Accountancy Question Bank

CLASS – XII ACCOUNTANCY
INDEX
UNIT TOPIC (SET- I & SET II) PAGE NO
I FUNDAMENTALS OF 2-29
PARTNERSHIP FIRMS
II GOOD WILL AND CHANGE IN 30 – 62
PROFIT SHARING RATIO
III ADMISSION OF A PARTNER 63- 90
IV ISSUE OF SHARES 91 - 119
V ANALYSIS OF FINANCIAL 120-146

STATEMENTS AND
RATIO ANALYSIS
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KENDRIYA VIDYALAYA SANGATHAN CHENNAI REGION
ACCOUNTANCY CLASS XII
SAMPLE QUESTIONS - MCQ
UNIT – 1 SET – 1
TOPIC: ACCOUNTING FOR PARTNERSHIP FIRMS - FUNDAMENTALS
1. Rani and Shyam are partners in a firm. They are entitled to interest on their capital
but the net profit was not sufficient for paying his interest, then the net profit will
be disturbed among partner in
a. 1 : 2
b. Profit Sharing Ratio
c. Capital Ratio
d. Equally
2. Which one of the following items is recorded in the Profit and Loss appropriation
account
a. Interest on Loan
b. Partner Salary
c. Rent paid to Partner’s
d. Managers Commission
3. In case of partnership the act of any partner is :

a. Binding on all partners
b. Binding on that partner only
c. Binding on all partners except that particular partner
d. None of the above
4. . Which of the following statement is true?

a. A minor cannot be admitted as a partner
b. A minor can be admitted as a partner, only into the benefits of the partnership
c. A minor can be admitted as a partner but his rights and liabilities are same of
adult partner
5. Oustensible partners are those who

a. do not contribute any capital but get some share of profit for lending their
name to the business
b. contribute very less capital but get equal profit
c. do not contribute any capital and without having any interest in the business,
lend their name to the business
d. contribute maximum capital of the business
6. Number of partners in a partnership firm may be :

a. Maximum Two
b. Maximum Ten
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c. Maximum One Hundred
d. Maximum Fifty
7. In the absence of Partnership Deed, the interest is allowed on partner’s capital: a.

@ 5% p.a.
b. @ 6% p.a.
c. @ 12% p.a.
d. No interest is allowed
8. A and B are partners in partnership firm without any agreement. A has given a
loan of Rs 50,000 to the firm. At the end of year loss was incurred in the business.
Following interest may be paid to A by the firm
: a. @5% Per Annum
b. @ 6% Per Annum
c. @ 6% Per Month
d. As there is a loss in the business, interest can’t be paid
9. A and B are partners in a partnership firm without any agreement. A has

withdrawn Rs 50,000 out of his Capital as drawings. Interest on drawings may be
charged from A by the firm :
a. @ 5% Per Annum
b. @ 6% Per Annum
c. @ 6% Per Month
d. No interest can be charged
10. A and B are partners in a partnership firm without any agreement. A devotes more
time for the firm as compare to B. A will get the following commission in
addition to profit in the firm’s profit:
a. 6% of profit
b. 4% of profit
c. 5% of profit
11. In the absence of partnership deed, the following rule will apply :
a. No interest on capital
b. Profit sharing in capital ratio
c. Profit based salary to working partner
d. 9% p.a. interest on drawings
12. In the absence of agreement, partners are not entitled to :

a. Salary
b. Commission
c. Equal share in profit
d. Both (a) and (b)
13. Interest on capital will be paid to the partners if provided for in the partnership
deed but only out of:
a. Profits
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b. Reserves
c. Accumulated Profits
d. Goodwill
14. Which one of the following items cannot be recorded in the profit and loss
appropriation account? a. Interest on capital
b. Interest on drawings
c. Rent paid to partners
d. Partner’s salary
15. . According to Profit and Loss Account, the net profit for the year is Rs1,50,000.
The total interest on partner’s capital is Rs18,000 and interest on partner’s
drawings is Rs2,000. The net profit as per Profit and Loss Appropriation Account
will be : a. Rs1,66,000
b. Rs1,70,000
c. Rs1,30,000
d. Rs1,34,000
16. Interest on Capital is under the Fixed Capital Account method is credited to
___________.
a. Partners current account
b. Partners capital account
c. P&L account
17. In case of guarantee of minimum profit to a partner deficiency of guaranteed

partner is from shared by remaining partner in ____________.
a. Profit Sharing Ratio
b. Agreed Ratio
c. Sacrificing Ratio
d. Gaining Ratio
18. Manager’s commission is a ___________ against profits

a. Charge
b. Appropriation
c. Both a&b
19. A and B are Partners .A drew Rs 32,000 .If the rate of Interest on Drawing is 12%
per annum then ______ will amount of interest on drawing . a. Rs 1820
b. Rs 1000
c. Rs 1920
20. If average capital employed in a firm is Rs 12,00,000 , actual profit is Rs 1,50,000

and Normal rate of return is 10% per annum . The amount of super profit will be
______
a. Rs 15000
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b. Rs 12000
c. Rs 30000
21. The Goodwill of firm Rs 1,80,000 valued at three year's purchase of super profit .
If capital employed is Rs 2,00,000 and Normal rate of return is 10% per annum
.The amount of average profit will be ___________ a. Rs 60,000
b. Rs 20,000
c. Rs 18,000
d. Rs 80,000
22. Goodwill is an ________ asset , but not a _______ asset
a. Intangible , Fictitious
b. Tangle, Fictitious
c. Fixed, Fictitious
23. A,B and C were partner in a firm sharing Profit in the ratio of 3:2:1 during the
year the firm earned profit of Rs. 84,000. Calculate the amount of Profit or Loss
transferred to the capital A/c of B.
a. Loss Rs. 87,000

b. Profit Rs. 87,000
c. Profit Rs.28,000
d. Profit Rs.14,000
24. Closing entry for interest on loan allowed to partners

a. Interest on partner’s loan …Dr.
To Profit and Loss A/c
b. Interest on loan …Dr.
To Profit and Loss Appropriation A/c
c. Profit and Loss A/c …Dr.
To interest on partner’s loan A/c
d. Profit and Loss Appropriation A/c …Dr.
To interest on loan A/c
25. Salary to a partner under fixed capital account is credited to

a. Partner’s Capital A/c
b. Partner’s current A/c
c. Profit & Loss A/c
d. Partner’s Loan A/c
26. A, B, and C are partner’s sharing profits in the ratio of 5:3:2According to the
partnership agreement C is to get a minimum amount of Rs. 10,000 as his share of
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profits every year. The net profit for the year ended 31st March, 2019 amounted to
Rs. 40,000. How much amount contributed by A?
a. Rs. 1,350
b. Rs. 1,250
c. Rs. 750
d. Rs. 1,225
27. A partnership firm earned divisible profit of Rs. 5,00,000, interest on capital is to
be provided to partner is Rs. 3,00,000, interest on loan taken from partner is Rs.
50,000 and profit sharing ratio of partners is 5:3 sequence the following in correct
way
(A) Distribute profits between partners
(B) Charge interest on loan to Profit and Loss A/c
(C) Calculate the net profit Transfer to Profit and Loss appropriation A/c IV.
(D) Provide interest on capital
a. DABC
b. CBAD
c. ABCD
d. BCDA
28. A and B are partner’s sharing profit equally. A draw regularly Rs. 4,000 at the end
of every month for 6 months. Year ended on 30thSeptember 2018, calculate
interest on drawings @ rate 5% p.a.
a. Rs. 350
b. Rs. 450
c. Rs. 150
d. Rs. 250
29. A and B are the partner sharing profit in the ratio of 2:3. They admitted C as a
new partner for 1/5thshare in the profit of the firm Rs. 50,000 for the year ended
31st
March 2019. What will be C’s share in
profit a. Rs. 5,000
b. Rs. 10,000
c. Rs. 20,000
d. Rs. 8,000
The following questions consist of two statements, one labelled as the ‘Assertion (A)’
and the other as ‘Reason (R)’. You are to examine these two statements carefully
and select the answers using the code given below:
30. Assertion (A): In order to compensate a partner for contributing capital to the
firm in excess of the profit sharing ratio, firm pays such interest on partner’s
capital. Reason (R): Interest on capital is treated a charge against profit.
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
31. Match the following -
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1. Ratio in which Partners share profit & losses before (A) New profit sharing
reconstitution of firm ratio
2. Ratio in which Partners surrenders their share of (B) Gaining Ratio
profit in favour of other partners
3. Ratio in which all the Partners share the future profit (C) Sacrificing Ratio
and losses
4. Ratio in which Partners acquire the share from other (D) Old Ratio
a. 1-D, 2-C, 3-A, 4-B

b. 1-A, 2-C, 3-D, 4-B
c. 2-A, 1-C, 4-D, 3-B
32. Interest on partner’s loan will be credited to___________

