would be the profit-sharing ratio of Arun and Barun?

A 1:1

B 2:3

C 3:2

D 3:4

15 If the guarantee is given to the partner by some partners, deficiency on

such will be borne by
A Partnership firm.

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 B All of the other partners

C Partners who had given the guarantee

D None of the above

16 If the partnership deed is silent interest on drawings will be charged @

A 6% per annum

B 6% per month

C Any other rate

D Will not be charged

17 Shalu, Shan& Julie are partners sharing profits in the ratio of 6: 4: 1.

Julie is guaranteed a minimum profit of ₹ 20,000. The firm incurred a
loss of ₹ 2,20,000 for the year ended 31st March, 2024. What amount of
deficiency will be borne by Shalu and Shan.
A ₹ 10,000 each.

B ₹ 20,000 each.

C ₹ 24,000 by Shalu & ₹ 16,000 by Shan.

D ₹ 12,000 by Shalu & ₹ 8,000 by Shan.

18 Which of the following items is not dealt through Profit and Loss
Appropriation Account?
A Interest on Partner’s Loan

B Partner’s Salary

C Interest on Partner’s Capital

D Partner’s Commission

19 A, B and C sharing profits in the ratio of 2: 2: 1 have fixed capitals of

₹ 3,00,000, ₹ 2,00,000 and ₹ 1,00,000 respectively. After closing the
accounts for the year ending 31st March 2024, it was discovered that
interest on capitals was provided @ 12% instead of 10% p.a. In the
adjusting entry:
A Cr. A ₹ 1,200; Dr. B ₹ 800 and Dr. C ₹ 400

B Dr. A ₹ 1,200; Cr. B ₹ 800 and Cr. C ₹ 400

C Cr. A ₹ 800; Cr. B ₹ 400 and Dr. C ₹ 1,200

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 D Dr. A ₹ 800; Dr. B ₹ 400 and Cr. C ₹ 1,200

20 A partner withdrew ₹ 4,000 per month from 1st July, 2023, on beginning
of every month. Accounts are closed at 31st March, 2024. Calculate
interest on drawings while rate of interest is 10% per annum.
A ₹ 1,600

B ₹ 1,800

C ₹ 1,500

D ₹ 2,200

21 Rani and Shyam is partner in a firm. They are entitled to interest on their
capital but the net profit was not sufficient for paying his interest, then
the net profit will be disturbed among partner in.
A Capital Ratio

B Profit Sharing Ratio

C Interest on Capital Ratio

D Equally

22 A, B, and C are partner’s sharing profits in the ratio of 5:3:2. According

to the partnership agreement C is to get a minimum amount of ₹ 10,000
as his share of profits every year. The net profit for the year ended 31st
March, 2024 amounted to ₹ 40,000. How much amount contributed by A?

A ₹ 1,350

B ₹ 1,250

C ₹ 750

D ₹ 1,225

23 The relation of the partner with the firm is that of.

A An owner

B An agent and a Principal

C An agent

D Manager

24 Closing entry for interest on loan allowed to partners.

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 A Interest on partner’s loan …Dr.
To Profit and Loss A/c
B Interest on loan …Dr.
To Profit and Loss Appropriation A/c
C Profit and Loss Appropriation A/c …Dr.
To interest on loan A/c
D No entry

25 A and B are partners in partnership firm without any agreement. A has

given a loan of ₹ 50,000 to the firm. At the end of year loss was incurred
in the business. Following interest may be paid to A by the firm:
A @ 5% Per Annum

B @ 6% Per Annum

C @ 6% Per Month

D As there is a loss in the business, interest can’t be paid

26 Interest on partners loan is treated as:

A Charge against profit.

B Appropriation out of profits.

C Either (a) or (b)

D None of the above.

27 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 Profit before interest on
partner’s capital was ₹ 6,00,000 and Z demanded minimum profit of ₹
5,00,000 as his financial position was not good. However, there was no
written agreement on this point. How will the profit be distributed?
A Other partners will pay Z the minimum profit and will share the loss
equally.
B Other partners will pay Z the minimum profit and will share the loss in
capital ratio.
C X and Y will take ₹ 50,000 each and Z will take ₹ 5,00,000.

D ₹ 2,00,000 to each of the partners.

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 Read the following hypothetical situation, Answer Question No.28 and
29.
Kareena and Monika were partners in a firm. Their partnership agreement
provides that:
Profits would be shared by Kareena and Monika in the ratio of 3:2.
5% p.a. interest is to be allowed on capital.
Monika should be paid a monthly salary of ₹ 600.
The following balances are extracted from the books of the firm, on March
31st,2024.

Particulars Kareena (₹) Monika (₹)

Capital accounts 40,000 40,000
Current accounts 7,200 (Cr) 2,800 (Dr)
Drawings 10,850 8,150
Following is the Profit and Loss Appropriation Account for the year
ended31st March 2024.
Particulars ₹ Particulars ₹
Salary-Monika __________ Net Profit 16,700
Interest on capital:
Kareena current a/c ____
Monika current a/c ____

4,000
Share of profit:
Kareena’s current a/c ____
Monika’s current a/c 2,200 ______

28 Kareena’s profit will be.

A ₹ 3,200

B ₹ 3,300

C ₹ 4,200

D ₹ 3,000

29 Firm’s Net profit before charging interest on capital and after charging
partner’s salary was ₹ ______.
A ₹ 9,500

B ₹ 5,900

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 C ₹7,200

D ₹ 5,500

30 A partnership firm earned divisible profit of ₹ 5,00,000, interest on capital

is to be provided to partner is ₹ 3,00,000, interest on loan taken from
partner is ₹ 50,000 and profit-sharing ratio of partners is 5:3. Sequence
thefollowing in correct way:
(A) Distribute profits between partners.
(B) Charge interest on loan to Profit and Loss A/c.
(C ) Calculate the net profit Transfer to Profit and Loss appropriation A/c.
(D) Provide interest on capital.
A D-A-B-C

B C-B-A-D

C A-B-C-D

D B-C-D-A

31 Anju, Manju and Sanju entered into a partnership on 1 st April 2023 to

share profits in the ratio of 2:1:1. It was provided in the deed that Sanju’s
share of profit will not be less than ₹ 70,000 per annum. The losses for
the year ended 31st March, 2024 were ₹ 2,00,000 before allowing interest
₹ 8,000 on Anju’s Loan which is due for the current year.
The journal entry for deficiency of Sanju’s share of profit to be met by
Anju and Manju will be :-
A Anju’s capital a/c Dr 82,000
Manju’s capital a/c Dr 40,000
To Sanju’s capital a/c 1,22,000
B Anju’s capital a/c Dr 150,000
Manju’s capital a/c Dr 50,000
To Sanju’s capital a/c 2,00,000
C Anju’s capital a/c Dr 81,333
Manju’s capital a/c Dr 40,667
To Sanju’s capital a/c 1,22,000
D Anju’s capital a/c Dr 1,81,333
Manju’s capital a/c Dr 40,667
To Sanju’s capital a/c 2,22,000
32 Calculate manager’s commission if profit is ₹ 66,000 and commission
is allowed @ 10% after charging such commission.
A ₹ 6,600

B ₹ 5,500

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 C ₹ 6,000

D ₹ 5,000

33 Sohan and Mohan are partners sharing profits and losses in the
ratio of 2:3 with the capitals of ₹ 5,00,000 and ₹ 6,00,000
respectively. On 1st January 2024, Sohan and Mohan granted loans
of ₹ 20,000 and ₹ 10,000 respectively to
the firm. Determine the amount of loss to be borne by each
partner for the year ended 31st March 2024 if the loss before
interest for the year amounted to ₹ 2,500.
A Share of Loss Sohan –₹ 1,250 Mohan – ₹ 1,250.

B Share of Loss Sohan –₹ 1,000 Mohan – ₹ 1,500.

C Share of Loss Sohan –₹ 820 Mohan – ₹ 1,230.

D Share of Loss Sohan –₹ 1,180 Mohan – ₹ 1,770.

34 Arya and Marya are partners sharing profits and losses in the ratio
of 3:2. The firm maintains fluctuating capital accounts and the
balance of the same as on 31st March 2024 is ₹ 4,00,000 and ₹
4,65,000 for Arya and Marya respectively. Drawings during the
year were ₹ 65,000 each. As per the partnership Deed, Interest on
capital @ 10% p.a. on Opening Capital has been allowed to them.
Calculate the opening capital of Arya given that the divisible profits
during the year 2023-24 was ₹ 2,25,000.
A ₹ 3,30,000

B ₹ 4,40,000

C ₹ 4,00,000

D ₹ 3,00,000

35 A, B and C are partners. A‘s capital is ₹ 3,00,000 and B‘s capital is

₹ 1,00,000. C has not invested any amount as capital but he alone
manages the whole business. C wants 30,000 p.a. as salary,
though the deed is silent. Firm earned a profit of ₹1,50,000. How
much will each partner receives as an appropriation of profits?
A A ₹ 60,000; B ₹ 60,000; C ₹ 30,000

B A ₹ 90,000; B ₹ 30,000; C ₹ 30,000

C A ₹ 40,000; B ₹ 40,000 and C ₹ 70,000

D A ₹ 50,000; B ₹ 50,000 and C ₹ 50,000

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36 Choose the correct sequence of the following transactions in
context of Division of Profits.
i. Guarantee by Firm to Partners
ii. Guarantee by Partners to Firm
iii. Transfer of Profits to Profit and Loss Appropriation Account
iv. Guarantee by Partner to Partner
A (i); (iii) ; (iv) ; (ii)

B (iii); (i) ; (ii) ; (iv)

C (iii) ; (ii) ; (i); (iv)

D (ii); (iii); (iv); (i)

37 Vinita and Ankita are partners. Vinita draws a fixed amount at the
beginning of every month. Interest on drawings is charged @8%
p.a. At the end of the year interest on Vinita's drawings amounts to
₹ 2,600. Monthly drawings of Vinita were:
A ₹ 8,000

B ₹ 60,000

C ₹ 7,000

D ₹ 5,000

38 Jyotika, a partner withdrew ₹ 5,000 in the beginning of each

quarter and interest on drawings was calculated as ₹ 1,500 at the
end of accounting year 31st March 2024. What is the rate of interest
on drawings charged?
A 6% p.a.

B 8% p.a.

C 10% p.a.

D 12% p.a.

39 Interest on capital is allowed on the:

A Capital at the end of the year

B Opening capital

C Average capital

D Capital employed

40 Which of the following statement is true?

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A A minor cannot be admitted as a partner.

B A minor can be admitted as a partner, only into the benefits of the

partnership.
C A minor can be admitted as a partner but his rights and liabilities are
same of adult partner.
D None of the above.

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 ANSWERS:

QUE 1 2 3 4 5 6 7 8 9 10

ANS A C A B D C A A D D

QUE 11 12 13 14 15 16 17 18 19 20

ANS D C A A C D C A B C

QUE 21 22 23 24 25 26 27 28 29 30

ANS C A B A B A D B A D

QUE 31 32 33 34 35 36 37 38 39 40

ANS C C D D D C D D B A

******************

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 KENDRIYA VIDYALAYA SANGATHAN, AHMEDABAD REGION

SUBJECT: ACCOUNTANCY CLASS: XII

CHAPTER: 1. GOODWILL:NATURE AND VALUATION

2. CHANGE IN PROFIT SHARING RATIO AMOUNG EXISTING PARTNERS

1 Assertion (A): According to AS-26, Intangible Assets, Self-generated

Goodwill is recognised in the books of accounts because Gaining
Partner compensates Sacrificing Partner.
Reason (R): Self-generated Goodwill is not recognised in the books
of account.
In the context of above two statements, which of the above options is
correct?
A Both (A) and (R) are true and (R) is the correct explanation of (A)

B Both (A) and (R) are true and (R) is not the correct explanation of (A)

C (A) is true, but (R) is false

D (A) is false, but (R) is true

2 Assertion (A): Overvaluation of closing stock is subtracted from the

current year profit and added to the next year in opening stock, while
calculating average profit.
Reason (R): Closing stock of current year become opening stock of
next year.

A Both (A) and (R) are true and (R) is the correct explanation of (A)

B Both (A) and (R) are true and (R) is not the correct explanation of (A)

C (A) is true, but (R) is false

D (A) is false, but (R) is true

3 Assertion (A): At the time of change in profit sharing ratio. Gaining

partner brings his share of Goodwill to compensate sacrificing partner.
Reason (R): Goodwill may or may not be brought in cash by the
Gaining partner to compensate the sacrificing partner for sacrificing
his profit share.

A Both (A) and (R) are true and (R) is the correct explanation of (A)

B Both (A) and (R) are true and (R) is not the correct explanation of (A)

C (A) is true, but (R) is false

D (A) is false, but (R) is true

4 Assertion (A): When the partners change their profit sharing ratio, it
does lead to dissolution of old firm.
Reason (R): Change in profit sharing ratio dissolves the firm and new
partnership firm comes into existence.

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 A Both (A) and (R) are true and (R) is the correct explanation of (A)

B Both (A) and (R) are true and (R) is not the correct explanation of (A)

C (A) is true, but (R) is false

D (A) is false, but (R) is true

5 ` Statement I :Goodwill is an Statement II : AS-26,

intangible asset and is recognised Intangible assets prescribes to
as an asset only when it is recognise goodwill as an asset
purchased. only when consideration has
been paid for it.

A Both statements are correct

B Both statements are incorrect

C Only statement I is correct

D Only statement II is correct

6 Statement I : Goodwill, when valued by Weighted Average profit

method , total of weights will be taken base for calculating average
business profit.
Statement II : Goodwill, when valued Average profit method , total
number of years will be taken as base for calculating average business
profit.

A Both statements are correct

B Both statements are incorrect

C Only statement I is correct

D Only statement II is correct

7 Statement I : Profit sharing ratio changes when an End of economic

relationship among the partners will takes place.
Statement II : Profit sharing ratio changes when an amalagamation
of two or more partnership firms will takes place.

A Both statements are correct

B Both statements are incorrect

C Only statement I is correct

D Only statement II is correct

8 Statement I :Ana and Kate are partners in a firm sharing profits in

the ratio 3:2. Shraw was admitted as a new partner. Ana surrenderd
¼ of his share and Kate surrendered 1/3 of his share in favour of
Shraw. Their new profit sharing ratio will be – 27:16:17.
Statement II : Atul and Neera were partners ina firm sharing profits
and losses in the ratio of 3:2. They admit Mitali as a new partner.
Goodwill of the firm was valued at ₹2,00,000. Mitali brings her share

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 of goodwill premium of ₹20,000 in cash which is entirely credited to
Atul’s capital A/C . The new profit sharing ratio will be 5:4:1

A Both statements are correct

B Both statements are incorrect

C Only statement I is correct

D Only statement II is correct

9 (i)Sacrificing ratio (a)New ratio – gaining ratio

(ii)Gaining ratio (b)Old ratio – sacrificing ratio

(iii)New ratio (c)New ratio – Old ratio

(iv)Old ratio (d)Old ratio – new ratio

A (i) (a) (ii) (b) (iii) (c) (iv) (d)

B (i) (d) (ii) (c) (iii) (b) (iv) (a)

C (i) (a) (ii) (d) (iii) (c) (iv) (b)

D (i) (b) (ii) (a) (iii) (d) (iv) (c)

10 (i) Decrease in asset (a)credit in revaluation account

(ii) Increase in asset (b)debit in revaluation account

(iii) loss of revaluation account (c) credited to partners capital

account

(iv) profit of revaluation account (d)debited to partners capital

account

A (i) (a) (ii) (b) (iii) (c) (iv) (d)

B (i) (d) (ii) (c) (iii) (b) (iv) (a)

C (i) (a) (ii) (d) (iii) (c) (iv) (b)

D (i) (b) (ii) (a) (iii) (d) (iv) (c)

11 (i)Ratio in which Partners share (a)New profit sharing ratio

profit and loss before
reconstitution of firm
(ii) Ratio in which Partners (b) Gaining ratio
surrender their share of profit in
favour of other partner’s
(iii) Ratio in which all the (c) Sacrificing ratio
Partners share the future profit
and losses
(iv)Ratio in which Partners (d) Old ratio
acquire the share from other
A (i) (a) (ii) (b) (iii) (c) (iv) (d)

B (i) (d) (ii) (a) (iii) (b) (iv) (c)

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 C (i) (d) (ii) (c) (iii) (a) (iv) (b)

D (i) (b) (ii) (c) (iii) (d) (iv) (a)

12 (i)Average profit (a)Assets – outside liabilities

(ii)Super profit (b)Total profits/Number of years

(iii)Capital employed (c)Average profit – Normal profit

A (i) (a) (ii) (b) (iii) (c)

B (i) (c) (ii) (a) (iii) (b)

C (i) (b) (ii) (c) (iii) (a)

D None of the above

13 Pooja purchased Ritik’s business on 1st April, 2019. It was agreed to

value goodwill at three year’s purchase of average normal profits of
the last four years. The profits of Ritik’s business for the last four
years were:-
Year ended ₹
31st March, 2016 90,000
31st March, 2017 1,60,000
31st March, 2018 1,80,000
31st March, 2019 2,20,000
Following are noticed:-
(i) During the year ended 31st March, 2016 an asset was sold
at a gain (profit) of ₹ 10,000.
(ii) During the year ended 31st March, 2017 a machine got
destroyed in accident and ₹ 30,000 was written off as a
loss in profit and loss account.
(iii) During the year ended 31st March 2018, firm’s assets
were not insured due to oversight. Insurance premium
being ₹ 10,000.
Calculate the value of goodwill.

