Class 12 Accountancy Part-1 Chapter 3 Reconstitution of Partnership Admission of a Partner

In this quiz, students will explore the key concepts of the Reconstitution of Partnership with a focus on the Admission of a Partner as outlined in ICSE Class 12 Accountancy, Chapter 3. The quiz aims to test students’ understanding of the accounting procedures involved when a new partner joins an existing partnership firm. Topics covered will include the calculation of the new profit-sharing ratio, revaluation of assets and liabilities, treatment of goodwill, and the journal entries required to record the admission process. Through multiple-choice questions, short answer questions, and case-based scenarios, students will apply their knowledge of the legal and financial implications of admitting a partner, ensuring they grasp the core principles of partnership reconstitution. The quiz is designed to assess both theoretical knowledge and practical application, encouraging students to demonstrate their proficiency in handling complex accounting transactions related to the admission of a partner.

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Category: Calculation of New Profit Sharing Ratio

1. A and B share profits 7:3. C is admitted for $\frac{1}{4}$ share, with new ratio between A and B becoming 3:2. What is the gain/sacrifice for A and B?

a) A gains $\frac{1}{5}$, B loses $\frac{1}{5}$

b) A gains $\frac{1}{4}$, B loses $\frac{1}{4}$

c) A gains $\frac{1}{4}$, B no change

d) A no change, B loses $\frac{1}{5}$

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Category: When Goodwill Already Appears in the Books

2. P and Q share profits in $3 : 2$ ratio with \$45,000 goodwill in books. R is admitted for $\frac{2}{7}$th share by acquiring $\frac{3}{4}$ from P and $\frac{1}{4}$ from Q. R brings \$70,000 capital and \$28,000 goodwill. What is P's sacrificing ratio?

a) $3 : 1$

b) $3 : 2$

c) $2 : 1$

d) $1 : 1$

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Category: Hidden or Inferred Goodwill

3. P and Q have capitals of \$60,000 and \$40,000 respectively, sharing profits equally. They admit R for $\frac{1}{3}$rd share. R contributes \$50,000 as capital. What is the journal entry to record R's share of goodwill?

a) Bank A/c Dr. \$50,000 To R's Capital A/c \$50,000

b) Goodwill A/c Dr. \$10,000 To P's Capital A/c \$5,000 To Q's Capital A/c \$5,000

c) R's Current A/c Dr. \$10,000 To P's Capital A/c \$5,000 To Q's Capital A/c \$5,000

d) No journal entry is required for goodwill

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Category: Premium for Goodwill brought by Existing Partner also

4. If a new partner does not bring the full amount of premium for goodwill in cash, what is the correct journal entry to adjust the unpaid portion?

a) Debit Premium for Goodwill A/c and Credit New Partner's Capital A/c

b) Debit New Partner's Current A/c and Credit Sacrificing Partners' Capital A/cs in sacrificing ratio

c) Debit Sacrificing Partners' Capital A/cs and Credit New Partner's Current A/c

d) No entry is required for the unpaid portion

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Category: Occasions: Admission of a Partner

5. A and B are partners sharing profits in the ratio of $3:2$. They admit C as a new partner for $\frac{1}{5}$th share, which he acquires equally from A and B. What will be the sacrificing ratio?

a) 3:2

b) 1:1

c) 2:1

d) 1:2

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Category: Proper Form of Balance Sheet

6. What must be true for a balance sheet to be correctly prepared?

a) Total Liabilities must be greater than Total Assets

b) Total Assets must exceed Total Liabilities

c) Total Liabilities must equal Total Assets

d) Only current assets should match current liabilities

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Category: Occasions: Change in the profit sharing ratio among the existing partners

7. A and B are partners sharing profits in $4 : 3$. They decide to share future profits equally. The total value of assets is \$210,000 and liabilities are \$90,000. If they revalue the assets to \$240,000, what will be the journal entry for the revaluation?

a) Asset A/c Dr. \$30,000; To Revaluation A/c \$30,000; Revaluation A/c Dr. \$30,000; To A's Capital A/c \$17,142.86; To B's Capital A/c \$12,857.14

b) Asset A/c Dr. \$30,000; To A's Capital A/c \$17,142.86; To B's Capital A/c \$12,857.14

c) Revaluation A/c Dr. \$30,000; To A's Capital A/c \$15,000; To B's Capital A/c \$15,000

d) Asset A/c Dr. \$30,000; To A's Capital A/c \$20,000; To B's Capital A/c \$10,000

8 / 283

Category: Adjustment of Partners’ Capital

8. When a new partner is admitted, the adjustment of capital can be done in which of the following ways?

a) Calculation of new partner's capital based on old partners' capital and adjusting old partners' capital based on new partner's capital

b) Only by calculating the new partner's capital

c) Only by adjusting old partners' capital

d) By issuing debentures to adjust the capital

9 / 283

Category: Accounting Treatment of Revaluation of Assets and Liabilities

9. (A) At the time of admission of a new partner, revaluation of assets and liabilities is necessary to ensure fair treatment of the new partner.
(R) Revaluation ensures that the new partner neither benefits from an increase in asset values nor suffers from a decrease in asset values.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

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Category: Occasions: Change in the profit sharing ratio among the existing partners

10. Ram and Shyam are partners sharing profits in the ratio $3 : 2$. They decide to change their profit-sharing ratio to $1 : 1$. Who gains and who loses due to this change?
\begin{enize}
\item [Solution Description]
Initially, Ram's share is $\frac{3}{5}$ and Shyam's share is $\frac{2}{5}$. The new ratio is $\frac{1}{2}$ each.

Step 1: Calculate Ram's gain or loss.
Old share - New share = $\frac{3}{5} - \frac{1}{2} = \frac{6}{10} - \frac{5}{10} = \frac{1}{10}$ (Loses).

Step 2: Calculate Shyam's gain or loss.
Old share - New share = $\frac{2}{5} - \frac{1}{2} = \frac{4}{10} - \frac{5}{10} = -\frac{1}{10}$ (Gains).

Hence, Ram loses and Shyam gains.
\item Both gain equally
\item Ram gains and Shyam loses
\item Ram loses and Shyam gains
\item Neither gains nor loses
\item c) Ram loses and Shyam gains
\end{enumerate}

\item (Change in Profit Sharing Ratio) If the profit-sharing ratio changes from $5 : 3$ to $7 : 5$, what is the percentage gain for the partner whose share increases?

a) 11.11\%

b) 8.33\%

c) 10\%

d) 12.5\%

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Category: Adjustment of Hidden Goodwill

11. X and Y are partners with capitals of \$8,00,000 and \$6,00,000 respectively, sharing profits in the ratio of 2:1. They admit Z for 1/5th share, who brings \$5,00,000 as capital. The firm's total assets are \$25,00,000 and liabilities are \$5,00,000. Calculate the hidden goodwill.

a) \$0

b) \$1,00,000

c) \$2,00,000

d) \$3,00,000

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Category: Occasions: Change in the profit sharing ratio among the existing partners

12. (A) When the profit-sharing ratio among existing partners is changed, the firm is reconstituted but not dissolved.
(R) A change in profit-sharing ratio alters the terms of partnership but does not terminate the firm's existence.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

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Category: Occasions: Death of a partner

13. In case of the death of a partner, which account is debited to transfer the deceased partner's share of profit till the date of death?

a) Capital Account of the deceased partner

b) Profit and Loss Suspense Account

c) Current Account of the deceased partner

d) Goodwill Account

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Category: Occasions: Retirement of a partner

14. (A) When a partner retires, the remaining partners may continue the business.
(R) The retirement of a partner dissolves the partnership firm.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

15 / 283

Category: Accounting Treatment of Revaluation of Assets and Liabilities

15. An unrecorded liability of \$5,000 is discovered during revaluation. How is this adjustment recorded in the books?

a) Debit Unrecorded Liability A/c \$5,000; Credit Revaluation A/c \$5,000

b) Debit Revaluation A/c \$5,000; Credit Cash A/c \$5,000

c) Debit Revaluation A/c \$5,000; Credit Unrecorded Liability A/c \$5,000

d) Debit Capital A/c \$5,000; Credit Revaluation A/c \$5,000

16 / 283

Category: Accounting Treatment of Goodwill including Hidden Goodwill

16. (A) Hidden goodwill is calculated as the difference between the desired total capital of the firm and the actual combined capital of all partners, including the new partner's contribution.
(R) The sacrificing ratio is always equal to the old profit-sharing ratio unless specified otherwise in the partnership agreement.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

17 / 283

Category: Accounting Treatment of Goodwill including Hidden Goodwill

17. P and Q have capitals of \$6,00,000 and \$4,00,000. R joins for a 1/3rd share by investing \$3,00,000. P and Q decide to share future profits equally. Calculate the amount of goodwill to be credited to P's capital account if the hidden goodwill is distributed in sacrificing ratio (initially 3:2).

a) \$2,40,000

b) \$1,80,000

c) \$0

d) \$3,00,000

18 / 283

Category: Change in Profit Sharing Ratio

18. A and B are partners sharing profits in the ratio of $5 : 3$. They admit C for $\frac{1}{6}$th share in profits. What is the new profit sharing ratio of A, B, and C?

a) 20 : 12 : 9

b) 25 : 15 : 8

c) 5 : 3 : 1

d) 10 : 6 : 4

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Category: Premium for Goodwill brought by Existing Partner also

19. When a new partner is admitted and the existing partners sacrifice their profit-sharing ratio, how is the premium for goodwill brought in by the new partner treated?

a) Debited to Revaluation Account

b) Credited to all partners' capital accounts equally

c) Credited to sacrificing partners' capital/current accounts in the sacrificing ratio

d) Credited to new partner's capital account only

20 / 283

Category: Adjustment of Hidden Goodwill

20. Which account is debited when adjusting hidden goodwill in the books of accounts?

a) Existing partners' capital accounts.

b) New partner's capital account.

c) Revaluation account.

d) Profit \& Loss account.

21 / 283

Category: Proper Form of Balance Sheet

21. Which of the following is a liability in a balance sheet?

a) Sundry Debtors

b) Plant and Machinery

c) Sundry Creditors

d) Inventory

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Category: Adjustments at the time of Admission of a Partner

22. A and B are partners sharing profits in the ratio of 3:2. They admit C as a new partner who brings \$40,000 as capital for a 1/5th share. The total capital of the firm is to be adjusted based on C's contribution. What is the adjusted capital of A if the capitals of A and B were initially \$60,000 and \$40,000, respectively?

a) \$90,000

b) \$96,000

c) \$100,000

d) \$84,000

23 / 283

Category: Occasions: Admission of a Partner

23. (A) When a new partner is admitted, the premium for goodwill brought in by them is credited to the sacrificing partners’ capital accounts.
(R) The premium for goodwill is distributed among the sacrificing partners in their sacrificing ratio.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

24 / 283

Category: Accounting Treatment of Revaluation of Assets and Liabilities

24. (A) Revaluation Account is a nominal account.
(R) It follows the principle of debiting all expenses/losses and crediting all incomes/gains.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

25 / 283

Category: When Goodwill Already Appears in the Books

25. (A) When goodwill already appears in the books and a new partner brings his share of goodwill in cash, the existing goodwill must be written off before recording the new partner's share of goodwill.
(R) The existing goodwill represents the past reputation of the firm and does not reflect the current value contributed by the new partner.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

26 / 283

Category: When Goodwill Already Appears in the Books/Balance Sheet

26. If the existing goodwill in the books is \$6,000 and the old profit-sharing ratio is 2 : 1, what will be the journal entry to write it off?

a) Dr. A’s Capital A/c \$4,000; Dr. B’s Capital A/c \$2,000; Cr. Goodwill A/c \$6,000

b) Dr. Goodwill A/c \$6,000; Cr. A’s Capital A/c \$4,000; Cr. B’s Capital A/c \$2,000

c) Dr. A’s Capital A/c \$3,000; Dr. B’s Capital A/c \$3,000; Cr. Goodwill A/c \$6,000

d) Dr. Goodwill A/c \$6,000; Cr. A’s Capital A/c \$3,000; Cr. B’s Capital A/c \$3,000

27 / 283

Category: Without Adjustment of Partners’ Capital

27. A and B are partners with capitals of \$50,000 and \$30,000 respectively. They admit C as a new partner who introduces \$40,000 as his capital. Without adjusting the existing partners' capital, which journal entry correctly records this transaction?

a) Cash/Bank A/c Dr. \$40,000; To A's Capital A/c \$40,000

b) Cash/Bank A/c Dr. \$40,000; To B's Capital A/c \$40,000

c) A's Capital A/c Dr. \$40,000; To Cash/Bank A/c \$40,000

d) Cash/Bank A/c Dr. \$40,000; To C's Capital A/c \$40,000

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Category: When Goodwill Already Appears in the Books/Balance Sheet

28. P and Q share profits in the ratio 7:5. They admit R as a partner, and the new profit-sharing ratio becomes 7:5:4. What is the sacrificing ratio of P and Q?

a) 7:5:4

b) 7:5

c) 5:4

d) 1:1

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Category: Hidden or Inferred Goodwill

29. P and Q are partners with capitals of \$300,000 and \$200,000, sharing profits in 2:1. They admit R for a 1/6th share, which he acquires from P. R brings \$150,000 as capital. Calculate the hidden goodwill and the new profit-sharing ratio.

a) \$200,000; 3:2:1

b) \$250,000; 3:2:1

c) \$250,000; 2:1:1

d) \$300,000; 3:1:1

30 / 283

Category: Meaning of Reconstitution of Partnership

30. X, Y, and Z are partners sharing profits in the ratio 5:3:2. Z retires, and X and Y decide to share future profits in the ratio 3:2. Is this considered reconstitution of the firm?

a) No, because the firm continues with the same name.

b) Yes, as the profit sharing ratio among the remaining partners changes, leading to a new agreement.

c) No, since only dissolution can lead to reconstitution.

d) Yes, but only if a new partner is admitted.