a. Partner’s loan account
b. Partner’s Capital account
c. P &L account
33. A and B are partners in a partnership firm without any agreement. A devotes more
time for the firm as compared to B. A will get the following commission in
addition to profit in the firm’s profit -
a. 6% of profit
b. 4% of profit
c. 5% of profit
34. Charulata is a partner in a firm. She withdrew Rs.10,000 in middle of each quarter
during the year ended 31st March, 2019. Interest on her drawings @ 9% p.a. will
be:
a. Rs.1,350
b. Rs.2,250
c. Rs.900
d. Rs.1,800
35. Gagandeep, a partner advanced a loan of ` 60,000 to the firm on 30th November
2020. The firm incurred a loss of ` 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
36. P, Q and R are partners in a firm. Net profit before appropriations is` 7,87,000.
Total interest on capital and salary to the partners amounted to ` 40,000 and `
75,000 respectively. P and Q are entitled to receive a commission @ 6% each on
net profit after taking into consideration interest on capital salaries and all
commission. Calculate commission payable to P and Q.
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(a) Rs18,000 each (b) Rs 40,320 each (c) Rs 36,000 each (d) Rs 24,000 each
37. Sanyam, Charvi and Yuvraj are partners in a firm. Yuvraj has been given a
guarantee of minimum profit of Rs 14,000 by the firm. Firm incurred a loss of
Rs 6,000 during the year. Capital accounts of Sanyam and Charvi will be
a. Rs 20,000 each
b. Rs 7,000 each
c. Rs 3,000 each
d. Rs 10,000 each
38. A and B are partners sharing profits and losses equally. They admitted C as a
partner with an equal share giving him a guarantee of minimum Rs 50,000 profit
p.a. The profit for the year after C’s admission was Rs 1,20,000. What will be the
net amount that will be credited to A’s Capital A/c?
a. Rs 50,000
b. Rs 40,000
c. Rs 35,000
d. Rs 80,000
39. If a partner withdraws an equal amount in the beginning of each month for a
period of 10 months, what will be the average period for calculation of Interest on
Drawings?
a. 6.5 months
b. 7.5 months
c. 6 months
d. 5.5 months
40. A and B are partners sharing profits and losses in the ratio of 3:2 with capitals Rs
5,00,000 each. According to partnership deed, interest on capital is allowed @
10%
p.a. The profit for the year is Rs 50,000. What amount will be credited to A and B
in such condition?
a. Rs 50,000 to A and B each
b. Rs 25,000 to A and B each
c. Rs 30,000 to A and Rs20,000 to B
d. None of the above.
41. Manager is entitled to a commission of 10% of the net profits after charging such
commission. The net profit for the year is Rs 1,32,000. What will be the amount
of manager’s commission?
a. Rs 13,200
b. Rs 12,000
c. Rs 10,000
42. P and Q are partners sharing profits and losses in the ratio of 2:1 with capitals Rs
1,00,000 and Rs 80,000 respectively. The interest on capital has been provided to
them @ 8% instead of 10%. In the rectifying adjustment entry, Q will be:
a. Debited by Rs 400
b. Credited by Rs 400
c. Debited by Rs 1600
d. Credited by Rs 1600.
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43. Akhil and Ravi are partners sharing profits and losses in the ratio of 7:3 with
capitals of Rs 8,00,000 and Rs 6,00,000 respectively. According to partnership
deed interest on capital is to be provided @ 8% p.a. and is to be treated as a
charge. Profit for the year isRs80,000. Choose the correct option:
a. A will be credited by Rs 64,000 and B will be credited by Rs 48,000.
b. A will be credited by Rs 56,000 and B will be credited by Rs 24,000.
c. A will be credited by Rs 22,400 and B will be credited by Rs 9,600.
d. A will be credited by Rs 41,600 and B will be credited by Rs 38,400.
44. X, Y and Z are partners sharing profits and losses equally. Their capitals on
March 31, 2021 are Rs 80,000; Rs 60,000; Rs 40,000 respectively. Their personal
assets are worth as follows: X- Rs 20,000; Y - Rs 15,000 and Z- Rs 10,000. The
extent of their liability in the firm would be:
a. X- Rs 80,000; Y- 60,000; Z- Rs 40,000
b. X- Rs 20,000; Y- 15,000; Z- Rs 10,000
c. X- Rs 1,00,000; Y- 75,000; Z- Rs 50,000
d. Equal.
45. A and B are partners. B draws a fixed amount at the end of every month. Interest
on drawings is charged @15% p.a. At the end of the year interest on B’s drawings
amounted to Rs 8,250. Drawings of B were:
a. Rs 12,000 p.m.
b. Rs 10,000 p.m.
c. Rs 9,000 p.m.
d. Rs 8,000 p.m.
46. Mohit and Rohit were partners in a firm with capitals of Rs 80,000 and Rs 40,000
respectively. The firm earned a profit of Rs 30,000 during the year. Mohit's share
in the profit will be:
a. Rs 20000
b. Rs 15000
c. Rs 10000
d. Rs 18000.
47. R and S are partners sharing profits in the ratio of 2:1. S has advanced a loan of
Rs 1,00,000 to the firm on 1st October, 2020. The net profit earned by the firm for
the year ending 31st March, 2021 is Rs 90,000. What amount will be credited to
S’s capital account?
a. Rs 60,000
b. Rs 30,000
c. Rs 29,000
d. Rs 32,000.
48.
I Interest on Capital A Cr. Side of Profit and Loss
Appropriation A/c
II Interest on Drawings B Dr. side of Profit and Loss
Appropriation A/c
III Interest on Partner’s Loan C Dr. side of Profit and Loss A/c
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a) I-A; II-B; III-C
b) I-B; II-A; III-C
c) I-C; II-B; III-A
d) I-B; II-C; III-A
49.
I Drawings in the beginning of each quarter A 4.5
II Drawings in the beginning of each month B 6.5
III Drawings in the end of each quarter C 7.5
a) I-A; II-B; III-C

b) I-B; II-A; III-C
c) I-C; II-B; III-A
d) I-B; II-C; III-A
Read the following information carefully and answer the questions that follow:
X and Y are partners in 3:2. Their capital balances as on 1st April 2020 amounting to
Rs 2,00,000 each. On 1st February, 2021, X contributed an additional capital of Rs
1,00,000. Following are the terms of deed:
a) Interest on capital @ 6% per annum

b) Interest on drawings @ 8% per annum
c) Salary to X Rs 1500 per month
d) Commission to Y @10% on net profit after charging interest on capital, salary and his
. commission
Drawings of the partners were Rs 20,000 and Rs 30,000 respectively during the year.
Net profit earned by the firm was Rs 2,08,000
Choose the correct option based on the above information:

50. What is the amount of Interest on capitals of X and Y:
a. Rs 12,000 each
b. Rs 12,000 to X and Rs Rs13,000 to Y
c. Rs 13,000 to X and Rs12,000 to Y
51. What is the amount of interest on drawings of X and Y:

a. Rs 1200 and Rs 1800 respectively
b. Rs 800 and Rs 1200 respectively
c. Rs 1200 and Rs 800 respectively
d. Rs 1600 Rs 2400 respectively
52. What is the amount of commission payable to Y?

a. Rs 15,000
b. Rs 16,500
c. Rs 20,800
d. None of these
53. What is X's share in the net divisible profit?

a. Rs 1,24,400
b. Rs 83,600
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c. Rs 91,200
d. Rs 60,800
54. What will be the closing capital of X after all adjustments?

a. Rs 4,22,200
b. Rs 4,01,400
c. Rs 3,00,000
d. Rs 4,23,000
Read the following information carefully and answer the questions that follow:
A, B and C were partners sharing profits in the ratio of 1:2:3. Their fixed capitals on 1st
April, 2020 were: A Rs 3,00,000; B Rs 4,50,000 and C Rs 10,00,000. Their partneRs hip
deed provided the following:
A provides his personal office to the firm for business use charging yearly rent of Rs
1,50,000. i Interest on capitals @8% p.a. and interest on drawings @ 10% p.a. ii A
was allowed a salary @ 10,000 per month. iii B was allowed a commission of 10% of
net profit as shown by Profit and Loss account, after charging such commission.
iv C was guaranteed a profit of Rs 3,00,000 after making all adjustments.
The net profit for the year ended 31st march, 2021 was Rs 10,30,000 before making above
adjustments.
You are informed that A has withdrawn Rs 5,000 in the beginning of each month, B has
withdrawn Rs 5,000 at the end of each month and C has withdrawn Rs 24,000 in the
beginning of each quarter.
Choose the correct option based on the above information:

55. A’s rent will be shown in:
a. Profit and loss account
b. Profit and Loss Appropriation account
c. A’s Capital account
56. Net profit for the year is:

a. Rs 10,30,000
b. Rs 11,80,000
c. Rs 7,30,000
d. Rs 8,80,000
57. What will be the divisible profit?

a. Rs 5,56,000
b. Rs 5,50,000
c. Rs 5,52,000
d. Rs 5,53,000.
58. What will be the total interest on drawings?

a. Rs 24,000
b. Rs 12,000
c. Rs 36,000
d. 48,000.
59. What will be the commission of B?