A ₹ 4,59,000

B ₹ 4,95,000

C ₹ 59,400

D ₹ 9,45,000

14 Goodwill is valued at 3 years’ purchase of average profits earned by

the firm in last four years.
31 March 2021 – ₹ 90,000 (abnormal loss of ₹ 20,000)
31 March 2022 – (₹ 60,000) loss
31 March 2023 – ₹ 1,24,000 (closing stock overvalued by ₹ 4,000)
31 March 2024 – ₹ 1,36,000

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 A ₹ 2,10,000

B ₹ 1,20,000

C ₹ 1,00,000

D ₹ 2,00,000

15 Grey and Ana are partners sharing profits equally .They admit Kia for
¼ share. Goodwill is valued at 4 years’ purchase of average profits
earned by the firm in last years.
31/3/2018 – ₹ 1,10,000
31/3/2019 - ₹ 1,65,000
31/3/2020 - ₹ (1,30,000)
31/3/2021 – ₹ 47,000
31/3/2022 - ₹ 68,000
Books of accounts of the firm were perused and following were
noticed :
1. Abnormal gain of ₹55000 during the year ended 31/3/2018.
2. The firm incurred loss in year 2019-20
3. Repair of ₹20000 wrongly debited to Building account. Depreciation
charged on building @10% p.a on straight line method.
A ₹ 23,76,000

B ₹ 17,36,000

C ₹ 13,76,000

D ₹ 13,06,000

16 Raghu,Vansh and Supriya are partners in a firm sharing profits and

losses in the ratio of 3:2:1. Supriya dies on 1st April, 2023. On the
date of her death, it was decided to value goodwill on the basis of two
years' purchase of weighted average profits of the firm for the last
three years.
The profits of the last three years and weights assigned as 1,2,3.
Year Profit assigned
2020 - 21 ₹ 30,000 (including gain from speculation 10,000)
2021 – 22 ₹ 80,000
2022 – 23 ₹ 1,00,000
You are required to:
Calculate Goodwill on the basis of two years' purchase of weighted
average profits of the firm for the last three years
A ₹ 6,10,000

B ₹ 1,06,000

C ₹ 6,01,000

D ₹ 1,60,000

17 Vinayak , Harsh and Raman are partners in a firm sharing profits and
losses in the ratio of 4/9 : 1/3 : 2/9 -. Raman dies on 31st March,
2024. Vinayak acquires 4/9 of Raman’s share and the balance is
acquired by Harsh.
On the date of Raman's death, it was decided to value the goodwill of
the firm on the basis of two years' purchase of average Super profit.
Page 5 of 12
 The average net profit made by the firm is ₹ 49,000 per annum.
The remuneration of the partners, considered as management cost, is
estimated to be ₹ 9,000 per annum. There was an overvaluation of
opening stock of ₹ 3000.
The total value of assets and liabilities of the firm is ₹ 2,20,000 and
80,000 respectively.
The normal rate of return in the industry is 15%.
A ₹ 48,000

B ₹ 44,000

C ₹ 34,000

D ₹ 10,000

18 Reserves and accumulated profits are transferred to partners ' capital

accounts at the time of reconstitution in:
A Old profit-sharing ratio

B Sacrificing Ratio

C Gaining ratio

D New profit-sharing ratio

19 Calculate the goodwill of a firm on the basis of two years purchases of

the average profit of last four years. Profits for the last four years
ended 31st March were:
31.03.2020 ₹ 30,600
31.03.2021 ₹ 48,400
31.03.2022 ₹ 46,600
31.03.2023 ₹ 34,400
Additional Information:
i. The closing stock for the year ended 31st March, 2022 was
undervalued by ₹ 2,600.
ii. The cost of management expenses per annum ₹ 2,000 should be
made for the purpose of goodwill valuation.
A ₹ 76,000

B ₹ 67,000

C ₹ 86,000

D ₹ 1,67,000

20 Question No. 20 and 21 based on the information given below:-

Information:
(a) Average Capital Employed– ₹ 10,00,000.
(b) Net Profit/Loss of the firm for the past years: 2022-- ₹ 1,60,000
(Profit); 2023- ₹ 1,40,000 (Profit); 2024- ₹ 2,70,000 (Profit).
(c) Normal Rate of Return on capital is 11%.
d) Remuneration to each partner for his service to be treated as a
charge on profit-₹ 2,500 per month.
(e) Assets (excluding goodwill)–₹ 11,00,000; Liabilities-₹ 1,00,000.
From the following information, calculate value of goodwill of M/s Amit
& Amar:
(i) At three years purchase of Average Profit
Page 6 of 12
 A ₹ 3,90,000

B ₹ 9,30,000

C ₹ 4,30,000

D ₹ 3,40,000

21 (ii) On the basis of Capitalisation of Average Profit.

A ₹ 81,11,818

B ₹ 11,81,818

C ₹ 88,18,181

D ₹ 10,00,000

22 Question No. 22 to 25 are Case based :-

SULA YARDS is a partnership firm with Suraj, Willame and Yash as
partners, engaged in production and sales of solar panels. Their capital
contributions were ₹ 3,00,000,₹ 2,00,000 and ₹ 1,00,000 respectively
profit-sharing ratio of 3: 2 :1. As India was seen to have high scope of
generating solar energy and Government of India also supporting the
industry, they are now looking to expand their business converting their
partnership firm into a private company. They decided to value Goodwill
for the purpose.
Assets of the firm on 31st March, 2023 were ₹ 7,00,000, whereas
external liabilities were ₹1,00,000.Net Profits of the firm for the last
three years were ₹ 2,00,000; ₹ 1,80,000; ₹ 1,60,000. Normal rate of
return is 10%. Management cost is expected at ₹ 60,000 per annum.
A. Goodwill of the firm on the basis of 4 years' purchase of 3 years'
Average Profit is?
A ₹ 4,80,000

B ₹ 3,60,000

C ₹ 4,00,000

D ₹ 3,20,000.

23 B. Goodwill of the firm on the basis of 4 years' purchase of 3 years'

Average Super Profit is
A ₹ 2,50,000

B ₹ 2,00,000

C ₹ 2,40,000

D ₹ 2,80,000

24 C. Goodwill of the firm on the basis of Capitalisation of Average Profit

is
A ₹ 12,00,000

B ₹ 6,00,000

Page 7 of 12
 C ₹ 10,00,000

D ₹ 14,00,000

25 D. Goodwill of the firm on the basis of Capitalisation of Super Profit is

A ₹ 10,00,000

B ₹ 14,00,000

C ₹ 6,00,000

D ₹ 12,00,000

26 Ankush, Priyansh and Saransh are partners sharing profits and losses
in the ratio of 4:3:2 decide to share profits and losses in 2:3:4 with
effect from 1st April 2022. Value of Workmen compensation reserve
had balance of ₹ 90,000.What is the journal entry , if claim on
Workmen compensation is ₹99,000.

A Workmen compensation claim 99,000

To Revaluation A/C 9,000

To Workmen compensation reserve 90,000

B Workmen compensation reserve A/C Dr. 90,000

Revaluation A/C Dr. 9,000
To Workmen compensation claim 99,000

C Workmen compensation reserve A/C Dr. 99,000

To Revaluation A/C 9,000
To Workmen compensation claim 90,000
D None of the above

27 Mac and Mohan are partners sharing profits and losses in 3:2. With
effect from 1st April 2024, they decided to share profits and losses in
1:1. Goodwill of the firm was valued at ₹ 60,000. The adjustment
entry will be:
A Dr. Mohan’s capital A/C and Mac’s Capital A/C by ₹6,000

B Dr. Mac’s Capital A/C and Cr. Mohan’s capital A/C by ₹6,000

C Dr. Mac Capital A/C and Cr. Mohan’s capital A/C by ₹600

D Dr. Mohan’s capital A/C and Mac’s Capital A/C by ₹600

28 The capital employed in the firm throughout the period has been
₹ 4,00,000. Having regard to the risk involved, 15% is considered to be
a fair return on the capital. The remuneration of all the partners during
this period is estimated to be ₹ 1,00,000 per annum. Profits for 4 years
were :- ₹ 2,50,000, ₹ 3,25,000, ₹ 3,75,000, ₹ 3,50,000.
Calculate the value of goodwill on the basis of

i. 2 years’ purchase of super profits earned on average basis during

the above mentioned 3 years
A ₹ 2,80,000

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 B ₹ 4,40,000

C ₹ 8,40,000

D ₹ 4,80,000

29 (ii) By capitalisation method of super profit

A ₹ 2,40,000

B ₹ 4,20,000

C ₹ 2,30,000

D ₹ 3,20,000

30 Amen purchased B’s business with effect from 1st April 2019. It was
agreed that the firm’s goodwill will be valued at two year’s purchase of
average normal profit of the last three years. Profits of B business for
last three years ended 31st March were:-
2017: ₹ 1,00,000 (including an abnormal gain of ₹ 10,000)
2018: ₹ 1,10,000 (after charging an abnormal loss of ₹ 20,000)
2019: ₹ 85,000 (including interest of ₹ 5,000 from non-trade
investment)
Calculate value of the firm’s goodwill.
A ₹ 1,00,000

B ₹ 2,00,000

C ₹ 3,00,000

D ₹ 4,00,000

31 Question 31 to 34 based on the gives case:-

Read the following text and answer the following questions based
thereon:
Seema and Reema befriended each other while doing Bachelors in
Fashion Designing from a well-known college in France. After
completing their Bachelors in 2018, both returned to India and opened
a boutique in Indra Nagar, Bengaluru by investing 50,00,000, each and
sharing profits and losses equally. After being in business for 6 years,
they mutually decided to change their profit-sharing ratio to 2:3 w.e.f.
1st April, 2024 and for this purpose goodwill is to be valued at 3 years'
purchase of average profit of last 5 years which are as follows. 2019-
20: ₹ 75,000; 2020-21: ₹ 1,0,000; 2021-22: ₹ 1,25,000; 2022-23:
₹ 85,000; 2023-24: ₹ 1,15,000.
On 31st March, 2024, Workmen Compensation Reserve and
Advertisement Suspense A/c in the books were ₹ 5,00,000 and ₹
2,00,000 respectively. As there is no claim of compensation by
workmen, the partners decided to carry forward the Workmen
Compensation Reserve in the Balance Sheet of the reconstituted firm.
I. Goodwill of the firm based on 3 Years' purchase of Average Profit is

A ₹ 3,00,000

B ₹ 5,00,000.

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 C ₹ 15,00,000.

D ₹ 1,00,000.

32 II. Journal entry for accounting treatment of Workmen Compensation

Reserve will be.

A Reema’s capital A/C Dr. 50,000

To Seema’s capital A/C 50,000
B Workmen Compensation Reserve A/C Dr 5,00,000
To Reema’s capital A/C 2,50,000
To Seema’s capital A/C 2,50,000

C Seema’s capital A/C Dr. 50,000

To Reema’s capital 50,000
D Workmen Compensation Reserve A/C Dr. 5,00,000
To Reema’s capital A/ 2,00,000
To Seema’s capital A/C 3.00,000
33 III. Journal treatment for accounting treatment of Advertisement
Suspense will be :
A Seema’s Capital A/C Dr. 20,000
To Reema's Capital A/ 20,000
B Advertisement Suspense A/c ..Dr. 2,00,000
To Seema's Capital A/C 80,000
To Reema's Capital A/c 1,20,000

C Reema's Capital A/ ...Dr. 20,000

To Seema's Capital A/c 20,000
D Seema's Capital A/c ...Dr. 1,00,000
Reema's Capital A/c ...Dr. 1,00,000
To Advertisement Suspense 2,00,000
34 IV. Journal entry for accounting treatment of Goodwill will be:

A Seema's Capital A/c .Dr. 50,000

To Reema's Capital A/c 50,000
B Goodwill A/c ...Dr. 1,00,000
To Seema's Capital A/c 50,000
To Reema's Capital A/c 50,000

C Reema's Capital A/c Dr. 30,000

To Seema's Capital A/c 30,000
D Goodwill A/c Dr. 15,00,000
To Seema's Capital A/c 6,00,000
To Reema's Capital A/c 9,00,000

35 Sweety, Amit and Ajit were partners in a firm sharing profits and losses
equally. Harshit is admit as a new partner for an equal share. Harshit is
brought his share of capital and premium of goodwill in cash. The
premium for goodwill will be divided among :

A Old partners in old ratio

B New partners in new ratio

C New partners in sacrificing ratio

Page 10 of 12
 D Old partners in sacrificing ratio

36 Aarij & Rehana are partners sharing profits and losses in the ratio of
3:2. Sam is admitted for ¼ and for which ₹ 30,000 and ₹ 10,000 are
credited as a premium for goodwill to Aarij and Rehana respectively.
The new profit- sharing ratio of Aarij: Rehana:Sam will be:
A 3:2:1

B 12:8:5

C 33:27:20

D 9:6:5

37 Question 37 to 40 based the given study :

Show the accounting treatment under the following cases:-
Show the amount debited or credited to partner’s capital A/C.
Kaity , Shaily and Ruhan are partners sharing profits and losses in the
ratio of 5: 3: 2, decided to share future profits and losses in the ratio of
2 :3: 4 with effect from 1st April, 2018.
An extract of their Balance Sheet as at 31st March, 2024 is :

LIABILITIES ASSESTS

Investments Fluctuation Investments

Reserve ₹20,000 (At cost) ₹ 2,20,000

CASE I: If the market value of investments is ₹ 2,20,000.

A Kaity(Cr) -10,000 Shaily(Dr) - 6,000 Ruhan(Dr) - 4,000

B Kaity(Cr) -10,000 Shaily(Cr) - 6,000 Ruhan(Cr) - 4,000

C Kaity(Dr) -10,000 Shaily(Dr) - 6,000 Ruhan(Dr) - 4,000

D None of the above

38 Case II: If the market value of investments is ₹ 2,10,000.

A Kaity(Cr)15,000 Shaily(Cr) 13,000 Ruhan (Cr) 12,000

B Kaity(Dr) 5,000 Shaily(Dr) 3,000 Ruhan (Dr) 2,000

C Kaity(Cr) 5,000 Shaily(Cr) 3,000 Ruhan (Cr) 2,000

D None of the above

39 Case III : If the market value of investments is ₹ 2,28,000.

A Kaity (Cr)10,000 Shaily(Cr) 6,000 Ruhan(Cr) 4,000

B Kaity (Dr)10,000 Shaily(Cr) 6,000 Ruhan(Cr) 4,000

C Kaity (Dr)10,000 Shaily(Cr) 6,000 Ruhan (Cr)4,000

D None of the above

Page 11 of 12
 40 Case IV : If the market value of investments is ₹ 1,90,000.

A Kaity(Dr) 5,000 Shaily(Cr) 3,000 Ruhan(Cr) 2,000

B None of the above

C Kaity(Dr) 15,000 Shaily(Dr) 13,000 Ruhan(Dr) 1s2,000

D Kaity(Dr) 5,000 Shaily(Dr) 3,000 Ruhan(Dr) 2,000

ANSWERS:

QUE 1 2 3 4 5 6 7 8 9 10

ANS D A A C C A D A B D

QUE 11 12 13 14 15 16 17 18 19 20

ANS C C B A C D B A A A

QUE 21 22 23 24 25 26 27 28 29 30

ANS B B C B C B A D D B

QUE 31 32 33 34 35 36 37 38 39 40

ANS A B D C D C B C A D

******************

Page 12 of 12
 KENDRIYA VIDYALAYA SANGATHAN, AHMEDABAD REGION

SUBJECT: ACCOUNTANCY CLASS: XII

CHAPTER: 3-ADMISSION OF A PARTNER

1 Assertion:(A) Admission of a partner leads to dissolution of old firm and

bringing new firm into existence.
Reason(R): As a result of admission of a partner, old partners along with
the new partner constitute the new firm. Thus, old firm is dissolved and
new firm comes into existence.
In the context of the above two statements, which of the following
is correct?

A Assertion (A) and reason (R) are correct but the reason (R) is not the
correct explanation of assertion(A).

B Both, Assertion (A) and reason (R) are the correct explanation of
assertion(A).

C Assertion (A) is correct but the reason (R) is not correct.

D Both Assertion (A) and Reason(R) are incorrect.

2 Assertion: (A) Revaluation A/c is prepared at the time of Admission of a

partner.
Reason: (R): It is required to adjust the values of assets and liabilities
at the time of admission of a partner, so that the true financial position of
the firm is reflected.
In the context of the above two statements, which of the following
is correct?
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.

3 Assertion (A): At the time of admission of a partner the goodwill already

existing in the books of accounts, the goodwill is written off by all partners
including new partner.
Reason(R): When goodwill already exists in books at the time of
admission, the existing goodwill must be written off by debiting the old
partners in their old profit-sharing ratio.
In the context of the above two statements, which of the following
is correct?
A Both Assertion (A) and Assertion (A) are true.

Page 1 of 14
 B Both Assertion (A) and Reason (R) are false.

