Accountancy

Chapter 5 - Retirement & Death of a Partner

MULTIPLE CHOICE QUESTIONS

Sl.No Question:
Q1. If Goodwill is appearing in the balance sheet it will be Credited to :
(A) Gaining partner
(B) Retiring partners
(C) All partners
(D) Remaining Partners’
Q.2 In which ratio Retiring partner is compensated by the continuing partner for his
share of goodwill, in which ratio?
(A) Gaining ratio
(B) Sacrificing ratio
(C) Old ratio
(D) New ratio
Q.3 If three partners A, B, C are sharing profit as 5:3:2, then on the death of a partner A,
how much B and C will pay to A executor on account of goodwill. Goodwill is to
be calculated on the basic of 2 years purchase of last 3 years average profit, profits
for the last 3 years are Rs. 3,28,000 Rs. 3,46,000 and Rs. 4,00,000.
(A) Rs. 3,16,000 and Rs. 1,42,000
(B) Rs. 2,44,000 and Rs. 2,16,000
(C) Rs. 4,29,600 and Rs. 2,86,400
(D) Rs. 2,16,000and Rs. 1,44,000
A, B and C are partners in a firm sharing profit and losses in 3:4:2 B retire from the
Q.4 firm. The profit on revaluation on that date was Rs. 72,000, New ratio between A
and C is 5:3 Profit on revaluation will be distributed as:
(A) A Rs. 32,000 B Rs. 24,000 C Rs. 16,000
(B) ARs. 24,000 B Rs. 32,000 C Rs. 16,000
(C) A Rs. 45,000 C Rs. 27,000
(D)47,250 C Rs. 24,750
Q.5 Retiring or outgoing partner
(A) Is liable for firm liabilities
(B) Not liable for any liabilities of the firm
(C) Is liable for obligation incurred before his retirement
(D) Is liable for obligation incurred before and after his retirement
Q.6 P, Q and R sharing profit and losses in the ratio of 8:5:3. Q retire from the firm
takes 3/16 from P and R takes 5/16 from P. New profit sharing ratio between Q and
R will be
(A)1:1
(B)10:6
(C)9:7
(D)5:3

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 Retiring or outgoing partner
Q.7 (A) Is liable for firm liabilities
(B) Not liable for any liabilities of the firm
(C) Is liable for obligation incurred before his retirement
(D) Is liable for obligation incurred before and after his retirement
Q.8 A ,B and C sharing profits in the ratio 4:3:2. A retires B and C decided to share
profit in the future in the ratio of 5:3.what will be the gaining ratio:
(A)21:11
(B)11:21
(C)11:13
(D)13:11
Q.9 A,B and C are sharing profits in the ratio of 3:2:1. B retires and on the day of B’s
retirement Goodwill s valued at Rs 60,000.A and C decided to share future profit
in the ratio of 3:2.Journal Entry will be
(A) A’s Capital A/c Dr. 18000
C’s Capital A/c Dr. 42000
To B’s Capital A/C 60,000
(B) A’s Capital A/c Dr. 6000
C’s Capital A/c Dr. 14000
To B’s Capital A/C 20,000
(C) A’s Capital A/c Dr. 36000
C’s Capital A/c Dr. 24000
To B’s Capital A/C 60,000
(D) A’s Capital A/c Dr. 12000
C’s Capital A/c Dr. 8000
To B’s Capital A/C 20,000

Q.10 At what rate is interest payable on the amount remaining unpaid to the executer of
deceased partner, In the absence of any agreement among partners, when he opts
for interest and not share of profit:
(A) 6%
(B) 12%
(C) 7.5%
(D) 8%
11. What treatment is made of accumulated profits and losses on the retirement of a
partner?
A) Credited to all partner’s capital account in old ratio.
B) Debited to all partner’s capital account in old ratio.
C) Credited to remaining partner’s capital account in new ratio.
D) Credited to remaining partner’s capital account in gaining ratio.

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12. What journal entry will be recorded for writing off the goodwill already existing in
Balance sheet at the time of retirement of a partner?
A) Retiring Partner’s Capital, A/c Dr.
To Goodwill A/c
B) All Partner’s Capital A/c’s Dr. (in old ratio)
To Goodwill A/c
C) Remaining Partner’s Capital A/c’s Dr. (in gaining ratio)
To Goodwill A/c
D) Remaining Partner’s Capital A/c’s Dr. (in new ratio)
To Goodwill A/c

13. What journal entry will be recorded for deceased Partner’s share in profit from the
closure of last balance sheet till date of his death?
A) Profit and Loss A/c Dr.
To Deceased Partner’s Capital A/c
B) Deceased Partner’s Capital A/c Dr.
To Profit and Loss A/c
C) Deceased Partner’s Capital A/c Dr.
To Profit and Loss Suspense A/c
D) Profit and Loss Suspense A/c Dr.
To Deceased Partner’s Capital A/c

14. On the death of a partner, the amount due to him will be credited to:
A) All partner’s capital accounts.
B) Remaining partner’s capital accounts.
C) His executor’s account.
D) Government’s revenue account.