31 / 283

Category: Meaning of Reconstitution of Partnership

31. (A) The reconstitution of a partnership firm always results in the termination of the existing agreement and creation of a new one.
(R) A change in profit sharing ratio among partners necessitates the formation of a new partnership agreement.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

32 / 283

Category: Adjustment of Hidden Goodwill

32. Why is hidden goodwill calculated during the admission of a new partner?

a) To increase the total liabilities of the firm.

b) To reduce the capital of the existing partners.

c) To determine the unrecorded value of the firm's goodwill and compensate existing partners.

d) To adjust the revaluation of assets.

33 / 283

Category: Change in Profit Sharing Ratio

33. P and Q are partners with a profit sharing ratio of $2:1$. R joins as a new partner and gets $\frac{1}{4}$th share. If the remaining share is divided between P and Q in the ratio $3:2$, what is the new profit sharing ratio?

a) $9 : 6 : 5$

b) $2 : 1 : 1$

c) $6 : 3 : 3$

d) $4 : 2 : 1$

34 / 283

Category: Accounting Treatment of Goodwill including Hidden Goodwill

34. A new partner brings \$200,000 for a 1/4 share in the firm. The existing total capital of all partners (including the new partner) is \$600,000. What is the hidden goodwill?

a) 150,000

b) 200,000

c) 250,000

d) 300,000

35 / 283

Category: Accounting Treatment of Goodwill including Hidden Goodwill

35. A and B are partners with capital balances of \$4,00,000 and \$3,00,000 respectively. They admit C as a new partner who invests \$2,50,000 for a 1/4th share in profits. Calculate the hidden goodwill.

a) \$25,000

b) \$45,000

c) \$50,000

d) \$60,000

36 / 283

Category: Calculation of New Profit Sharing Ratio

36. (A) When a new partner is admitted, the remaining share of profit after deducting the new partner's share is always divided among the old partners in their original profit-sharing ratio.
(R) The old partners’ sacrifice ratio must be equal to their old profit-sharing ratio unless specified otherwise.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

37 / 283

Category: Unrecorded Assets and Liabilities

37. What is the correct journal entry to record an unrecorded asset worth \$5,000 in the books?

a) Unrecorded Asset A/c Dr. \$5,000; To Cash A/c \$5,000

b) Revaluation A/c Dr. \$5,000; To Unrecorded Asset A/c \$5,000

c) Unrecorded Asset A/c Dr. \$5,000; To Revaluation A/c \$5,000

d) Cash A/c Dr. \$5,000; To Unrecorded Asset A/c \$5,000

38 / 283

Category: Change in Profit Sharing Ratio

38. X and Y are partners sharing profits in the ratio of $7 : 5$. Z is admitted as a new partner for $\frac{1}{6}$th share, which he acquires equally from X and Y. Calculate the new profit sharing ratio.

a) 3 : 2 : 1

b) 7 : 5 : 6

c) 5 : 4 : 3

d) 6 : 5 : 1

39 / 283

Category: Accounting Treatment of Revaluation of Assets and Liabilities

39. How is an unrecorded liability treated during revaluation?

a) Credited to Revaluation Account

b) Debited to Old Partners' Capital Accounts

c) Debited to Revaluation Account

d) Ignored in revaluation process

40 / 283

Category: Accounting Treatment of Accumulated Profits and Losses

40. What is the correct accounting treatment for accumulated losses when a new partner is admitted if the losses are to be adjusted through journal entries?

a) Debited to the new partner's capital account

b) Debited to the old partners' capital accounts in their old ratio

c) Credited to the Profit and Loss Account

d) Adjusted through the Revaluation Account

41 / 283

Category: Occasions: Admission of a Partner

41. X and Y are partners sharing profits in $\frac{5}{7} : \frac{2}{7}$. Z is admitted for $\frac{1}{5}$th share, bringing \$30,000 as capital and \$10,000 as goodwill. The total capital of the firm is \$150,000 after admission. What is X's adjusted capital if capitals are adjusted based on new profit-sharing ratio?

a) \$75,000

b) \$80,000

c) \$85,714.29

d) \$90,000

42 / 283

Category: Hidden or Inferred Goodwill

42. A and B are partners with capitals of \$200,000 and \$150,000 respectively, sharing profits in a 3:2 ratio. They admit C as a new partner for a 1/4th share in profits. C brings \$180,000 as capital. What is the hidden goodwill of the firm?

a) \$160,000

b) \$190,000

c) \$210,000

d) \$240,000

43 / 283

Category: Necessary Accounts

43. What is the total loss transferred to Partners A and B's Current Accounts from the Revaluation Account?

a) 5,400

b) 6,600

c) 7,200

d) 8,100

44 / 283

Category: New Partner brings in only a part of his share of Goodwill

44. How is the premium for goodwill brought in by the new partner distributed among the existing partners?

a) In their old profit sharing ratio

b) In their sacrificing ratio

c) Equally among all partners

d) Only to the managing partner

45 / 283

Category: Calculation of New Profit Sharing Ratio

45. (A) When a new partner is admitted, the old partners' profit sharing ratio changes.
(R) The new partner acquires his share of profits from the old partners.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

46 / 283

Category: Necessary Accounts

46. What is the closing balance in Partner B's Capital Account?

a) B's closing balance is shown as \$54,000 under "To Balance c/d" \end{itemize} Therefore, the closing balance is \$54,000.

b) \$50,000

c) \$54,000

d) \$65,000

e) \$30,000

47 / 283

Category: Necessary Accounts

47. What is the journal entry made to record the increase in the value of Fixed Assets and decrease in Outstanding Expenses?

a) Fixed Assets A/c Dr. \$12,000; Outstanding Expenses A/c Dr. \$320; To Revaluation A/c \$12,320

b) Fixed Assets A/c Dr. \$12,320; To Revaluation A/c \$12,320

c) Revaluation A/c Dr. \$12,000; To Fixed Assets A/c \$12,000

d) Outstanding Expenses A/c Dr. \$320; To Revaluation A/c \$320

48 / 283

Category: Calculation of New Profit Sharing Ratio

48. A and B are partners sharing profits in the ratio of $7 : 5$. C is admitted for $\frac{1}{4}$ share, which he acquires $\frac{1}{8}$ from A and $\frac{1}{8}$ from B. Calculate the new profit sharing ratio.

a) $10 : 8 : 6$

b) $11 : 7 : 6$

c) $9 : 7 : 8$

d) $12 : 6 : 6$

49 / 283

Category: Occasions: Admission of a Partner

49. The balance sheet shows assets at \$200,000 and liabilities at \$50,000. On admission of a new partner, land is revalued to \$250,000 from \$180,000, and creditors increase by \$10,000. What is the net effect on capital accounts of old partners if they share profits equally?

a) \$25,000 each

b) \$30,000 each

c) \$35,000 each

d) \$40,000 each

50 / 283

Category: Occasions: Admission of a Partner

50. Partners A and B share profits in the ratio $\frac{3}{5} : \frac{2}{5}$. They admit C for $\frac{1}{4}$th share in profits. What is the sacrificing ratio of A and B?

a) 1:1

b) 2:1

c) 3:2

d) 4:3

51 / 283

Category: Without Adjustment of Partners’ Capital

51. P and Q are partners in the ratio 7:5. R is admitted as a new partner bringing \$25,000 as capital and \$15,000 as goodwill. The sacrificing ratio of P and Q is 3:2. What will be the total amount credited to old partners' capital accounts for goodwill?

a) \$9,000

b) \$6,000

c) \$12,000

d) \$15,000

52 / 283

Category: Calculation of New Profit Sharing Ratio

52. X and Y share profits in the ratio 3:2. Z is admitted for $\frac{1}{5}$ share, acquiring $\frac{3}{20}$ from X and $\frac{1}{20}$ from Y. What is the new ratio?

a) $9:7:4$

b) $10:6:4$

c) $8:8:4$

d) $11:5:4$

53 / 283

Category: Hidden or Inferred Goodwill

53. (A) When a new partner is admitted, hidden goodwill is calculated as the excess of the total capital of the new firm over the combined adjusted capitals of all partners.
(R) Hidden goodwill arises because the new partner's capital contribution reflects the unrecorded value of the firm's reputation.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

54 / 283

Category: Occasions: Change in the profit sharing ratio among the existing partners

54. Partners X and Y share profits in the ratio $7 : 5$. They decide to change the ratio to $3 : 2$. If the goodwill is valued at \$72,000, what amount will be debited to Y's capital account for goodwill adjustment?

a) \$1,200

b) \$600

c) \$1,800

d) \$2,400

55 / 283

Category: Occasions: Retirement of a partner

55. In which account is the retiring partner's share of goodwill recorded if the remaining partners decide to pay it?

a) Retiring Partner's Capital Account

b) Remaining Partners' Capital Accounts

c) Profit and Loss Account

d) Goodwill Account

56 / 283

Category: Accounting Treatment of Revaluation of Assets and Liabilities

56. A firm revalues its assets and liabilities, resulting in a net loss of \$12,000. The old partners share profits in the ratio 4:3:1. What is the correct journal entry to record this loss?

a) Revaluation A/c Dr. \$12,000 To Old Partners' Capital A/cs \$12,000

b) Old Partners' Capital A/cs Dr. \$12,000 To Revaluation A/c \$12,000

c) Revaluation A/c Dr. \$12,000 To Cash A/c \$12,000

d) Profit and Loss A/c Dr. \$12,000 To Revaluation A/c \$12,000

57 / 283

Category: Adjustments at the time of Admission of a Partner

57. P and Q (3:2) admit R who brings \$30,000 as capital for $\frac{1}{3}$ share. After revaluation, assets increased by \$12,000. What will be P's adjusted capital if capitals are adjusted in new profit-sharing ratio?

a) \$40,000

b) \$42,400

c) \$43,200

d) \$45,600

58 / 283

Category: Accounting Treatment of Goodwill including Hidden Goodwill

58. When goodwill is brought in cash by a new partner, which journal entry correctly records this transaction?

a) Bank A/c Dr. To Old Partners’ Capital A/cs

b) New Partner’s Current A/c Dr. To Bank A/c

c) Bank A/c Dr. To Premium for Goodwill A/c

d) Old Partners’ Capital A/cs Dr. To New Partner’s Current A/c

59 / 283

Category: Hidden or Inferred Goodwill

59. X and Y are partners sharing profits in the ratio of 3:2. Their capitals are \$500,000 and \$300,000 respectively. They admit Z as a new partner for $1/4^{th}$ share in profits. Z brings \$400,000 as his capital. Calculate the hidden goodwill of the firm.

a) \$300,000

b) \$350,000

c) \$400,000

d) \$450,000

60 / 283

Category: When Goodwill Already Appears in the Books

60. (A) When a new partner is admitted and brings goodwill in cash, the existing goodwill must be written off in the old profit sharing ratio of the old partners.

(R) The existing goodwill recorded in the books belongs to the old partners and should be adjusted before distributing the new partner's goodwill.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

61 / 283

Category: Occasions: Change in the profit sharing ratio among the existing partners

61. Ramesh and Suresh are partners sharing profits in the ratio of $5 : 3$. They decide to change their profit sharing ratio to $3 : 2$. What will be the sacrifice or gain for Ramesh and Suresh respectively?

a) Sacrifice $\frac{1}{40}$, Gain $\frac{1}{40}$

b) Gain $\frac{1}{40}$, Sacrifice $\frac{1}{40}$

c) No change in profit sharing ratio

d) Sacrifice $\frac{2}{40}$, Gain $\frac{2}{40}$

62 / 283

Category: Accounting Treatment of Revaluation of Assets and Liabilities

62. (A) The profit or loss on revaluation of assets and liabilities is always transferred to the old partners' capital accounts in their old profit sharing ratio.
(R) The new partner should neither suffer due to a decrease in the value of assets nor benefit from an increase in the value of assets at the time of admission.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

63 / 283

Category: Proper Form of Balance Sheet

63. (A) In a balance sheet, assets are listed in the order of liquidity, with the most liquid asset appearing first.
(R) This helps in understanding how quickly assets can be converted into cash.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

64 / 283

Category: Adjustment of Partners’ Capital

64. (A) When a new partner joins the firm, adjusting the capital of old partners based on the new profit-sharing ratio ensures fairness in the distribution of profits and losses.
(R) The adjusted capital reflects the revised contribution of each partner to the firm’s total capital as per the new profit-sharing arrangement.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

65 / 283

Category: Unrecorded Assets and Liabilities

65. (A) Unrecorded assets are brought into account by debiting the asset account and crediting the Revaluation Account.
(R) This is because unrecorded assets increase the value of the firm's assets and must be accounted for in the books.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

66 / 283

Category: Premium for Goodwill brought by Existing Partner also

66. P and Q share profits in the ratio 5:4. R is admitted for $\frac{1}{5}$th share, taking $\frac{2}{15}$th from P and $\frac{1}{9}$th from Q. If the total goodwill is \$135,000, how much will Q receive as compensation for his sacrifice?

a) \$12,000

b) \$15,000

c) \$18,000

d) \$21,000

67 / 283

Category: Calculation of Sacrificing Ratio

67. (A) When partners A and B share profits in the ratio 7:5 and admit C by sacrificing $\frac{1}{12}$ and $\frac{1}{6}$ of their shares respectively, the sacrificing ratio will always be equal to the ratio in which they sacrifice their individual shares.
(R) The sacrificing ratio is calculated by deducting each partner's new share from their old share, not necessarily equal to the ratio in which they sacrifice individually.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