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a. Rs 8,00,000
b. Rs 96,000
c. Rs 80,000
d. Rs 72,000.
60. Assertion (A): In the absence of Partnership deed profits and losses are divided
equally among the partners.
Reason(R): This rule is applicable according to Indian partnership Act,
1932. a. Both (A) and (R) are true and (R) is the correct explanation of (A)
b. Both (A) and (R) are true and (R) is not the correct explanation of (A)
c. is true, bur (R) is false
d. is false, but (R) is true.
61. Assertion (A): Personal properties of a partner may also be used to pay off the
firm’s debts.
Reason(R): All partners have limited liability in the firm.
a. Both (A) and (R) are true and (R) is the correct explanation of (A)
c. ‘(A) is true, but (R) is false
d. ‘(A) is false, but (R) is true.
62. Assertion (A): Partnership firm is a form of organisation where two or more
persons carry on business activity on the basis of agreement among them.
Reason(R): The profit or loss arising from the partnership business is shared by
the partners in the agreed ratio.
63. Assertion (A): Maximum number of partners in a partnership firm is 50.

Reason(R): Maximum number of partners in a partnership firm is prescribed in
Companies Act, 2013.
64. Assertion (A): A partnership deed covers all matters relating to mutual
relationship among the partners.
Reason(R): But in the absence of partnership deed, provisions of the Indian
partnership Act, 1932 shall apply for accounting purposes.
65. Assertion (A): Rent to partner is not shown in Profit and Loss Appropriation
Account.
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Reason(R): Rent to a partner is a charge against profit.
66. Assertion (A): Interest on Partner’s capital may be shown in Profit and Loss
Account.
Reason(R): If Partners treat interest on capital as a charge.
67. Assertion (A): Rent payable to partner is credited to Partner’s Capital account.
Reason(R): Rent is payable to partner for letting the firm use his personal
property for business.
68. Assertion (A): For calculating Interest on Drawings, product method is used.
Reason(R): Partners withdraw different amounts of money at different intervals
of time.
69. Assertion (A): Guarantee of minimum profit may be given to a partner.

Reason(R): It is compulsory as per Indian Partnership Act, 1932.
70. Vidit and Seema were partners in a firm sharing profits and losses in the ratio of 3
: 2. Their capitals were Rs.1,20,000 and Rs.2,40,000, respectively. They were
entitled to interest on capitals @ 10% p.a. The firm earned a profit of Rs.18,000
during the year. The interest on Vidit’s capital will be:
a. Rs.12,000
b. Rs.10,800
c. Rs.7,200
d. Rs.6,000
71. Neena and Sara were partners in a firm with fixed capitals of Rs. 5,00,000 and
Rs. 4,00,000 respectively. It was discovered that interest on capital @ 6% p.a. was
credited to the partners for the two years ending 31st March, 2018 and 31st
March, 2019 whereas there was no such provision in the partnership deed. Their
profit sharing ratio during the last two years was:
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2017 – 18 4:5
2018 - 19 5:1
JOURNAL
a. Neena’s Current A/c – Dr. 9,000 To Sara’s Current A/c 9,000
b. Neena’s Current A/c – Dr. 900 To Sara’s Current A/c 900
c. Saara’s Current A/c – Dr. 9,000 To Neena’s Current A/c 9,000
d. Saara’s Current A/c – Dr. 900 To Neena’s Current A/c 900
72. X, Y, and Z are partners in the ratio of 4 : 3 : 2. Salary to X Rs.15,000 and to Z

Rs.3,000 omitted and profits distributed. For rectification, now X will be credited
: a. Rs.15,000
b. Rs.1,000
c. Rs.12,000
d. Rs.7,000
73. Assertion (A): A Firm should have a Partnership Deed.

Reason (R) : In case of dispute or any misunderstanding among partners ,
partnership deed acts as an evidence in the court of law.
a. Both A and R are true and R is the correct explanation of A
b. Both A and R are true and R is not the correct explanation of A
c. A is true , but R is false
d. A is false , but R is true
74. Assertion (A) : Fixed Capital Accounts of a partner never shows a debit balance
inspite of regular and consistent losses year after year.
Reason (R) : When Capital Accounts are fixed , losses are recorded in Partners’
Current Account.
d. A is false , but R is true
75. P, Q, and R are partners in 3 : 2 : 1. R is guaranteed that his share of profit will not
be less than rs.70,000. Any deficiency will be borne by P and Q in the ratio of 2 :
1. Firm’s profit was rs.2,40,000. Share of P will be :
a. Rs.1,00,000
b. Rs.1,10,000
c. Rs.1,20,000
d. Rs.1,02,000
__________________________________________________________________
_
Q1 . Which of the following items is not dealt through Profit and Loss
Appropriation Account?
a. Interest on Partner’s Loan b. Partner’s Salary
c. Interest on Partner’s Capital d. Partner's Commission
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Q2. E, F and G are partners sharing profits in the ratio of 3:3:2. As per the partnership
agreement, G is to get a minimum amount of Rs.80,000 as his share of profits every
year and any deficiency on this account is to be personally borne by E. The net profit
for the year ended 31st March, 2020 amounted to Rs.3,12 ,000. Calculate the amount
of deficiency to be borne by E?
a. Rs.1,000 b. Rs.4,000
c. Rs.8,000 d. Rs.2,000
Q3. One of the partners in a partnership firm has withdrawn Rs. 9,000 at the end of
each quarter, throughout the year. Calculate interest on drawings at the rate of 6%
per annum.
a. Rs.1,350 b. Rs.800
c. Rs.1,080 d. Rs.810
Q4. In case the partners’ capitals are fixed, in which account will the withdrawal of
capital be recorded?
a. Partners’ Capital A/c
b. Partners’ Current Account
c. Either in Partners’ Capital or Current A/c
d. Profit and Loss Appropriation Account
Q5. Mohit, Shobhit and Rohit are partners sharing profits and losses in the ratio 2 :
1 : 1. Rohit isguaranteed a profit of Rs.14,000. The firm incurred a profit of
Rs.20,000 during the year. Calculate the amount of deficiency borne by Mohit and
Shobhit.
a. Mohit Rs.4,500 and ShobhitRs.4,500
b. Mohit Rs.3,000 and ShobhitRs.6,000
c. Mohit Rs.3,000 and ShobhitRs.3,000
d. Mohit Rs.6,000 and ShobhitRs.3,000
Q6. Mohit and Rohit were partners in a firm with capitals of Rs. 80,000 and Rs.
40,000 respectively. The firm earned a profit of Rs. 30,000 during the year. Mohit’s
share in the profit will be:
a. Rs. 20,000 b. Rs. 10,000
c. Rs. 15,000 d. Rs. 18,000
Q7. Where would you record the interest on drawings when capitals are
fluctuating?
a. Partners’ Fixed Capital A/c b. Partners’ Current A/c
c. Either of the two d. Partners’ Capital A/c
Q8. Ram and Mohan are partners in a firm without any Partnership deed. Their
capitals are: Ram Rs.8,00,000 and Mohan Rs.6,00,000. Ram is an active partner and
looks after the business. Ram wants that profit should be shared in proportion of
capitals. Whether his claim is valid or not?
a. Yes b. May or may not be
c. Can’t say d. No
Q9. . If a fixed amount is withdrawn for personal use on the last day of every
month of calendar year, for what period amount of drawings will be calculated?
a. 6 ½ Months b. 7 ½ Months
c. 5 ½ Months d. 6 Months
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Q10. In the absence of Partnership Deed, interest on loan of a partner is allowed:
a. At 8% per annum. b. At 6% per annum.
c. No interest is allowed. d. At 12% per annum.
Q11. Interest on Partners’ Loan is to treated as –

a. An appropriation out of profits b. a charge against profits
c. Both (a) and (b) d. None of the above
Q12. . P and Q are partners in a firm. They are entitled to interest on their capitals
but the net profit was not sufficient for this interest. The net profit will be distributed
between partners in
a. Agreed Ratio b. Profit Sharing Ratio
c. Capital Ratio d. Ratio of Interest on Capital
Q13. X is a partner who used the stock of the firm worth Rs. 10,000 and suffered a
loss of Rs. 2,000. He wants the firm to bear the loss. How much ‘X’ is liable to pay
to firm?
a. Rs.2,000 b. Rs.10,000
c. Rs.12,000 d. Rs.8,000
Q14. What is the maximum number of partners that a partnership firm can have?
a. 20 b. 10
c. 50 d. 100
Q15. A partner who has invested more capital in the firm is entitled to get interest
on the excess amount of capital. (True/ False)
Q16. If all the partners agree, a minor may be admitted for the benefit of
partnership. (True/False)
Q17. 1. ---------------------------- is an extension of Profit & Loss Account.

