1 ABC INSTITUTE OF COMMERCE

Time: 1.30 Hours

Marks:-40
ABC-PSR12

1. Any change in the relationship of existing partners which results in an end of the existing
agreement and enforces making of new agreement is called:
a.Revaluation of partnership b.Reconstitution of partnership
c.Reaslisation of partnership d.None of the above
2. The ratio in which a partner surrenders his share in favour of a partner is known as:
a.New profit - sharing ratio
b.Sacrificing ratio
c.Gaining ratio d.Capital ratio
3. The ratio in which a partner receives a rise in his share of profits is known as:
a.New ratio b.Sacrificing ratio c.Capital ratio d.Gaining ratio
4. Reserves and accumulated profits are transferred to partners capital accounts at the time of
reconstitution in:
a.Old profit-sharing ratio b.Sacrificing ratio
c.Gaining ratio d.New profit- sharing ratio
5. Increase and decrease in the value of assets and liabilities are recorded through:
a.Partner's capital account b.Revaluation account
c.Profit and loss appropriation A/c d.Balance sheet
6. In which of the following case, revaluation account is debited?
a.Increase in value of asset b.Decrease in value of asset
c.Decrease in value of liability d.Nochange in value of assets
7. In which of the following cases, revaluation account is credited?
a.Decrease in value of liability b.Increase in value of liability
c.Decrease in value of asset d.Nochange in value of liability
8. Partner's capital account is credited when there is
a.Profit on revaluation b.Transfer of general reserve

c.Transfer of accumulated profits d.All of the above

9. Sacrificing ratio is the difference between:
a.New ratio and old ratio b.Old ratio and new ratio
c.New ratio and gaining ratio d.Old ratio and Gaining ratio
10. A and B are partners in a firm sharing profits in the ratio of 3:2. They decided to share future
sacrifice.
profits equally. Calculate A's gain or
a.2/10 (sacrifice) b.5/10 (gain) c.1/10 (gain) d.1/10 (sacrifice)
11. In case of change in profit-sharing ratio, the gaining partner must compensate the sacrificing
amount of
partners by paying the proportional
b.Cash c.Goodwill d.None of the above
a.Capital
12. In case of change in profit-sharing ratio, the accumulated profits are distributed to the
partners in
a.New ratio b.Old ratio c.Sacrificing ratio d.Equal ratio
13. X, Y & Z are partners sharing profits and losses in the ratio of 5:3:2. They decide to share the
future profits in the ratio of 3:2:1. Workmen compensation reserve appearing in the balance
sheet on the date if no information is available for the same will be:
a.
Distributed among the partners in old profit sharing ratio

b. Distributed among the partners in new profit sharing ratio

C. Distributed among the partners in capital ratio
d. Carried forward to new balance sheet without any adjustment.

14. A, B & Cwere are partners in a firm sharing profits in the ratio of 3:4:1. They decided to
share profits equally w.e.f. from 1-4-2019. On that date the profit and loss account showed
T i m e : 1 . 3 0 HOUrs

ABC-PSR12

profit and loss account, decided to

it was
the credit balance of 96,000. Instead of closing the
ratio. In the journal entry:
adjustment entry reflecting the change in profit sharing
record an
a. Dr. A by 4,000; DR. B by 16,000; Cr. C by 20,000
b. Cr. A by 4,000; Cr. B by 16,000; Dr. C by 20,000
C. Cr. A by 16,000; Cr. B by 4,000; DR. C by 20,000
d. Dr. A by 16,000; Dr. B by 4,000; Cr. C by 20,000
15. U, V & W are partners sharing profits in the ration of 2:3:5. They also decide to record the
etfect of the following revaluations and reassessments without affecting the book values of

assets and
liabilities by passing a single adjustment entry:
Book value (Rs.) Revised value (Rs.)
Land and building 3,50,000
3,00,000
Furniture 1,50,000 1,00,0000
Sundry creditors 60,000 20,000
Outstanding salaries 10,000 15,000
The single adjustment entry will
a.Dr. W and Cr. U by 10,500
c.Dr.V and Cr. U by Rs.10,500
b.Dr.U and Cr. W byRs.10,500
d.Dr. Wand Cr.V by Rs.10,500
16. X and Y shares profits and losses in the ratio of 3:2. With effect from 1st April 2019 they
agreed to share profit equally. The goodwill of the firm was valued at Rs.60,000. The
adjustment entry will be
a.Debit Y and Credit X with Rs.6,000
b.Debit X and Credit Y with Rs.6,000
c.Debit X and credit Y with Rs.600
d.Debit bi and credit X with Rs.600
17. Sacrificing ratip :
a.New ratio - old ratio