15. P, Q and R have been sharing profits and losses in the ratio of 5:3:2. Q retires.
Share of Q is taken by P and R in the ratio of 2:1. New profit-sharing ratio will
be:
A) 6:4
B) 7:3
C) 7:2
D) 6:3
16 A, B and C were partners in a firm sharing profit and losses in the ratio of
2:2:1. The capital balance are Rs. 50,000 for A, Rs. 70,000 for B, Rs. 35,000
for C. B decided to retire from the firm and balance in reserve on the date was
Rs. 25000. If goodwill of the firm was valued at Rs. 30,000 and profit on
revaluation was Rs. 7,500, then, what amount will be payable to B?
a) Rs. 70,820
b) Rs. 76,000
c) Rs. 75,000
d) Rs. 95,000
17 A, B and C are partners with profit sharing ratio 4:3:2. B retires and goodwill
was valued Rs. 1,08,000. If A and C share profits in 5:3, find out the goodwill
shared by A and C in favour of B.
a) Rs. 22,500 and Rs. 13,500
b) Rs. 16,500 and Rs. 19,500
c) Rs. 67,500 and Rs. 40,500
d) Rs. 19,500 and Rs. 16,500
18 X, Y and Z are partners in the ratio of 2:3:5. Goodwill is already appearing in their
books at a value of Rs. 60,000. X retires and Y and Z decided to share future
profits equally. Journal entry will be:

A) Y’s capital A/c Dr. 12,000 and X’s capital A/c Cr. 12,000
B) Y’s capital A/c Dr. 60,000 and X’s capital A/c Cr. 60,000
C) X’s capital A/c Dr. 2,400, Y’s capital A/c Dr. 3,600, Z’s capital A/c Dr. 6,000
and Goodwill A/c Cr. 12,000
D) X’s capital A/c Dr. 12,000, Y’s capital A/c Dr. 18,000, Z’s capital A/c 30,000
and Goodwill A/c Cr. 60,000

19 A, B and C were partners sharing profit and losses in the ratio of 2:2:1. Books
are closed on 31st March every year. C dies on 5 th November,2018. Under the
partnership deed, the executors of the deceased partner are entitled to his share
of profit to the date of death, calculate on the basis of last year’s profit. Profit
for the year ended 31st March ,2018 was Rs. 2,40,000. C’s share of profit will
be:
a) Rs. 28,000
b) Rs. 32,000
c) Rs. 28,800
d) Rs. 48,000
20 At what rate is interest payable on the amount remaining unpaid to the executor
of deceased partner, in absence of any agreement among partners, when he opts
for interest and not share of profit:
12% p.a.
8% p.a.
6% p.a.
7.5% p.a.
21 Gaining Ratio’ mean:
A) Old Ratio – New Ratio
B) New Ratio – Old Ratio
C) Old Ratio – Sacrifice Ratio
D) New Ratio – Sacrifice Ratio

22 On retirement of a partner, goodwill will be credited to the capital account

of:
A) Retiring partner
B) Remaining Partners
C) All partners
D) None of the above

23 P, Q and R have been sharing profits in the ratio of 8:3:5. P Retires. Q

takes 3/16th share from P and R takes 5/16 th share from P. New profit-
sharing ratio will be:
A) 1:1 B) 10:6
C) 9:7 D) 5:3

24 P, Q and R share profits in the ratio of 5:4:3. R retires and the new ratio is
5:3. If R is given Rs 6,000 as goodwill, Journal entry will be:
A) P’s capital A/C Dr 1,000
Q’s capital A/C Dr 5,000
To R’s capital A/c 6,000

B) P’s capital A/C Dr 5,000

Q’s capital A/C Dr 1,000
To R’s capital A/c 6,000

C) P’s capital A/C Dr 3,750

Q’s capital A/C Dr 2,250
To R’s capital A/c 6,000

D) P’s capital A/C Dr 3,333

Q’s capital A/C Dr 2,667
To R’s capital A/c 6,000

25 A, B & C were partners in a firm sharing profits and losses in the ratio of
5:3:2. C retired & his capital balance after adjustments regarding reserves,
accumulated profits/losses & his share of gain on revaluation was 2,50,000.
C was paid 3,22,000 including his share of goodwill. The amount credited
to C’s Capital A/C, on his retirement, for goodwill will be:
A) Rs 72,000 B) Rs 7,200
C) Rs 14,000 C) Rs 3,22,000
 KEY/ANSWER SHEET
MultpleChice question
Q.1 (C) All partners

Q.2 a) Gaining ratio

Q.3 Rs. 4,29,600 and Rs. 2,86,400

Q.4 Rs. 24,000 B Rs. 32,000 C Rs. 16,000

Is liable for obligation incurred before his retirement
Q.5
Q.6 1:1

Q.7 Is liable for obligation incurred before his retirement

Q.8 (A)21:11

Q.9 (B) A’s Capital A/c Dr. 6000

C’s Capital A/c Dr. 14000
To B’s Capital A/C 20,000
(A) 6%
Q.10
Q.11 A

Q.12 B
D
Q.13
Q.14 C

Q.15 B

Q.16 D

Q.17 D

Q.18 D

Q.19 C
Q.20 C
Q.21 B
Q.22 A
Q.23 A
Q.24 B
Q.25 A

PREPARED BY THE PGTs ( COMMERCE ) OF BHUBANESWAR, GUWAHATI, KOLKATA,

RANCHI, SILCHAR AND TINSUKIA REGIONS.

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