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Practice test 1(Partnership)

Accountancy (055)
Class XII
Maximum marks: 36 Time Allowed: 80 minutes

General Instructions:

1. This question paper contains 17 questions. All questions are compulsory.

2. Question Nos.1 to 11 carries 1 mark each.
3. Questions Nos. 12 to 14 carries 3 marks each.
4. Questions Nos. from 15 carries 4 marks each 5. Questions Nos. from 16 and 17 carries 6
marks each .

1. Accounting Standard-26 requires that goodwill is to be recorded in the books of accounts only
when money or money’s worth has been paid for it. At the time of admission, Vivaan, a new
partner was unable to bring in his share of goodwill in cash, so according to Accounting
Standard-26 his:
(a) Current A/c will be credited
(b) Current A/c will be debited
(c) Capital A/c will be debited
(d) Capital A/c will be credited

2. Read the following statements: Assertion (A) and Reason (R). Choose the correct alternative
from those given below.
Assertion: Michael, Mike and Stephen were partners sharing profits and losses in the ratio 3:2:1.
Stephen being a partner wants that he should be exempted from sharing the losses in the firm.
Reasoning: According to Partnership Act 1932,”It may be agreed between the partners that one
or more of them shall not be liable for losses.” Alternatives:
(a) Both A and R are correct, and R is the correct explanation of A.
(b) Both A and R are correct, but R is not the correct explanation of A.
(c) A is correct but R is incorrect.
(d) A is incorrect but R is correct.
3. Danish, Zaid and Mihir who were sharing profits and losses equally decided to share the
future profits and losses in the ratio to 5:4:3 with effect from 1st April 2023. An extract of their
Balance Sheet as at 31st March 2023 is:
Liabilities Amount Assets Amount
Investment Fluctuation 85,0000 Investments( At 8,00,000
Reserve Cost)
At the time of reconstitution, if the market value of Investment was Rs. 7,06,000, the
Revaluation A/c will be:
(a) Debited with 15,000
(b) Debited with 9,000
(c) Credited with 2,000
(d) Credited with 12,000
OR
Sam, Tom and Jerry were partners sharing profits and losses equally. Sam sold a land costing
Rs.5,00,000 belonging to the firm, without informing other partners and made a profit of
Rs.50,000 on sale of such land. Which decision should be taken by the firm to rectify
this situation?
(a) Sam needs to return only Rs.5,00,000 to the firm.
(b) Sam is required to return Rs.50,000 to the firm.
(c) Sam is required to pay back Rs.50,000 only equally to Tom and Jerry. (d) Sam needs to
return Rs.5,50,000 to the firm

4. Mike and Ken were two partners sharing profits and losses in the ratio 4:3. Ken was in need of
funds so he took a loan of Rs.50, 000 from the firm at an agreed rate of interest being 10% p.a. If
Interest is charged on loan to the partner it will be:
(a) Debited to Profit and Loss A/c
(b) Credited to Profit and Loss A/c
(c) Debited to Profit and Loss Appropriation A/c
(d) Credited to Profit and Loss Appropriation A/c

5. Neil, Nitin and Nitesh were partners in the firm sharing profits and losses equally. Neil retires
from the firm and on his retirement, he is entitled for the payment due to him after all the
adjustments.
At the time of retirement, if nothing is mentioned about the payment made due to him, in which
account, the amount will be transferred:
(a) Retiring Partner’s Current A/c
(b) Retiring Partner’s Capital A/c (c) Retiring Partner’s Loan A/c
(d) Retiring Partner’s Bank A/c
 OR
Stella, Grace and Carol were partners in the firm sharing profits and losses in the ratio 3:2:1.
Carol was guaranteed a profit of 15,000 after making all adjustments. Any deficiency is to be
borne by Grace. The net profit for the year 31st March 2023 was Rs.60,000.
Grace will be ________ by Rs.________.
(a) Credited, Rs.6,500. (b)
Debited, Rs.5,000.
(c) Credited, Rs.7,500.
(d) Debited, Rs. 2,500.