C Assertion (A) is true and Reason (R) is false.

D Assertion (A) is false and Reason (R) is true.

4 Assertion (A): General reserve not distributed among the old partner but
is carried forward in the balance sheet prepared after admission of a
partner.
Reason(R): General reserve is set aside out of past profits and therefore,
it is not distributed among old partners.
In the context of the above two statements, which of the following
is correct?

A Assertion (A) and reason (R) are correct but the reason (R) is not the
correct explanation of assertion(A).

B Both, Assertion (A) and reason (R) are the correct explanation of
assertion(A).

C Assertion (A) is correct but the reason (R) is not correct.

D Both Assertion (A) and Reason(R) are incorrect.

5 Statement (1): At the time of admission of partners if there is any

General Reserve, Reserve Fund or the balance of Profit & Loss Account
appearing in the balance sheet, it should be transferred to old partners’
Capital/Current Accounts in their old profit-sharing ratio.
Statement (2): The General Reserve, Reserve Fund or the balance of
Profit & Loss Account are the result of the past profits before the admission
of a new partner.
In the context of the above statements, which one of the following
is correct?

A Both Statement (1) and Statement (2) are true.

B Both Statement (1) and Statement (2) are false.

C Statement (1) is true, but Statement (2) is false.

D Statement (1) is false, but Statement (2) is true.

Page 2 of 14
6 Statement (1): On reconstitution of a firm, ‘Interest on Drawings’ is
shown in P & L Appropriation A/c.
Statement (2): On admission of a partner, ‘Interest on Drawings’ are
charge against the profits.
In the context of the above statements, which one of the following
is correct?

A Both Statement (1) and Statement (2) are true.

B Both Statement (1) and Statement (2) are false.

C Statement (1) is true, but Statement (2) is false.

D Statement (1) is false, but Statement (2) is true.

7 Statement (1): Revaluation A/c is prepared at the time of Admission of

a partner.
Statement (2): The Profit or Loss on the revaluation of Assets and
Liabilities, on reconstitution of firm, is distributed among old partners in
their old ratio.
In the context of the above statements, which one of the
following is correct?

A Both Statement (1) and Statement (2) are true.

B Both Statement (1) and Statement (2) are false.

C Statement (1) is true, but Statement (2) is false.

D Statement (1) is false, but Statement (2) is true.

8 Statement (1): Rent to partner is not shown in the Capital Account.

Statement (2): Rent to a partner is a charge against profit.
In the context of the above statements, which one of the
following is correct?

A Both Statement (1) and Statement (2) are true.

B Both Statement (1) and Statement (2) are false.

C Statement (1) is true, but Statement (2) is false.

Page 3 of 14
 D Statement (1) is false, but Statement (2) is true.

9 Match group I with group II and select the correct answer using the
codes given below the list:
Group I Group II
A. Reserve fund/general reserve 1. Old ratio – new ratio
B. Sacrificing ratio 2. Credit to revaluation A/c
C. Increase in the value of liability 3. Accumulated profit
D. Increase in the value of asset 4. Debit to revaluation A/c

A A-2, B-4, C-1, D-3

B A-4, B-3, C-1, D-2

C A-2, B-3, C-4, D-1

D A-3, B-1, C-4, D-2

10 Match the following with respect to journal entries for treatment of

goodwill.
(i) Incoming partner A No Entry
brings his share of
goodwill.
(ii) Incoming partner does B Premium for Goodwill A/c Dr.
Incoming Partner’s Capital A/c Dr.
not bring his share of
To Sacrificing Partners Capital A/c
goodwill
(iii) Incoming partner pays C Premium for Goodwill A/c Dr.
To Sacrificing Partners Capital A/c
his share of goodwill
privately
(iv) Incoming partner D Incoming Partner’s Capital A/c Dr.
brings only a part of To Sacrificing Partners Capital A/c

his share of goodwill

A i- B, ii-C, iii-A, iv-D

B i- C, ii-D, iii-A, iv-B

C i- D, ii-C, iii-A, iv-B

D i- D, ii-C, iii-B, iv-A

Page 4 of 14
11 Match the following using codes given below

1 Old partners A Premium for goodwill

2 Sacrificing partners B Profit of the newly

reconstituted firm

3 All partners C Introduce capital

4 New partner D Revaluation profit

A 1-D; 2-A; 3-B; 4-C

B 1-D; 2-A; 3-C; 4-B

C 1-D; 2-B; 3-A; 4-C

D 1-D; 2-B; 3-C; 4-A

12 Match the following using codes given below

1 Sacrificing Ratio A Nominal Account

2 Gaining Ratio B Reconstitution of Partnership

3 Revaluation Account C New Ratio-Old Ratio

4 Admission of Partner D Old Ratio-New Ratio

A I-B, II-C, III-A, IV-D

B I-D, II-B, III-A, IV-C

C I-D, II-C, III-A, IV-B

D I-D, II-C, III-B, IV-A

13 X and Y are sharing profits and losses in the ratio 3:2. They admit Z as a
partner and give him 2/10th share in the profits. The new profit-sharing
ratio will be

A 12:8:5

B 3:2:2

C 3:2:5

Page 5 of 14
 D 2:1:2

14 Unrecorded Assets or Liabilities are transferred to

A Partners’ Capital Accounts

B Revaluation Account

C Profit & Loss Account

D Partners’ Current Accounts

15 Aditya and Shiv were partners in a firm with capitals of ₹ 3,00,000 and
₹ 2,00,000, respectively. Naina was admitted as a new partner for 1/4th
share in the profits of the firm. Naina brought ₹ 1,20,000 for her share of
goodwill premium and ₹ 2,40,000 for her capital. The amount of goodwill
premium credited to Aditya will be

A ₹40,000

B ₹30,000

C ₹72,000

D ₹60,000

16 Aditi and Bobby were partners with capital of ₹ 30,000 each. They
admitted Chetana as a new partner for 1/4th share in the profit of the firm.
Chetana brought ₹ 48,000 as her capital. On Chetana’s admission, the
Profit and Loss Account of the firm showed a credit balance of ₹ 24,000.
Value of goodwill of the firm on Chetana’s admission will be

A ₹40,000

B ₹60,000

C ₹75,000

D ₹30,000

17 X and Y are partner in a firm with capital of ₹ 18,000 and ₹ 20,000.

Page 6 of 14
 Z brings ₹ 10,000 for his shares of Goodwill and he is required to bring
proportionate capital for 1/3rd share in profits. The capital contribution of
Z will be

A ₹24,000

B ₹19,000

C ₹12,000

D ₹14,000

18 A and B are partners sharing profits and losses in the ratio 3:2. C is
admitted 1/4th and for which ₹ 30,000 and ₹ 10,000 are credit as a
Premium for Goodwill to A and B respectively. The new profit-sharing ratio
of A, B and C will be

A 3:2:1

B 12:8:5

C 9:6:5

D 33:27:20

19 When a new partner is admitted, the balance of ‘General Reserve’

appearing in the balance sheet at the time of admission is credited to

A Profit & loss appropriation account

B capital accounts of all the partners

C Capital accounts of old partners

D Revaluation account

20 Ganga and Jamuna are partners sharing profit in the ratio of 2:1. They
admitted Saraswati for 1/5th share in future profits. On the date of
admission, Ganga’s capital was ₹ 1,02,000 and Jamuna’s capital was ₹
73,000. Sarasvati agrees to contribute proportionate capital in the new
firm. How much capital will be brought by Sarasvati?

A ₹43,750

Page 7 of 14
 B ₹37,500

C ₹50,000

D ₹40,000

21 Mehak and Chetan were partners with capital of ₹ 40,000 each. They
admitted Aadi’s as a new partner for 1/5th share in the profit of the firm.
Aadi’s brought ₹ 80,000 as his capital. On Aadi’s admission, the profit and
loss account of the firm showed a debit balance of ₹ 10,000. Value of
goodwill of the firm on Aadi’s admission will be.

A ₹ 2,50,000

B ₹ 2,40,000

C ₹ 2,30,000

D ₹ 40,000

22 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 ₹ 60,0000. 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%.
Angle’s share in loss on revaluation amounted to ₹ 30,000. New value of
furniture will be: -

A ₹ 2,17,000

B ₹ 1,03,000

C ₹ 3,03,000

D ₹ 1,83,000

23 A and B are partners in a firm having capitals of ₹ 15,000 each. R is

admitted for 1/3rd share for which he has to bring ₹ 20,000 for his shares
of capital. The amount of goodwill will be: -

A ₹ 8,000

Page 8 of 14
 B ₹ 10,000

C ₹ 9,000

D ₹ 11,000

24 For which of the following situation, old profit-sharing ratio of partner is

used at the time of admission of a new partner?

A When new partner brings only a part of his shares of goodwill

B When new partner is not able to bring his shares of goodwill

C When, at the time of admission, goodwill already exists in the balance

sheet

D When new partner brings his shares of goodwill in cash

Case based question

On 1st April 2021 Seema and Chandra entered into partnership for sharing
profits in the ratio of 4:3. They admitted Tipu as a new partner on 1st April
2023 for 1/5th share which he acquired equally from Seema and Chandra.
For the year ended on 31st March, 2024 the form earned profit at the
higher rate than normal rate of return. Therefore, they decided to expand
their business. To meet the requirement of additional capital of ₹
5,00,000, they admitted Pravina as a new partner on 1 st April 2024 for
1/7th share in profits which she acquired from Seema and Chandra in the
ratio of 7:3. Goodwill of the firm at the time of Pravina’s admission was
decided for ₹ 3,50,000. Along with her capital Pravina brought her share
of goodwill in cash.
Based on the above case study question choose the correct
alternative for question 25-28
25 What will be the new profit-sharing ratio after Tipu’s admission?

A 16: 12: 7

B 33: 23: 14

C 11: 23: 33

D None of the above

26 What will be the new profit-sharing ratio of Seema, Chandra, Tipu and
Pravina?
A Equal

B 26:10:1:5

C 3:10:7:5

Page 9 of 14
 D 13:10:7:5

27 With how much amount cash account will be debited at the time of
Pravina’s admission?
A ₹ 1,50,000

B ₹ 8,50,000

C ₹ 5,50,000

D None of the above

28 Which of the following journal entry is correct?

A Seema’s A/c with ₹ 35,000 and Chandra’s A/c with ₹ 15,000

B Seema’s A/c with ₹ 15,000 and Chandra’s A/c with ₹ 35,000

C Seema’s A/c with ₹ 2,45,000 and Chandra’s A/c with ₹ 1,05,000

D Seema’s A/c with ₹ 1,05,000 and Chandra’s A/c with ₹ 2,45,000

29 Manas and Mili are partners in a firm sharing profits in the ratio of 3:2.
Anita is admitted as a new partner for 1/4th share in the future profits.
Capital of Manas and Mili were ₹ 3,00,000 and ₹ 1,50,000 respectively.
Anita brought ₹ 2,00,000 as her capital. The value of goodwill of the firm
on Anita’s admission would be: -

A ₹ 2,50,000

B ₹ 8,00,000

C ₹ 4,00,000

D ₹ 1,50,000

30 A and B are partners sharing profits and losses in the ratio of 7:5. They
agree to admit C, their manager, into partnership who is to get 1/6th share
in the profits. He acquires this share as 1/24th from A and 1/8th from B,
the new profit-sharing ratio will be.

A 13:7:4

B 7:5:6

C 5:6:7

Page 10 of 14
 D 13:4:7

31 Amar and Prem are partners in a firm sharing profits and losses in the
ratio of 3:1. Balance Sheet (Extract)

Liabilities ₹ Assets ₹

Land & Building 30,00,000

If the value of Land & Building reflected in the balance sheet is

undervalued by 16.67%, find out the value of Land & Building to be
shown in the new Balance Sheet:

A ₹ 25,00,000

B ₹ 36,00,000

C ₹ 24,00,000

D ₹ 35,00,000

32 A and B are partners in a firm having capital balances of ₹ 54,000 and

₹ 36,000 respectively. They admit C in partnership for 1/3rd share and C
is to bring proportionate amount of capital. The capital amount of C would
be:

A ₹ 90,000

B ₹ 45,000

C ₹ 5,400

D ₹ 36,000

33 At the time of admission of a partner, what will be the effect of the

following information? Balance in Workmen compensation reserve ₹
2,80,000. Claim for workmen compensation ₹ 2,20,000.

A ₹ 2,80,000 Debited to the Partner’s capital Accounts.

B ₹ 2,20,000 Debited to Revaluation Account.

C ₹ 60,000 Credited to the Partner’s capital Accounts.

Page 11 of 14
 D ₹ 60,000 to Debited Revaluation Account

34 Being new partner Chalder brought ₹ 20,000 for his share of goodwill.
Which account should be debited?
A Goodwill account.

B Bank account.

C Partners’ Capital Accounts.

D profit & Loss Appropriation Account

35 Increase and decrease in the value of assets and liabilities at admission

of anew partner are recorded through

A Profit and loss Account

B Profit and Loss Appropriation account

C Partner’s capital Accounts.

D Revaluation Account.

36 Arun and Vijay are partners in a firm sharing profits and losses in the
ratio of 5:1. Balance Sheet (Extract)
Liabilities ₹ Assets ₹

Machinery 40,000

If the value of machinery reflected in the balance sheet is overvalued by

33 %, find out the value of Machinery to be shown in the new Balance
Sheet:

A ₹ 44,000

B ₹ 48,000

C ₹ 32,000

D ₹ 30,000

37 A firm has an unrecorded investment of ₹ 5,000 at the admission of X a

new partner. Entry in the firm’s journal on admission of a Z will:
A Revaluation Account Dr. ₹ 5,000
To Investment A/c ₹ 5000

Page 12 of 14
 B Investment A/c Dr. ₹ 5000
To Revaluation A/c ₹ 5000

C Partner’s Capital A/c Dr. ₹ 5000

To Unrecorded Investment A/c ₹ 5000

D None of these

38 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 ₹ 1,20,000 against capital and
₹ 80,000 against goodwill. Find the capital balances for each partner
taking Z’s capital as base. Capitals of X & Y at the time of Admission of Z
were ₹ 2,50,000 and ₹ 1,50,000 respectively.
A ₹ 3,00,000; ₹ 1,20,000 and ₹ 1,20,000

B ₹3,00,000; ₹1,20,000 and ₹1,80,000

C ₹3,00,000; ₹1,80,000 and ₹ 1,20,000

D ₹3,00,000; ₹1,80,000 and ₹ 1,80,000

39 P, Q and R share profits in the ratio of 5:3:2. S is entitled for 1/5th share
in profits which he acquires equally from P, Q and R. Goodwill of the firm
is to be valued at three year’s purchase of last four year’s profits which
are ₹ 50,000; ₹ 60,000; ₹ (30,000) and ₹ 40,000. S cannot bring his
share of goodwill in cash. Credit will be given to

A P ₹ 30,000; Q ₹ 30,000; R ₹ 30,000

B P ₹ 6,000; Q ₹ 6,000; R ₹ 6,000

C P ₹ 45,000; Q ₹ 27,000; R ₹ 18,000

D P ₹ 9,000; Q ₹ 9,000; R ₹ 9,000

40 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

A 3:1:5

B 9:7:4

Page 13 of 14
 C 3:2:5

D 7:9:4

ANSWER:
QUE 1 2 3 4 5 6 7 8 9 10

ANS D A D D A C A A D B

QUE 11 12 13 14 15 16 17 18 19 20

ANS A C A B D B A D C B

QUE 21 22 23 24 25 26 27 28 29 30

ANS A D B C B D C A D A

QUE 31 32 33 34 35 36 37 38 39 40

ANS B B C B D D B C B B

******************

Page 14 of 14
 KENDRIYA VIDYALAYA SANGATHAN, AHMEDABAD REGION
SUBJECT: ACCOUNTANCY CLASS: XII
CHAPTER – 3: RETIREMENT AND DEATH OF A PARTNER
Q
1 Given below the two statements, one labelled as Assertion (A) and
other labelled as Reason (R)
Assertion (A): Amount due to the retiring partner is always transferred
to his loan A/c
Reason (R): Amount due to the retiring partner may be paid
immediately or later in instalments.
In the context of above two statements, which of the below options is
correct?
A Assertion (A) and Reason are correct and Reason (R) is the correct
explanation of Assertion (A).
B Assertion (A) and Reason are correct and Reason (R) is not the correct
explanation of Assertion (A).
C Assertion (A) is correct but Reason is not correct.
D Assertion (A) is not correct but Reason is correct.
2 Given below the two statements, one labelled as Assertion (A) and
other labelled as Reason (R)
Assertion (A): In absence of partnership deed or agreement, interest on
amount due to deceased partner is paid @ 6% p.a. on the outstanding
amount.
Reason (R): Unpaid amount is not a loan to the firm. Thus, interest is
not payable in the absence of agreement.
In the context of above two statements, which of the below options is
correct?
A Assertion (A) and Reason are correct and Reason (R) is the correct
explanation of Assertion (A)
B Assertion (A) and Reason are correct and Reason (R) is not the correct
explanation of Assertion (A)
C Assertion (A) is correct but Reason is not correct
D Assertion (A) is not correct but Reason is correct
3 Given below the two statements, one labelled as Assertion (A) and

Page 1 of 12
 other labelled as Reason (R)
Assertion (A): At the time of retirement of a partner, his share of
goodwill is divided equally among continuing partners.
Reason (R): Continuing partners compensate the retiring partner by
paying goodwill in their gaining ratio.
In the context of above two statements, which of the below options is
correct?
A Assertion (A) and Reason are true and Reason (R) is the correct
explanation of Assertion (A)
B Assertion (A) and Reason are true and Reason (R) is not the correct
explanation of Assertion (A)
C Assertion (A) is false, but Reason (R) is true
D Assertion (A) is true, but Reason(R) is false
4 Given below the two statements, one labelled as Assertion (A) and
other labelled as Reason (R)
Assertion (A): The retiring / deceased partner is entitled to his share in
the accumulated profits and is liable to share the accumulated losses, if
any.
Reason (R): These accumulated profits or losses belong to all the
partners and should be transferred to the capital accounts of all partners
in their old profit-sharing ratio.
In the context of above two statements, which of the below options is
correct?
A Both Assertion (A) and Reason are true and Reason (R) is the correct
explanation of Assertion (A)
B Both Assertion (A) and Reason are true and Reason (R) is not the correct
explanation of Assertion (A)
C Both Assertion (A) and Reason (R) false
D Assertion (A) is false, but Reason (R) is true
5 Statement – I: In case of retirement of a partner, profit or loss on
revaluation of Assets and reassessment of Liabilities is distributed among
old partners in gaining ratio.
Statement – II: Gaining ratio is the ratio in which the continuing
partners acquire the share from the retiring / deceased partner.