c.Old ratio - New ratio

b.Old ratio- gaining ratio
d.Gaining ratio - old ratio

18. X,Y & Z are partners sharing profit and losses in the ratio of 5:3:2. From 1st
decided to share profit and losses equally. The partnership deed provide that April 2018 thev
in the event of
any change in the profit sharingratio the goodwill should be
valued at 2 years
the average profit of the preceding five years the
profit and loss of the
purchase of
31st march, are preceding years and
Year 2013-14 2014-15 2015-16 2016-17 2017-18
Profit 70,000 85,000 45,000 35,000 10,000 (loss)
Adjustment entry will be:
a. Dr. Y's capital Ac Rs.3,000, 7's capital A/c 12,000; Cr. X's
b. Y's capital capital A/c Rs.15,000
Dr. A/c Rs.12,000, Z's capital A/c 3,000; Cr. X's
Z's capital
capital A/c Rs.15,000o
c. Dr. A/c Rs.3,000; X's capital A/c 12,000; Cr. Y's
d. Dr. Y's capital A/c Rs.15,000; Cr. Z's capital A/c capital A/c Rs.15,000
12,000, and X's capital A/c
Rs.3,000
19 A.B & Care sharing profits and losses in the ratio
and of 4:3:2, decided to share
April, 2018. An extract of future profits
losses in the ratio of 2:3:4 with effect from
sheet as at 31st march, 2020 is:
1 their balance
Liabilities Amount Assets
Investments fluctuation reserve 18,000 Amount
Investments (at cost)
Case-1 if there is no additional information. 2,00,000
 ABC-PSR12 Marks:-40

Case-2.If the market value of investments is

Case -3. If the market
value of investments is Rs.2,00,000
Case-4. If the market
value of Rs.1,91,000
Case-5. If the market value investments is Rs.2,18,000
of investments is
What will the amount
credited to partner's Rs.1,73,000
20. Match the capital A/c
following items:
|IGoodwill which is acquired by making a
li
Goodwill location which arises
payment (a) Inherent goodwill
lii from favourable (b) Purchased goodwill
Goodwill which arises due to efficiency of
management
21. Match
the following items:
i)If goodwill is valued at Rs.1,20,000 at 4 years
normal is 10% and average purchase of super profit; (a) | Rs.8,00,000
profits are Rs.50,000, capital employed will
be
(i)
(b) Rs.2,00,000
Rs.5,00,000
22. Match the following items
) General reserve will be distributed in
(a) Sacrificing/ gaining
ratio
(ii)Advertisement suspense will be debited to partner's A/cs (b) Old ratio
in
(ii) Goodwill value will be adjusted in New ratio
23. Match the following itemns
() Ratio in which partners share profit and loss before (a) New profit sharing
reconstitution offirm ratio
(ii) Ratio in which partners surrender their share of profitin favour (b) Gaining ratio
ofother partner's
(ii) Ratio in which all the partners share the future profit and Sacrificing ratio
losses
(iv) Ratio in which partners acquire the share from other (d) Old ratio

24. Match the following items

Old ratio - new ratio (a) Gaining ratio
Goodwill (b) Fixed assets
(i)
General reserve Credit balance
(ii)
New ratio - old ratio (d) Sacrificing ratio
| (iv)
25. Match the following items
(a) At the time of retirement
(i) Revaluation Acis opened At the time of death
(ii)
Sacrificing ratio (b)
O A tthe time of admission
(ii) Valuation of goodwill
(d) At the time of reconstitution of partnership firm

is NOT true in relation to goodwill?