a. Statement of Profit and Loss b. Profit and Loss Appropriation account
c. Balance Sheet d. Trading Account
Q18. Under ----------------------------------------- system,the balance of capital

changes with every transaction of the partner with the firm.
a. Fluctuating Capital System b. Fixed Capital System
c. Current Account System d. None of the above
Q19. If the Partners’ Capital Accounts are fixed, how the ‘salary payable to partner’
will be
recorded?
a. On the debit side of Partners’ Current Account
b. On the debit side of Partners’ Capital Account
c. On the credit side of Partners’ Current Account
Q20. If a fixed amount is withdrawn by a partner on the first day of every month,
interest on the total amount is charged for …………… months :
a. 6 b. 6½
c. 5½ d. 12
16 | P a g e
Q21. A, B and C are partners in the ratio of 5:3: 2. Before B’s salary of Rs.17,000
firm’s profit is Rs.97,000. How much in total B will receive from the firm?
a. Rs.17,000 b. Rs.40,000
c. Rs.24,000 d. Rs.41,000
Q22. In the absence of express agreement, interest @ 6% p.a. is provided :

a. On Opening balance of partner’s capital accounts
b. On Closing balance of partner’s capital accounts
c. On Loan given by partners to the firm
d. On Opening balance of partner’s current accounts
Q23. A, B and C were Partners with capitals of Rs.50,000; Rs.40,000 and Rs.30,000
respectively carrying on business in partnership. The firm’s reported profit for the
year was Rs.80,000. As per provision of the Indian Partnership Act, 1932, find out
the share of each partner in the above amount after taking into account that no
interest has been provided on an advance by A of Rs.20,000 in addition to his capital
contribution.
a. Rs.26,267 for Partner B and C and Rs.27,466 for Partner A
b. Rs.26,667 each partner.
c. Rs.33,333 for A Rs.26,667 for B and Rs.20,000 for C
d. Rs.30,000 each partner
Q23. Interest on partner’s capitals will be debited to

a. Profit and Loss Account b. Profit and Loss Appropriation Account
c. Partner’s Capital Accounts d. None of the Above
Q24. X, Y, and Z are partners in a firm. At the time of division of profit for the year,
there was dispute between the partners. Profit before interest on partner’s capital
was rs.6,00,000 and Z demanded minimum profit of rs.5,00,000 as his financial
position was not good. However, there was no written agreement on this point. How
the profits will be distributed between all partners ?
a. Other partners will pay Z the minimum profit and will share the loss equally.
b. Other partners will pay Z the minimum profit and will share the loss in capital
ratio.
c. X and T will take rs.50,000 each and Z will take rs.5,00,000.
d. rs.2,00,000 to each of the partners
Q25. Balance of Partner’s Current accounts have :

a. Debit balance b. Credit balances
c. Either Debit or Credit balances d. Neither Debit nor credit balances
Q26. . In the absence of partnership deed, partners share profits or losses :

a. In the ratio of their Capitals b. In the ratio decided by the court
c. Equally d. In the ratio of time devoted
Q27. Which of the following is not incorporated in the Partnership Act?

a. Profit and loss are to be shared equally
17 | P a g e
b. No interest is to be charged on capital
c. All loans are to be charged interest @6% p.a.
d. All drawings are to be charged interest
Q28. Partners are supposed to pay interest on drawings only when it is --------------
-by the ---------
a. Provided, Agreement
b. Permitted, Investors
c. Agreed, Partners
d. ‘A’ & ‘C’ above
Q29. If a fixed amount is withdrawn by a partner on the last day of every month,
interest on the total amount is charged for …………… months.
a. 6 months b. 6½ months
c. 5½ months d. 12 months
Q30. When Partners’ Capital accounts are fixed, which one of the following items
will be written in the partner’s capital account?
a. Partner’s Drawings
b. Additional capital introduced by the partner in the firm
c. Loan taken by partner from the firm
d. Loan Advanced by partner to the firm
Q31. Seeta and Geeta are partners sharing profits and losses in the ratio 4 : 1. Meeta
was manager who received the salary of Rs.4,000 p.m. in addition to a commission
of 5% on net profits after charging such commission. Profit for the year is
Rs.6,78,000 before charging salary. Find the total remuneration of Meeta.
a. Rs.78,000 b. Rs.88,000
c. Rs.87,000 d. Rs.76,000
Q32. Q89. P, Q, and R are partners in 3 : 2 : 1. R is guaranteed that his share of profit
will not be less than rs.70,000. Any deficiency will be borne by P and Q in the ratio
of 2 : 1. Firm’s profit was rs.2,40,000. Share of P will be :
a. rs.1,00,000
b. rs.1,10,000
c. rs.1,20,000
d. rs.1,02,000
Q33. According to Profit and Loss Account, the net profit for the year is Rs.1,50,000.
The total interest on partner’s capital is Rs.18,000 and interest on partner’s drawings
is Rs.2,000. The net profit as per Profit and Loss Appropriation Account will be
a. Rs.1,66,000 b. Rs.1,70,000
c. Rs.1,30,000 d. Rs.1,34,000
Q 34. If equal amount is withdrawn by a partner in the beginning of each month

during a period of 6 months, interest on the total amount will be charged for
……………… months
a. 2½ b. 3
c. 3½ d. 6
18 | P a g e
Q35. Which one of the following items cannot be recorded in the profit and loss
appropriation account?
a. Interest on capital b. Interest on drawings
c. Rent paid to partner d. Partner’s salary
Q36. In a partnership firm, a partner withdrew rs.5,000 per month on the first day of
every month during the year for personal expenses. If interest on drawings is charged
@ 6% p.a. the interest charged will be -------------
a. rs.3,600 b. rs.1,950
c. rs.1,800 d. rs.1,650
Q37. Which of the following statement is true?

a. Fixed capital account will always have a credit balance
b. Current account can have a positive or a negative balance
c. Fluctuating capital account can have a positive or a negative balance
d. All of the above
Q38 A ,Y and Z are partners in 5 : 4 : 1. Z is guaranteed that his share of profit will
not be less than rs.80,000. Any deficiency will be borne by A and Y in 3 : 2. Firm’s
profit was rs.5,60,000. How much deficiency will be borne by Y ?
a. Rs.2,14,400 b. Rs.14,400
c. Rs.2,09,600 d. Rs.9,600
Q39. Interest on Partner’s drawings will be debited to ---------

a. Profit and Loss Account
b. Profit and Loss Appropriation Account
c. Partner’s Current Account
d. Interest Account
Q 40. A partner introduced additional capital of rs.30,000 and advanced a loan of

rs.40,000 to the firm at the beginning of the year. If there is no partnership deed ,
then partner will receive year’s interest --------------
a. rs.4,200 b. Rs.2,400
c. Nil d. rs.1,800
Q 41. X and Y are partners in the ratio of 3:2. Their fixed capitals are rs.2,00,000and
rs.1,00,000 respectively. After closing the accounts for the year ending 31st March
2019, it was discovered that interest on capital was allowed @ 12% instead of 10%
per annum. By how much amount X will be debited/credited in the adjustment
entry?
a. rs.600 (Debit) b. rs.400 (Credit)
c. rs.400 (Debit) d. rs.600 (Credit)
Q 42. A, B and C are partners in a firm without any agreement. They have
contributed 750,000, 730,000 and 720,000 by way of capital in the firm. A was
unable to work for six months in a year due to illness. At the end of year, firm earned
a profit of 2,25,000. What will be A’s share in the profits?
19 | P a g e
a. rs.77,500 b. rs.73,750
c. rs.75,000 d. rs.72,500
Q43. According to Profit and Loss Account, the net profit for the year is rs.4,20,000.
Salary of a partner is rs.5,000 per month and the commission of another partner is
rs.10,000. The interest on drawings of partners is rs.4,000. What will be net profit
as per Profit and Loss Appropriation Account will be :
a. rs.3,54,000 b. rs.3,46,000
c. rs.4,09,000 d. rs.4,01,000
Q44 Interest on partner’s drawings will be credited to –

a. Profit and Loss Account b. Profit and Loss Appropriation Account
c. Partner’s Capital Accounts d. None of the Above
Q 45. Is rent paid to a partner appropriation of profits?
a. It is appropriation of profit
b . It is not appropriation of profit
c If partner’s contribution as capital is maximum
d. If partner is a working partner
Q46 Vikas is a partner in a firm. His drawings during the year ended 31st March,
2019 were rs.72,000. If interest on drawings is charged @ 9% p.a. the interest
charged will be :
a. rs.324 b. rs.6,480
c. rs.3,240 d. rs.648
Q 47 .When a partner is given guarantee by other partners, loss on such guarantee

will be borne by :
a. Partnership firm b. All the other partners
c. Partners who give the guarantee d. Partner with highest profit sharing ratio.
Q 48 . What is the nature of partnership from legal point of view?