Read the following hypothetical situation and answer question no. 6 and 7
Ana and Anne started a partnership business on 1st April, 2022. Their capital contributions were
Rs. 3, 00,000 and Rs. 1, 00,000 respectively. Ana rented her property to carry on business for
Rs.2, 500 p.m. Interest on capitals @12% p.a. Ana, to get a salary of Rs. 4,000 p.m. Anne to get
a commission of 2% of the net profit. Profits are to be shared in the ratio of 3:2. The profits for
the year ended 31st March, 2023 before providing for rent was Rs. 2, 00,000.
Dr. Profit and Loss Appropriation Account Cr.
st
for the year ended 31 March, 2023
Particulars Rs. Particulars Rs.
To Interest on capital: By Profit and Loss A/c _______(2
Ana _______ )
Anne _______
To Partner’s Salary:
Ana 48,000
To Anne’s commission _______(1
To Profit transferred to )
Ana’s Capital A/c
Anne’s Capital A/c _______
_______
_______ _______
6. The amount to be reflected in blank (1) will be:
(a) Rs.3,720
(b) Rs.3,400
(c) Rs. 2,800
(d) Rs.2,940

7. The amount to be reflected in blank (2) will be:

(a) Rs.1,62,000
(b) Rs. 1,74,500
(c) Rs. 1,71,400
(d) Rs.1,70,000

8. Which of the following is a right of a partner?

(a) sharing profits and losses with other partners in the agreed ratio
(b) inspecting and having a copy of the books of accounts
(c) retiring from the firm without giving proper notice (d) taking part in the misconduct of the
business Choose the correct option:
(i) Only (b) and (c) (ii)
Only (c)
(iii) Only (a) and (b)
(iv) Only (a) and (d)

9. David and Garry are partners in a firm with capitals of Rs. 90,000 and Rs. 80,000 respectively.
Zenith brings Rs.70,000 as his capital for 1/4th share in profits. Zenith’s share of goodwill will
be:
(a) Rs. 34,000.
(b) Rs. 29,000.
(c) Rs.10,000.
(d) Rs.14,000.

10. Edward and Hayward are partners. Edward draws a fixed amount at the beginning of every
quarter. Interest on drawings is charged @10% p.a. At the end of the year, interest on Edward’s
drawings amounted to Rs.7,500. Drawings of Edward were: (a) Rs. 34,000 per quarter. (b) Rs.
44,000 per quarter
(c) Rs. 30,000 per quarter
(d) Rs. 60,000 per quarter
OR
Ayan, Azan and Aqib are partners carrying on furniture business. Ayan withdrew Rs. 5,000 at the
end of each month. Azan withdrew Rs.10,000 at end of each quarter. Aqib withdrew Rs.40,000
at the end of each month for six months. The partnership deed provides for interest on drawings
@ 12% p.a. The interest on drawing charged from Ayan, Azan and Aqib at the end of the year
will be:
(a) Ayan- Rs. 1,800, Azan- Rs.3,300, Aqib- Rs. 6,000
(b) Ayan- Rs. 2,400, Azan- Rs. 1,200, Aqib- Rs. 5,000 (c) Ayan- Rs. 1,400, Azan- Rs.
3,200, Aqib- Rs. 2,000
(d) Ayan- Rs. 3,200, Azan- Rs. 2,300, Aqib- Rs. 8,000
11. At the time of dissolution, Harry, a creditor of the firm agreed to take over the furniture of the
book value of Rs. 1, 00,000 at Rs. 89,000 and the balance in cash in full settlement of his
account of Rs.1, 10,000.
Which journal entry will be passed for the balance to be paid in cash?
(a) Realisation A/c Dr. 35,000
To Bank A/c 35,000 (b)
Realisation A/c Dr. 21,000
To Bank A/c 21,000 (c) Realisation
A/c Dr. 11,000
To Bank A/c 11,000 (d)
Realisation A/c Dr. 15,000
To Bank A/c 15,000

12. Mac, Jack and Lac were partners in a firm sharing profits and losses in the ratio of 2:2:1

Balance Sheet (extract) As at 31st March, 2023

Liabilities (Rs) Assets (Rs)
Workmen’s Compensation Reserve 5,00,000

On Jack’s retirement from the firm on 1st April, 2023, he had a balance of Rs.8, 00,000 (cr.) in
his capital account. The liability of Workmen’s Compensation Reserve was Rs. 5, 75,000. You
are required to pass journal entries and show how much amount is transferred to his loan
account?

13. Viraf, Virat and Vaibhav were partners with capitals of Rs 2,30,000, Rs 1,20,000 and
Rs.2,40,000. After distributing the profit of 5,20,000 for the year ended 31st March 2023 in
their agreed ratio of 3:2:1 it was observed that:
• Interest on capital was provided at 14% p.a. instead of 10% p.a.
You are required to pass adjustment entry.
OR
Eden and Ivon were partners in a firm sharing profits and losses in the ratio of 5:4. Their capitals
were Rs.75,000 and Rs. 90,000 respectively. After the accounts for the financial year ending
March 31, 2023 have been prepared, it is observed that interest on capital @ 10% per annum and
salary to Eden @ Rs.9,000 per annum, as provided in the partnership deed has not been credited
to the partners’ capital accounts before distribution of profits.
You are required to give necessary rectifying entries using Profit and Loss Adjustment Account.
14. Kate and Vincet were partners in a firm. On 1st April, 2022, the firm had assets of Rs.90,000
including cash of Rs. 8,000. The partners’ capital accounts showed a balance of Rs. 70,000
and reserves constituted the rest. The normal rate of return is 30% and average profits of the
firm are valued at Rs. 47,000.
You are required to find out the value of goodwill of the firm at 4 years purchase of super profits.