26. Which of the following b.It is fictitious assets
asset
a.lt is an intangible d.None of the above
realisable value
c.It has a
 ABC INSTITUTE OF COMMERCE
Time: 1.30 Hours

ABC-PSR12 Marks:-40

27. When goodwill is not purchased goodwill account can:

a.Never be raised in the book b.Be raised in the book
c.Be partially raised in the
books d.Be raised as per the agreement of the
28. The goodwill of the firm is partners
NOT affected by:
a.Location of the firm b.Reputation of firm
c.Better customer service d.None of the above
29. The profit earned
by a business over the last 5 years are as follows:
Rs.12,000, Rs.13,000, Rs.14,000, Rs.18,000, and 2000 (loss) based on 2
last 5 years profits, value of years purchase of the
goodwill will be:
a.Rs.23,600 b.Rs.22,000
30. The
c.Rs.1,10,000 d.Rs.1,18,000
average profit of a business over the last 5
years amounted to Rs.60,000. The normal
commercial yield on
capital invested in such a business is deemed to be 10% p.a. the net
capital invested in the business is
Rs.5,00,000. Amount of goodwill, if it is based on 3 years
purchase of last 5 years super profit be
will
A.1,00,000 b.1,80,000 C.30,000
31. The d.1,50,000
following question consist of two statements, one labelled as the 'Assertion
other as 'Reason (R ). You are to (A) and the
examine these two statements carefully and select the
answers using the code
given below:
a. Both A and R are
individually true and R is the correct explanation of A.
b. Both A and R are
individually true but R is not the correct explanation of A.
C. A is true but R is false
d. A is false but R is true
Assertion (A): In order to
compensate a partner for contributing capital to the firm in excess of the
profit-sharing ratio, firmpays such interest on partners capital.
Reason (R ): Interest on capital is treated a
charge against profit.
32. The profits for the previous three
years are given below:
2018-2019 Rs.23,000 (including an abnormal gain of Rs.8,000)
2019-2020 Rs.40,000 (after charging an abnormal loss of Rs.12,000)
2020-2021 Rs.38,000 (after writing off bad debts amounting to Rs.6,000)
The amount of goodwill at two years purchase of the
average profits of the last three years will
be..

a.Rs.65,000 b.Rs.70,000 c.Rs.68,000 d.Rs.35,000

33. A and B are partners sharing profits in the ratio of 2:3. Their balance sheet shows machinery
at Rs.4,00,000; stock at Rs.80,000 and debtors at Rs.3,20,000. C is admitted and
new profit
sharing ratio is agreed at 6:9:5. Machinery is revalued at Rs.3,40,000 and a provision is made
for doubtful debts @2.5%. A's share in loss on revaluation amounted to Rs.20,000. Revalued
value of stock will be:
A.Rs.98,000 b.Rs.1,00,000 c.Rs.60,000 d.Rs.62,000
34. Gagandeep, a partner advanced a loan of Rs.60,000 to the firm on 30h November 2020. The
firm incurred a loss of Rs.15,000 during the year ending 31st march, 2021. In the absence of
partnership deed interest a loan allowed to Gagandeep will be
a.Rs.3,600 b.Rs.900 c.Rs.1,200 d.Rs.1,800

35. Vikas, and Yogesh were in partnership sharing profits and losses in the ratio of 2:1. They
admitted kunal as a new partner. Kunal brought Rs.1,00,000 as his share of goodwill
premium, which was entirely credited to vikas's capital account. On the date of admission.
gOodwill of the firm was valued at Rs.5,00,000. The new profit sharing ratio of vikas, Yogesh
and kunal will be:
 ABC INSTITUTE
Time: 1.30 Hours OF MMERCE
Marks:-40