a. It is a separate legal entity
b. It is not a separate legal entity
c. Both a and b are correct
Q49 . TRISHA is a partner in a firm. She withdrew rs.6,000 at the end of each
quarter during the year ended 31st March, 2019. Interest on her drawings @ 10%
p.a. will be :
a. rs.900 b. rs.600 c. rs.1,500 d. rs.1,200
Q50. X and Y are partners in the ratio of 3:2. Their Capitals are rs.2,00,000 and
rs.1,00,000 respectively. Interest on capital is to be allowed @ 8% p.a.
Firm incurred a loss of rs.60,000 for the year ended 31st March 2019.
Interest
on Capital will be –
a. X rs.16,000; Y rs.8,000 b. A rs.8,000; Y rs.4,000
20 | P a g e
c. X rs.14,400; Y rs.9,600 d. No Interest will be allowed
Q51. Anuradha is a partner in a firm. She withdrew rs.6,000 in the beginning of

each
quarter during the year ended 31st March, 2019. Interest on her drawings
@ 10% p.a. will be :
a. rs.900 b. rs.1,200 c. rs.1,500 d. rs.600
Q52. A and B contribute rs.1,00,000 and rs.60,000 respectively in a partnership firm
by way of capital on which they agree to allow interest @ 8% p.a. Their profit and
loss sharing ratio is 3 : 2. The profit at the end of the year was rs.2,800 before
allowing interest on capital. If there is a clear agreement that interest on capital will
be paid even in case of loss, then B’s share will be:
a. Profit rs.6,000
b. Profit rs.4,000
c. Loss rs.6,000
d. Loss rs.4,000
Q53. X, Y, and Z are partners in a firm. At the time of division of profit for the year,
there was dispute between the partners .Profit before interest on partner’s capital
was rs.6,000 and Y demanded interest @24% p.a. on his loan of rs.80,000. There
was no agreement on this point. Calculate the amount payable to X, Y, and Z
respectively.
a. Rs.2,000 to each partner
b. Loss of rs.4,400 for X and Z; Y will take rs.14,800
c. rs.400 for X, rs.5,200 for Y and rs.400 for Z
Q54. On 1st June 2018 a partner introduced in the firm additional capital rs.50,000.
In the absence of partnership deed, on 31st March 2019 he will receive interest :
a. rs.3,000 b. Zero
c. rs.2,500 d. rs.1,800
Q55 On 1st January 2019, a partner advanced a loan of rs.1,00,000 to the firm. In
the absence of agreement, interest on loan on 31st March 2019 will be :
a. Nil b. rs.1,500
c. rs.3,000 d. rs.6,000
Q56. A partner introduced additional capital of rs.30,000 and advanced a loan of

rs.40,000 to the firm at the beginning of the year. Partner will receive year’s
interest:
a. rs.4,200 b. rs.2,400
c. Nil d. rs.1,800
Q57. A, B and C are partners. A’s capital is rs.3,00,000 and B’s capital is
rs.1,00,000. C has not invested any amount as capital but he alone manages the
whole business. C wants rs.30,000 p.a. as salary. Firm earned a profit of
rs.1,50,000. How much will be each partner’s share of profit:
a. A rs.60,000; B rs.60,000; C rs.Nil
b. A rs.90,000; B rs.30,000; C rs.Nil
21 | P a g e
c. A rs.40,000; B rs.40,000 and C rs.40,000
d. A rs.50,000; B rs.50,000 and C rs.50,000.
Q58. Net profit of a firm is rs.49,500. Manager is entitled to a commission of 10%

on profits before charging his commission. Manager’s Commission will be:
a. rs.4,950 b. rs.4,500
c. rs.5,500 d. rs.495
Q59. Which one from the below is not a right of a partner?

a. Right to inspect the books of accounts
b. Right to take part in the management of the firm
c. Right to share the profit/losses with other partners in agreed ratio
d. Right to receive salary at the end of every year
Q60. . Guarantee given to partner ‘A’ by the other partners ‘B & C’ means :
a. In case of loss, ‘A’ will not contribute towards that loss
b. In case of insufficient profits, ‘A’ will receive only the minimum guarantee amount
c. In case of loss or insufficient profits, ‘A’ will withdraw the minimum guarantee
amount
d. All of the above
Q61. . Assertion (A): In absence of a deed, a sleeping partner who contributed 75% of
total capital would get 75% of the profit earned. Reason (R) : A sleeping partner , in
absence of a deed , gets equal share of profit , irrespective of his capital share
d. A is false , but R is true.
Q62. The following question consist of two statements, one labelled as the ‘Assertion
(A)’ and the other as ‘Reason (R)’. You are to 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, firm pays such interest on partner’s
capital.
Reason (R): Interest on capital is treated a charge against profit.
Q63. Assertion (A): Partner share profit and loss equally.

Reason (R) : Partnership is the relation between persons who have agreed to share
the profit of a business carried on by all or any of them acting for all.
(A) Both Assertion (A) and Reason(R) are true, but Reason ( R) is the correct
explanation of Assertion (A)
(B) Both Assertion A and Reason (R) are true but Reason (R ) is not the correct
explanation off Assertion (A)
22 | P a g e
(C) Assertion A is true, but Reason are is false
(D) Assertion A is false, but Reason are is true.
Q64. Assertion (A): the interest on capital is recorded in the debit side of the current
account when fixed capital is maintained.
Reason (R) : have the capital of the partners is fixed and all the transaction is
recorded in the current account.
(A) Both Assertion (A) and Reason(R) are true, but Reason ( R) is the
correct explanation of Assertion (A)
(B) Both Assertion A and Reason (R) are true but Reason (R ) is not the
correct explanation off Assertion (A)
(C) Assertion A is true, but Reason are is false
(D) Assertion A is false, but Reason are is true.
Q65. Tanuja and Renu were partners in trading in Hand Sanitizer. Their profit sharing
ratio is 3:2. Their fixed capitals on 1-Apr-2020 were Rs. 3 lakhs and 6 lakhs
respectively. During the COVID pandemic, all partners decided to help the poor
daily workers personally. For this Tanuja took hand sanitizer mounting to Rs24000
from the firm. And distributed those to the workers family. On the other hand, Renu
withdrew Rs. 1 Lakh from her capital on 1-Jan-2021 and provided a medical mobile
Van in the containment zone. The Partnership deed provides for charging interest
on drawings @ 6% PA. and allowing interest on capital @ 9% PA.
Based on the above information, you are required to answer the following
questions:
1. Interest on Tanuja’s drawings will be:
a. Rs. 1440
b. Rs. 720
c. NIL
d. Rs. 240
2. Interest on Partners drawings will be debited to

a. Profit and Loss A/c
b. Partners’ Capital A/c
c. Profit and Loss Appropriation A/c
d. Partners Current A/c
3. Interest on Renu’s Capital will be ______________
ASNWER KEY
TOPIC: ACCOUNTING FOR PARTNERSHIP FIRMS - FUNDAMENTALS
Q.No Answer Q.No Q.No Answer
1 C 13 25 B
2 B 14 26 B
3 A 15 27 D
4 B 16 28 D
5 C 17 29 B
23 | P a g e
6 D 18 30 C
7 D 19 31 A
8 B 20 32 A
9 D 21 33 D
10 D 22 34 D
11 A 23 35 C
12 D 24 36 C
Q.No Answer Q.No Answer Q.No Answer Q.No Answer
37 D 49 C 61 C 73 B
38 C 50 C 62 B 74 D
39 D 51 B 63 C 75 A
40 B 52 A 64 B
41 B 53 C 65 A
42 B 54 B 66 A
43 D 55 A 67 D
44 B 56 D 68 A
45 B 57 B 69 C
46 B 58 C 70 D
47 C 59 C 71 C
48 B 60 A 72 D
Clues to Higher Order Thinking Problems

Share of A in profit= 40,000 less Deficiency paid to
38 C C=5,000. So net amount received by A=35,000.
Time left after first drawing=10 months; Time left after last
39 D drawing=1 month; (10+1)/2=5.5
Interest payable to A and B=50,000 each. So the profit will
be divided in an equal ratio between A and B. When
40 B appropriations are more than profits then the available profit
is distributed between the partners in the ratio of net amount
payable to them.
41 B 1,32,000*10/110=12,000.
Q will be credited by Rs1,600 (interest@2% to be given to