Page 2 of 12
 A Both the statements are true
B Both the statements are false
C Statement – I is true and Statement – II is false
D Statement – I is false and Statement – II is true
6 Statement – I: At the time of retirement / death of a partner, goodwill is
valued as per agreement among the partners.
Statement – II: The retiring / deceased partner is compensated for his
share of goodwill by the continuing partners in their gaining ratio.
A Both the statements are true
B Both the statements are false
C Statement – I is true and Statement – II is false
D Statement – II is true and Statement – I is false
7 Statement – I: On retirement / death of a partner, the retiring /
deceased Partners’ Capital Account will be credited with goodwill of the
firm.
Statement – II: If the firm has agreed to settle the retiring or deceased
partner’s account by paying him a lump sum amount, then the amount
paid to him in excess of what is due to him, based on the balance in his
capital account after making necessary adjustments in respect of
accumulated profits and losses and revaluation of assets and liabilities,
etc., shall be treated as his share of goodwill.
A Both the statements are true
B Both the statements are false
C Statement – I is true and Statement – II is false
D Statement – II is true and Statement – I is false
8 Statement – I: Section 37 of Indian Partnership Act, 1932 states that
the retiring partner has an option to receive either interest @ 6% p.a. till
the date of payment or such share of profits which has been earned with
his / her money (i.e., based on capital ratio).
Statement – II: The total amount due to the retiring partner, which is
ascertained after all adjustments have been made, has to be paid
immediately to the retiring partner in all cases.
A Both the statements are true

Page 3 of 12
 B Both the statements are false
C Statement – I is true and Statement – II is false
D Statement – II is true and Statement – I is false
9 Match the following and choose correct option:

1. Profit& Loss Appropriation A. Distribution of General Reserve

Account
2. Profit & Loss Suspense B. Distribution of Net Profit
C. Distribution of Profit up to the date
of death
A [1-B, 2-C]
B [1-B, 2-A]
C [1-A, 2-C]
D [1-C, 2-A]
10 Match the following and choose correct option:

1. The deceased partner’s share of A. Profit & Loss Adjustment

profit/loss up to his death is recorded
in : In case when profit sharing ratio
of old partners’ remain same.
2. The deceased partner’s share of B. Profit & Loss
profit/loss up to his death is recorded
in :In case when profit sharing ratio of
old partners’ changed.
C. Partners’ capital A/c
D. Profit & Loss Suspense A/c
A [1-B, 2-C]
B [1-B, 2-A]
C [1-A, 2-D]
D [1-D, 2-C]

Page 4 of 12
11 Match the following and choose correct option:

1. A, B and C are partners in the firm. B retires A. ₹ 65,000

from the firm. The capital of A and C after all
adjustment is ₹ 50,000 and ₹ 60,000. Adjust their
capitals in new profit sharing ratio. Calculate the
new capital of C.
2. A, B and C are partners in ratio 2:1:1. B retires B. ₹ 55,000
from the firm. The capital of new firm is fixed at ₹
1,20,000. Calculate the new capital of partner of A.
C. ₹ 40,000
D. ₹ 80,000
A [1-B, 2-D]
B [1-B, 2-A]
C [1-D, 2-C]
D [1-C, 2-A]
12 Match the following and choose correct option:

1. X, Y and Z are partners sharing ratio A. X and Y both gains.

4:3:3. Z retires and the new ratio between
X and Y is 7:3. Which partner gain?
2. X, Y and Z are partners sharing in ratio B. Only X gains
6:5:4. Z retires and new ratio between X
and Y is 11:4. Which partners sacrifice?
C. Only Y Sacrifice
D. X and Y both sacrifices.
A [1-B, 2-C]
B [1-B, 2-A]
C [1-A, 2-C]
D [1-B, 2-D]
CASE STUDY BASED QUESTION:
B, G and M are partners in a firm sharing profits and losses in the ratio of
7:8:5. Balance sheet of the firm as at 31st march, 2024 was as follows:
Balance Sheet as at 31st March, 2024
Liabilities ₹ Assets ₹

Page 5 of 12
 Investment Buildings 1,30,000
fluctuation reserve 60,000 Machinery 1,50,000
Creditors 87,500 Motor 90,000
Bills payable 50,000 Furniture 45,000
Bank loan 52,500 Debtors 1,20,000
Capitals: Stock 60,000
B – 2,20,000 Investment 1,80,000
G – 1,90,000 Bills receivable 30,000
M – 1,60,000 5,70,000 Bank 15,000
8,20,000 8,20,000
M retired from the firm as on that date giving his share of profits to B for
₹ 27,000 and to G for ₹ 36,000. For the purpose of M’s retirement, it was
agreed that:
(i) Stock is to be appreciated by 20%.
(ii) Motor vehicles is to be valued at ₹ 70,000
(iii) Provision for doubtful debts is to be created at 10%.
(iv) Investments are sold for ₹ 2,30,000
(v) Unrecorded furniture was valued at ₹ 10,000, which was taken by the
retiring partner.
Based on the above information, answer the following questions:
13 New profit sharing ratio of B and G would be
A 1:1
B 7:8
C 3:4
D 16:19
14 Gain / Loss on revaluation of assets and reassessment of liabilities would
be
A ₹ 30,000 Gain
B ₹ 28,000 Gain
C ₹ 40,000 Gain
D ₹ 18,000 Gain
15 On retirement of M, goodwill of the firm was valued at
A ₹ 63,000

Page 6 of 12
 B ₹ 2,52,000
C ₹ 1,80,000
D Cannot be determined from the given data
16 Amount transferred to M’s loan account will be
A ₹ 2,48,000
B ₹ 2,38,000
C ₹ 2,28,000
D ₹ 2,23,000
17 If three partners A, B and C are sharing profit as 5:3:2, then on the death
of a partner A, how much B and C will pay to an executor on account of
goodwill. Goodwill is to be calculated on the basic of 2 years purchase of
last 3 years average profit. Profits for the last 3 years are ₹ 3,28,000,
₹ 3,46,000 and ₹ 4,00,000.
A ₹ 3,16,000 and ₹ 1,42,000
B ₹ 2,44,000 and ₹ 2,16,000
C ₹ 4,29,600 and ₹ 2,86,400
D ₹ 2,16,000 and ₹ 1,44,000
18 A, B and C are partners in a firm sharing profit and losses in 3:4:2. B
retires from the firm. The profit on revaluation on that date was ₹
72,000, New ratio between A and C is 5:3. Profit on revaluation will be
distributed as:
A A ₹ 32,000; B ₹ 24,000; C ₹ 16,000
B A ₹ 24,000; B ₹ 32,000; C ₹ 16,000
C A ₹ 45,000; C ₹ 27,000
D A ₹ 47,250; C ₹ 24,750
19 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, 2023. On the date of P’s death, the
Profits of the firm were calculated as ₹ 80,000. P’s share of Profits will be
adjusted by.
A Debiting Profits and Loss A/c with ₹ 40,000
B Debiting Profits and Loss Appropriation A/c with ₹ 40,000
C Debiting Profits and Loss Suspense A/c with ₹ 80,000
D Debiting Profits and Loss Suspense A/c with ₹ 40,000

Page 7 of 12
20 The old profit-sharing ratio among Rajender, Satish and Tejpal were
2:2:1. The new profit-sharing ratio after Satish’s retirement is 3:2. The
gaining ratio is:
A 3:2
B 2:1
C 1:1
D 1:2
21 At the time of retirement of a partner, compensation paid to sacrificing
partner as goodwill is recorded by passing the following journal entry:
A Goodwill A/c ... Dr.
To Retiring partner’s capital A/c
B Gaining partner’s capital A/c ... Dr.
To Retiring partner’s capital A/c
C Gaining partner’s capital A/c ... Dr.
To Goodwill A/c
D Retiring partner’s capital A/c ... Dr.
To Gaining partner’s capital A/c
22 From the following information, calculate the amount due to Mohan (the
retiring partner) Capital account balance ₹ 1,50,000; Loan account
balance (cr.) ₹ 1,25,500; Accrued interest on loan ₹ 4,000; Value of
Goodwill ₹ 1,25,000; Revaluation profit ₹ ₹ 25,000; Share of profit 50%.
A ₹ 3,50,000
B ₹ 3,54,500
C ₹ 3,44,000
D ₹ 3,55,000
23 A, B and C are partners in ratio 2:2:1. C retires from the firm. The capital
balance of A, B & C are ₹ 1,20,000; ₹ 1,40,000 and ₹ 1,00,000. C was to
be paid in cash brought in by A and B. What be the new capital of A and B
of newly constituted firm?
A New capital of A ₹ 1,80,000 and of B ₹ 1,80,000
B New capital of A ₹ 1,20,000 and of B ₹ 1,40,000
C New capital of A ₹ 1,80,000 and of B ₹ 1,20,000
D New capital of A ₹ 1,20,000 and of B ₹ 1,80,000

Page 8 of 12
24 Claim of the retiring partner is payable in the following form.
A Fully in cash
B Fully transferred to Loan A/c to be paid later with some interest on it
C Party in Cash and party as loan repayable later with agreed interest
D Any of the above method
25 Retiring or outgoing partner.
A Is liable for firm liabilities
B Not liable for any liabilities of the firm
C Is liable for obligation incurred before his retirement
D Is liable for obligation incurred before and after his retirement
26 A, B, and C are partners sharing profits in the ratio of 7:5:4. C died on
30th June, 2023 and profits for the year 2023-24 were ₹ 24,000. C’s
share in profit will be ______.
A ₹ 1,500
B ₹ 2,400
C ₹ 3,000
D ₹ 4,800
27 Ram, Mohan and Sohan are partner sharing profit in the ratio of 4:3:2.
Mohan died on 1st Oct 2023, new ratio will be 1:2 among Ram and Sohan,
goodwill of the firm is valued at ₹ 6,00,000. _____________ amount will
be transfer to Mohan capital A/c.
A ₹ 1,50,000
B ₹ 1,00,000
C ₹ 3,00,000
D ₹ 2,00,000
28 Mohan a partner died on 30th September, 2023 he withdraws ₹ 4,000 per
month in the beginning of every month. Rate of interest charged on
drawings is 12% p.a. Amount of interest on drawing will be _________ if
firm closes its account at the end of every year.
A ₹ 1,680
B ₹ 840
C ₹ 2,400
D ₹ 4,800

Page 9 of 12
29 An account prepared to ascertain the gain or loss at the time of death of a
partner is called
A A realisation Account
B Executors Account
C Revaluation Account
D Decreased Partner
30 In the event of death of a partner the General Reserve is transferred to
partners’ capital A/c in.
A Capital ratio
B New ratio
C Gaining ratio
D Old ratio
31 A, B & C are partners. C retires from the firm. There is workmen
Compensation Reserve appearing in Balance Sheet of ₹ 60,000. Claim on
account of Workmen Compensation is ₹ 15,000. Calculate the amount
credited to C for Workmen Compensation Reserve.
A ₹ 15,000
B ₹ 45,000
C ₹ 30,000
D ₹ 75,000
32 Vijay, Ajay and Sanjay are partners in a firm sharing profits and losses in
the ratio of 7:5:8. Sanjay dies on 28th August, 2023. His share in the
profits of the firm till the date of his death was determined at ₹ 75,000. It
will be debited to which of the following accounts?
A Profit & loss suspense A/c
B Profit & loss A/c
C Profit & loss appropriation A/c
D Profit & loss adjustment A/c
33 Choose the odd one:
A Revaluation A/c
B Adjustment of Goodwill
C Gaining ratio
D Realisation A/c

Page 10 of 12
34 According to the Indian partnership act, 1932, interest payable on the
amount due to the deceased partner is
A 6% p.a.
B 8% p.a.
C 10% p.a.
D 12% p.a.
35 A, B and C are partners sharing profits in ratio 3:2:1. C retired from the
firm. The total capital of new firm is fixed at ₹ 60,000. What will be the
new capital of A and B:
A ₹ 30,000 and ₹ 30,000
B ₹ 24,000 and ₹ 36,000
C ₹ 36,000 and ₹ 24,000
D ₹ 40,000 and ₹ 20,000
36 Anu, Monu and Sonu were partners in a firm sharing profits in the ratio of
5:3:2. Monu died on 1st January, 2024. Anu and Sonu will acquire Monu’s
share in the ratio of
A 1:1
B 5:3
C 3:5
D 5:2
37 P, Q and R sharing profit and losses in the ratio of 8:5:3. Q retires from
the firm takes 3/16 from P and R takes 5/16 from P. New profit-sharing
ratio between Q and R will be
A 1:1
B 10:6
C 9:7
D 5:3
38 If three partners A, B, C are sharing profit as 5:3:2, then on the death of
a partner A, how much B and C will pay to A’s executor on account of
goodwill. Goodwill is to be calculated on the basic of 2 years’ purchase of
last 3 years average profit, profits for the last 3 years are ₹ 3,28,000 ₹
3,46,000 and ₹ 4,00,000.
A ₹ 3,16,000 and ₹ 1,42,000

Page 11 of 12
 B ₹ 2,44,000 and ₹ 2,16,000
C ₹ 4,29,600 and ₹ 2,86,400
D ₹ 2,16,000 and ₹ 1,44,000
39 A, B and C are partners sharing profits in the ratio 2:2:1. B retires from
the firm. The capital account of A, B and C are ₹ 60,000 ₹ 70,000 and
₹ 50,000 respectively after adjustment of Goodwill, Reserved and
Revaluation. B was to be paid in cash brought in by A and C in such a way
that their capital is in proportion of new ratio. How much amount A and C
must bring to pay B :
A ₹ 50,000 by A and ₹ 20,000 by B
B ₹ 60,000 by A and ₹ 10,000 by B
C ₹ 35,000 by A and ₹ 35,000 by B
D ₹ 40,000 by A and ₹ 30,000 by B
40 At the time death of a partner General reserve appearing in the balance
sheet should be credited to:
A All partners including deceased partner in their old profit-sharing ratio
B Remaining partners in the new profit-sharing ratio
C Neither the decreased nor the remaining partners
D Remaining partner in gaining ratio

Answer:
QUE 1 2 3 4 5 6 7 8 9 10

ANS D C C A B A D C A D

QUE 11 12 13 14 15 16 17 18 19 20

ANS A A D C B B C B D C

QUE 21 22 23 24 25 26 27 28 29 30

ANS B B +A D C A D B C D

QUE 31 32 33 34 35 36 37 38 39 40

ANS A C D A C D A C B A

******************

Page 12 of 12
 KENDRIYA VIDYALAYA SANGATHAN, AHMEDABAD REGION
SUBJECT: ACCOUNTANCY: XII
CHAPTER: DISSOLUTION OF PARTNERSHIP
Q
1 Assertion (A):
On dissolution, goodwill account is transferred to Realisation Account.
Reason (R):
Goodwill is an Intangible Asset which is not seen or touched.
A Both Assertion and reason are true and reason is correct explanation
of assertion.
B Assertion and reason both are true but reason is not the correct
explanation of assertion.
C Assertion is true, reason is false.
D Assertion is false, reason is true.
2 Assertion (A):
At the time of Dissolution of Partnership Firm, the amount received from
realisation of all the assets of the firm is used first of all to pay the
external liabilities of the firm.
Reason (R):
As per the Partnership Act 1932, Outside liability should be paid first of
all, at the time of dissolution of Partnership Firm.
A Both Assertion and reason are true and reason is correct explanation
of assertion.
B Assertion and reason both are true but reason is not the correct
explanation of assertion.
C Assertion is true, reason is false.
D Assertion is false, reason is true.
3 Assertion (A):
A Partnership firm is dissolved compulsorily when all the partners or
all but one partner, become insolvent.
Reason (R):
Dissolution of Partnership Firm and dissolution of partnership both are the
same.
A Both Assertion and reason are true and reason is correct explanation
of assertion.