ABC-PSR12

A.7:5:3 b.7:3:5 c.5:7:3 d.3:5:7

36. P, Q 8 R are
partners a firm. Net profit before
in
salary to the partners amounted toappropriations
is Rs.7,87,000. st
on capital and
Tota t
and Q are entitled to Rs.40,000
receive a commission @6% each on
and Rs.75,000 respectively.
net profit after taking
consideration interest on capital salaries and all commission. Calculate
into
to P and Q. commission payad
A.Rs.18,000 each b.Rs.40,320 each d.Rs.24,000 each
37. Charvi and c.Rs.36,000 each
vaanya were partner sharing profit and losses in 3:2 with affect from 1 AP
2021, they decided to share future profits equally. On that
date, following journal entry was
passed by the firm:
Date
Particulars L.F. Debit amt. Debit amt.
Charvi's current A/c
30,000
Dr. to vaanya's current A/c 30,000
which of the
following balance was existing in the books of the firm on the date of reconstitution
a.
Contingency reserve Rs.3,00,000
b. Profit and loss (Dr.) balance
Rs.3,00,000
C. Profit and loss (Cr.) balance
d.
Rs.3,00,000
Advertisement suspense account Rs.2,00,000
38. The following question consist of two statements, one labelled as the 'Assertion (A) and the
other as 'Reason (R ). You are to examine thesetwo statements carefully and select the
answers using the code given below:
a. Both A and R are individually true and Risthecorrect explanation of A.
b. Both A and R are individually true but R is notthe correct explanation of A
C. A is true but R is false
d. A is false but R is true
Assertion (A): It is necessary to show the true position of the firm at the time of admission of a new
partner. Reason (R ): The gain or loss revaluation which is transferred to all the partner's capital
account in new profit - sharing ratio.

CASE STUDY QUESTIONs

Read the following paragraph and answer the following question from 1 to 5.
39. Any changes in the relations of partnership wil result in the reconstitution of the
partnership firm. All the reserves and surplus will be distributed among the partners into
existing profit sharing ratio. When it is decided by the partners to make changes in the
existing ratio, a separate account is opened, which is known as profit and loss adjustment or
revaluation or revolution account to make the revaluation of assets and reassessment of
liabilities. With the motive to calculate actual economic benefits.
1. The need of revaluation of assets and liabilities:
a. Assets and liabilities should appear at revised values
b. Any profit and loss an account of change in values belong to old partners
C. All unrecorded assets and liabilities get recorded
d. None of the above

2. Revaluation account is a:

a.Real account b.Nominal account

c.Personal account d.None of the above

3. Any change in the relationship of existing partners which results in an end of the existir

agreement and enforces making

of new agreement is called
a.Revaluation of partnership b.Reconstitution of partnership
 me: 1.30Hours
ABC-PSR12
Marks:-40
c.Realization of partnership d.None of the above

4. In case of change in profit - sharing ratio, the accumulated

partners in profits are distributed to the
a.New ratio b.Old ratio
c.Sacrificing ratio d.Equal ratio
5. Increase and decrease in the value of
assets and liabilities
a partners capital account are recorded through:
c.Profit and loss b.Revaluation account
appropriation d.Balance sheet
Read the following
40.
paragraph and answer the following question from 1 to 3.
Bhavya and Naman were partner in a firm
noticed that a lot of food is left at carrying on a tiffin service in Hyderabad. Bhavya
the end of the day. To avoid
it can be distributed to
the needy. Naman wanted that wastage, she suggested that
it should be mixed with the
being served the next day. Naman then food
give
increased, he will not mind free distribution of
a
personal that if his share in the
profit
decided to change their leftover food. Bhavya happily agreed. So
profit sharing ratio 1:2 with immediate effect. On that they
revaluation of assets and reassessment date
of liability was carried out that
of Rs.18,000. On that resulted into a gain
day at the goodwill of the firm was valued at
Based on the above
information you are required to answer the Rs.1,20,000.
1.
Sacrificing ratio equal to: following questions:
a.Old ratio minus new ratio
b.New share minus old share
c.Old share plus new share
d.Old share

2 Sacrificing /gain of bhavya and naman will

a.
Bhavya sacrifice a/6, naman gains 1/6 be
b. Bhavya gains 1/6, naman sacrifice 1/6
C. Only bhavya gains 1/6
d. Only naman sacrifice 1/6

3 At the time of change in profit sharing ratio gaining partner capital account is...
. andd
sacrificing partneris for the adjustment of goodwill
a.Credited debited b.Debited credited
c.Increased or deceased d.Deceased or increased

4. Pass the journal entry for adjustment of goodwill

a. Naman's capital A/c Dr.1,20,000
To bhavya's capital A/c 1,20,000
b. Bhavya's capital A/c Dr. 60,000
To naman's capital A/c 60,000
C. Naman's capital A/c Dr.20,000
To bhavya's capital A/c 20,000
d. Naman's capital A/c Dr. 1,00,000
To bhavya's capital A/c 1,00,000