42 B Q) and Q will be debited by Rs1,200(share of Q in loss to
the firm). So, finally Q will be credited by Rs400.
IOC to Akhil= Rs64,000 less share of loss= Rs22,400
(32,000*7/10). Net amount paid to Akhil= Rs41,600.
43 D
IOC to Ravi= Rs48,000 less share of loss= Rs9,600
(32000*3/10). Net amount paid to Ravi= Rs38,400.
A partner has unlimited liability in the partnership firm. So
he has to pay the amount of capital plus his personal
44 B property to pay off the debts of the firm. Since partners have
already paid the amount of capital so now they will have to
pay only their personal assets to the firm in case of loss.
24 | P a g e
45 B 8,250*(100/15)*(12/5.5) =1,20,000/12= 10,000.
In the absence of partnership Deed, profits are shared

46 B equally among the partners.
Net profit of the firm=90,000-3,000(interest on loan) =
87,000. S’s share in profit=87,000*1/3= 29,000. Only share
47 C
of profit is credited to Partner’s Capital a/c, interest on loan
is credited to Partner’s Loan A/c.
IOC is transferred to Dr. side of P& L Appropriation A/c;
48 B IOD to Cr. Side of P & L Appropriation A/c and Interest on
Partner’s Loan to the Dr. side of P & L A/c.
Average period for drawings in beginning of each quarter is
7.5; for beginning of each month is 6.5 and for end of each
49 C quarter is 4.5. Formula for
calculating average period = (Time left after first drawing
+Time left after last drawing)/2
IOC to X= (2,00,000*6/100)+(1,00,000*6/100*2/12)=
50 C 13,000 IOC to Y= 2,00,000*6/100= 12,000
IOD will be calculated for an average period of six months
51 B since time of drawings is not given.
2,08,000-13,000-12,000(IOC)-18,000(salary)=
52 A
1,65,000*10/110= 15,000.
Divisible profit= 2,08,000(N.P.)+800+1,200(IOD)-13,000-
53 C 12,000(IOC)18,000(salary)-15,000(commission)= 1,52,000.
Share of X in divisible profit= 1,52,000* 3/5= 91,200
Closing capital of X= 2,00,000(opening
capital)+1,00,000(addl.
54 B
capital)+13,000(IOC)+18,000(salary)+91,200(profit
share)20,000(drawings)800(IOD)= 4,01,400.
55 A Charge against profit is shown in P & L A/c.
56 D 10,30,000-1,50,000(rent to the partner)= 8,80,000
8,80,000(N.P.)+12,000(IOD)-24,000-36,000-
57 C 80,000(IOC)80,000(commission)-1,20,000(salary)=
5,52,000.
IOD for A= 60,000*10/100*6.5/12=3,250 IOD for
B=60,000*10/100*5.5/12=2,750
58 B
IOD for C=16,000*10,100*7.5/12=6,000.
Total IOD= 3,250+2,750+6,000= 12,000.
59 C 8,80,000*10/110= 80,000.
In the absence of partnership Deed, profits are shared

60 A equally among the partners, as per the provisions of Indian
partnership act, 1932.
25 | P a g e
61 C All partners have unlimited liability.
62 B Both the statements are two different facts.
Maximum number of partners is 50 according to Indian

63 C partnership Act, 1932 and 100 as per Indian Companies Act,
2013.
64 B Both the statements are two different facts.
65 A Charge against profit is shown in P & L account.
66 A Charge against profit is shown in P & L account.
Rent payable to partner is not shown in Capital account; it is

67 D shown in Rent payable account.
Both the statements are true and R is the correct explanation

68 A
of A.
Guarantee of minimum profit to a partner depends on mutual
69 C consent of partners, it is not compulsory.
70 D Rs.6,000
Saara’s Current A/c – Dr. 9,000 To Neena’s Current A/c

71 C
9,000
72 D Rs.7,000
73 A Rs.1,00,000
74 D A is false , but R is true
75 A P's share is Rs 1,20,000 - contribution to deficiency Rs

20,000. P's share is Rs 1,00,000
SET – 2
TOPIC - PARTNERSHIP FUNDAMENTALS

Q.NO ANS Q.NO ANS
1 (a) 34 c
2 (d) 35 c
3 (d) 36 b
4 (a) 37 d
5 (d) 38 d
6 © 39 c
26 | P a g e
7 (d) 40 b
8 (d) 41 c
9 © 42 c
10 b 43 a
11 b 44 b
12 d 45 b
13 b 46 c
14 c 47 c
15 FALSE 48 b
16 TRUE 49 a
17 b 50 d
18 ANS 51 c
19 c 52 d
20 b 53 c
21 d 54 b
22 c 55 b
23 ANS 56 b
24 d 57 d
25 c 58 a
26 c 59 d
27 d 60 c
28 a 61 d
29 c 62 c
30 b 63 d
31 a 64 d
32 a 65 ,1.b, 2. d, and 3. Rs 51,750
33 d 66
UNIT – 1 Clues to Higher Order Thinking Problems SET – 2
Q.NO 1. (a) Interest on Partners’ Loan

2. (d) rs.2,000
3. (d) rs.810
4. (a) Partners’ Capital Account
5. (d) rs.6,000
6. (c ) rs.15,000
7. d) Partners’ Capital A/c
8. (d) No
9. (c) 5 ½ Months
10. (b) At 6% per annum
11. (b) charge against profits
12 .(d ) Ratio of Interest on Capital
13. (b) rs.10,000
14.c)50
15. False
27 | P a g e
16. True
17. (b) Profit and Loss Appropriation Account
18. (a) Fluctuating Capital System
19. (b) No
20. (b) 6½ months
21. (d) 41,000
22. (c)On loan given by partners to the firm
23. (a) rs.26,267 for Partner B and C and rs.27,466 for Partner A.
24. .(d)
25. (c)Either Debit or Credit balance
26. (c) Equally
27. (d)All drawings are to be charged interest
28. (a) Provided , Agreement
29. (c )5½ months
30 .(b) Additional capital introduced by the partner in the firm
31. (a) rs.78,000
32. (a).
33. (d)rs.1,34,000
34. (c ) 3 ½ months
35. (c ) Rent paid to a partner
36. (b)rs.1,950
37. (d)All of the above
38. (d) rs.9,600
39. (c )Partner’s Current Account
40. (b) rs.2,400
41. (c) rs.400 (Debit)
42.(c) rs.75,000
43.(a)rs.3,54,000
44. (b)Profit and Loss Appropriation Account
45. (b)It is not appropriation of profit
46. (c)rs.3,240
47. (c)Partners who give the guarantee
48. (b) It is not a separate legal entity
49.(a)rs.900
50. (d) No interest will be allowed
51. (c) rs.1,500 27 |
52. (d)Loss rs.4,000
53. (c)rs.400 for X , rs.5,200 for Y and rs.400 for Z
54. (b)Zero
55.(b) rs.1,500.
56. (b) rs.2,400
57.(d) A rs.50,000; B rs.50,000 and C rs.50,000
28 | P a g e
58. (a) rs.4,950
59. (d) Right to receive salary at the end of every year
60. (c ) In case of loss or insufficient profits, ‘A’ will withdraw the minimum guarantee
amount
61. (d), A is false , but R is true
62. (c )
63. (d )
64. (d )
65. 1. (b ) Rs 720, . 2. (d). partners current Account. 3. Rs 51,750.
29 | P a g e
UNIT – 1I SET – 1
GOODWILL
A. Multiple Choice Questions

1. Goodwill i s _ _ _ __
(a) tangible asset
(b) intangible asset
(c) fictitious asset
(d) both (b) & (c)
2. Goodwill of the firm on the basis of 2 years' purchase of average profit of the last 3 years
is Rs. 25,000. Find average profit.
(a) Rs. 50,000

(b) Rs. 25,000
( c) Rs. 10,000
(d) Rs. 12, 500
3. Calculate the value of goodwill at 3 years' purchase when: Capital employed
Rs. 2, 50,000; Average profit Rs. 30,000 and normal rate of return is I0%.
(a) Rs. 3000