68 / 283

Category: Proper Form of Balance Sheet

68. Which of the following is classified as a fixed asset in the balance sheet?

a) Cash at Bank

b) Sundry Debtors

c) Provision for Doubtful Debts

d) Plant and Machinery

69 / 283

Category: Accounting Treatment of Accumulated Profits and Losses

69. When accumulated profits are not distributed but adjusted through one journal entry upon admission of a new partner, which of the following entries is correct?

a) Debit Sacrificing Partners’ Capital A/c; Credit Gaining Partner’s Capital A/c

b) Debit Gaining Partner’s Capital A/c; Credit Sacrificing Partners’ Capital A/c

c) Debit Accumulated Profits A/c; Credit All Partners’ Capital A/c

d) Debit New Partner’s Capital A/c; Credit Old Partners’ Capital A/c

70 / 283

Category: Adjustment of Partners’ Capital

70. P and Q are partners with capitals of \$60,000 and \$40,000, sharing profits in the ratio $3 : 2$. R is admitted for $1/4$th share by bringing \$25,000 as capital. The total capital of the firm based on R's capital is \$100,000. What is the hidden goodwill?

a) \$15,000

b) \$20,000

c) \$25,000

d) \$30,000

71 / 283

Category: Accounting Treatment of Goodwill including Hidden Goodwill

71. A and B are partners in a firm with capitals of \$5,00,000 and \$3,00,000 respectively. They admit C as a new partner for 1/4th share in profits. C brings \$4,00,000 as capital. What is the value of hidden goodwill?

a) \$2,00,000

b) \$3,00,000

c) \$4,00,000

d) \$5,00,000

72 / 283

Category: Accounting Treatment of Goodwill including Hidden Goodwill

72. X and Y admit Z into partnership. Z contributes \$3,60,000 for 30\% profit share. X and Y's capitals before Z's admission are \$5,00,000 and \$4,00,000 respectively. The sacrificing ratio is 3:2. What is the journal entry to adjust Z's share of goodwill?

a) Debit X and Y's Capital A/cs; Credit Z's Current A/c

b) Debit Z's Current A/c; Credit X and Y's Capital A/cs

c) No entry is needed

d) Debit Goodwill A/c; Credit X and Y's Capital A/cs

73 / 283

Category: Adjustment of Hidden Goodwill

73. (A) Hidden goodwill is calculated as the excess of desired total capital over the actual combined capital of all partners.
(R) This adjustment ensures that the new partner's capital contribution aligns with the profit-sharing ratio.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

74 / 283

Category: Occasions: Retirement of a partner

74. On D’s retirement, assets were revalued and liabilities reassessed. Machinery increased by \$15,000, stock decreased by \$6,000, and creditors reduced by \$4,000. What is the net effect on the revaluation account?

a) \$5,000 (Credit)

b) \$13,000 (Debit)

c) \$17,000 (Credit)

d) \$25,000 (Debit)

75 / 283

Category: Premium for Goodwill brought by Existing Partner also

75. If the old profit-sharing ratio of Partners A and B is 3:2, and after admitting Partner C, the new ratio becomes 5:3:2, what will be the amount of goodwill brought in by Partner B if the total goodwill is \$50,000?

a) \$2,000

b) \$3,000

c) \$5,000

d) \$6,000

76 / 283

Category: Calculation of Sacrificing Ratio

76. (A) The sacrificing ratio is calculated by subtracting the new profit sharing ratio from the old profit sharing ratio.
(R) The purpose of calculating the sacrificing ratio is to distribute the goodwill brought in by the new partner among the old partners.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

77 / 283

Category: Without Adjustment of Partners’ Capital

77. Partners P and Q have capitals of \$80,000 and \$60,000 respectively, sharing profits in the ratio 4:3. R is admitted as a new partner for 1/6th share in profits and brings \$25,000 as capital. Under the "Without Adjustment of Partners’ Capital" method, what will be the total capital of the firm after R's admission?

a) \$140,000

b) \$160,000

c) \$165,000

d) \$180,000

78 / 283

Category: When Goodwill Already Appears in the Books

78. A and B share profits in the ratio $4 : 3$. C is admitted for $\frac{1}{5}$th share, acquiring it equally from A and B. If the new profit-sharing ratio becomes $13 : 11 : 6$, what is the sacrificing ratio between A and B?

a) $4 : 3$

b) $1 : 1$

c) $13 : 11$

d) $6 : 1$

79 / 283

Category: New Partner brings in only a part of his share of Goodwill

79. (A) When a new partner brings in only a part of his share of goodwill in cash, the remaining unpaid goodwill is adjusted through his Current Account.
(R) The Current Account is used instead of the Capital Account to ensure the new partner's capital remains intact as per the partnership agreement.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

80 / 283

Category: Unrecorded Assets and Liabilities

80. (A) Recording an unrecorded asset in the books increases the total assets of the firm and is credited to the Revaluation Account.
(R) The Revaluation Account is used to record all adjustments related to changes in the value of assets and liabilities, including unrecorded ones.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

81 / 283

Category: Occasions: Change in the profit sharing ratio among the existing partners

81. What happens when partners change their profit sharing ratio?

a) The old partnership agreement remains unchanged.

b) A new partnership agreement replaces the old one.

c) All partners will have equal profits regardless of the change.

d) The firm dissolves automatically.

82 / 283

Category: Calculation of Sacrificing Ratio

82. P and Q are partners sharing profits in the ratio 7:3. R is admitted for $\frac{1}{4}$ share, and P and Q decide to share future profits equally. What is the sacrificing ratio?

a) 13 : 3

b) 7 : 3

c) 26 : 6

d) No sacrifice by Q

83 / 283

Category: Necessary Accounts

83. The Revaluation Account shows a loss of \$7,200 distributed among partners A and B in the ratio 5:3. If Partner A's existing capital is \$65,000 and the required capital after revaluation adjustment is \$62,000, what will be the journal entry to adjust the surplus in Partner A's capital?

a) Partner’s Current A/c Dr. \$1,500; To Partner’s Capital A/c \$1,500

b) Partner’s Capital A/c Dr. \$1,500; To Partner’s Current A/c \$1,500

c) Partner’s Current A/c Dr. \$62,000; To Partner’s Capital A/c \$62,000

d) Partner’s Capital A/c Dr. \$62,000; To Partner’s Current A/c \$62,000

84 / 283

Category: Calculation of Sacrificing Ratio

84. P and Q share profits in the ratio of 7:5. R is admitted for $\frac{1}{6}$ share, and P and Q agree to share future profits equally. What is the gain or sacrifice for P and Q?

a) P gains $\frac{1}{6}$, Q sacrifices $\frac{1}{6}$

b) P sacrifices $\frac{1}{6}$, Q gains $\frac{1}{6}$

c) P sacrifices $\frac{1}{6}$, Q neither sacrifices nor gains

d) Both sacrifice equally

85 / 283

Category: Without Adjustment of Partners’ Capital

85. How is the new partner's capital contribution recorded in the books of accounts?

a) Debit the new partner's Capital account, Credit Cash/Bank

b) Debit Cash/Bank, Credit the new partner's Capital account

c) Debit the old partners' Capital accounts, Credit Cash/Bank

d) Debit Cash/Bank, Credit the old partners' Capital accounts

86 / 283

Category: Calculation of New Profit Sharing Ratio

86. P and Q are partners sharing profits in the ratio of 5:4. They admit R for $\frac{1}{6}$ share in the firm, which he acquires equally from P and Q. What is the new profit sharing ratio?

a) $15:12:9$

b) $17:13:6$

c) $18:14:4$

d) $16:12:8$

87 / 283

Category: Accounting Treatment of Accumulated Profits and Losses

87. If the Workmen's Compensation Fund has an excess amount at the time of admission of a new partner, it should be:

a) Transferred to the new partner’s capital account \leftitem Carried forward as a reserve in the balance sheet

b) Distributed equally among all partners

c) Credited to the old partners’ capital/current accounts in their old ratio

88 / 283

Category: Accounting Treatment of Accumulated Profits and Losses

88. X and Y are partners sharing profits in the ratio of 3:2. Their Balance Sheet shows a General Reserve of \$50,000 and a Profit and Loss Account (Dr.) balance of \$20,000. They admit Z as a new partner for a 1/5th share. The new profit-sharing ratio is 4:3:2. If accumulated profits are not distributed but adjusted through capital accounts, what amount will be debited to Z's Capital Account?

a) \$5,000

b) \$6,667

c) \$7,500

d) \$8,000

89 / 283

Category: Occasions: Admission of a Partner

89. (A) When a new partner is admitted, the old partners must adjust their capital accounts to reflect the new profit sharing ratio.
(R) The new profit sharing ratio is calculated by deducting the sacrificed ratio from the old ratio.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

90 / 283

Category: Meaning of Reconstitution of Partnership

90. Partners A, B, C share profits in the ratio 4:3:2. After C's death, A and B decide to continue the firm with a new profit sharing ratio of 3:2 respectively. How much does B gain in terms of profit share due to this change?

a) $\frac{1}{5}$

b) $\frac{2}{15}$

c) $\frac{1}{15}$

d) $\frac{3}{20}$

91 / 283

Category: Accounting Treatment of Accumulated Profits and Losses

91. At the time of admission of a new partner, accumulated profits and losses are transferred to:

a) The capital accounts of all partners (old and new)

b) The current accounts of all partners (old and new)

c) Only the capital accounts of the old partners

d) Only the current accounts of the old partners

92 / 283

Category: New Partner brings in only a part of his share of Goodwill

92. When a new partner brings only a part of his share of goodwill in cash, which account is credited when recording the cash brought in?

a) Only Premium for Goodwill A/c

b) Only New Partner's Capital A/c

c) Both Premium for Goodwill A/c and New Partner's Capital A/c

d) Sacrificing Partners' Capital A/cs

93 / 283

Category: Admission of a Partner

93. (A) When a new partner is admitted, the profit sharing ratio of old partners always decreases.
(R) The new partner's share of profit comes from the sacrifice of existing partners.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

94 / 283

Category: Proper Form of Balance Sheet

94. If a company's total assets are \$500,000 and its owner's equity is \$300,000, what are its total liabilities?

a) \$800,000

b) \$200,000

c) \$100,000

d) \$500,000

95 / 283

Category: Occasions: Death of a partner

95. (A) The executor’s account is credited in case of death of a partner.
(R) The deceased partner’s share is transferred to their legal representative.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

96 / 283

Category: Without Adjustment of Partners’ Capital

96. What is the effect on the profit-sharing ratio when a new partner is admitted without adjusting the capitals of existing partners?

a) The profit-sharing ratio remains unchanged

b) The profit-sharing ratio is adjusted only for the old partners

c) The profit-sharing ratio is adjusted to include the new partner

d) The profit-sharing ratio is calculated based on the new partner's capital only

97 / 283

Category: Adjustment of Partners’ Capital

97. A and B are partners sharing profits in the ratio 2:1 with capitals of \$80,000 and \$40,000 respectively. They admit C as a new partner for 1/3rd share, who brings \$30,000 as capital and \$12,000 as goodwill. The goodwill is withdrawn by A and B. The total capital of the firm is to be calculated based on C's capital. If the new profit-sharing ratio is 1:1:1, how much additional capital must B bring to adjust his capital?

a) \$10,000

b) \$5,000

c) \$0

d) \$15,000

98 / 283

Category: Admission of a Partner

98. (A) After C's admission, the new profit-sharing ratio of A, B, and C is 9:3:4 as calculated based on their capital contributions.
(R) The total capital of the firm is determined by dividing C's capital contribution (\$60,000) by his share in profits ($\frac{1}{4}$), resulting in \$240,000.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

99 / 283

Category: Without Adjustment of Partners’ Capital

99. (A) When a new partner is admitted without adjusting the existing partners' capital accounts, the goodwill brought in by the new partner must always be distributed among the old partners in their sacrificing ratio.

(R) The sacrificing ratio represents the proportion in which the old partners agree to give up their share of profits in favor of the new partner.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

100 / 283

Category: New Partner brings in only a part of his share of Goodwill

100. P and Q are partners sharing profits in the ratio 5:3. They admit R as a new partner for 1/5th share in profits. R brings \$8,000 as his capital and \$1,200 as his share of goodwill, but pays only 60\% in cash. The goodwill already exists in the books at \$20,000. What will be the total amount transferred to P's Capital A/c after all adjustments?

a) \$1,250

b) \$1,200

c) \$1,500

d) \$1,750

101 / 283

Category: Change in Profit Sharing Ratio

101. A and B share profits in the ratio $3 : 2$. C is admitted for $\frac{1}{5}$th share, with A and B agreeing to share the remaining profits in the ratio $5 : 3$. What is the new profit sharing ratio?

a) 5 : 3 : 2

b) 3 : 2 : 1

c) 4 : 3 : 3

d) 2 : 5 : 3

102 / 283

Category: Occasions: Admission of a Partner

102. If a new partner brings \$80,000 for $\frac{1}{5}$ share in partnership, what should be the total capital of the firm?

a) \$80,000

b) \$200,000

c) \$400,000

d) \$320,000

103 / 283

Category: Adjustments at the time of Admission of a Partner

103. If the old profit-sharing ratio was 2:1 and the new ratio is 3:2:1 after admitting a new partner, what is the sacrificing ratio of the old partners?

a) 1:1

b) 1:0

c) 2:1

d) 3:2

104 / 283

Category: Occasions: Retirement of a partner

104. When a partner retires, what is the immediate effect on the total capital of the partnership?

a) Total capital increases due to revaluation.

b) Total capital decreases proportionally.

c) Total capital may decrease or remain unchanged depending on settlement terms.

d) Total capital always remains the same.