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 B Assertion and reason both are true but reason is not the correct
explanation of assertion.
C Assertion is true, reason is false.
D Assertion is false, reason is true.
4 Assertion (A): Realisation account is prepared at the time of dissolution
of partnership.
Reason (R): Realisation account records the cash release from sale of
assets and amount paid to external liabilities.
A Both Assertion and reason are true and reason is correct explanation
of assertion.
B Assertion and reason both are true but reason is not the correct
explanation of assertion.
C Assertion is true, reason is false.
D Assertion is false, reason is true.
5 Statement 1: All the time of dissolution of partnership firm all assets
should be transferred to realization A/c.
Statement 2: All assets except the cash or bank balances are transferred
to the realization A/c.
A Only statement 1 is correct.
B Only statement 2 is correct.
C Both statements are correct.
D Both statements are incorrect.
6 Statement 1: The property of the firm shall be applied in the first
instance in payment of the debts of the firm.
Statement 2: The Indian partnership act, 1932 is silent regarding the
modes of dissolution of a partnership firm.
A Only statement 1 is correct.

B Only statement 2 is correct.

C Both statements are correct.

D Both statements are incorrect.

7 Statement 1: Realisation loss is not transferred to the insolvent partner’s

capital A/c.
Statement 2: The insolvency loss at the time of dissolution of the firm is
shared by the solvent partners in their profit-sharing ratio.

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 A Only statement 1 is correct.

B Only statement 2 is correct.

C Both statements are correct.

D Both statements are incorrect.

8 Statement 1: All fictitious assets are transferred to the partner’s capital

A/c in the ratio of their respective capitals.
Statement 2: Goodwill will be sold like any other assets when the firm is
dissolved.
A Only statement 1 is correct.

B Only statement 2 is correct.

C Both statements are correct.

D Both statements are incorrect.

9 Match the following

(i) Realisation A/c Dr

a. On payment of liabilities.
To Cash/Bank A/c

b. If a partner agrees to
(ii) No entry
settle a liability.

c. When the assets are given

to any of the creditors (iii) Realisation A/c Dr
towards the payment of his To concerned Partner’s capital A/c
dues
A a(iii), b(ii), c(i)

B a(i), b(iii), c(ii)

C a(ii), b(iii), c(i)
D a(i), b(ii), c(iii)
10 Match List-I with List-II.

List-I List-II

I. Partner's current accounts (a) Dissolution of partnership

II. Goodwill account (b) Admission of a partner

Page 3 of 11
 III. Partner's drawing account (c) Fixed capital of partners

(d) Goods taken by a partner for self-

IV. Realisation account
consumption

A I-(a), II-(d), III-(b), IV-(c)

B I-(c), II-(b), III-(d), IV-(a)
C I-(a), II-(b), III-(d), IV-(c)
D I-(c), II-(d), III-(b), IV-(a)
11 Match List-I with List-II.

List-I List-II

I. When the assets are sold for

(a) No entry
cash.

II. When an asset is taken over (b) Bank A/c Dr

by a partner. To Realization A/c

III. When the assets are given to

(c) Concerned Partner capital A/c Dr
any of the creditors towards the
To Realisation A/c
payment of his dues.

A I (a) II (c) III (b)

B I (a) II (b) III (c)
C I(c) II (a) III (b)
D I (b) II (c) III (a)
12 Match List-I with List-I .

List-I List-II

I. When Realisation expenses are borne

(a) No entry
and also paid by the firm

II. When Realisation expenses are (b) Bank A/c Dr

borne by the same partner. To Realization A/c

(c) Partner’s capital A/c Dr

III. When Realisation expenses are
To Cash/Bank A/c

Page 4 of 11
 borne by a partner and paid by the
firm.

A I (a) II (c) III (b)

B I (a) II (b) III (c)
C I(c) II (a) III (b)
D I (b) II (c) III (a)
13 A firm is dissolved, Rahul a partner is to carry out dissolution for which he
will get ₹ 8000, including expenses. Realisation Expenses were ₹ 5,200.
Realisation Account will be debited by.
A ₹ 13,200
B ₹ 5,200
C ₹ 8,000
D ₹ 2,800
14 At the time of dissolution, total assets are of ₹ 20,00,000 and outside
liabilities are of ₹ 16,80,000. If assets realised 150% and realisation
expenses paid were ₹ 50,000. Gain or Loss on realisation will be.
A Gain ₹ 10,00,000
B Loss ₹ 10,00,000
C Loss ₹ 9,50,000
D Gain ₹ 9,50,000
15 In case of dissolution, total creditors of the firm were ₹ 40,000; creditors
worth ₹ 10,000 were given a piece of furniture costing ₹ 8,000 in full and
final settlement. Remaining creditors allowed a discount of 10%. What will
be the amount with which cash will be credited in the realisation account
for payment to creditors?
A ₹ 28,700
B ₹ 27,000
C ₹ 20,000
D ₹ 25,500
16 On dissolution of a firm, a partner’s capital account has a credit balance of
₹ 42,000. His share of profit in Realisation account is ₹ 9,000. He has paid
firm’s Realisation expenses ₹ 3,000. He will finally get a payment of:
A ₹ 39,000
B ₹ 42,000

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 C ₹ 54,000
D ₹ 48,000
17 If opening capitals of partners are A ₹ 3,00,000, B ₹ 2,00,000 and C ₹
1,00,000 and their drawings during the year are A ₹ 50,000, B ₹ 40,000
and C ₹ 30,000 and creditors are ₹ 60,000, what will be the amount of
assets of the firm?
A ₹ 5,40,000
B ₹ 4,20,000
C ₹ 4,80,000
D ₹ 6,60,000
18 On dissolution of a firm, firm’s Balance Sheet total is ₹ 77,000. On the
assets side of the Balance Sheet items were shown preliminary expenses
₹ 2,000; Profit & Loss Account (Debit) Balance ₹ 4,000 and Cash Balance
₹ 1,800. Loss on Realisation was ₹ 6,300. Total assets (including cash
balance) Realised will be:
A ₹ 69,200
B ₹ 71,000
C ₹ 64,700
D ₹ 62,900
19 On dissolution of a firm, a partner took-over the investments of ₹ 15,000
at ₹ 19,000. By how much amount the Realisation Account will be
credited?
A ₹ 4,000
B ₹ 19,000
C Nil
D ₹ 23,000
20 How much amount will be paid to Creditors for ₹ 25,000 if ₹ 5,000 of the
creditors are not to be paid and the remaining creditors agreed to accept
5%.
A ₹ 18,750
B ₹ 19,000
C ₹ 19,750
D ₹ 20,000
21 How much amount will be paid to A, if his opening capital is ₹ 2,00,000
and his share of realisation profit amounts to ₹ 10,000 and he has taken

Page 6 of 11
 over assets valuing ₹ 25,000 from the firm?

A ₹ 2,35,000
B ₹ 1,65,000
C ₹ 2,15,000
D ₹ 1,85,000
22 On dissolution of firm, which item is debited to the realisation account?
A Realisation expenses paid by partner
B Balance of reserve fund
C Amount of unrecorded asset
D Creditor’s balance shown in the Balance Sheet
23 In the Balance Sheet Total Debtors appear at ₹ 50,000 and Provision for
Doubtful Debts appear at ₹ 1,500. How much amount will be realised from
Debtors, if bad debts amount to ₹ 10,000 and remaining debtors are
realised at a discount of 5%.
A ₹ 38,000
B ₹ 36,500
C ₹ 36,575
D ₹ 39,500
24 For Realisation Expenses When expenses are paid by any partner and
borne by firm. What should be entry for this transaction?
A Realisation A/c Dr
To Expense A/c
B Expense A/c Dr
To Partner’s capital A/c
C Realisation A/c Dr
To Partner’s capital A/c
D Firm’s A/c Dr
To Partner’s capital A/c
25 On dissolution of a firm, an unrecorded furniture of the value of ₹ 10,000
was taken up by a partner for ₹ 8,200. Which Account will be credited and
by how much amount? :
A Cash Account by ₹ 8,200
B Realisation Account by ₹ 1,800
C Partner’s Capital Account by ₹ 10,000

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 D Realisation Account by ₹ 8,200
26 In case of dissolution A one of the partners was paid only ₹ 5,000 for his
loan to the firm which amounted to ₹ 5,500. ₹ 500 will be recorded in
which account and on which side
A Realisation account credit side.
B Realisation account debit side.
C Loan account debit side.
D A’s capital account credit side.
27 On dissolution of the firm amount received from sale of
unrecorded asset is credited to :
A Partner’s capital Account
B Profit and loss Account
C Cash Account
D Realisation Account
28 On dissolution of a firm, debtors were ₹ 17,000. Of these ₹ 500 became
bad and the rest realised 60%. Which account will be debited and by how
much amount?
A Realisation Account by ₹ 16,500
B Profit & Loss Account by ₹ 500
C Cash Account by ₹ 9,900
D Debtors Account by ₹ 7,100
29 Rohan and Ravish were partners in a firm. On dissolution of the firm, loan
given by Rohan to the firm was ₹ 30,000, by Ravish was ₹ 15,000 and by
Mrs. Ravish was ₹ 10,000. The first payment will be made for
A Ravish’s loan
B Rohan’s loan
C Ravish loan and Rohan’s loan in the ratio of their loan amount
D Mrs. Ravish’s loan
30 Total assets of a partnership firm, which was dissolved were ₹ 30,00,000
and its total liabilities were ₹ 6,00,000. Assets were realised at 80% and
liabilities were settled at 5% less. If dissolution expenses were ₹ 30,000,
the profit or loss on dissolution was
A Profit ₹ 18,00,000
B Profit ₹ 6,00,000
C Loss ₹ 18,00,000

Page 8 of 11
 D Loss ₹ 6,00,000
31 X, Y and Z were partners in a firm sharing profits in the ratio of 4:3:3. On
31st March, 2023, the firm was dissolved. X was appointed to complete
the dissolution process for which he was allowed a remuneration of ₹
42,000. X also agreed to bear dissolution expenses. Actual expenses on
dissolution amounted to Rs which were paid by X. X’s Capital Account will
be credited by
A ₹ 33,000
B ₹ 42,000
C ₹ 18,000
D ₹ 9,000
32 On dissolution of a firm, its Balance Sheet revealed total Creditors ₹
50,000; Total Capital ₹ 48,000; Cash Balance ₹ 3,000. Its Assets were
realised at 12% less. Loss on Realisation will be:
A ₹ 6,000
B ₹ 11,760
C ₹ 11,400
D ₹ 3,600
33 On dissolution of a firm, a partner took over ₹ 17, 000 investments for ₹
14,000. Which one of the following accounts will be debited/credited with
how much amount?
A Partner’s Capital Account Debit with ₹ 14,000
B Partner’s Capital Account Credit with ₹ 17,000
C Realisation Account Credit with ₹ 17,000
D Realisation Account Credit with ₹ 3,000
34 On dissolution of the firm of Ramesh, Suresh and Naresh. Naresh had
agreed to bear all realisation expenses for which he was paid ₹ 14,500.
Actual expenses on realisation amounted to ₹ 11,000 which were paid by
Naresh. the amount to be credited to Naresh’s Capital Account will be
A ₹ 1,700
B ₹ 14,500
C ₹ 11,000
D ₹ 25,500
35 On the basis of following data, final payment to a partner on firm’s
dissolution ‘will be made: Debit balance of Capital Account ₹ 14,000;

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 Share of his profit on Realisation ₹ 43,000; Firm’s asset taken over by him
for ₹ 17,000.
A ₹ 12,000
B ₹ 31,000
C ₹ 43,000
D ₹ 29,000
36 On dissolution of a firm, a partner’s capital account has a credit balance of
₹ 42,000. His share of profit in Realisation account is ₹ 9,000. He has paid
firm’s Realisation expenses ₹ 3,000. He will finally get a payment of:
A ₹ 39,000
B ₹ 42,000
C ₹ 54,000
D ₹ 48,000
37 On dissolution of a firm, Debtors ₹ 17,000 were shown in the Balance
Sheet. Out of this ₹ 2,000 became bad. One debtor became insolvent.
70% were recovered from him out of ₹ 5,000. Full amount was recovered
from the balance debtors. On account of this item, loss in realisation
account will be:
A ₹ 3,500
B ₹ 2,000
C ₹ 5,100
D ₹ 1,500
38 What will be total assets (except cash) of the firm from the following (if)
creditor ₹ 20,000, partner’s loan ₹ 15,000 Partner’s capital ₹ 50,000 Cash
in hand ₹ 10,000.
A ₹ 85,000
B ₹ 65,000
C ₹ 75,000
D ₹ 55,000
39 On the day of dissolution of the firm ‘Roop Brothers’ had partner’s capital
amounting to ₹ 1,50,000, external liabilities ₹ 35,000, cash balance Rs
8,000 and Profit and Loss A/c (Dr) ₹ 7,000. If realisation expense and loss
on realisation amounted to ₹ 5,000 and ₹ 25,000respectively, the amount
realised by sale of assets is
A ₹ 1,64,000

Page 10 of 11
 B ₹ 1,45,000
C ₹ 1,57,000
D ₹ 1,50,000
40 At the time of dissolution of a firm, firm’s total assets were ₹ 5,00,000,
creditors were ₹ 1,00,000. Realisation 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 Gain ₹ 95,000
B Loss ₹ 75,000
C Gain ₹ 4,95,000
D Loss ₹ 1,00,000

ANSWER:
QUE 1 2 3 4 5 6 7 8 9 10

ANS B A C D B A B B B B

QUE 11 12 13 14 15 16 17 18 19 20

ANS D C C D B C A C B B

QUE 21 22 23 24 25 26 27 28 29 30

ANS D A A C D A D C D D

QUE 31 32 33 34 35 36 37 38 39 40

ANS B C A B A C A C D A

******************

Page 11 of 11
 KENDRIYA VIDYALAYA SANGATHAN, AHMEDABAD REGION
SUBJECT : ACCOUNTANCY CLASS: XII
CHAPTER : ACCOUNATING FOR SHARE CAPITAL

Q
1 Assertion (A): The liability of a shareholder is limited up to the
nominal price of shares subscribed by one.
Reason (R): Paid-up Capital is the amount of nominal value of
shares that have been called up by the company for payment by the
subscriber towards the share.
A Both Assertion (A) and Reason (R) are true and Reason (R) is the
correct explanation of Assertion (A).
B Both Assertion (A) and Reason (R) are true and Reason (R) is not the
correct explanation of Assertion (A).
C Assertion (A) is true but Reason (R) is False
D Assertion (A) is False but Reason (R) is true.
2 Assertion (A): Shares can be issued to employees at a discount.
Reason (R): Shares can be issued to public at a discount.
A Both Assertion (A) and Reason (R) are true and Reason (R) is the
correct explanation of Assertion (A).
B Both Assertion (A) and Reason (R) are true but Reason (R) is not the
correct explanation of Assertion (A).
C Assertion (A) is true but Reason (R) is false.
D Assertion (A) is false but Reason (R) is true.
3 Assertion: Securities Premium can be used for issue of fully paid-up
bonus shares.
Reason: The Companies Act, 2013 prescribes that Securities
Premium Reserve can be used for issuing fully paid-up bonus shares.
A Both Assertion (A) and Reason (R) are true and Reason (R) is the
correct explanation of Assertion (A).
B Both Assertion (A) and Reason (R) are true and Reason (R) is not the
correct explanation of Assertion (A).
C Assertion (A) is true but Reason (R) is False
D Assertion (A) is False but Reason (R) is true.

Page 1 of 11
4 Assertion (A): Proportionate allotment or pro-rata allotment is
made in case of oversubscriptions of shares.
Reason (R): In the case of over-subscription, it is not possible for
the company to allot shares to every applicant in the number that he
desires.
A Both Assertion (A) and Reason (R) are true and Reason (R) is the
correct explanation of Assertion (A).
B Both Assertion (A) and Reason (R) are true and Reason (R) is not the
correct explanation of Assertion (A).
C Assertion (A) is true but Reason (R) is False
D Assertion (A) is False but Reason (R) is true.
5 Which of the following statement is True regarding Subscribed but
not fully paid-up capital?
Statement I- The company has called-up the total nominal (face)
value of the share but has not received it.
Statement II- The company has not called-up the total nominal
(face) value of the share.
A Only I
B Only II
C Both ‘I’ and ‘II’
D None of these
6 Which of the following statement is True?
Statement I- SEBI prescribed that application money should not be
less than 25% of the issue price.
Statement II-According to Companies Act 2013, minimum
Application money should be 15% of the face value or amount as
may be prescribed by SEBI.
A Only I
B Only II
C Both ‘I’ and ‘II’
D None of these
7 Which of the following statement is True?
Statement I- Shares cannot be allotted unless minimum
subscription is received.