15. Carol and Lacy were partners. They decided to dissolve their firm. Pass the journal entries
for the following after various assets and external liabilities have been transferred to
Realisation A/c:
1.Carol took over half of the investments worth Rs. 30,000 at 2% discount and the remaining
investments were sold at a profit of 18% of the book value.
2.Lacy is allowed a remuneration of Rs. 13,000 for dissolution work and is to bear all the
expenses of realisation which amounted to Rs. 5,000 were paid by the firm.
3. Carol had given a loan of Rs. 89,000 to the firm which was duly paid.
4. Lacy agreed to pay off her brother’s loan of Rs. 13,000 at a discount of 5%.

16. On 31st March 2023 the Balance sheet of Zoya and Zara who were sharing profits and losses
in the ratio of 3:2 was as follows.
Liabilities Amount (Rs.) Assets Amount (Rs.)
Creditors 29,000 6,000 Cash at bank 9,000
Bills payable 16,000 Debtors 20,000
General reserves Less : Provision 1000 19,000
Capitals Stock 15,000
Zoya 50,000 85,000 Land and Building 25,000
Zara 35,000 Plant and Machinery 30,000
Goodwill 10,000
Profit and Loss account 28,000
1,36,000 1,36,000
th st
They decided to admit Sara for 1/5 share on 1 April, 2022 in the firm on the following terms:
(a) Goodwill of the firm is valued at Rs 28,000.
(b) Depreciate Plant and Machinery by 10%, appreciate Land and Building by 40%.
(c) The provision for doubtful debts was to be increased by Rs. 800.
(d) A liability of Rs. 1,000 included in the creditors is not likely to arise.
(e) New profit sharing ratio between Zoya, Zara and Sara shall be 5:3:2 respectively. (f) Sara
was to contribute capital equal to 1/5th of the total capital of Zoya and Zara after all
adjustments.
You are required to prepare Revaluation Account and Partners’ Capital Accounts.
 OR
Mark, Musk and Alen were partners in a firm sharing profits in 2:2:1 ratio, On 31.3.2023 Alen
retires from the firm. On the date of Alen’s retirement the Balance Sheet of the firm was as
follows:
Balance Sheet of Mark, Musk and Alen
as at 31.3.2023
Liabilities (Rs.) Assets (Rs.)
Creditors 54,000 Bank 55,000
Bill Payable 24,000 Debtor 12,000
Outstanding Rent 4,400 Less: Provision for
Provision for Legal Claim Capitals 12,000 Doubtful 800 11,200
: Stock 18,000
Mark 92,000 Furniture 8,200
Musk 60,000 1,92,000 Premises 1,94,000
Alen 40,000 2,86,400 2,86,400
On Alen’s retirement it was agreed that:
(a) Premises will be appreciated by 5%.
(b) Furniture will be appreciated by Rs. 2,000.
(c) Stock will be depreciated by 10%.
(d) Provision for bad debts was to be made at 5% on debtors.
(e) Provision legal damages to be made for Rs. 14,400. (f) Goodwill of the firm is valued
at Rs. 48,000.
(g) Rs. 50,000 from Alen’s Capital A/c will be transferred to his Loan A/c and balance will be
paid by cheque.
Prepare Revaluation A/c, Partners Capital A/c’s and Balance Sheet of Mark and Musk after
Alen’s Retirement.

17. Ester, Emma and Lucy were partners in a firm sharing profits in the ratio of 2: 2: 1. The firm
closes its books on 31st March every year. On 30th September, 2022 Lucy died. The partnership
deed provided that on the death of a partner her executors will be entitled to the following:
(a)Balance in her capital account which amounted to Rs. 3,15,000 and interest on capital @9%.
(b)Her share in the profits of the firm till the date of her death amounted to Rs.70,000.
(c) Her share in the goodwill of the firm. The goodwill of the firm on Lucy’s death was valued at
Rs. 1,50,000.
You are required to calculate the amount to be transferred to Lucy’s Capital A/c.