105 / 283

Category: Unrecorded Assets and Liabilities

105. If an unrecorded asset worth \Rs.20,000 is sold for cash, what will be the journal entry?

a) Cash A/c Dr. \Rs.20,000; To Asset A/c \Rs.20,000

b) Revaluation A/c Dr. \Rs.20,000; To Cash A/c \Rs.20,000

c) Cash A/c Dr. \Rs.20,000; To Unrecorded Asset A/c \Rs.20,000

d) Cash A/c Dr. \Rs.20,000; To Revaluation A/c \Rs.20,000

106 / 283

Category: Change in Profit Sharing Ratio

106. (A) When a new partner is admitted and acquires his share from the old partners, the new profit sharing ratio must be calculated to determine future profit distribution.
(R) The new profit sharing ratio helps in dividing future profits/losses among partners and calculating the sacrificing ratio.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

107 / 283

Category: Proper Form of Balance Sheet

107. What is the correct order of listing items under "Liabilities" in a balance sheet?

a) Long-term liabilities, then current liabilities

b) Alphabetical order

c) Random order

d) Current liabilities, then long-term liabilities

108 / 283

Category: Premium for Goodwill brought by Existing Partner also

108. When an existing partner brings in premium for goodwill to compensate a sacrificing partner, which of the following journal entries is correct?

a) Debit Cash A/c; Credit Premium for Goodwill A/c

b) Debit Sacrificing Partner’s Capital A/c; Credit Existing Partner’s Capital A/c

c) Debit Existing Partner’s Capital A/c; Credit Sacrificing Partner’s Capital A/c

d) Debit Premium for Goodwill A/c; Credit Sacrificing Partner’s Capital A/c

109 / 283

Category: Necessary Accounts

109. (A) In the Revaluation Account, the loss of \$3,000 is transferred to the capital accounts of A and B in their old profit-sharing ratio of 5:3.
(R) The Revaluation Account records changes in the value of assets and liabilities, and any resulting profit or loss is distributed among the existing partners in their old profit-sharing ratio.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

110 / 283

Category: Calculation of New Profit Sharing Ratio

110. P and Q are partners sharing profits in the ratio of $3 : 2$. They admit R as a new partner for $\frac{1}{5}$ share in profits. Calculate the new profit sharing ratio.

a) $15 : 10 : 5$

b) $12 : 8 : 5$

c) $10 : 8 : 7$

d) $9 : 6 : 10$

111 / 283

Category: Accounting Treatment of Revaluation of Assets and Liabilities

111. A partnership firm has assets worth \$200,000 and liabilities of \$50,000. On revaluation, the value of assets increases by 10\% while liabilities decrease by 20\%. If the old partners share profits in the ratio 3:2, what will be the amount credited to the partner with the higher share?

a) \$12,000

b) \$15,000

c) \$18,000

d) \$20,000

112 / 283

Category: When Goodwill Already Appears in the Books/Balance Sheet

112. A and B are partners with a profit-sharing ratio of 5:3. Their Balance Sheet shows goodwill valued at \$16,000. They admit C who brings \$12,000 as his share of goodwill for 1/6th share in profits. The new profit-sharing ratio becomes 5:3:2. How much premium for goodwill should be credited to B's Capital Account after adjusting the existing goodwill?

a) \$4,500

b) \$3,000

c) \$6,000

d) \$7,500

113 / 283

Category: Adjustment of Hidden Goodwill

113. A and B are partners with capitals of \$\ 40,000 and \$\ 30,000 respectively. They admit C as a new partner for 1/4th share in profits. C brings \$\ 25,000 as his capital. Calculate the hidden goodwill.

a) \$\ 3,000

b) \$\ 5,000

c) \$\ 7,000

d) \$\ 10,000

114 / 283

Category: Admission of a Partner

114. If the total capital of the firm is fixed at \$240,000 based on C's capital contribution, what should be A's adjusted capital?

a) \$120,000

b) \$135,000

c) \$150,000

d) \$160,000

115 / 283

Category: Premium for Goodwill brought by Existing Partner also

115. A and B share profits in the ratio 4:3. C is admitted for $\frac{1}{7}$th share, acquiring $\frac{1}{14}$th each from A and B. The total goodwill is \$84,000, and C brings half in cash. What will be credited to A's Capital Account?

a) \$4,500

b) \$6,000

c) \$7,500

d) \$9,000

116 / 283

Category: New Partner brings in only a part of his share of Goodwill

116. M and N are partners sharing profits equally. They admit O as a new partner who brings \$20,000 as capital and pays only \$5,000 out of his \$8,000 share of goodwill. How much will be debited to O’s current account for the unpaid goodwill?

a) \$3,000

b) \$8,000

c) \$5,000

d) \$1,500

117 / 283

Category: Occasions: Retirement of a partner

117. (A) No valid assertion can be generated due to missing syllabus content.
(R) No valid reason can be generated due to missing syllabus content.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

118 / 283

Category: Necessary Accounts

118. (A) Revaluation Account is prepared to record the effect of revaluation of assets and reassessment of liabilities.
(R) The balance in Revaluation Account is transferred to the old partners' capital accounts in their old profit sharing ratio.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

119 / 283

Category: New Partner brings in only a part of his share of Goodwill

119. X and Y are partners sharing profits in the ratio 3:2. They admit Z as a new partner who brings in \$2,400 as his share of goodwill. However, Z could only pay \$1,500 in cash, and the remaining amount is to be adjusted through his current account. The goodwill already appears in the books at \$10,000 which is to be written off. What will be the journal entry for adjusting the unpaid portion of Z's goodwill?

a) Debit Z's Current A/c \$900 and credit X's Capital A/c \$540 and Y's Capital A/c \$360.

b) Debit Z's Current A/c \$900 and credit X's Capital A/c \$600 and Y's Capital A/c \$300.

c) Debit Z's Current A/c \$1,500 and credit X's Capital A/c \$900 and Y's Capital A/c \$600.

d) Debit Z's Current A/c \$900 and credit X's Capital A/c \$360 and Y's Capital A/c \$540.

120 / 283

Category: Occasions: Death of a partner

120. (A) On the death of a partner, their capital account is transferred to their legal heirs.
(R) The legal heirs are entitled to the deceased partner's share of profits and assets as per the partnership deed.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

121 / 283

Category: Meaning of Reconstitution of Partnership

121. (A) The retirement of a partner leads to the reconstitution of the partnership firm.
(R) Retirement changes the profit-sharing ratio among the remaining partners.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

122 / 283

Category: Adjustment of Partners’ Capital

122. (A) On admission of a new partner, the capital of old partners may need adjustment to align with the new profit-sharing ratio.
(R) The adjustment ensures that each partner's capital is proportionate to their share in profits.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

123 / 283

Category: When Goodwill Already Appears in the Books

123. If old partners A and B have a profit-sharing ratio of 3:2, and after admitting C, the new ratio becomes 3:3:2, what is the sacrificing ratio between A and B?

a) 3:2

b) 1:1

c) 9:1

d) 2:3

124 / 283

Category: Hidden or Inferred Goodwill

124. X and Y are partners sharing profits in the ratio 5:3. They admit Z for $\frac{1}{6}$th share in profits. The new profit-sharing ratio is 2:2:1. What is the sacrificing ratio of X and Y?

a) 5:3

b) 9:1

c) 2:2:1

d) 1:1

125 / 283

Category: Calculation of Sacrificing Ratio

125. X and Y are partners sharing profits in the ratio 5:3. Z is admitted as a new partner. The new profit sharing ratio is 3:2:1. What is the sacrificing ratio of X and Y?

a) 3 : 2

b) 5 : 3

c) 3 : 1

d) 1 : 1

126 / 283

Category: Accounting Treatment of Goodwill including Hidden Goodwill

126. P and Q are partners with capitals of \$7,00,000 and \$5,00,000 respectively. They admit R as a new partner for 1/6th share. If the hidden goodwill is \$6,00,000, what is the total capital of the new firm?

a) \$18,00,000

b) \$20,00,000

c) \$21,60,000

d) \$24,00,000

127 / 283

Category: Occasions: Admission of a Partner

127. If partners A and B share profits in ratio 3:2 and admit new partner C for $\frac{1}{5}$ share, what is the new profit sharing ratio of A and B?

a) 3:2

b) 12:8

c) 9:6

d) 4:1

128 / 283

Category: Without Adjustment of Partners’ Capital

128. X and Y are partners with capitals of \$60,000 and \$40,000 respectively, sharing profits equally. They admit Z as a new partner who pays \$15,000 as goodwill for his 1/4th share in the firm. If no adjustment is made to the existing partners’ capitals, how much goodwill will X receive?

a) \$5,000

b) \$7,500

c) \$10,000

d) \$15,000

129 / 283

Category: Admission of a Partner

129. How much goodwill is brought in by C if it is to be credited to A and B in their sacrificing ratio (3:1)?

a) \$5,000

b) \$6,000

c) \$7,000

d) \$8,000

130 / 283

Category: Occasions: Admission of a Partner

130. X and Y are partners sharing profits in the ratio of $7:5$. Z is admitted for $\frac{1}{6}$th share, which he acquires entirely from X. What will be the new profit-sharing ratio?

a) 7:5:2

b) 5:5:2

c) 7:5:1

d) 5:5:1

131 / 283

Category: Without Adjustment of Partners’ Capital

131. (A) When a new partner is admitted without adjusting the existing partners' capital accounts, the balance sheet will show an increase in both Cash/Bank and the new partner's capital.
(R) The new partner's capital is recorded directly in their capital account without any adjustments to the old partners' capitals.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

132 / 283

Category: Calculation of Sacrificing Ratio

132. P and Q are partners sharing profits in the ratio 2:1. R is admitted as a new partner for $\frac{1}{6}$ share. P and Q agree to share future profits equally. What is the gain or sacrifice by Q?

a) Gains $\frac{1}{12}$

b) Sacrifices $\frac{1}{12}$

c) No gain or sacrifice

d) Gains $\frac{1}{6}$

133 / 283

Category: Admission of a Partner

133. P and Q have capitals of \$80,000 and \$40,000, sharing profits 3:2. R is admitted with \$50,000 capital for $\frac{1}{3}$ share. The total capital of the firm is adjusted to \$180,000. Calculate P's adjusted capital.

a) \$72,000

b) \$74,000

c) \$76,000

d) \$78,000

134 / 283

Category: Hidden or Inferred Goodwill

134. (A) When a new partner is admitted, hidden goodwill is calculated as the excess of total capital based on new partner's capital over the existing combined capital of all partners.
(R) The new partner's capital share represents the proportion of total firm value they are acquiring.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

135 / 283

Category: New Partner brings in only a part of his share of Goodwill

135. X and Y are partners sharing profits in the ratio of 3:2. They admit Z as a new partner who gets 1/5th share in profits. Z brings \$12,000 as capital but only \$2,000 out of his \$3,000 share of goodwill in cash. The remaining goodwill is to be adjusted through Z’s current account. What will be the journal entry for the unpaid goodwill?

a) Debit Z’s Current A/c \$1,000; Credit X’s Capital A/c \$600; Credit Y’s Capital A/c \$400

b) Debit Z’s Capital A/c \$1,000; Credit X’s Capital A/c \$600; Credit Y’s Capital A/c \$400

c) Debit Z’s Current A/c \$1,000; Credit X’s Current A/c \$600; Credit Y’s Current A/c \$400

d) Debit Z’s Capital A/c \$1,000; Credit X’s Current A/c \$600; Credit Y’s Current A/c \$400

136 / 283

Category: Adjustment of Hidden Goodwill

136. What is the formula to calculate hidden goodwill when a new partner is admitted?

a) $\text{Hidden Goodwill} = \text{Total Capital} - \text{New Partner's Capital}$

b) $\text{Hidden Goodwill} = \text{New Partner's Capital} - \text{Old Partners' Capital}$

c) $\text{Hidden Goodwill} = \text{Total Liabilities} - \text{Total Assets}$

d) $\text{Hidden Goodwill} = \left(\text{New Partner's Capital} \times \frac{1}{\text{New Partner's Share}}\right) - \text{Total Adjusted Capital of All Partners}$

137 / 283

Category: When Goodwill Already Appears in the Books/Balance Sheet

137. A and B are partners with a profit-sharing ratio of 4:3. The goodwill in their books is \$7,000. They admit C as a new partner who brings \$6,000 as premium for goodwill. What will be the journal entry to write off the existing goodwill?

a) Debit A’s Capital \$3,000; Debit B’s Capital \$4,000; Credit Goodwill \$7,000

b) Debit Goodwill \$7,000; Credit A’s Capital \$4,000; Credit B’s Capital \$3,000

c) Debit A’s Capital \$4,000; Debit B’s Capital \$3,000; Credit Goodwill \$7,000

d) Debit Goodwill \$4,000; Credit A’s Capital \$3,000; Credit B’s Capital \$1,000

138 / 283

Category: Hidden or Inferred Goodwill

138. X and Y are partners with capitals of \$250,000 and \$200,000 respectively, sharing profits equally. The total assets of the firm are \$600,000, and liabilities are \$100,000. They admit Z as a new partner for a 1/5th share in profits. Z brings \$120,000 as capital. Calculate the hidden goodwill.

a) \$20,000

b) \$40,000

c) \$60,000

d) No goodwill exists

139 / 283

Category: Occasions: Death of a partner

139. A deceased partner's capital account is to be settled by:

a) Transferring funds to their legal heirs

b) Adjusting profits from the last fiscal year

c) Reallocating shares to surviving partners

d) Writing off the balance as bad debt

140 / 283

Category: Hidden or Inferred Goodwill

140. A and B are partners with capitals of \$600,000 and \$400,000, sharing profits in the ratio 5:3. C is admitted for $1/5^{th}$ share and brings \$500,000 as capital. What will be the journal entry to record C's share of goodwill assuming no information about sacrificing ratio?

a) Debit C's Capital A/c \$200,000; Credit A's Capital A/c \$125,000, B's Capital A/c \$75,000

b) Debit C's Current A/c \$200,000; Credit A's Capital A/c \$120,000, B's Capital A/c \$80,000

c) Debit C's Current A/c \$200,000; Credit A's Capital A/c \$125,000, B's Capital A/c \$75,000

d) Debit C's Capital A/c \$200,000; Credit A's Capital A/c \$150,000, B's Capital A/c \$50,000

141 / 283

Category: Meaning of Reconstitution of Partnership

141. A partnership firm has three partners, X, Y, and Z, sharing profits in the ratio 3:2:1. They decide to admit a new partner W, who brings additional capital. The new profit sharing ratio after admission is 2:2:1:1. What is the sacrifice ratio of the existing partners?

a) X:Y:Z = 1:1:1

b) X:Y:Z = 1:2:1

c) X:Y:Z = 1:0:0

d) X:Y:Z = 0:1:0

142 / 283

Category: Meaning of Reconstitution of Partnership

142. What happens to the existing partnership agreement during reconstitution?

a) The existing agreement remains unchanged.

b) The existing agreement is terminated and replaced by a new one.

c) The firm dissolves completely.

d) The partners are legally bound to continue the old agreement.