Page 2 of 11
 Statement II-SEBI has prescribed that a company issuing shares to
public cannot allot shares unless it receives subscription of 90% of
the shares issued.
A Only I
B Only II
C Both ‘I’ and ‘II’
D None of these
8 Which of the following statement is True?
Statement I- Securities premium cannot be applied for paying
dividends to members.
Statement II- Securities premium can be applied for issuing partly
paid-up bonus shares to members.
A Only I
B Only II
C Both ‘I’ and ‘II’
D Both are wrong
9 Match the followings:
(i) Equity Shares - (a) Owner of the company
(ii) Preference Shares - (b) Creditors of the company
(iii) Debentures - (c) Hybrid Security
(iv) Securities Premium - (d) excess received over the face
value of shares
A (i)-a (ii)-c (iii)-b (iv)-d
B (i)-a (ii)-d (iii)-b (iv)-c
C (i)-b (ii)-c (iii)-a (iv)-d
D (i)-a (ii)-d (iii)-b (iv)-c
10 Match the followings:
(i) Authorised Capital - (a) Shares issued to Public
(ii) Issued Capital - (b) Shares applied by Public
(iii) Subscribed Capital - (c) Uncalled Capital
(iv) Reserve Capital - (d) Registered Capital of company
A (i)-d (ii)-c (iii)-b (iv)-a
B (i)-d (ii)-a (iii)-b (iv)-c
C (i)-b (ii)-c (iii)-a (iv)-d

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 D (i)-d (ii)-a (iii)-b (iv)-c
11 Match the followings:
(i) Under Subscription - (a) Shares applied > Shares issued
(ii) Over Subscription - (b) Shares applied < Shares issued
(c) Shares applied ≥ Shares issued
(d) Shares allotted in proportion
A (i)-d (ii)-c
B (i)-d (ii)-a
C (i)-b (ii)-a
D (i)-d (ii)-a
12 Match the followings:
(i) Bonus Shares - (a) Issue of shares made to members free
(ii) Demat Share - (b) Shares in electronic form
(iii) Right Issue - (c) Shares issue by company to
employees/directors at a discount
(iv) Sweat Equity Shares - (d) Invitation to shareholders to purchase
new shares
A (i)-d (ii)-c (iii)-b (iv)-a
B (i)-d (ii)-a (iii)-b (iv)-c
C (i)-a (ii)-b (iii)-d (iv)-c
D (i)-d (ii)-a (iii)-b (iv)-c
13 Forfeiture of shares results in the reduction of______.
A Paid-up capital
B Authorized capital
C Fixed assets
D Reserve capital
14 Calculate the amount of second & final call when Rakesh Ltd, issues
Equity shares of ₹ 10 each at a premium of 40% payable on
Application ₹ 3, On Allotment ₹ 5, On First Call ₹ 2.
A Second & final call ₹ 14.
B Second & final call ₹ 3.
C Second & final call ₹ 1.
D Second & final call ₹ 4.
15 An issue of shares that is not a public issue but offered to a selected
group of persons is called:

Page 4 of 11
 A Public offer
B Initial Public offer
C Preferential allotment
D Private placement of shares
16 When a company forfeit the shares held by the shareholders?
A When shares issued at discount
B When the shareholder not paid the allotment or call money
C Both ‘A’ and ‘B’
D None of these
17 Savitri Ltd. Forfeited 20,000 equity shares of ₹ 100 each for non-
payment of first and final call of ₹40 per share. The maximum
amount of discount at which these shares can be reissued will be:
A ₹ 80,00,000
B ₹ 2,00,000
C ₹ 20,00,000
D ₹ 12,00,000
18 Reserve Capital is also known as:
A Capital Reserve
B Authorised Capital
C Uncalled Capital
D General Reserve
19 A Ltd. issued 100 shares of ₹ 10 each at ₹ 4 premium out of which ₹
7 (including ₹1 premium) was called-up and paid-up. The uncalled
capital will be:
A ₹ 4 per share
B ₹ 9 per share
C ₹ 3 per share
D ₹ 2 per share
20 Which of the following statement(s) is/are true?
(i) Authorised Capital < Issued Capital
(ii) Authorised Capital ≥ Issued Capital
(iii) Subscribed Capital ≤ Issued Capital
(iv) Subscribed Capital > Issued Capital

Page 5 of 11
 A (ii) and (iii) both
B (i) and (iv) both
C (i) Only
D (ii) Only
21 The directors of Mahi Ltd. resolved that 1,000 equity shares of ₹100
each, ₹ 75 called-up be forfeited for non-payment of first call of ₹
25. 90% of these shares were re-issued as fully paid for ₹60 per
share. The gain on re-issue is…………….
A ₹ 90,000
B ₹ 50,000
C ₹ 75,000
D ₹ 9,000
22 Assertion (A): - A Company is Registered with an authorized
Capital of ₹ 10,00,000 Equity Shares of ₹ 10 each of which 4,00,000
Equity shares were issued and subscribed. All the money had been
called up except ₹ 2 per share which was declared as ‘Reserve
Capital’. The Share Capital reflected in balance sheet as ‘Subscribed
and Fully paid up’ will be Zero.
Reason (R): - Reserve Capital can be called up at any time.
A Both Assertion (A) and Reason (R) are Correct and Reason (R) is the
correct explanation of Assertion (A)
B Both Assertion (A) and Reason (R) are Correct, but Reason (R) is not
the correct explanation of Assertion (A)
C Assertion (A) is incorrect, but Reason (R) is Correct.
D Assertion (A) is correct, but Reason (R) is incorrect
23 Permission from Central Government to issued share capital is
required if Nominal Capital exceeds:
A ₹ 11 crore
B ₹ 10 crore
C ₹ 1 crore
D ₹ 1 lakh
Read the following statement carefully and give the answer
for the questions 24 and 27:

Page 6 of 11
 X Ltd issued 2,00,000 shares of ₹ 100 each. Amount to be paid on
Application ₹ 30 per share; on allotment ₹ 40 per share and on first
& final call ₹ 30 per share. All money was duly subscribed and paid
towards the nominal value of shares except on 9,000 shares who
failed to pay allotment and calls money. These shares were
forfeited. 5,000 shares were re-issued at ₹ 80 per share fully paid.
24 Which amount of the following will be shown into the Balance Sheet
of the company under the sub-head “Share Capital”?
A ₹ 1,96,00,000
B ₹ 1,97,20,000
C ₹ 2,00,00,000
D ₹ 1,97,70,000
25 Which amount the following will be called paid up share capital?
A ₹ 1,96,00,000
B ₹ 2,00,00,000
C ₹ 1,97,20,000
D ₹ 1,97,70,000
26 Which amount of the following, balance in Share Forfeiture Account?
A ₹ 4,00,000
B ₹ 50,000
C ₹ 1,20,000
D ₹ 1,50,000
27 Which amount of the following will be transferred to Capital Reserve?
A ₹ 4,00,000
B ₹ 1,20,000
C ₹ 50,000
D ₹ 1,50,000
28 If 5,000 shares of ₹ 10 each were forfeited for non-payment of final
call money of ₹ 3 per share and only 3,500 of these shares were re-
issued @₹ 11 per share as fully paid up, then what is the minimum
amount that company must collect at the time of re-issue of the
remaining 1,500 shares?
A ₹ 2,000
B ₹ 1,000

Page 7 of 11
 C ₹ 3,000
D ₹ 4,500
29 The allowed amount of discount on re-issue of shares will be _____
A @ 10% of Issue Price
B Up to the amount of forfeited money
C Could not issue at discount
D None of these
30 Once, forfeited shares reissued, balance of share forfeiture money
will be transferred to ___
A Reserve Capital
B General Reserve
C Capital Reserve
D Securities Premium Reserve
31 If the premium on the forfeited shares has already been received,
then securities premium account should be:
A Debited
B Credited
C No treatment
D None of these
32 PQR Ltd. forfeited 150 shares of ₹ 10 each, issued at a premium of ₹
2, for non-payment of the final call of ₹ 3. Out of these, 100 shares
were re-issued at ₹ 11 per share. How much amount would be
transfer to Capital Reserve?
A ₹ 500
B ₹ 1,200
C ₹ 300
D ₹ 700
33 Arav Ltd. forfeited 5,000 shares of ₹ 10 each on which ₹ 8 (including
₹ 2 premium was called) and ₹ 5 (including ₹ 1 premium) was paid.
Out of these 3,000 shares were re-issued. Determine the minimum
amount at which these shares can be re-issued as fully paid up.
A ₹ 5,000
B ₹ 18,000

Page 8 of 11
 C ₹ 30,000
D None of these
34 Balance in Forfeited Share account is shown in the balance sheet
under the head of-
A Current Liabilities
B Non-Current Liabilities
C Share Capital
D None of these
35 If on share nominal face value of ₹ 10, ₹ 8 have been called up and
also received, it will be shown as:
A Subscribed and Fully Paid-up
B Subscribed but not Fully Paid-up
C Issued Share Capital
D Reserve Capital
36 …………… is transferred to Capital Reserve.
A Profit on sale of fixed assets
B Profit on issue of shares
C Profit on forfeiture of shares
D All of these
37 A company invited applications for 1,00,000 shares and it received
applications for 1,50,000 shares. Applications for 30,000 shares were
rejected and the remaining were allotted shares on pro-rata basis.
How many shares an applicant for 3,000 shares will be allotted:
A 3,600 shares
B 2,500 shares
C 5,000 shares
D 2,700 shares
38 laddu Ltd. invited applications for 1,00,000 shares of ₹ 10 each
payable ₹ 5 on application, ₹ 3 on allotment and ₹ 2 on call. Public
has applied for 1,90,000 shares. Pro-rata allotment was made in the
ratio 7:4. Determine the amount to be refunded by the company at
the time of allotment of shares.
A ₹ 2,00,000

Page 9 of 11
 B ₹ 75,000
C ₹ 1,50,000
D None of the above
39 12,000 shares of ₹ 100 each forfeited due to non-payment of ₹ 40
per share. First & final call of ₹ 30 per share not yet made. These
shares were reissued at ₹ 80 per share for ₹ 70 per share. Which of
the following journal entry is correct for the re-issue of forfeiture of
shares?
A Bank A/c Dr. 9,60,000
To Share Capital A/c 9,60,000
B Bank A/c Dr. 8,40,000
To Share Capital A/c 8,40,000
C Bank A/c Dr. 9,60,000
To Share Capital A/c 8,40,000
To Securities Premium Reserve A/c 1,20,000
D Bank A/c Dr. 9,60,000
Share Foreiture A/c Dr. 2,40,000
To Share Capital A/c 12,00,000
40 Alx Ltd. purchased building from SJ Ltd for ₹ 7,20,000. The
consideration was paid by issue of Equity Shares of ₹100 each at a
premium of ₹ 20. The Share Capital Account is credited with:
A ₹ 6,00,000
B ₹ 6,000
C ₹ 1,60,000
D None of the above

Page 10 of 11
 ANSWER:
QUE 1 2 3 4 5 6 7 8 9 10

ANS C C A A C A C D A B

QUE 11 12 13 14 15 16 17 18 19 20

ANS C C A D D B D C A A

QUE 21 22 23 24 25 26 27 28 29 30

ANS D D C B A C C D B C

QUE 31 32 33 34 35 36 37 38 39 40

ANS C D B C B D B B C A

******************

Page 11 of 11
 KENDRIYA VIDYALAYA SANGATHAN, AHMEDABAD REGION

SUBJECT: ACCOUNTANCY CLASS: XII

CHAPTER : Issue of Debenture

1 Read the following statements: Assertion and Reason, choose one of

the correct alternative given below:
Assertion (A): Collateral security means secondary security in
addition to principal security.
Reason (R): Debentures can be issued as a collateral security by the
companies incase principal security fall short.

A Both Assertion and reason are true and reason is correct explanation
of assertion.

B Assertion and reason both are true but reason is not the correct
explanation of assertion.

C Assertion is true, reason is false.

D Assertion is false, reason is true.

2 Read the following statements: Assertion and Reason, choose one of

the correct alternative given below:
Assertion (A): Sarita Pvt. Ltd. issued 15%, 10,000 Debentures at
par @ ₹ 100 per Debenture. The company suffered a loss but still the
directors of the company paid Interest on Debentures.
Reason (R): Interest on debenture is a charge against profits and
therefore, its payment is not subject to the earning of profit.

A Both Assertion and reason are true and reason is correct explanation
of assertion

B Assertion and reason both are true but reason is not the correct
explanation of assertion.

C Assertion is true, reason is false.

D Assertion is false, reason is true.

Page 1 of 14
3 Read the following statements: Assertion and Reason, choose one of
the correct alternative given below:
Assertion (A) : Debenture holders do not enjoy any voting right.
Reason (R) : A debenture holder just lends money but does not
become an owner of the company with the purchase of debentures.

A Both Assertion (A) and Reason (R) are True and Reason (R) is the
correct explanation of Assertion (A)

B Both Assertion (A) and Reason (R) are True and Reason (R) is not the
correct explanation of Assertion (A)

C Assertion (A) is True but Reason (R) is False.

D Assertion (A) is False but Reason (R) is True.

4 Read the following statements: Assertion and Reason, choose one of

the correct alternative given below:
Assertion (A): Debenture holders are the creditor of company
carrying a fixed rate of interest.
Reason (R): Debentures are short term loans taken from public.

A Both Assertion (A) and Reason (R) are true and Reason(R) is correct
explanation of Assertion (A)

B Both Assertion (A) and Reason (R) are true and Reason(R) is not the
correct explanation of Assertion (A).
C Assertion (A) is true but Reason (R) is False.

D Assertion (A) is false but Reason (R) is true.

5 Statement I: "Convertible debentures can be exchanged for equity

shares."
Statement II: "Non-Convertible debentures cannot be converted
into equity shares."
Based on the above statements, which of the following is correct?

A Both Statement I and Statement II are true.

B Statement I is true, but Statement II is false.

Page 2 of 14
 C Statement II is true, but Statement I is false.

D Both Statement I and Statement II are false.

6 Statement I: "Redeemable debentures must be repaid by the

company after a certain period."
Statement II: "Irredeemable debentures have no fixed maturity
date and can be redeemed at the company's discretion."
Based on the above statements, which of the following is correct?

A Both Statement I and Statement II are true.

B Statement I is true, but Statement II is false.

C Statement II is true, but Statement I is false.

D Both Statement I and Statement II are false.

7 Statement I : "Secured debentures are backed by specific assets of

the company."
Statement II : "Unsecured debentures are not backed by any
specific collateral."
Based on the above statements, which of the following is correct?

A Both Statement I and Statement II are true.

B Statement I is true, but Statement II is false

C Statement II is true, but Statement I is false.

D Both Statement I and Statement II are false.

8 Statement I : "Bearer debentures are transferable by delivery."

Statement II : "Registered debentures are issued in the name of the
holder."
Based on the above statements, which of the following is correct?

A Both Statement I and Statement II are true.

B Statement I is true, but Statement II is false.

C Statement II is true, but Statement I is false.

Page 3 of 14
 D Both Statement I and Statement II are false.

9 Match the Following:

Column A: Column B:

i. Convertible Debentures A. Debentures that are backed

by specific assets of the
company.
ii.Non-Convertible Debentures B. Debentures that are not
convertible into equity shares.
iii.Secured Debentures C. Debentures that can be
converted into equity shares
after a certain period.
iv.Unsecured Debentures D. Debentures that are not
backed by any specific collateral.

A i–D ii – A iii – B iv – C

B i–C ii – B iii – A iv – D

C i–B ii – C iii – D iv – A

D i–A ii – B iii – C iv – D

10 Match the Following:

Column A: Column B:

i. Redeemable Debentures A. Debentures that are repayable

after a specified period.
ii. Irredeemable Debentures B. Debentures that are negotiable
instruments and can be
transferred by delivery.
iii. Registered Debentures C. Debentures issued in the name
of the holder.

iv. Bearer Debentures D. Debentures that have no fixed

maturity date.

Page 4 of 14
 A i–D ii – A iii – B iv – C

B i–C ii – D iii – A iv – B

C i–A ii – D iii – C iv – B

D i–A ii – B iii – C iv – D

11 Match the Following:

Column A: Column B:

i. Issue at Par A. Debentures that are issued more

than face value.
ii. Issue at Premium B. Debentures that are issued less
than face value
iii. Issue at Discount C. Debentures issued at face value

A i–C ii – B iii – A

B i–B ii – C iii – A

C i–C ii – A iii – B

D i–A ii – B iii – C

12 Match the Following:

Column A: Column B:

i. The term describes the difference between A. Maturity

the issue price and the face value of Date.
debentures
ii. The term for the process of distributing B. Allotment.
debentures to potential investors

iii. The term refers to the period after which C. Premium/

the company will repay the principal amount Discount
of debentures
A i–C ii – B iii – A

Page 5 of 14
 B i–B ii – C iii – A

C i–C ii – A iii – B

D i–A ii – B iii – C

13 A Ltd. issued 1,000, 10% debentures of ₹ 100 each at a premium of

5%. What will be the total amount of interest for one year

A ₹ 10,500

B ₹ 10,000

C ₹ 5,250

D ₹ 5,000

Read the passage given below and answer the following questions.
(From Question No. 14 to 17)
Bee ltd purchased the following assets of See ltd. Land and building
of ₹ 55,00,000 at ₹ 75,00,000; Furniture ₹ 20,00,000; and Machinery
₹ 30,00,000. The purchase consideration was ₹ 1,00,00,000.Payment
of ₹ 10,00,000 was made through cheque and remaining amount by
issue of 9% debentures of ₹ 100 each at a premium of 20%
14 According to Companies Act 2013, what is the maximum rate of
premium at which debentures can be issued ?
A 10%

B 15%

C 20%

D maximum limit not specified

15 Amount credited to Capital Reserve A/c is

A ₹ 25,00,000

B ₹ 20,00,000

C ₹ 15,00,000

D ₹ 10,00,000

Page 6 of 14
16 What is the number of debentures to be issued?