143 / 283

Category: Adjustment of Hidden Goodwill

143. (A) If a new partner's capital contribution implicitly indicates hidden goodwill, it must be distributed among old partners in their sacrificing ratio.
(R) The sacrificing ratio determines the proportion in which old partners give up their share of profits to admit the new partner.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

144 / 283

Category: Necessary Accounts

144. What is the total amount debited to the Revaluation Account as per the given data?

a) To Stock A/c = \$5,400

b) To Outstanding Liability A/c = \$1,200

c) To Investments A/c = \$1,500 \end{itemize} Total Debit = \$5,400 + \$1,200 + \$1,500 = \$8,100

d) \$7,600

e) \$8,100

f) \$9,800

g) \$6,300

145 / 283

Category: Accounting Treatment of Accumulated Profits and Losses

145. (A) On admission of a new partner, accumulated profits must be transferred to the old partners' capital accounts in their old profit-sharing ratio.
(R) Accumulated profits represent undistributed earnings attributable to the old partners before the admission of the new partner.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

146 / 283

Category: When Goodwill Already Appears in the Books

146. When goodwill already appears in the books and a new partner is admitted, how is the existing goodwill treated?

a) It is credited to the new partner’s capital account

b) It is transferred to the revaluation account

c) It is written off in the old partners' capital accounts in their old ratio

d) It remains unchanged in the balance sheet

147 / 283

Category: Premium for Goodwill brought by Existing Partner also

147. (A) When a new partner is admitted and the profit sharing ratio changes, an existing partner who gains from the change must compensate the sacrificing partner in the form of goodwill.
(R) This compensation is necessary because the sacrificing partner gives up a part of their profit share, and the gainer benefits from this sacrifice.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

148 / 283

Category: When Goodwill Already Appears in the Books

148. A and B are partners sharing profits in 3:2. Goodwill appearing in the books is \$10,000. They admit C, who brings \$15,000 as premium for goodwill. What is the correct journal entry to write off existing goodwill?

a) Debit Goodwill A/c \$10,000; Credit Cash A/c \$10,000

b) Debit A’s Capital A/c \$6,000, B’s Capital A/c \$4,000; Credit Goodwill A/c \$10,000

c) Debit C’s Capital A/c \$15,000; Credit Premium for Goodwill A/c \$15,000

d) Debit Revaluation A/c \$10,000; Credit Goodwill A/c \$10,000

149 / 283

Category: Accounting Treatment of Revaluation of Assets and Liabilities

149. If the Revaluation Account shows a credit balance of \text{\$}24,000 and the old partners share profits in a ratio of 3:2:1, how much profit will each partner receive?

a) Partner 1: \$10,000; Partner 2: \$9,000; Partner 3: \$5,000

b) Partner 1: \$12,000; Partner 2: \$8,000; Partner 3: \$4,000

c) Partner 1: \$8,000; Partner 2: \$12,000; Partner 3: \$4,000

d) Partner 1: \$6,000; Partner 2: \$8,000; Partner 3: \$10,000

150 / 283

Category: When Goodwill Already Appears in the Books/Balance Sheet

150. P and Q share profits in 2:1 ratio. Their Balance Sheet shows goodwill of \$9,000. R is admitted for 1/4th share bringing \$18,000 as goodwill. The new profit-sharing ratio is 1:1:1. After writing off the existing goodwill and distributing the new goodwill, what amount will be credited to Q's Capital Account?

a) \$12,000

b) \$6,000

c) \$3,000

d) \$0

151 / 283

Category: Hidden or Inferred Goodwill

151. (A) Hidden goodwill is calculated when the value of firm's goodwill is not explicitly mentioned in the question.
(R) Hidden goodwill represents the excess of the desired total capital of the firm over the actual combined capital of all partners.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

152 / 283

Category: Proper Form of Balance Sheet

152. After revaluation, the value of Plant and Machinery increased by \$10,000. If Sundry Creditors are \$68,000, Capital Accounts total \$400,000, and Current Assets (excluding Plant and Machinery) amount to \$368,250, what is the new total of assets after revaluation?

a) \$468,000

b) \$478,000

c) \$488,000

d) \$458,000

153 / 283

Category: Occasions: Retirement of a partner

153. X, Y, and Z are partners sharing profits in the ratio 4:3:2. Y retires, and X and Z agree to share future profits in the ratio 3:2. Calculate the gaining ratio of X and Z.

a) 5:6

b) 7:8

c) 4:5

d) 2:3

154 / 283

Category: Premium for Goodwill brought by Existing Partner also

154. (A) When a new partner is admitted and the profit-sharing ratio changes, the gaining partner must compensate the sacrificing partner(s) by paying goodwill in cash only.
(R) The purpose of compensating the sacrificing partner(s) is to ensure that they are fairly compensated for their loss of future profits due to the change in profit-sharing ratio.

a) The Assertion states that the gaining partner must compensate the sacrificing partner(s) by paying goodwill in cash only, which is false. Goodwill can be adjusted through capital accounts without involving cash. The Reason correctly explains the purpose of compensation but does not justify the Assertion since cash payment is not mandatory. Thus, Assertion is false, but Reason is true.

b) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

c) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

d) Assertion is true, but Reason is false.

e) Assertion is false, but Reason is true.

155 / 283

Category: Hidden or Inferred Goodwill

155. A and B are partners with capitals of \$50,000 and \$30,000 respectively, sharing profits in the ratio 3:2. They admit C as a new partner for $\frac{1}{4}$th share in profits. C brings \$40,000 as his capital. Calculate the hidden goodwill.

a) \$20,000

b) \$30,000

c) \$40,000

d) \$50,000

156 / 283

Category: Adjustments at the time of Admission of a Partner

156. (A) When a new partner is admitted, the total capital of the firm can be calculated as $\text{Total Capital} = \frac{\text{New Partner's Capital}}{\text{New Partner's Share}}$.
(R) This formula ensures that the new partner's capital is proportionate to their profit-sharing ratio.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

157 / 283

Category: Necessary Accounts

157. What is the amount brought in by Partner C to become an equal partner if the old capital ratio between A and B was 5:3?

a) 25,000

b) 30,000

c) 35,000

d) 40,000

158 / 283

Category: Proper Form of Balance Sheet

158. (A) Sundry Debtors are always shown on the assets side of the balance sheet after deducting the Provision for Doubtful Debts.
(R) The Provision for Doubtful Debts is created to account for potential losses from customers who may not pay their dues.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

159 / 283

Category: Occasions: Retirement of a partner

159. When a partner retires from a firm, the remaining partners gain his share in profits. If A, B, and C are partners sharing profits in the ratio 3:2:1, and B retires, what will be the new profit-sharing ratio of A and C if they decide to acquire B's share in their old profit-sharing ratio?

a) 5:1

b) 11:3

c) 9:5

d) 7:2

160 / 283

Category: Unrecorded Assets and Liabilities

160. During revaluation, unrecorded assets worth \$6,000 and unrecorded liabilities worth \$2,000 are recorded. The old partners' profit-sharing ratio is 2:1. How much profit will each partner get from the Revaluation Account?

a) \$2,000 and \$2,000

b) \$3,000 and \$1,000

c) \$2,666.67 and \$1,333.33

d) \$4,000 and \$0

161 / 283

Category: Premium for Goodwill brought by Existing Partner also

161. Ashok and Kishore are partners sharing profits in 4:3. They admit Balraj as a new partner with a new profit-sharing ratio of 3:2:2. What is the sacrificing ratio of Ashok and Kishore?

a) 4:3

b) 3:2

c) 1:1

d) 5:2

162 / 283

Category: Occasions: Retirement of a partner

162. A, B, and C are partners in a firm sharing profits in the ratio of 5:3:2. B retires, and his share is taken equally by A and C. What is the new profit-sharing ratio of A and C?

a) 13:7

b) 9:5

c) 7:3

d) 8:5

163 / 283

Category: Adjustment of Partners’ Capital

163. X and Y are partners sharing profits in the ratio 3:2 with capitals of \$50,000 and \$30,000 respectively. They admit Z as a new partner for 1/5th share, who brings \$20,000 as capital and \$8,000 as goodwill. The goodwill is immediately withdrawn by X and Y in their profit-sharing ratio. The total capital of the firm is to be calculated based on Z's capital. What will be the adjusted capital of X after all adjustments if the new profit-sharing ratio becomes 3:2:1?

a) \$45,000

b) \$50,000

c) \$48,000

d) \$52,000

164 / 283

Category: Accounting Treatment of Revaluation of Assets and Liabilities

164. What is the correct journal entry for recording a decrease in the value of machinery during revaluation?

a) Cash A/c Dr. To Machinery A/c

b) Revaluation A/c Dr. To Machinery A/c

c) Machinery A/c Dr. To Revaluation A/c

d) Old Partners' Capital A/c Dr. To Machinery A/c

165 / 283

Category: Adjustment of Partners’ Capital

165. The sacrificing ratio is calculated as:

a) Old Ratio + New Ratio

b) Old Ratio – New Ratio

c) New Ratio – Old Ratio

d) Equal to the new profit-sharing ratio

166 / 283

Category: Unrecorded Assets and Liabilities

166. How is the profit or loss on revaluation of assets and liabilities divided among partners?

a) Equally among all partners

b) Among old partners in their old profit-sharing ratio

c) Among all partners in their new profit-sharing ratio

d) Only to the new partner

167 / 283

Category: When Goodwill Already Appears in the Books

167. A and B are partners with profit-sharing ratio $7 : 5$ and a goodwill balance of \$60,000. C is admitted for $\frac{1}{4}$th share which he acquires $\frac{3}{5}$ from A and $\frac{2}{5}$ from B. If C brings \$50,000 capital and \$20,000 as goodwill, what will be B's new capital after all adjustments if his capital before adjustments was \$120,000?

a) \$95,000

b) \$103,000

c) \$115,000

d) \$108,000

168 / 283

Category: Meaning of Reconstitution of Partnership

168. In a firm, partners P, Q, R share profits in the ratio 5:3:2. After retirement of R, P and Q agree to share future profits equally. Calculate the gain ratio of remaining partners.

a) P:Q = 1:0

b) P:Q = 0:1

c) P:Q = 1:1

d) P:Q = 2:1

169 / 283

Category: Meaning of Reconstitution of Partnership

169. A and B are partners sharing profits in the ratio 3:2. They admit C as a new partner with 1/5th share in profits. What will be the new profit sharing ratio of A, B, and C?

a) 3:2:1

b) 6:4:5

c) 12:8:5

d) 9:6:5

170 / 283

Category: Occasions: Change in the profit sharing ratio among the existing partners

170. (A) A change in the profit-sharing ratio among existing partners results in reconstitution of the firm without dissolution.
(R) The partnership agreement is modified to reflect the new profit-sharing terms, but the firm continues its operations under the revised agreement.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

171 / 283

Category: When Goodwill Already Appears in the Books/Balance Sheet

171. A and B are partners sharing profits in the ratio of 5 : 3. They admit C, who pays \$20,000 as goodwill. The new profit-sharing ratio is 4 : 3 : 2. What is the sacrificing ratio of A and B?

a) 5 : 3

b) 4 : 3

c) 13 : 3

d) 3 : 1

172 / 283

Category: Calculation of Sacrificing Ratio

172. (A) If the old profit-sharing ratio of partners A and B is 3:2 and their new ratio after admitting C is 5:3:2, then the sacrificing ratio between A and B is 1:1.
(R) The sacrificing ratio is calculated by subtracting the new ratio from the old ratio for each partner.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

173 / 283

Category: Adjustment of Hidden Goodwill

173. P and Q are partners with capitals of \$10,00,000 and \$8,00,000, sharing profits equally. They admit R for 1/3rd share, who brings \$9,00,000. The firm’s goodwill is not recorded in the books. Calculate the value of hidden goodwill.

a) \$1,00,000

b) \$2,00,000

c) \$3,00,000

d) \$0

174 / 283

Category: Change in Profit Sharing Ratio

174. (A) When a new partner is admitted into the firm, the remaining profit share of the old partners must be distributed in their old profit sharing ratio if there is no agreement to the contrary.

(R) The old partners are entitled to continue earning profits in the same proportion as before unless they agree to change their profit-sharing ratio.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

175 / 283

Category: Change in Profit Sharing Ratio

175. P and Q are partners sharing profits in the ratio of $3 : 2$. They admit R for $\frac{1}{4}$th share. The remaining share is to be divided between P and Q in the new ratio of $2 : 1$. Calculate the new profit sharing ratio.

a) 3 : 2 : 1

b) 2 : 1 : 1

c) 6 : 3 : 3

d) 4 : 3 : 1

176 / 283

Category: Admission of a Partner

176. A and B are partners sharing profits in the ratio 3:2. C is admitted for $\frac{1}{5}$ share in profits, which he acquires equally from A and B. The new profit-sharing ratio is:

a) 4:3:2

b) 3:2:1

c) 5:3:2

d) 6:3:1

177 / 283

Category: Adjustments at the time of Admission of a Partner

177. X and Y share profits 3:2. Z is admitted with $\frac{1}{5}$ share. Goodwill is valued at \$50,000. What amount will be credited to X's capital account if the sacrificing ratio is 3:2?

a) \$3,000

b) \$4,000

c) \$5,000

d) \$6,000

178 / 283

Category: Without Adjustment of Partners’ Capital

178. (A) When a new partner is admitted, the existing partners' capitals are always adjusted to reflect their new profit-sharing ratio.
(R) The adjustment of existing partners' capitals is mandatory to maintain accurate financial records of the firm.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

179 / 283

Category: Unrecorded Assets and Liabilities

179. A firm discovers an unrecorded asset worth \$5,000 and an unrecorded liability of \$3,000 before admitting a new partner. The old partners share profits in the ratio 3:2. What will be the net effect on the Revaluation Account?

a) Net loss of \$2,000

b) Net profit of \$500

c) Net profit of \$2,000

d) No effect on Revaluation Account

180 / 283

Category: Unrecorded Assets and Liabilities

180. A business discovers an unrecorded asset worth \Rs.50,000. What is the correct journal entry to record this asset?

a) Machinery A/c Dr. \Rs.50,000; To Revaluation A/c \Rs.50,000

b) Unrecorded Asset A/c Dr. \Rs.50,000; To Cash A/c \Rs.50,000

c) Revaluation A/c Dr. \Rs.50,000; To Unrecorded Asset A/c \Rs.50,000

d) Unrecorded Asset A/c Dr. \Rs.50,000; To Revaluation A/c \Rs.50,000

181 / 283

Category: Occasions: Death of a partner

181. How is goodwill treated in case of the death of a partner if it appears in the books?

a) Credited only to the deceased partner’s capital account

b) Written off in the old profit-sharing ratio

c) Transferred to all remaining partners equally

d) Ignored completely

182 / 283

Category: Adjustment of Hidden Goodwill

182. P and Q have capitals of \$\ 60,000 and \$\ 45,000 respectively. R is admitted for a 1/6th share, contributing \$\ 18,000 as capital. Determine the hidden goodwill amount.

a) \$\ 9,000

b) \$\ 12,000

c) \$\ 15,000

d) No hidden goodwill exists

183 / 283

Category: Adjustments at the time of Admission of a Partner

183. If the new partner is admitted for a $\frac{1}{5}$ share and the old partners' ratio was 3:2, what is the new profit-sharing ratio?

a) 9:6:5

b) 12:8:5

c) 10:7:5

d) 15:10:5

184 / 283

Category: Adjustments at the time of Admission of a Partner

184. (A) The sacrificing ratio is calculated to determine the portion of goodwill to be credited to the old partners.
(R) The new partner's share of goodwill is distributed among the old partners in their sacrificing ratio.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

185 / 283

Category: Necessary Accounts

185. What is the total of the liabilities side in the Balance Sheet?

a) Creditors = \$6,000

b) Outstanding Expenses = \$2,000

c) Workmen's Compensation Fund = \$4,000

d) Capital A/cs: A (\$50,000) + B (\$30,000) = \$80,000 \end{itemize} Total Liabilities = \$6,000 + \$2,000 + \$4,000 + \$80,000 = \$92,000

e) \$95,000

f) \$92,000

g) \$90,000

h) \$85,000

186 / 283

Category: When Goodwill Already Appears in the Books

186. X and Y are partners sharing profits in the ratio of $5 : 3$. Their books show goodwill at \$24,000. They admit Z as a new partner who acquires $\frac{1}{6}$th share equally from both partners. Z brings \$36,000 as capital and \$12,000 as goodwill. What will be the journal entry to write off existing goodwill?

a) X's Capital A/c Dr. \$15,000; Y's Capital A/c Dr. \$9,000; To Goodwill A/c \$24,000

b) X's Capital A/c Dr. \$12,000; Y's Capital A/c Dr. \$12,000; To Goodwill A/c \$24,000

c) Goodwill A/c Dr. \$24,000; To X's Capital A/c \$15,000; To Y's Capital A/c \$9,000

d) Premium for Goodwill A/c Dr. \$12,000; To X's Capital A/c \$7,500; To Y's Capital A/c \$4,500

187 / 283

Category: Meaning of Reconstitution of Partnership

187. P and Q are partners sharing profits equally. They decide to change their profit sharing ratio to 2:1. Which statement about reconstitution of partnership is correct in this scenario?

a) The firm dissolves automatically due to the change in profit sharing ratio.

b) No reconstitution occurs as the number of partners remains the same.

c) Reconstitution happens because the profit sharing ratio changes, altering the partnership agreement.

d) Only admission or retirement of a partner leads to reconstitution.

188 / 283

Category: Occasions: Admission of a Partner

188. Partners X and Y have profit sharing ratio 5:3. They admit Z who gets $\frac{1}{4}$ share equally from both. What is the sacrificing ratio?

a) 5:3

b) 1:1

c) 2:1

d) 3:2

189 / 283

Category: Admission of a Partner

189. Old profit-sharing ratio between X and Y is 2:1. After admitting Z, their new ratio becomes 6:3:4. What is the sacrificing ratio of X and Y?

a) 1:1

b) 2:1

c) 3:2

d) 4:3

190 / 283

Category: When Goodwill Already Appears in the Books/Balance Sheet

190. (A) When goodwill already appears in the books and a new partner is admitted, the existing goodwill must be written off in the old profit-sharing ratio of the existing partners.
(R) The sacrifice made by the old partners is calculated based on the difference between their old profit-sharing ratio and new profit-sharing ratio.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

191 / 283

Category: Adjustments at the time of Admission of a Partner

191. A and B are partners sharing profits in the ratio of 3:2. They admit C for $\frac{1}{4}$ share. If total capital of the firm is to be \$80,000 after C's admission, what should be C's capital?

a) \$16,000

b) \$20,000

c) \$24,000

d) \$30,000

192 / 283

Category: Adjustment of Partners’ Capital

192. Goodwill brought in by the new partner is distributed among the old partners in:

a) Their old profit-sharing ratio

b) Their new profit-sharing ratio

c) Their sacrificing ratio

d) Equally among all partners

193 / 283

Category: Adjustment of Partners’ Capital

193. (A) When a new partner is admitted and the capital of old partners is adjusted based on the new partner’s capital, the adjustment ensures alignment with the new profit-sharing ratio.
(R) The adjustment of capital is necessary to maintain fairness in the distribution of profits and losses among all partners.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

194 / 283

Category: Accounting Treatment of Goodwill including Hidden Goodwill

194. X and Y are partners sharing profits in the ratio 3:2. Z is admitted as a new partner for 1/5th share, bringing \$6,00,000 as capital. The hidden goodwill is calculated as \$10,00,000. What will be the journal entry to adjust Z's share of goodwill if no cash is brought in?

a) Z's Capital A/c Dr. \$2,00,000; To X's Capital A/c \$1,00,000; To Y's Capital A/c \$1,00,000

b) Z's Current A/c Dr. \$2,00,000; To X's Capital A/c \$1,20,000; To Y's Capital A/c \$80,000

c) Z's Capital A/c Dr. \$2,00,000; To Goodwill A/c \$2,00,000

d) No entry will be passed

195 / 283

Category: New Partner brings in only a part of his share of Goodwill

195. M and N are partners with profit-sharing ratio 2:1. They admit O as a new partner for 1/4th share. O brings \$6,000 as capital and \$1,600 as goodwill but pays only 50\% in cash. The goodwill in the books is \$15,000. What will be the journal entry for the unpaid portion of O's goodwill?

a) Debit O's Current A/c \$800 and credit M's Capital A/c \$533.33 and N's Capital A/c \$266.67.

b) Debit O's Current A/c \$800 and credit M's Capital A/c \$600 and N's Capital A/c \$200.

c) Debit O's Current A/c \$800 and credit M's Capital A/c \$400 and N's Capital A/c \$400.

d) Debit O's Current A/c \$1,600 and credit M's Capital A/c \$800 and N's Capital A/c \$800.

196 / 283

Category: Occasions: Death of a partner

196. No questions can be generated due to missing syllabus content.

a) N/A

b) N/A

c) N/A

d) N/A

197 / 283

Category: Calculation of Sacrificing Ratio

197. A and B are partners sharing profits in the ratio 7:5. C is admitted as a new partner, and A and B surrender $\frac{1}{4}$ of their respective shares in favour of C. What is the sacrificing ratio of A and B?

a) 7 : 5

b) 5 : 7

c) 1 : 1

d) 3 : 2

198 / 283

Category: Unrecorded Assets and Liabilities

198. (A) The Revaluation Account is debited when an unrecorded liability is brought into the books.
(R) Recording an unrecorded liability decreases the net assets of the firm, which is a loss to the old partners.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

199 / 283

Category: When Goodwill Already Appears in the Books/Balance Sheet

199. (A) When goodwill already appears in the books and a new partner is admitted, the existing goodwill must be written off in the old partners' capital accounts in their old profit-sharing ratio.
(R) Writing off the existing goodwill ensures that the new partner does not benefit from the goodwill created by the old partners.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

200 / 283

Category: Accounting Treatment of Accumulated Profits and Losses

200. If the Workmen’s Compensation Fund has an excess amount at the time of admitting a new partner, how should it be treated?

a) Transferred to the Revaluation Account

b) Kept as a reserve for future use

c) Distributed equally among all partners

d) Transferred to the old partners' capital accounts in their old profit-sharing ratio

201 / 283

Category: Occasions: Admission of a Partner

201. (A) When a new partner is admitted, the existing partners' capital accounts are adjusted based on the new profit sharing ratio and the new partner's capital contribution.
(R) The total capital of the firm is recalculated based on the new partner's capital contribution for their share in the firm.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

202 / 283

Category: Admission of a Partner

202. A and B are partners with capitals of \$90,000 and \$30,000 respectively. They admit C who brings \$60,000 as capital for $\frac{1}{4}$th share. What will be A's adjusted capital if the total capital is based on C’s contribution?

a) 90,000

b) 1,20,000

c) 1,35,000

d) 1,50,000

203 / 283

Category: Calculation of New Profit Sharing Ratio

203. X and Y are partners sharing profits in the ratio of $5 : 3$. They admit Z with $\frac{1}{6}$ share in profits. The new profit sharing ratio between X and Y becomes $2 : 1$. Find the new profit sharing ratio.

a) $10 : 5 : 3$

b) $5 : 3 : 2$

c) $8 : 4 : 3$

d) $12 : 6 : 3$

204 / 283

Category: Adjustments at the time of Admission of a Partner

204. X and Y are partners sharing profits in the ratio of 5:3. Z is admitted for a $\frac{1}{4}$th share in profits. What is the new profit-sharing ratio between X, Y, and Z?

a) 5 : 3 : 4

b) 10 : 6 : 8

c) 15 : 9 : 8

d) 20 : 12 : 16

205 / 283

Category: Accounting Treatment of Goodwill including Hidden Goodwill

205. Vinay and Naman are partners sharing profits in a ratio of 4:1. If they admit a new partner and their new ratio becomes 3:1:1, what is their sacrificing ratio?

a) 4:1

b) 3:1

c) 1:0

d) 1:1

206 / 283

Category: Change in Profit Sharing Ratio

206. A and B are partners sharing profits in the ratio of $3:2$. They admit C as a new partner for $\frac{1}{5}$th share. Calculate the new profit sharing ratio if the remaining share is divided between A and B in their old ratio.

a) $12 : 8 : 5$

b) $3 : 2 : 1$

c) $15 : 10 : 1$

d) $6 : 4 : 5$

207 / 283

Category: Without Adjustment of Partners’ Capital

207. X and Y are partners sharing profits in the ratio 5:3. They admit Z as a new partner who brings \$30,000 as capital and \$12,000 as goodwill. The sacrificing ratio of X and Y is 4:1. What will be the amount of goodwill credited to X's capital account?

a) \$9,600

b) \$2,400

c) \$7,200

d) \$10,800

208 / 283

Category: Calculation of New Profit Sharing Ratio

208. X and Y are partners with profit-sharing ratio $5:3$. They admit Z, who gets $\frac{1}{4}$ share from X. What is Z's share in the firm?

a) $\frac{1}{2}$

b) $\frac{1}{3}$

c) $\frac{1}{4}$

d) $\frac{1}{5}$

209 / 283

Category: Necessary Accounts

209. A partnership firm has a Revaluation loss of \$9,800 shared among Partners A and B in the ratio 3:2. Partner A's existing capital is \$65,000, and his required capital after adjustments is \$63,000. What will be the balance in Partner A's Current Account post these adjustments?

a) \$3,880 Debit

b) \$3,880 Credit

c) \$1,880 Debit

d) \$1,880 Credit

210 / 283

Category: Occasions: Admission of a Partner

210. P and Q have capitals of \$80,000 and \$60,000 respectively, sharing profits in the ratio of $4:3$. R joins with a capital of \$70,000 for a $\frac{1}{5}$th share. What should be the adjusted capitals of P and Q based on the new ratio?

a) \$160,000; \$120,000

b) \$150,000; \$130,000

c) \$180,000; \$100,000

d) \$170,000; \$110,000

211 / 283

Category: Change in Profit Sharing Ratio

211. X and Y are partners sharing profits in the ratio of $7 : 3$. They admit Z for $\frac{1}{5}$th share in profits. If X and Y decide to sacrifice equally, what is the sacrificing ratio?