A 65,000 Debentures

B 70,000 Debentures

C 75,000 Debentures

D 80,000 Debentures

17 Securities premium reserve A/c is to be credited with

A ₹ 10,00,000

B ₹ 15,00,000

C ₹ 20,00,000

D ₹ 25,00,000

Read the passage given below and answer the following questions.
(From Question No. 18 TO 21)
Nikhil Technologies Ltd. issued 5,000; 9% Debentures of ₹100 each
at a premium of ₹20 payable as follows:
(i) ₹40 including premium of ₹10 on application
(ii) ₹40 including premium of ₹10 on allotment
(iii) Balance as first and final call.

Applications were received for 5,000 debentures and allotment was

made to all the applicants. All the calls were made, and amounts
received.
18 What is the total interest payable on the debentures issued?

A ₹ 1,20,000

B ₹ 45,000

C ₹ 4,50,000

D ₹ 4,500

19 What amount of the money received in Application is transferred to

the Securities Premium Reserve Account?

Page 7 of 14
 A ₹ 5,00,000

B ₹ 50,000

C ₹ 1,00,000

D ₹ 5,000

20 The amount of money received during Application is:

A ₹ 2,00,000

B ₹ 1,50,000

C ₹ 20,00,000

D ₹ 2,50,000

21 The is the balance amount per debenture to be received at the first

and final call is:
A ₹ 20

B ₹ 40

C ₹ 30

D ₹ 10

22 F Ltd. purchased machinery for a book value of ₹ 4,00,000. The

consideration was paid by issue of 10% Debentures of ₹ 100 each at
a discount of 20%. The Debenture Account will be credited by :
A ₹ 4,00,000

B ₹ 5,00,000

C ₹ 3,20,000

D ₹ 4,80,000

23 Interest payable on debentures is

A An Appropriation of profits of the company

B A charge against profits of the company

Page 8 of 14
 C Transferred to Sinking Fund Investment Account

D Transferred to General Reserve

24 Debentures that do not carry any charge or security on asset of the

company are known as:
A Secured Debentures

B Unsecured Debentures

C Convertible Debentures

D Registered Debentures

25 Z ltd issued 10,000, 9% Debentures of ₹ 100 each at a Premium of

10% payable along with Application. Subscription was received for
9,000 Debentures and all the Applicants were allotted the
Debentures. Pass the journal entry to record the Application money
received
A Bank a/c Dr 10,00,000
To Debenture Application 10,00,000

B Bank a/c Dr 10,00,000

To Debenture Application and Allotment 10,00,000

C Bank a/c Dr 9,90,000

To Debenture Application and Allotment 9,90,000

D Bank a/c Dr 9,90,000

To Debenture Application 9,90,000

26 X ltd issued 20,000, 8%Debentures of ₹ 100 each at a discount of

10%. It has balance in Securities Premium Reserve of ₹ 1,40,000 and
Capital Reserve of ₹ 90,000. While passing journal entry to write off
Discount on Issue of Debentures, Capital Reserve will be debited with
how much amount.
A ₹ 90,000

B ₹ 60,000

C ₹ 70,000

Page 9 of 14
 D ₹ 80,000

27 Omega Ltd purchased a business. The purchase price was paid by

20,000, 6% debentures of ₹ 100 each issued at a premium of 10%.
The purchase consideration was
A ₹ 20,00,000

B ₹ 22,00,000

C ₹ 24,00,000

D None

28 Alfa Ltd. Obtained loan of ₹ 1,00,000 from HDFC bank and issued
1200, 10% Debentures of ₹ 100 each as collateral security. The
amount shown in balance sheet under long term borrowings:
A ₹ 1,00,000

B ₹ 1,20,000

C ₹ 20,000

D ₹ 1,32,000

29 The Principal amount of debentures will be repaid by the company

either at the end of a specified period or by instalments during the life
time of the company. Such types of debentures are called :

A Redeemable Debentures

B Irredeemable Debentures

C Convertible Debentures

D Bearer Debentures

30 The debentures whose principal amount is not repayable by the

company during its life time, but the payment is made only at the
time of Liquidation of the company, such debentures are called

A Bearer Debentures

B Redeemable Debentures

Page 10 of 14
 C Irredeemable Debentures

D Non-Convertible Debentures

31 Premium received on issue of debentures may be utilised for

A For writing off discount allowed on issue of shares

B For writing off premium allowed on redemption of debentures

C For writing off preliminary expenses

D For All of the Above

32 Debentures of a Company can be issued

A For Cash

B For Consideration other than Cash

C As a Collateral Security

D Any of the above

33 Debentures issued as collateral security will be debited to :

A Bank Account

B Debentures Suspense Account

C Debentures Account

D Bank Loan Account

34 Interest on debentures issued as a collateral security is paid on :

A Nominal value of debentures

B No interest is paid

C Face value of debentures

D Paid up value of debentures

35 X Ltd. acquired assets of ₹ 20 lakhs and took over creditors of ₹ 20

thousand from F Ltd. A Ltd. issued 8% debentures of ₹ 200 each at a

Page 11 of 14
 discount of 10% as purchase consideration. Number of debentures
issued will be.

A 11,000

B 9,000

C 10,000

D 10,100

36 If Vendors are issued Debentures of ₹ 80,000 in consideration of net

Assets of ₹ 1,00,000, the balance of ₹ 20,000 will be credited to :

A Statement of Profit & Loss

B Goodwill Account

C General Reserve Account

D Capital Reserve Account

37 If Vendors are issued Debentures of ₹ 4,40,000 in consideration of

Assets of ₹ 5,00,000 and Liabilities of ₹ 1,00,000, the balance of ₹
40,000 will be debited to:

A General Reserve Account

B Capital Reserve Account

C Goodwill Account

D Statement of Profit & Loss

38 Issued 5,000, 12% debentures of ₹ 100 each at a discount of 2%,

redeemable at a premium of 5%. In such case :

A Loss on Issue will be Credited by ₹ 10,000

B Loss on Issue will be debited by ₹ 35,000

C Premium on Redemption will be debited by ₹ 25,000.

D Premium on Redemption will be credited by ₹ 35,000.

Page 12 of 14
39 Globe Ltd. issues 20,000, 9% debentures of ₹ 100 each at a discount
of 5% redeemable at the end of 5 years at a premium of 6%. For
what amount ‘Loss on Issue of Debentures Account’ will be debited?

A ₹ 1,00,000

B ₹ 1,20,000

C ₹ 2,80,000

D ₹ 2,20,000

40 On 1st April 2023, Sunrise Limited issued 5,000, 8% debentures of ₹

100 each at a discount of 5%. What will be the total amount of
interest for the year ending 31st March 2024?

A ₹ 38,000

B ₹ 42,000

C ₹ 40,000

D ₹ 25,000

Page 13 of 14
 ANSWER:
QUE 1 2 3 4 5 6 7 8 9 10

ANS A A A C A A A A B C

QUE 11 12 13 14 15 16 17 18 19 20

ANS C A B D A C B B B A

QUE 21 22 23 24 25 26 27 28 29 30

ANS B B B B C B B A A C

QUE 31 32 33 34 35 36 37 38 39 40

ANS D D B B A D C B D C

******************E

Page 14 of 14
 KENDRIYA VIDYALAYA SANGATHAN, AHMEDABAD REGION

SUBJECT: ACCOUNTANCY CLASS: XII

CHAPTER : FINANCIAL STATEMENTS, ANALYSIS OF FINANCIAL STATEMENTS,
COMPARATIVE AND COMMON SIZE STATEMENTS, ACCOUNTING RATIOS

1 Assertion (A): Analysis of Financial Statements helps in assessing

the present earning capacity as well as the future earning capacity.
Reason (R): With the help of Financial Statement analysis
profitability can be assessed with reference to sales as well as capital
invested in the business.
In the context of above two statements, which of the following is
correct?

A Assertion (A) and Reason (R) are correct but the Reason (R) is not
the correct explanation of Assertion (A).

B Both, Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).

C Assertion (A) is correct but the Reason (R) is not correct.

D Both Assertion (A) and Reason (R) are not correct.

2 Assertion (A): Contingent Liabilities are not the liabilities payable

yet but may become liabilities when an event associated with it
happens in future.
Reason (R): Proposed Dividend is a Contingent Liability because it
will become a liability after the shareholders declare, i.e., approve it.
In the context of above two statements, which of the following is
correct?

A Assertion (A) and Reason (R) are correct but the Reason (R) is not
the correct explanation of Assertion (A).

B Both, Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).

Page 1 of 15
 C Only Assertion (A) is correct.

D Assertion (A) is not correct but the Reason (R) is correct.

3 Assertion (A): Operating Ratio is calculated to assess the operating

efficiency of the enterprise.
Reason (R): Operating Ratio shows the percentage of Revenue from
Operations absorbed as cost. If the ratio is low, it is considered to be
better as it means operating expenses are less.
In the context of above two statements, which of the following is
correct?

A Assertion (A) and Reason (R) are correct but the Reason (R) is not
the correct explanation of Assertion (A).

B Both, Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).

C Only Assertion (A) is correct.

D Assertion (A) is not correct but the Reason (R) is correct.

4 Assertion (A): Personal bias can be reflected in ratio analysis.

Reason (R): Different people may interpret the same ratio in
different ways, which affects its reliability.
In the context of above two statements, which of the following is
correct?

A Assertion (A) and Reason (R) are correct but the Reason (R) is not
the correct explanation of Assertion (A).

B Both, Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).

C Only Assertion (A) is correct.

D Assertion (A) is not correct but the Reason (R) is correct.

5 Statement I: Net worth is also known as share capital.

Statement II: Shareholder's Funds are also known as net worth.

Page 2 of 15
 Choose the correct option from the options given below:

A Statement I is true and II is false

B Statement I is false and II is true.

C Both statements are true.

D Both statements are false.

6 Statement I: Debtors Turnover Ratio is an efficiency ratio.

Statement II: Operating Ratio is an income ratio.
Choose the correct option from the options given below:

A Statement I is true and II is false

B Statement I is false and II is true.

C Both statements are true.

D Both statements are false.

7 Statement I: Calls in Arrears is shown under Share Capital.

Statement II: Calls in Advance is shown under Current Liabilities.
Choose the correct option from the options given below:

A Statement I is true and II is false

B Statement I is false and II is true.

C Both statements are true.

D Both statements are false.

8 Statement I: Interest due on Calls in Arrears is shown under Share

Capital.
Statement II: Interest on Calls in Advance is shown under Current
asset.
Choose the correct option from the options given below:

A Statement I is true and II is false

Page 3 of 15
 B Statement I is false and II is true.

C Both statements are true.

D Both statements are false.

9 Match Group I with Group II and select the correct answer using the
codes given below the lists:
Group I Group II

1. Interest accrued on A. Current Liabilities- Short-term

Investments Borrowings

2. Bank Overdraft B. Property, Plant and

Equipment and Intangible
Assets- Intangible Assets

3. Trade Mark C. Current Assets- Inventories

4. Stores and Spares D. Current Assets- Other Current

Assets

A 1-C, 2- B, 3- D, 4- A

B 1-D, 2- C, 3- B, 4- A

C 1-D, 2- A, 3- B, 4- C

D 1-D, 2- A, 3- C, 4- B

10 Match Group I with Group II and select the correct answer using the
codes given below the lists:
Group I Group II

1. Common size A. Compares the assets and liabilities of

Balance Sheet current year with that of previous year.

2. Comparative B. Depicts the percentage relation of each

Balance Sheet asset/ liability to total assets/total of equity

Page 4 of 15
 and liabilities.

3. Common size C. Revenue from Operations is assumed to be

Income Statement equal to 100 and other values of revenue and
expenses are expressed as percentage of
Revenue from Operations.

4. Comparative D. Depicts the operating results of more than

Statement of P&L one accounting period so that changes in
absolute amounts as well as in terms of
percentage may be known.

A 1-D, 2- A, 3- C, 4- B

B 1-C, 2- D, 3- B, 4- A

C 1-B, 2- A, 3- C, 4- D

D 1-A, 2- C, 3- D, 4- B

11 Match Group I with Group II and select the correct answer using the
codes given below the lists:
Group I Group II

1. Horizontal A. Conducting for one accounting period

Analysis
2. Vertical Analysis B. Comparison of financial statements of an
enterprise for two or more accounting periods

3. Intra-firm C. Conducted for two or more accounting

Analysis periods.

4. Inter-firm D. Comparison of financial statements of two

Analysis or more enterprises for the same accounting
period.

Page 5 of 15
 A 1-D, 2- C, 3- B, 4- A

B 1-C, 2- A, 3- B, 4- D

C 1-C, 2- B, 3- D, 4- A

D 1-B, 2- C, 3- D, 4- A

12 Match the following:

i) Share Options Outstanding a) Non-current Liabilities

ii) Money received against b) Current Liabilities

share warrants
iii) Premium on redemption of c) Shareholder's Funds
debentures
iv) Provision for Tax

A i)- b); ii)- b); iii)- a); iv)- c)

B i)- c); ii)- a); iii)- b); iv)- a)

C i)- c); ii)- c); iii)- a); iv)- b)

D i)- a); ii)- a); iii)- b); iv)- c)

13 Out of the following, identify the item that is not shown in the Notes
to Accounts on Finance Costs:

A Interest paid on term loan

B Bank Deposit

C Interest paid on Bank Overdraft

D Discount on issue of Debentures written off

14 Out of the following items, identify which is not shown in the Notes to
Accounts on Other Expenses:

A Courier expenses

Page 6 of 15
 B Internet expenses

C Rent for factory

D Wages

15 A company has an Operating Cycle of eight months. It has account

receivables amounting to ₹ 1,00,000 out of which ₹ 60,000 have a
maturity period of 11 months. How would this information be
presented in the Balance Sheet?

A 40,000 as Current Assets and ₹ 60,000 as Non-current Assets.

B ₹ 60,000 as Current Assets and ₹ 40,000 as Non-current Assets.

C ₹ 1,00,000 as Non-current Assets.

D ₹ 1,00,000 as Current Assets.

16 Claims against the company not acknowledged as debt is shown as:

A Capital Commitments

B Non- current Liabilities

C Current Liabilities

D Contingent Liabilities

17 'Loose Tools' appear in the company's Balance Sheet under the

head/subhead:

A Inventory

B Non-current Assets

C Other current Assets

D Stores and Spare Parts

18 Calls-in-Advance and interest payable thereon is shown in the

Balance Sheet as

Page 7 of 15
 A Shareholders' Funds

B Other Non-current Liabilities

C Other Current Liabilities

D Trade Payables

19 Which of the following is not an objective of Analysis of Financial

Statements?

A To judge the financial health of the firm.

B To judge the short-term and long-term liquidity position of the firm.

C To judge the reasons for change in the profitability of the firm.

D To judge the variations in the accounting practices of the business

followed by different enterprises.

20 Which of the following statement is incorrect?

A Intra-firm analysis is a comparison of financial statements of an

enterprise for two or more accounting periods.

B Inter-firm analysis is a comparison of financial statements of two or

more enterprises for the same accounting period.

C Vertical analysis provides information in absolute and percentage

form.

D An income statement indicates the financial position of an enterprise

for an accounting period.

21 From the following, calculate Interest Coverage Ratio:

Net Profit after Tax ₹ 12,00,000; 10% Debentures ₹ 1,00,00,000;
Tax Rate 40%.

A 1.2 Times

B 3 Times

Page 8 of 15
 C 2 Times

D 5 Times

22 Which one of the following is correct?

(i) Quick Ratio can be more than Current Ratio.
(ii) High Inventory Turnover Ratio is good for the organisation,
except when goods are bought in small lots or sold quickly at low
margins to realise cash.
(iii) Sum of Operating Ratio and Operating Profit Ratio is always
100%.

A All are correct

B Only (i) and (iii) are correct

C Only (ii) and (iii) are correct

D Only (i) and (ii) are correct.

23 Revenue from operations ₹ 10,00,000, Average Inventory

₹ 1,25,000, Gross Loss on sales 25%. Find Inventory Turnover Ratio

A 8 times

B 10 times

C 2 times

D None of these

24 Current Ratio of Vick Pvt. Ltd. is 3: 2. Accountant wants to maintain it

at 2: 1. Following options are available:
(i) He can repay Bills Payable. (ii) He can purchase goods on credit.
(iii) He can take short-term loan.
Choose the correct option:

A Only (i) is correct

B Only (ii) is correct

Page 9 of 15
 C Only (i) and (iii) are correct

D Only (ii) and (iii) are correct

25 Comparative Income Statement shows:

A Revenue and expenses in absolute value.

B Increase/ decrease in absolute value of Revenues and Expenses

C Proportionate changes in Revenues and Expenses

D All of the above.