a) 7 : 3

b) 1 : 1

c) 3 : 2

d) 2 : 1

212 / 283

Category: Adjustment of Partners’ Capital

212. A and B are partners with capitals of \$40,000 and \$30,000 respectively, sharing profits in the ratio $2 : 1$. They admit C as a new partner who brings \$20,000 capital and agrees to acquire $1/4$th share in profits. The new profit-sharing ratio becomes $3 : 2 : 1$. Calculate the amount to be adjusted in cash if the total capital of the firm is based on C's capital.

a) \$3,333.33 withdrawn by B

b) \$4,000 withdrawn by A

c) \$5,000 brought in by C

d) No adjustment needed for any partner

213 / 283

Category: Calculation of New Profit Sharing Ratio

213. A and B are partners sharing profits in the ratio of $3:2$. They admit C as a new partner for $\frac{1}{5}$ share in profits. What will be the new profit sharing ratio if the remaining profit is shared by A and B in their old ratio?

a) 10 : 7 : 3

b) 12 : 8 : 5

c) 9 : 6 : 5

d) 15 : 10 : 5

214 / 283

Category: Adjustment of Hidden Goodwill

214. A and B are partners sharing profits in the ratio of 3:2. They admit C as a new partner for 1/4th share. C brings \$6,00,000 as capital. The total adjusted capital of A and B before C's admission is \$12,00,000. Calculate the hidden goodwill of the firm.

a) \$5,00,000

b) \$6,00,000

c) \$7,00,000

d) \$8,00,000

215 / 283

Category: Without Adjustment of Partners’ Capital

215. A and B are partners with capitals of \$50,000 and \$30,000 respectively, sharing profits in the ratio 3:2. They admit C as a new partner who brings \$20,000 as capital and \$5,000 as goodwill for 1/5th share of profits. Under the "Without Adjustment of Partners’ Capital" method, what will be A's capital after C's admission?

a) \$50,000

b) \$53,000

c) \$55,000

d) \$58,000

216 / 283

Category: Calculation of Sacrificing Ratio

216. X and Y are partners sharing profits in the ratio of 3:2. Z is admitted for $\frac{1}{5}$ share, which he acquires equally from X and Y. What is the sacrificing ratio?

a) 3:2

b) 1:1

c) 2:1

d) 1:2

217 / 283

Category: Admission of a Partner

217. What is the new profit-sharing ratio among A, B, and C after C's admission if C gets $\frac{1}{4}$ share and the remaining profit is shared between A and B in the ratio 3:1?

a) 9:3:4

b) 3:1:1

c) 3:1:4

d) 9:3:1

218 / 283

Category: Meaning of Reconstitution of Partnership

218. Which of the following is NOT a mode of reconstitution of a partnership firm?

a) Admission of a new partner.

b) Retirement of a partner.

c) Merger with a corporation.

d) Change in profit sharing ratio.

219 / 283

Category: Occasions: Death of a partner

219. (A) The deceased partner’s capital account is credited with interest on capital till the date of death.

(R) Interest on capital is calculated only for the period the partner was alive.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

220 / 283

Category: Meaning of Reconstitution of Partnership

220. (A) The admission of a new partner leads to the reconstitution of the partnership firm.
(R) A new partner brings additional capital and managerial capacity, which changes the existing partnership agreement.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

221 / 283

Category: When Goodwill Already Appears in the Books

221. P and Q have a goodwill of \$30,000 in their books, shared in $3 : 2$. R is admitted for $\frac{1}{6}$th share, bringing \$25,000 as capital and \$12,000 as goodwill. The new profit-sharing ratio is $9 : 6 : 5$. How much of R's goodwill will be credited to Q's capital account?

a) \$6,000

b) \$4,800

c) \$5,000

d) \$4,500

222 / 283

Category: Adjustment of Partners’ Capital

222. P and Q are partners sharing profits in the ratio 5:3 with capitals of \$60,000 and \$40,000 respectively. They admit R as a new partner for 1/4th share, who brings \$25,000 as capital. The total capital of the firm is to be based on R's capital. The new profit-sharing ratio is agreed as 4:2:1. How much excess capital will P withdraw after adjustment?

a) \$2,000

b) \$2,857.14

c) \$3,000

d) \$2,500

223 / 283

Category: When Goodwill Already Appears in the Books

223. (A) When goodwill already appears in the books and a new partner brings his share of goodwill in cash, the existing goodwill must be written off in the old partners' capital accounts in their old profit-sharing ratio.
(R) The old partners are entitled to the goodwill amount recorded in the books as it represents their past efforts and reputation.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

224 / 283

Category: Accounting Treatment of Accumulated Profits and Losses

224. A firm has a Workmen Compensation Fund of \$40,000 and an actual liability of \$25,000. Partners A and B share profits in 2:1. They admit C, and the new ratio is 3:2:1. How much will be credited to A's Capital Account if the excess fund is transferred to partners' capitals without distribution?

a) \$10,000

b) \$12,500

c) \$15,000

d) \$5,000

225 / 283

Category: Occasions: Change in the profit sharing ratio among the existing partners

225. In a partnership firm, X and Y share profits in $4 : 3$. They agree to change the ratio to $2 : 3$. What adjustment entry is required if Goodwill is valued at \$21,000?

a) Debit X and Credit Y with \$3,600

b) Debit Y and Credit X with \$3,600

c) No adjustment needed

d) Debit X and Credit Y with \$4,200

226 / 283

Category: Proper Form of Balance Sheet

226. A firm has Sundry Debtors of \$57,000 and a Provision for Doubtful Debts of \$1,000. If the total liabilities are \$527,250 and Current Assets (other than Debtors) are \$3,11,250, what is the total value of Fixed Assets?

a) \$150,000

b) \$160,000

c) \$165,000

d) \$170,000

227 / 283

Category: Hidden or Inferred Goodwill

227. P and Q are partners sharing profits in the ratio of 7:5. R is admitted for $1/6^{th}$ share and brings \$360,000 as capital. The total capital of the firm after R's admission is \$2,160,000. What is the value of goodwill and how much will be credited to P's account if the old profit-sharing ratio is the sacrificing ratio?

a) Goodwill = \$360,000; P's share = \$210,000

b) Goodwill = \$180,000; P's share = \$105,000

c) Goodwill = \$0; P's share = \$0

d) Goodwill = \$540,000; P's share = \$315,000

228 / 283

Category: Calculation of Sacrificing Ratio

228. A and B are partners sharing profits in the ratio of 5:3. C is admitted as a partner, and the new profit-sharing ratio becomes 3:2:1. What is the sacrificing ratio of A and B?

a) 4:3

b) 3:1

c) 5:2

d) 2:1

229 / 283

Category: Occasions: Retirement of a partner

229. What happens to the retiring partner's share in the partnership upon their retirement?

a) It is automatically transferred to the remaining partners equally.

b) It must be sold to an external party.

c) It is settled by payment or adjustment among the remaining partners as per the partnership agreement.

d) It remains unchanged in the partnership accounts.

230 / 283

Category: Occasions: Change in the profit sharing ratio among the existing partners

230. (A) A change in the profit sharing ratio among existing partners constitutes a reconstitution of the firm.
(R) The new profit sharing ratio requires mutual consent and must be documented in the partnership deed.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

231 / 283

Category: Necessary Accounts

231. In the given Revaluation Account, the total loss is \$3,000 shared between Partners A and B in the ratio 3:2. If Partner B's initial capital is \$54,000 and he needs to bring in additional cash to cover the deficit after revaluation, how much cash should Partner B contribute if his required capital remains at \$54,000?

a) \$1,000

b) \$1,200

c) \$1,500

d) \$2,000

232 / 283

Category: Accounting Treatment of Revaluation of Assets and Liabilities

232. At the time of admission of a new partner, why is revaluation of assets and liabilities necessary?

a) To adjust the old partners' capital accounts

b) To ensure new partner does not benefit/suffer from outdated values

c) To calculate goodwill for the new partner

d) To increase the value of all assets uniformly

233 / 283

Category: Adjustments at the time of Admission of a Partner

233. When capitals are adjusted in the new profit-sharing ratio and there is a surplus in a partner's capital account, how is it treated?

a) Debited to Revaluation Account

b) Credited to Goodwill Account

c) Transferred to Partner's Current Account

d) Adjusted in the Profit and Loss Account

234 / 283

Category: Without Adjustment of Partners’ Capital

234. When a new partner is admitted without adjusting the capital accounts of existing partners, what happens to their capital balances?

a) They are increased proportionally

b) They are decreased proportionally

c) They remain unchanged

d) They are adjusted based on goodwill

235 / 283

Category: Unrecorded Assets and Liabilities

235. Which of the following is the correct journal entry for payment of an unrecorded liability of \$3,000?

a) Revaluation A/c Dr. \$3,000; To Cash A/c \$3,000

b) Cash A/c Dr. \$3,000; To Revaluation A/c \$3,000

c) Unrecorded Liability A/c Dr. \$3,000; To Cash A/c \$3,000

d) Cash A/c Dr. \$3,000; To Unrecorded Liability A/c \$3,000

236 / 283

Category: Proper Form of Balance Sheet

236. (A) The total of liabilities must always equal the total of assets in a Balance Sheet.
(R) The Balance Sheet is based on the accounting equation: $\text{Assets} = \text{Liabilities} + \text{Capital}$.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

237 / 283

Category: Accounting Treatment of Accumulated Profits and Losses

237. (A) On the admission of a new partner, accumulated profits should be transferred to the Capital/Current accounts of old partners in their profit sharing ratio.
(R) The new partner is not entitled to any share in the accumulated profits or losses as they were earned/incurred by the old partners.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

238 / 283

Category: Accounting Treatment of Accumulated Profits and Losses

238. P and Q share profits in 5:3. Their Balance Sheet shows General Reserve \$60,000 and P\&L (Cr.) \$15,000. R is admitted for 1/4th share, and the new ratio is 2:1:1. If accumulated profits are adjusted through capital accounts, what is the net amount credited to Q's Capital Account?

a) \$28,125

b) \$37,500

c) \$18,750

d) \$45,000

239 / 283

Category: Change in Profit Sharing Ratio

239. P and Q are partners with a profit sharing ratio of $5 : 4$. R is admitted, and P surrenders $\frac{1}{4}$th of his share while Q surrenders $\frac{1}{3}$rd of his share in favor of R. Determine the new ratio.

a) 45 : 32 : 31

b) 5 : 4 : 3

c) 15 : 8 : 7

d) 9 : 8 : 5

240 / 283

Category: Occasions: Death of a partner

240. Which Act governs the settlement of accounts when a partner dies?

a) Companies Act, 2013

b) Contract Act, 1872

c) Indian Partnership Act, 1932

d) Sale of Goods Act, 1930

241 / 283

Category: Necessary Accounts

241. (A) The adjustment of surplus capital to partners' current accounts is mandatory when the existing capital exceeds the required capital as per the new profit-sharing ratio.
(R) Current accounts are used to track temporary adjustments in partners' capital without altering the fixed capital amounts.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

242 / 283

Category: Adjustment of Hidden Goodwill

242. X and Y have capitals of \$\ 50,000 and \$\ 40,000 respectively. Z is admitted as a new partner with a 1/5th share, bringing \$\ 20,000 as capital. What is the value of the firm's hidden goodwill?

a) \$\ 5,000

b) \$\ 10,000

c) \$\ 15,000

d) No hidden goodwill exists

243 / 283

Category: Meaning of Reconstitution of Partnership

243. What is the primary effect of reconstitution on the partnership firm?

a) The firm dissolves permanently.

b) The firm's legal status changes to a corporation.

c) The old agreement ends, and a new one begins while the firm continues.

d) All assets of the firm are liquidated.

244 / 283

Category: Premium for Goodwill brought by Existing Partner also

244. Partners X and Y share profits in the ratio 4:3. After admitting Z, the new ratio becomes 3:2:2. What is the sacrificing ratio of X and Y?

a) 4:3

b) 3:2

c) 1:1

d) 2:1

245 / 283

Category: Adjustments at the time of Admission of a Partner

245. P and Q are partners with capital balances of \$80,000 and \$60,000, respectively. They admit R as a new partner who brings \$50,000 for a 1/5th share in the firm. Calculate the hidden goodwill.

a) \$40,000

b) \$50,000

c) \$60,000

d) \$70,000

246 / 283

Category: Calculation of New Profit Sharing Ratio

246. P and Q share profits in $7:5$ ratio. R is admitted for $\frac{1}{6}$ share, acquired equally from P and Q. What is the new profit sharing ratio?

a) 4 : 3 : 1

b) 3 : 2 : 1

c) 5 : 4 : 1

d) 6 : 5 : 1

247 / 283

Category: Admission of a Partner

247. A and B are partners sharing profits in the ratio of 3:1. They admit C as a new partner for $\frac{1}{4}$th share in profits. What will be the new profit-sharing ratio?

a) 3:1:4

b) 9:3:1

c) 6:2:4

d) 9:3:4

248 / 283

Category: When Goodwill Already Appears in the Books/Balance Sheet

248. X and Y are partners sharing profits in the ratio of 5:3. They admit Z as a new partner who brings \$8,000 as goodwill. The existing goodwill in the books is \$4,000. The new profit-sharing ratio is 3:2:2. In what ratio should the existing goodwill be written off?

a) 5:3

b) 3:2

c) 3:2:2

d) 1:1:1

249 / 283

Category: Accounting Treatment of Revaluation of Assets and Liabilities

249. A piece of machinery with a book value of \$50,000 is revalued at \$40,000. What journal entry should be recorded for this decrease in value?

a) Debit Revaluation A/c \$10,000; Credit Machinery A/c \$10,000

b) Debit Machinery A/c \$10,000; Credit Revaluation A/c \$10,000

c) Debit Revaluation A/c \$40,000; Credit Machinery A/c \$40,000

d) Debit Cash A/c \$10,000; Credit Machinery A/c \$10,000

250 / 283

Category: Accounting Treatment of Goodwill including Hidden Goodwill

250. (A) Hidden goodwill is the excess of desired total capital of the firm over the actual combined capital of all partners.
(R) Hidden goodwill arises when a new partner brings additional capital into the firm.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

251 / 283

Category: Admission of a Partner

251. X and Y share profits in 7:3. Z is admitted as a partner for $\frac{1}{4}$ share, with his share acquired by X and Y in 2:1 ratio. If goodwill is valued at \$60,000, how much will Y account for?

a) \$15,000

b) \$20,000

c) \$30,000

d) \$40,000

252 / 283

Category: Proper Form of Balance Sheet

252. Which section of a properly formatted balance sheet includes accounts receivable?

a) Long-term liabilities

b) Owner's equity

c) Current assets

d) Non-current investments

253 / 283

Category: Accounting Treatment of Accumulated Profits and Losses

253. (A) On admission of a new partner, accumulated profits should be transferred to the old partners' capital accounts in their old profit-sharing ratio.

(R) The new partner is not entitled to any share in the accumulated profits earned before their admission.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

254 / 283

Category: New Partner brings in only a part of his share of Goodwill

254. (A) When a new partner brings only a portion of his goodwill share in cash, the remaining amount is debited to his current account.
(R) The unpaid goodwill portion is adjusted through the new partner’s current account to avoid reducing his capital.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

255 / 283

Category: Adjustments at the time of Admission of a Partner

255. (A) When a new partner is admitted with a $1/5$th share and the old profit-sharing ratio of existing partners is $3:2$, the new profit-sharing ratio of the old partners will be $12:8$.
(R) The sacrificing ratio is always equal to the old profit-sharing ratio when the new ratio is determined proportionally.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

256 / 283

Category: Calculation of Sacrificing Ratio

256. X and Y are partners sharing profits in the ratio of 5:3. Z is admitted as a new partner, and the new profit sharing ratio becomes 3:2:1. What is the sacrificing ratio of X and Y?

a) 3 : 2

b) 5 : 3

c) 3 : 1

d) 1 : 3

257 / 283

Category: Occasions: Retirement of a partner

257. E, F, and G share profits in 5:3:2. On G's retirement, his capital is \$40,000. The remaining partners adjust capitals in their new ratio (7:5) but first pay G in cash. If total adjusted capital is \$140,000, how much extra cash does E bring in?

a) \$2,500

b) \$5,000

c) \$7,500

d) \$10,000

258 / 283

Category: Occasions: Retirement of a partner

258. A, B, and C are partners sharing profits in the ratio of 3:2:1. On C's retirement, Goodwill is valued at \$72,000. The new profit-sharing ratio between A and B is 5:3. What amount will be credited to A's capital account due to goodwill adjustment?

a) \$9,000

b) \$12,000

c) \$18,000

d) \$24,000

259 / 283

Category: Adjustment of Hidden Goodwill

259. (A) The hidden goodwill of a firm is calculated as the excess of the inferred total capital over the combined adjusted capital of all partners.
(R) The new partner's capital contribution is used as the basis to determine the total implied capital of the firm.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

260 / 283

Category: Calculation of New Profit Sharing Ratio

260. (A) When a new partner is admitted and acquires his share of profits from the old partners in their old profit sharing ratio, the sacrificing ratio of the old partners will always be equal to their old profit sharing ratio.
(R) The sacrifice made by each old partner is proportional to their existing profit share when the remaining share is divided in the old ratio.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

261 / 283

Category: When Goodwill Already Appears in the Books/Balance Sheet

261. X and Y are partners sharing profits in the ratio of 3:2. They admit Z for 1/5th share of profit. The new profit-sharing ratio is 4:3:3. Goodwill already appears in the books at \$20,000. Z brings \$15,000 as his share of goodwill in cash. What will be the journal entry to write off the existing goodwill?

a) Debit X's Capital \$12,000; Credit Goodwill \$20,000

b) Debit X's Capital \$12,000 and Y's Capital \$8,000; Credit Goodwill \$20,000

c) Debit Y's Capital \$8,000; Credit Goodwill \$20,000

d) Debit Goodwill \$20,000; Credit X's Capital \$12,000 and Y's Capital \$8,000

262 / 283

Category: Calculation of Sacrificing Ratio

262. A, B, and C are partners sharing profits in the ratio 4:3:2. D is admitted for $\frac{1}{5}$ share. Calculate the sacrificing ratio of A, B, and C.

a) 4 : 3 : 2

b) 3 : 2 : 1

c) 2 : 1 : 1

d) 1 : 1 : 1

263 / 283

Category: When Goodwill Already Appears in the Books/Balance Sheet

263. When goodwill already appears in the books and a new partner is admitted, how should the existing goodwill be written off?

a) Debiting New Partner's Capital A/c and crediting Goodwill A/c

b) Crediting Old Partners' Capital A/cs and debiting Goodwill A/c

c) Debiting Old Partners' Capital A/cs and crediting Goodwill A/c

d) Crediting New Partner's Capital A/c and debiting Goodwill A/c

264 / 283

Category: New Partner brings in only a part of his share of Goodwill

264. (A) When a new partner brings only a portion of his share of goodwill in cash, the remaining amount is debited to his current account.
(R) The current account is used instead of capital account to keep track of the unpaid goodwill without affecting the partner's capital balance.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

265 / 283

Category: Unrecorded Assets and Liabilities

265. An unrecorded liability of \Rs.30,000 is discovered and brought into account. Which journal entry correctly records this transaction?

a) Unrecorded Liability A/c Dr. \Rs.30,000; To Revaluation A/c \Rs.30,000

b) Revaluation A/c Dr. \Rs.30,000; To Bank A/c \Rs.30,000

c) Revaluation A/c Dr. \Rs.30,000; To Unrecorded Liability A/c \Rs.30,000

d) Liability A/c Dr. \Rs.30,000; To Revaluation A/c \Rs.30,000

266 / 283

Category: Proper Form of Balance Sheet

266. During admission of a new partner, Goodwill is valued at \$20,500 and revalued downwards by 10\%. If the existing partners' Capitals are \$40,000 and \$35,000, and other Liabilities are \$50,000, what is the revised total of Liabilities after adjusting Goodwill?

a) \$120,000

b) \$122,950

c) \$123,500

d) \$121,800

267 / 283

Category: Occasions: Retirement of a partner

267. (A) When a partner retires, their capital account should always be settled in cash immediately.
(R) The retiring partner has an absolute right to withdraw their share from the firm’s assets.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

268 / 283

Category: New Partner brings in only a part of his share of Goodwill

268. P and Q are partners sharing profits in the ratio of 4:3. R is admitted as a new partner who brings \$25,000 as capital and \$7,000 as premium for goodwill for 1/6th share of profits. The premium for goodwill is distributed among P and Q. What will be the journal entry for this distribution?

a) Debit Premium for Goodwill A/c \$7,000; Credit P’s Capital A/c \$4,000; Credit Q’s Capital A/c \$3,000

b) Debit Premium for Goodwill A/c \$7,000; Credit P’s Current A/c \$4,000; Credit Q’s Current A/c \$3,000

c) Debit Goodwill A/c \$7,000; Credit P’s Capital A/c \$4,000; Credit Q’s Capital A/c \$3,000

d) Debit Premium for Goodwill A/c \$7,000; Credit R’s Capital A/c \$4,000; Credit Q’s Capital A/c \$3,000

269 / 283

Category: Premium for Goodwill brought by Existing Partner also

269. Partners X and Y share profits in the ratio 3:2. Partner Z is admitted for $\frac{1}{6}$th share of profit, taking $\frac{1}{10}$th from X and $\frac{1}{15}$th from Y. The total goodwill of the firm is \$90,000. What amount will be debited to Z's Current Account for goodwill adjustment?

a) \$12,000

b) \$15,000

c) \$18,000

d) \$20,000

270 / 283

Category: When Goodwill Already Appears in the Books

270. X and Y are partners sharing profits in the ratio of $5 : 3$. Goodwill appears in their books at \$20,000. They admit Z as a new partner for $\frac{1}{4}$th share. Z brings \$15,000 as capital and \$8,000 as goodwill. The new profit-sharing ratio is $10 : 6 : 4$. What will be the journal entry to write off existing goodwill?

a) X's Capital A/c Dr. \$12,500; Y's Capital A/c Dr. \$7,500; To Goodwill A/c \$20,000

b) Goodwill A/c Dr. \$20,000; To X's Capital A/c \$12,500; To Y's Capital A/c \$7,500

c) X's Capital A/c Dr. \$10,000; Y's Capital A/c Dr. \$10,000; To Goodwill A/c \$20,000

d) Goodwill A/c Dr. \$20,000; To Revaluation A/c \$20,000

271 / 283

Category: Adjustment of Partners’ Capital

271. X and Y are partners with capitals of \$50,000 and \$30,000, sharing profits in the ratio $5 : 3$. Z is admitted as a new partner with \$20,000 capital for $1/5$th share. The total capital of the firm is to be \$100,000. How much should X and Y adjust their capital?

a) X brings in \$5,000 and Y withdraws \$3,000

b) No adjustment needed for X or Y

c) X withdraws \$10,000 and Y brings in \$5,000

d) Both X and Y bring in additional capital

272 / 283

Category: Change in Profit Sharing Ratio

272. (A) When a new partner is admitted, the old partners' profit sharing ratio decreases.
(R) The new partner acquires his share of profit from the existing partners.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

273 / 283

Category: Premium for Goodwill brought by Existing Partner also

273. (A) When an existing partner gains a share in profit due to the admission of a new partner, they must compensate the sacrificing partner by bringing premium for goodwill.
(R) The gaining partner's capital account is debited and the sacrificing partner's capital account is credited when the premium for goodwill is brought in by the existing partner.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

274 / 283

Category: Occasions: Change in the profit sharing ratio among the existing partners

274. What is the primary effect of changing the profit sharing ratio among existing partners?

a) The firm dissolves permanently.

b) The firm's legal status changes to a sole proprietorship.

c) The existing partnership agreement is replaced by a new one.

d) All partners must contribute additional capital.

275 / 283

Category: Occasions: Change in the profit sharing ratio among the existing partners

275. If partners P and Q initially share profits in the ratio $3 : 2$ and change it to $1 : 1$, who gains from this change?

a) Partner P gains.

b) Partner Q gains.

c) Both partners gain equally.

d) Neither partner gains.

276 / 283

Category: Unrecorded Assets and Liabilities

276. An unrecorded liability of \$4,000 is paid off during revaluation. What will be the journal entry for this transaction?

a) Debit Cash A/c, Credit Revaluation A/c

b) Debit Revaluation A/c, Credit Unrecorded Liability A/c

c) Debit Revaluation A/c, Credit Cash/Bank A/c

d) Debit Unrecorded Liability A/c, Credit Cash A/c

277 / 283

Category: Admission of a Partner

277. (A) When a new partner is admitted to the firm, the existing partners' capital accounts need to be adjusted.
(R) The admission of a new partner changes the profit-sharing ratio among all partners.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

278 / 283

Category: Change in Profit Sharing Ratio

278. X and Y share profits in the ratio of $7:5$. Z is admitted for $\frac{1}{6}$th share. The new profit sharing ratio between X and Y remains unchanged. What is the new profit sharing ratio?

a) $35 : 25 : 12$

b) $7 : 5 : 1$

c) $14 : 10 : 6$

d) $21 : 15 : 4$

279 / 283

Category: Accounting Treatment of Accumulated Profits and Losses

279. When a new partner is admitted to a firm, accumulated profits should be transferred to the capital accounts of:

a) Old partners' capital accounts in their profit-sharing ratio

b) New partner's capital account in his/her share

c) All partners' capital accounts equally

d) Creditors of the firm

280 / 283

Category: When Goodwill Already Appears in the Books/Balance Sheet

280. (A) When goodwill already appears in the books and a new partner brings his share of goodwill in cash, the existing goodwill must be written off.
(R) The existing goodwill is written off to avoid double counting of goodwill in the books.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

281 / 283

Category: Accounting Treatment of Goodwill including Hidden Goodwill

281. (A) When a new partner is admitted and the value of goodwill is not explicitly given, hidden goodwill can be calculated as the difference between the total capital based on the new partner's share and the existing combined capital of all partners.
(R) Hidden goodwill represents the premium paid by the new partner for their share in the firm, which is not recorded in the books initially.

a) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

b) Both Assertion and Reason are true, but Reason is NOT the correct explanation of Assertion.

c) Assertion is true, but Reason is false.

d) Assertion is false, but Reason is true.

282 / 283

Category: Accounting Treatment of Revaluation of Assets and Liabilities

282. During revaluation, an unrecorded asset worth \$8,000 is discovered. The firm also finds an unrecorded liability of \$3,000. If the old profit-sharing ratio is 2:1, what is the net effect on the revaluation account?

a) \$3,000 (Debit)

b) \$5,000 (Credit)

c) \$8,000 (Credit)

d) \$11,000 (Credit)

283 / 283

Category: New Partner brings in only a part of his share of Goodwill

283. What happens to the portion of goodwill not brought in cash by the new partner?

a) It is written off as bad debt

b) It is adjusted through new partner's current account

c) It is ignored and not recorded

d) It is added to the firm's capital

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Class 12 Accountancy Part-1 Chapter 3 Reconstitution of Partnership Admission of a Partner

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