26 Revenue from operations is ₹ 60,00,000, other income is 15% of

Revenue from operations. Expenses are 60% of Revenue from
operations. Tax rate is 40%. Amount of profit after tax will be :

A ₹ 14,40,000

B ₹ 19,80,000

C ₹ 13,80,000

D ₹ 16,56,000

27 Revenue from operations is ₹ 50,00,000, other income is 20% of

Revenue from operations and Expenses are 50% of Revenue from
operations. Amount of profit before tax will be :

A ₹ 35,00,000

B ₹ 30,00,000

C ₹ 25,00,000

D ₹ 45,00,000

28 A transaction involving a decrease in Debt-Equity Ratio and increase

in Current Ratio is

A Issue of Debentures against the purchase of fixed assets.

Page 10 of 15
 B Issue of Debentures for cash

C Redemption of Preference shares for cash

D Issue of Equity shares for cash

29 Which of the following is not correct?

A Equity = Capital Employed + Debt.

B Equity = Share Capital + Reserves and Surplus.

C Debt = Long-term Borrowing + Long-term Provisions.

D Working Capital = Current Assets - Current Liabilities.

30 Net profit after tax is ₹ 1,20,000; 10% Debentures are of ₹

2,00,000; Capital Employed is ₹ 16,00,000. Rate of Tax 40%. Return
on Investment (ROI) will be:

A 20%

B 25%

C 22%

D 13.75%

31 Sincere Ltd has a Proprietary ratio of 25%. To maintain this ratio at

30%, management may:

A Increase equity

B Reduce debt

C Either increase equity or reduce debt

D Increase Current Assets

32 The two basic measures of operational efficiency of a company are:

A Inventory Turnover Ratio and Working Capital Turnover Ratio

B Liquid Ratio and Operating Ratio

Page 11 of 15
C Liquid Ratio and Current Ratio

D Gross Profit Margin and Net Profit Margin

Case Based MCQ (From Q. 33 to 36)

Sanco Computers Ltd. applied for a term loan of ₹ 10 Lac from Axis
Bank and submitted to the bank its Statement of Profit & Loss for the
year ended 31st March, 2024 and a Balance Sheet as at that date.
The bank requires certain accounting ratios of the Company before
providing the loan.
Following figures have been extracted from the financial statements
of the Company :
Particulars ₹

Share Capital 1,00,000

General Reserve 2,00,000

Balance of Profit & Loss (50,000)

Current Liabilities 1,25,000

Inventory 2,50,000

Trade Receivables 2,00,000

Marketable Securities 30,000

Cash at Bank 20,000

Tangible Fixed Assets 7,50,000

Loans @10% 4,00,000

12% Debentures 2,00,000

Net Profit for the year after interest and tax was 796,000. Rate of
Income Tax was 50%.
Based on the above mentioned information you are required to
answer the following questions :

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33 Debt-Equity Ratio of the Company will be :

A 2:1

B 1.6:1

C 2.4:1

D 1.71:1

34 Proprietary Ratio of the Company will be :

A 25%

B 22.22%

C 20%

D 50%

35 Interest Coverage Ratio of the Company will be :

A 3 times

B 2.5 times

C 1.75 times

D 4 times

36 Total Assets to Debt Ratio will be:

A 1.67:1

B 1.88:1

C 0.83:1

D 2.08:1

37 Which of the following are included in traditional classification of

ratios?
(i) Liquidity Ratios
(ii) Statement of Profit and Loss Ratios

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 (iii) Balance Sheet Ratios
(iv) Profitability Ratios
(v) Composite Ratios
(vi) Solvency Ratios

A (ii) (iii) (v)

B (i) (iv) (vi)

C (i) (ii) (vi)

D (i) (ii) (iii) (iv) (v) (vi)

38 The ................. may indicate that the firm is experiencing stock outs
and lost sales.

A Average Payment Period

B Inventory Turnover Ratio

C Average Collection Period

D Quick Ratio

39 If Total Sales is ₹ 2,50,000 and credit sales is 25% of cash sales. The
amount of credit sales is:

A ₹ 50,000

B ₹ 2,50,000

C ₹ 16,000

D ₹ 3,00,000

40 Cost of Revenue from operations ₹ 12,00,000

Inventory Turnover Ratio 4 times
If opening inventory was one-third of closing inventory, the closing
inventory will be:

A ₹ 2,25,000

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 B ₹ 4,50,000

C ₹ 4,00,000

D ₹ 1,50,000

Answers:

QUE 1 2 3 4 5 6 7 8 9 10

ANS B A B B B C C D C C

QUE 11 12 13 14 15 16 17 18 19 20

ANS B C B D D D A C D D

QUE 21 22 23 24 25 26 27 28 29 30

ANS B C B A D B A D A D

QUE 31 32 33 34 35 36 37 38 39 40

ANS C A C C D D A B A B

******************

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 KENDRIYA VIDYALAYA SANGATHAN, AHMEDABAD REGION
SUBJECT: ACCOUNTANCY CLASS: XII
CHAPTER : CASH FLOW STATEMENT
Q

1 Assertion (A): Depreciation is added back to net profit while

calculating Cash Flows from Operating Activities

Reason (R): Depreciation is a non-cash expense. It had reduced the

net profit while there is no cash flow.
A Both assertion and reason are true. Reason is a correct explanation of
assertion.
B Both assertion and reason are true but reason is not the correct
explanation of assertion
C Both assertion and reason are false
D Assertion is true but Reason is false
2 Assertion (A): Cash Flow statement is a substitute for income
statement.
Reason (R): Cash Flow Statement does not show Profit and Loss.
In the context of above two statements, which of the following is
correct?
A Both assertion and reason are true. Reason is a correct explanation of
assertion.
B Both assertion and reason are true but reason is not the correct
explanation of assertion
C Both assertion and reason are false

D Assertion is not correct but Reason is true

3 Assertion (A): Cash deposited into bank will not result in Flow of
Cash or Cash equivalents.
Reason (R): Cash deposited into bank is movement between items
of Cash.
in the context of above two statements, which of the following is
correct?
A Both assertion and reason are true. Reason is a correct explanation of
assertion.

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 B Both assertion and reason are true but reason is not the correct
explanation of assertion
C Both assertion and reason are false

D Assertion is true but Reason is false

4 Assertion (A): Declaration of Proposed (Final) Dividend does not

result in Flow of Cash.
Reason (R): It does not affect cash of the company since there is no
payment or receipt in cash.
in the context of above two statements, which of the following is
correct?
A Both assertion and reason are true. Reason is a correct explanation of
assertion.
B Both assertion and reason are true but reason is not the correct
explanation of assertion
C Both assertion and reason are false
D Assertion is true but Reason is false
5 Statement -I: Rent paid will be classified under Operating activity
while preparing Cash Flow Statement
Statement -II: Interest received in Cash on Loans and Advances
results in Cash Flow from Financing Activities
A Both Statement I and Statement II are correct
B Both Statement I and Statement II are incorrect
C Statement -1 is correct, statement-II is incorrect
D Statement-II is correct, statement-1 is incorrect
6 Statement I: Financing activities relate to Long Term Funds or
Capital of an enterprise.
Statement II: Separate disclosure of Cash Flows arising from
Financing Activities is important because they represent the extent to
which expenditures have been made for resources intended to
generate future income and Cash flows.
A Both Statement I and Statement II are correct
B Both Statement I and Statement II are incorrect
C Statement -1 is correct, statement-II is incorrect
D Statement-II is correct, statement-1 is incorrect

Page 2 of 10
7 Statement I: Sale of Marketable Securities will result in no flow of
Cash.
Statement II: Debentures issued as collateral security will result in
inflow of cash.
A Both Statement I and Statement II are correct
B Both Statement I and Statement II are incorrect
C Statement -1 is correct, statement-II is incorrect
D Statement-II is correct, statement-1 is incorrect
8 Statement I: Increase in provision for doubtful debts should be
added back for calculating cash from operations.
Statement II: Dividend received is a Financing Activity.
A Both Statement I and Statement II are correct
B Both Statement I and Statement II are incorrect
C Statement -1 is correct, statement-II is incorrect
D Statement-II is correct, statement-1 is incorrect
9 Match the following –
i ) Land sold at Loss of ₹ 10,000 a) Operating Activity
ii) Securities Premium at the time of b) Investing Activity
issue of Shares
c) Financing Activity
A i – a, ii – b
B i – b, ii – c
C i – c, ii – b
D i – c, ii – a
10 Match the following –
i) Conversion of Debentures into a) Financing Activity
shares
ii) Land sold @ 10% profit b) Investing activity
c) Is not shown in Cash Flow
Statement
A i – a, ii – b
B i – b, ii – c
C i – c, ii – b
D i – c, ii – a
11 Match the following –

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 i) 10% Debentures of ₹ 1,00,000 issued @ a) ₹ 15,000
20% premium
ii) Interest paid on long term loans b) ₹ 1,00,000
( ` 1,00,000)@15%
c) ₹ 1,20,000
A i – a, ii – b
B i – b, ii – c
C i – c, ii – b
D i – c, ii – a
12 Match the following –
i) Rent received on property held on a) Operating activity
investment
ii) Underwriting commission paid b) Investing activity
c) Financing activity
A i – a, ii – b
B i – b, ii – c
C i – c, ii – b
D i – c, ii – a
13 From the following particulars, what will be the amount of provision
for tax made during the year?
Provision for Taxation as on -
31.3.2023 ₹50,000
31.3.2023 ₹ 40,000
The Company paid taxes ₹ 45,000 for the year 2023-2024.
A ₹ 45,000
B ₹ 35,000
C ₹ 40,000
D ₹ 50,000
14 From the following information, the outflow of cash for the purchase
of machinery will be:
Written down value of machinery as on 1.4.2023 ₹ 5,00,000
Written down value of machinery as on 31.3.2024 ₹ 7,00,000
Depreciation on machinery charged during the year ₹ 60,000
Machinery having book value ₹ 25,000 sold for ₹ 20,000
A ₹ 2,70,000

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 B ₹ 2,80,000
C ₹ 2,75,000
D ₹ 2,85,000
15 On 1st January, 2023 company issued shares of ₹ 10,00,000 and paid
₹ 10,000 as Share Issue Expense. Amount shown in Financing
Activities
A ₹ 10,00,000 as Inflow and ₹ 10,000 as Outflow.
B ₹ 9,90,000 as Inflow.
C ₹ 10,10,000 as Inflow.
D ₹ 10,00,000 as Inflow from Shares and ₹ 10,000 as Inflow for Share
Issue Expenses.
16 Sale of Plant and Machinery of Book Value of ₹ 5,00,000 at a loss of
5%. Inflow under Investing Activities will be
A ₹ 4,75,000
B ₹ 5,00,000
C ₹ 5,25,000
D ₹ 3,60,000
17 Sale of Current Investment will be shown under
A Operating Activity
B Financing Activity
C Investing Activity
D Cash and Cash Equivalents
18 Issue of Shares at a Premium is shown as:
A Inflow under Operating Activities.
B Inflow under Financing Activities.
C Inflow under Investing activity
D Outflow under Financing Activities.
19 Dividend paid by a financing company is shown under :
A Operating activity
B Investing activity
C Financing activity
D Cash and cash equivalents.
20 Dividend paid by Non-financing company is shown under:
A Operating Activity
B Investing Activity

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 C Financing Activity
D Cash and Cash Equivalents.
21 What will be the effect of transaction ‘Payment of employee benefit
expenses’ on the Cash Flow Statement?
A Outflow from Operating Activities
B Outflow from Investing Activities
C Outflow from Financing Activities
D No effect on Cash Flow
22 X Ltd. purchased Machinery of ₹ 25,00,000 issuing a cheque of ₹
15,00,000 and 10% Debentures of ₹ 10,00,000 in the Cash Flow
Statement, the transaction will be shown as :
A Outflow of Cash under Investing activity ₹ 25,00,000 & inflow of Cash
under Financing Activity as receipt for Debentures ₹ 10,00,000
B Outflow of Cash under Investing activity ₹ 15,00,000
C Inflow of Cash ₹ 10,00,000 as Financing Activity
D None of the above
23 Paid ₹ 7,00,000 to acquire shares in XYZ Ltd and received a dividend
of ₹ 20,000 after acquisition. These transactions will result in :
A Cash used in Investing Activities ₹ 7,00,000
B Cash generated from Financing Activities ₹ 7,20,000
C Cash generated from Financing Activities ₹ 6,80,000
D Cash used in Investing Activities ₹ 6,80,000
24 From the following information, find out the inflow of cash by sale of
Office Equipment:
Office Equipments as on 1.4.2023 ₹ 3,00,000
Office Equipments as on 31.3.2024 ₹ 2,00,000
Depreciation charged during the year (2023 – 24) ₹ 40,000
Office Equipments purchased during the year ₹ 30,000
Part of Office Equipment sold at a profit of ₹ 12,000
A ₹ 1,00,000
B ₹ 1,02,000
C ₹ 90,000
D ₹ 1,12,000
25 Which of the following is not a part of Cash and Cash Equivalents?
A Inventories

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 B Current Investments
C Short-term Deposits
D Marketable Securities
26 What will be the effect of issue of Bonus shares on Cash Flow
Statement?
A No effect
B Inflow in Financing Activity
C Inflow in Investing Activity
D Inflow in Operating Activity
27 Insurance Claim received by Albert Co. Ltd. of ₹ 5,00,000 for Loss of
Machinery due to theft will be recorded in Cash Flow Statement in
which of the following manner?
A Added under Operating Activities as Extraordinary Item and
Subtracted from Operating Activities also.
B Subtracted under Operating Activities as Extraordinary Item and
Added to Operating Activities also.
C Added under Operating Activities as Extraordinary Item and Outflow
under Investing Activity also.
D Subtracted under Operating Activities as Extraordinary Item and
Inflow under Investing Activities also.
28 Decrease in Bank Overdraft is shown under which heading in a Cash
Flow Statement?
A Operating Activity
B Financing Activity
C Investing Activity
D Cash and Cash Equivalent
29 A company issued 20,000; 9% Debentures of ₹ 100 each at 10%
Discount. These debentures were to be redeemed at 15% Premium at
the end of 5 years. The balance in Securities Premium Account as on
the date of Issue was ₹ 3,70,000. How this transaction will be
reflected in Cash Flow Statement?
A Added ₹ 1,30,000 under Operating Activities as Loss on Issue of
Debentures written off and Inflow of ₹ 20,00,000 under Financing
Activities.

Page 7 of 10
 B Added ₹ 5,00,000 under Operating Activities as Loss on Issue of
Debentures written off and Inflow of ₹ 18,00,000 under Financing
Activities.
C Added ₹ 1,30,000 under Operating Activities as Loss on Issue of
Debentures written off and Inflow of ₹ 18,00,000 under Financing
Activities.
D Added ₹ 5,00,000 under Operating Activities as Loss on Issue of
Debentures written off and Inflow of ₹ 20,00,000 under Financing
Activities.
30 Investment costing ₹ 10,000 sold for ₹ 12,000. The amount shown in
Investing Activity is
A ₹ 2,000
B ₹ 10,000
C ₹ 12,000
D ₹ 2,200
31 Which of the following are regarded as Financial Activities in the Cash
Flow?
A The Interest that is paid
B The issue of Preference Share
C The redemption of the Preference Share
D All of the above
32 Which of the following statements is incorrect about the Cash Flow
Statement?
A It displays Cash receipts and Cash payments of an entity.
B It reconciles the closing Cash balance with the balance as per Bank
statement.
C It provides information about the Operating, Investing, and Financing
Activities.
D All of the above
33 Which of the following is an instance of Cash Flow from Financing
Activity?
A Payment of Dividend
B Receipt of Dividend on Investment
C Cash received from the customer
D Purchase of Fixed Asset

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34 Which of the following is an instance of Cash Flow from Investing
activity?
A Issue of Debenture
B Repayment of Long-term loan
C Purchase of raw materials for Cash
D Sale of investment by Non-financial organisation
35 What should be the common maturity period for a Marketable
Security to be qualified as Cash Equivalents from the date of its
acquisition?
A One month or less
B Three months or less
C 60 days or less
D None of the above
36 Which of the following transactions will result in Cash inflow?
A Cash withdrawn from bank
B Issue of 10% Debentures of ₹ 5,00,000 to Furniture suppliers.
C Cash received from Debtors of ₹ 2,00,000
D Redeemed 9% Preference shares by converting them into Equity
Shares
37 Purchase of Building by issue of Debentures is:-
A Overlooked in the preparation of Cash Flow Statement
B Operating activities
C Investing activities
D Financing activities
38 Which of the following is not added to the Net Profit while computing
the amount of funds from Operating activities?
A Depreciation charged on Machinery
B Profit on sale of Machinery
C Goodwill written off
D Loss on sale of Furniture
39 Depreciation is a __________.
A Cash expenditure
B Cash Operating expense
C Non-cash Non-operating expense
D Non-cash Operating expense

Page 9 of 10
 40 Which of the following is included in Cash from Operating activities?
A Sale of fixed assets
B Cash flow from business activities
C Cash flow from business activities and changes in current Assets and
Current Liabilities
D Borrowing from external sources

Answer :

QUE 1 2 3 4 5 6 7 8 9 10

ANS A D A A A A C C B C

QUE 11 12 13 14 15 16 17 18 19 20

ANS D B B D A A D B C C

QUE 21 22 23 24 25 26 27 28 29 30

ANS A B D B A A D B C C

QUE 31 32 33 34 35 36 37 38 39 40

ANS D B A D B C A B D C

******************

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