(b) Rs. 25,000
(c) Rs. 30,000
(d) Rs. 15,000
4. What are super profits
A) Actual profit – Normal Profit
b) Normal Profit - Actual profit
c) Actual profit + Normal Profit
d) None of the above
5. The net assets of the firm including fictitious assets of 5,000 are 85,000.The net
liabilities of the firm are 30,000.The normal rate of return is 10% and the average profits
of the firm are 8,000.Calculate the goodwill as per capitalization of super profits.
(a) Rs.20,000
(b) Rs. 30,000
(c) Rs. 25,000
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(d) None of the above
6. Which of the following items are added to previous year’s profits for finding normal
profits for valuation of goodwill.?
a)Loss on sale of fixed assets

b) Loss due to fire, earthquake etc
c) Undervaluation of closing stock
d) All of the above
7. Under which method of valuation of goodwill, normal rate of return is not considered?
a)Loss on sale of fixed assets
b) Loss due to fire, earthquake etc
c) Undervaluation of closing stock

d) All of the above
8. Following are the methods of calculating goodwill except:

a)Super profit method
b) Average profit method
c) Weighted Average profit method
d) Capital profit method
9. The excess amount which the firm can get on selling its assets over and above
the saleable value of its assets is called :
a)Surplus
b) Super profits
c) Reserve
d) Goodwill
10. When Goodwill is not purchased goodwill account can :
(a) Never be raised in the books
(b) Be raised in the books
(c) Be partially raised in the books
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(d) Be raised as per the agreement of the partners
11. The goodwill of the firm is not affected by:
(a) Location of the firm
(b) reputation of the firm
(c)Better customer
services (d)None of the
above
12. Weighted average profit method of calculating goodwill is used when:

(a) Profits are not equal
(b) Profits show a trend
(c) Profits are
fluctuating (d)None of
the above
13. Capital invested in a firm is 5,00,000.Normal rate of return is 10% .Average profit of
the firm are 64,000(after an abnormal loss of 4,000).Value of goodwill at four times the
super profits will be:
(a) Rs.72,000
(b) Rs. 40,000
(c) Rs. 2, 40,000
(d) 1,80,000
14. The capital of the firm of Anu and Benu is Rs. 1,00,000. Annual salary to
partners is Rs. 6,000 each. The profits for the last 3 years were RS. 30,000,
Rs. 36,000 and Rs. 42,000. Goodwill is valued Rs. 18,000 by 2 years purchase
of super profits. The normal rate of return will be
a)15%
b) 27%
c) 45%
d) 9%
15. Which of the following asset is excluded while calculated capital employed for
the purpose of calculation of goodwill.
a) Cash
b) b) Bank
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c) c) |Goodwill
d) d) Patents
16. Goodwill according to Capitalization of super profit method is Rs. 1,50,000

and capital employed is Rs. 5,00,000. Normal rate of return is 10%, liabilities
are Rs. 1,50,000. On the basis of given information, match the column I and
column II
Column I Column II
a. Normal Profit 1. 6,50,000

b. Assets 2. 65,000
c. Super Profit 3. 50,000
d. Actual profit 4. 15,000
17. A firm earned Rs. 60,000 as profit, the normal rate of return being 10%. Assets
of the firm are Rs. 7,20,000 (excluding goodwill) and liabilities are Rs.
2,40,000. Find the value of goodwill by Capitalization of average profit
method.
a) Rs. 1,20,000
b) Rs. 2,40,000
c) Rs 1,60,000
d) Rs. 80,000
18. If average capital employed in a firm is Rs. 8,00,000, average of actual profits is
Rs. 1,80,000 and normal rate of return is 10%, then value of goodwill as per
capitalization of average profits is
a) Rs. 10,00,000
b) Rs. 18,00,000
c) Rs. 80,00,000
d) 78, 20,000
19. Goodwill of the firm is not valued during

a) Admission of Partner
b) Retirement/death of partner
c) Amalgamation of two firm
d) Dissolution of partnership firm
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20. Average profit of a business over the last five years was Rs. 60,000. The
normal yield on capital invested in such a business is estimated at 10% p.a.
Capital invested in the business is RS. 5,00,000. Amount of goodwill if it is on
3years’s purchase of last 5 years super profits will be
a) Rs. 1,00,000
b) Rs. 1,80,000
c) Rs. 30,000
d) Rs. 1,50,000
21. What are super profits?
a) Actual profit-Normal Profit
b) Normal Profit-Actual Profit
c) Actual Profit+ Normal Profit
22. The excess amount which the firm can get on selling its assets over and above
the saleable value of its assets is called:
a) Super profits
b) Goodwill
c) Reserve
23. Assertion (A) Goodwill is the good name or reputation of the Business which brings
benefit to the business
Reason (R): It is an intangible asset as it has no physical existence
a) Both A and R are true and R is the correct explanation of A
b) Both A and R are true and R is not the correct explanation of A
c) A is true but R is false
d) A is false but R is true
24. Assertion: (A) Two factors affecting goodwill are efficient management repeated
customer leading to higher sales and profit thus it leads to higher value of goodwill
Reason (R) Management is efficient leads to higher profits increase in value of
goodwill
Similarly repeated customer leads to increased sale and thus higher profits increase in
value of goodwill
a) Both R and A are correct
b) Both R and A are not correct
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c) A is correct but R is not correct
d) R is correct but A is not correct
25. When the value of goodwill of the firm is not given but has to be inferred on the basis
of the net worth of the firm, it is called……………..
a) Goodwill under Super profit method
b) Goodwill under Average profit method
c) Self-generated goodwill
d) Hidden goodwill
26. Assertion ( A) Both Purchase and self-generated goodwill are accounted in the books of
account
Reason (R ) According to AS-26 only purchase goodwill is accounted in the books
of account. Self-generated goodwill is not accounted in the books of account
a) A is correct but R is not correct
b) R is correct but A is not correct
c) Both A and R is correct
d) Both A and R not correct
27. Assertion (A): Any abnormal gain is excluded by deducting from and any abnormal loss
is included by adding to the profits for the calculation of goodwill
Reason: (R ) Normal business profits earned by the business for the specified number
of years are considered for the calculation of goodwill
a) Both A and R are true and R is not correct explanation
b) Both A and R are not correct
c) R is true but A is not true
d) Both A and R are true and R is correct explanation of A
From the following information of M/s Sai and Maha answer the question number
28 to 31.
Information:
a) Average capital employed Rs. 10,00,000
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b) Net profit of the firm for the
past years 2019 Rs. 1,60,000 2020 Rs. 1,40,000 2021 Rs. 2,70,000
c) Normal rate of return on capital employed is 11%
d) Remuneration to each partner for his service to be treated a charge on profit –
Rs. 2,500 per month
28. Value of Goodwill at three year’s Purchase of Average Profit
a) Rs. 3, 90,000
b) Rs. 1, 30,000
c) Rs. 1, 90,000
29. Value of goodwill at three year’s purchase of Super Profit
a) Rs. 1, 50,000
b) Rs. 2, 00,000
c) Rs. 60,000
d) Rs. 3, 90,000
30. Value of Goodwill on the basis of Capitalization of Super profit
a) Rs. 60,000
b) Rs. 1,81,818
c) Rs. 3,90,000
d) Rs. 40,000
31. Value of goodwill on the basis of Capitalization of Average Profit
a) Rs. 40,000
b) Rs. 60,000
c) Rs. 3, 00,000
d) Rs. 1, 81,818
32. The following are the factors affecting goodwill except

a)Nature of business
b) Location of the customers
c) Technical know-how
d) Efficiency of management
33) Capital employed by a partnership firm is Rs. 5, 00,000. Its average profit is Rs.
60,000. The Normal rate of return in similar type of business is 10%. The amount
of super profit is
a) 50,000
b) 10,000
c) 6000
d) 56,000
34. Excess amount that a firm gets over and above the market value of assets at the time
of sales of its business is
a) profit
b) Super profit
c) Reserve
d) Goodwill
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35. When goodwill is not a purchased goodwill , goodwill
a) Is not shown in the balance sheet
b) Is shown in the balance sheet
c) May or may not be shown in the balance sheet
36. Weighted average profit method of calculating goodwill is useful when
a) Profits or not similar over the years
b) Profits show a trend either rising or falling
C) Profits are higher in one year and lower in another year
d) Profits are similar in all the years
37. Net assets of a firm including fictitious assets of Rs. 5000 are Rs. 85,000
Net liabilities of the firm are Rs. 30,000. Normal rate of return is 10% and the
average profit of the firm is Rs. 8,000. Value of goodwill as per capitalization of
super profit method will be
a) Rs. 20,000
b) Rs. 30,000
c) Rs. 25,000
d) Rs. 15,000
38. Total capital employed in the firm is Rs. 8,00,000. Normal rate of return is 15% and
profit for the year is Rs. 1,20,000. Value of goodwill as per capitalization method
will be
a) Rs. 8,20,000
b) Rs. 1,20,000
c) nil
d) Rs. 4,20,000
39. Total capital employed in a firm is Rs. 4,00,000. Normal rate of return is 15% and
profit for the year is Rs. 60,000. Value of goodwill as per capitalization would be
a) Rs. 4,10,000
b) Rs. 60,000
c) nil
d) Rs. 2,10,000
40. Average capital employed in a firm is Rs. 4,00,000 and the normal rate of return is
15%. Average profits of the firm is Rs. 80,000 per Annum. If management cost is
estimated at Rs. 10,000 per annum, then on the basis of two years’ purchase of
Super profit, value of Goodwill be
a) Rs. 10,000
b) Rs. 20,000
c) Rs. 60,000
d) Rs. 80,000
41. A firm earns profit of Rs. 1, 10,000. Normal rate of return is 10%. Assets of the
firm are Rs. 11, 00,000 and liabilities are Rs. 1, 00,000. Value of goodwill by
capitalization of average profit will be
a) RS. 2, 00,000
b) Rs. 10,000
c) Rs. 5,000
d) Rs. 1, 00,000
42. A firm earns profit of Rs. 55,000. Normal rate of return is 10% . Assets of the firm
are Rs. 5, 50,000 and liabilities are Rs. 50,000. Value of goodwill by capitalization
of average profit will be
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a) Rs. 1, 00,000
b) Rs. 50,000
c) Rs. 2,500
d) Rs. 50,000
43. Net profits during the last 3 years of a firm are:
Year I. II. III
Profit. Rs. 18,000. Rs. 20,000. Rs. 22,000
The capital investment of the firm is Rs. 60,000. Normal rate of return is 10%
value of goodwill on the basis of three years purchase of the super profit for the
last three years will be
a) Rs. 21,000
b) Rs. 42,000
c) Rs. 84,000
d) Rs. 20,000
44. Net profits during the last 3 years of a firm are:

Year I. II. III
Profit. Rs. 9, 000. Rs. 10,000. Rs. 11,000
The capital investment of the firm is Rs. 30,000. Normal rate of return is 10%
value of goodwill on the basis of three years purchase of the last three years will be
a) Rs. 21,000
b) Rs. 31,000
c) Rs. 42,000
d) Rs. 10,000
45. Average capital employed in a firm is Rs. 2,00,000 and the normal rate of
return is 15%. Average profits of the firm is Rs. 40,000 per Annum. If
management cost is estimated at Rs. 5,000 per annum, then on the basis of two
years’ purchase of Super profit, value of Goodwill be
a) Rs. 5,000
b) Rs. 10,000
c) Rs. 30,000
d) Rs. 40,000
46. A firm earned Rs. 60,000 as profit, the normal rate of return being 10% .
Assets of the firm are Rs. 7,20,000 ( excluding goodwill) and liabilities areRs.
2,40,000. Find the value of goodwill by capitalization of average profit method
a) Rs. 2,40,000
b) Rs. 1,80,000
c) Rs. 1,20,000
d) Rs. 60,000
47. A firm earned Rs. 30,000 as profit, the normal rate of return being 10% .
Assets of the firm are Rs. 3,60,000 ( excluding goodwill) and liabilities areRs.
1,20,000. Find the value of goodwill by capitalization of average profit method
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a) Rs. 1, 20,000
b) Rs. 90,000
c) Rs. 30,000
d) Rs. 60,000
48. Tangible assets of the firm are Rs. 14, 00,000 and Outside liabilities are Rs.
4,00,000. Profit of the firm is Rs. 1, 50,000 and normal rate of return is 10%. The
amount of capital employed will be
a) Rs. 10, 00,000
b) Rs. 1, 00,000
c) Rs. 50,000
d) Rs. 20,000
2,00,000. Profit of the firm is Rs. 75,000 and normal rate of return is 10%. The
a) Rs. 5, 00,000
b) Rs. 50,000
c) Rs. 25,000
d) Rs. 10,000
50. Average profit of the firm is Rs. 6, 00,000. Total tangible assets in the firm are
Rs. 28, 00,000 and outside liabilities are Rs. 8, 00,000. Normal rate of return in the
same type of business is 20% of the capital employed. Calculate the value of
goodwill by capitalization of super profit method.
a) Rs. 10, 00,000
b) Rs. 5, 00,000
c) Rs. 2, 50,000
d) Rs. 15, 00,000
51. As per AS-26 …………..goodwill is recorded in the books.

a) Purchased
b) Self-generated
c) Both of the above
d) None of these
52. For valuation of goodwill normal profit is calculated by ………..abnormal
gains and ………….abnormal losses
a) Adding, deducting
b) Deducting, adding
c) Deducting, not treating
53. Assertion: (A) Goodwill is considered as an intangible asset but not a fictitious
asset
Reason ( R ) Goodwill can neither be seen and touched nor it can be purchased or
sold with any other asset
a) Both Assertion ( A) and Reason ( R) are true and Reason (R ) is the correct
explanation of Assertion ( A)
b) Both Assertion (A) and Reason (R ) are true but Reason ® is not the correct
explanation of assertion (A)
c) Assertion (A) is false, but Reason (R) is true
d) Assertion (A) is true but Reason (R) is false
54. Assertion (A) The factors which affect profits also affect goodwill
39 | P a g e
Reason (R) Profits are directly related goodwill
c) Assertion (A) is false, but Reason (R ) is true
d) Assertion (A) is true but Reason ( R) is false
55. Assertion (A) Self-generated goodwill is the internally generated or hard
earned goodwill
Reason ( R ) It arises due to continued hard work of the organization, its better
quality products, etc.
c) Assertion (A) is false, but Reason (R ) is true
d) Assertion (A) is true but Reason (R) is false
56. If capital employed is Rs. 5, 00,000 and Capitalized value of average profit is
Rs. 4, 00,000 Goodwill will be
a) Rs. 1, 00,000
b) Rs. Rs. 50,000
c) Nil
d) 25,000
57. While calculating goodwill, If Closing Stock is undervalued it should be
a) Deducted from current year profit and added to the previous year profit
b) Added to the current year profit and deducted from previous year profit
c) None of the above
d) Should not consider
58. While calculating goodwill, if closing stock is overvalued it should be
a) Deducted from current year profit and added to the previous year profit
b) Added to the current year profit and deducted from previous year profit
c) None of the above
d) Should not consider
59. Goodwill which is acquired by making a payment is called
a) Inherited goodwill
b) Purchased goodwill
c) Hidden goodwill
60. Goodwill is ……………over its estimated life.
a) Amortized
b) Recorded
c) Accounted
61. Goodwill is valued at the time of dissolution of the firm.
a) True
b) Partially true
c) False
d) all of the above
62. Goodwill, Patents, Trademarks are examples of ………assets.
40 | P a g e
a) Tangible asset
b) Fictitious asset
c) Intangible asset
63. Assets which do not have physical existence i.e they cannot be seen and
touched are termed as
a) Goodwill
b) Fictitious assets
c) Intangible assets
64. Expenses expected to be incurred to earn profit are deducted to determine
normal profit for valuation of ………….
a) Average profit
b) Goodwill
c) Capital employed
d) All of the above
65. Purchased goodwill ……………in the books
a) Recorded in the books
b) Will not be recorded in the books
c) Partially entered in the books
2,00,000. Profit of the firm is Rs. 75,000 and normal rate of return is 10%. The
a) Rs. 3, 00,000
b) Rs. 50,000
c) Rs. 25,000
d) none of the above
67. Total Capital employed in the firm is Rs. 4,00,000. Normal rate of return is
15% and profit for the year is Rs. 60,000. Value of goodwill as per capitalization
method would be
a) Rs. 4,20,000
b) Rs. 60,000
c) nil
d) Rs. 2,10,000
68. Average net profit of Home Depot expected in the future is 54,000 per year.
Average capital employed in the business is Rs. 3, 00,000. Normal profit expected
from capital invested in similar type of business is 10%. The remuneration of the
partners is estimated to be
Rs.9, 000 p.a. Find the value of goodwill on the basis of two years’ purchase of
super profit.
a) Rs. 15,000
b) Rs. 30,000
c) Rs. 25,000
d) Rs. 20,000
69. Goodwill has a realizable value, being an intangible asset.
a) True
b) False
c) Partially true
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70. A firm earned net profits during the last five years as follows:
I-7,000 II- 6,500 III – 8,000 IV – RS. 7,500
The capital investment of the firm is Rs. 40,000. A fair return on capital in the
similar business is 12%. Find out the value of Goodwill of the business. IF it is
based on 3 years’ purchase of average super profits of the past five years.
a) Rs. 6,600
b) Rs. 5,600
c) Rs. 6,000
d) Rs. 4,000
71. Calculate the value of firm goodwill on the basis of one and half years’ purchase of the
average profit if the last three years, The profit for first year was Rs. 1,00,000 profit for the
second year was twice the profit of the first year and for the third year profit was one and
half time of the profit of the second year.
a) 2,00,000
b) 3,00,000
c) 6,00,000
d) 2,50,000
72. From the following information, calculate value of goodwill of the firm by capitalization
method. Total capital of the firm Rs. 16,00,000 Normal rate of return 10%. Profit for the
year Rs. 2,00,000
a) 4,00,000
b) 1,00,000
c) 2,00,000
d) 2,50,000
73. A business has earned average profit of Rs. 1,00,000 during the last few years. Find
out the value of goodwill by capitalization method, given that the assets of the business
are Rs. 10,00,000 and its external liabilities are Rs. 1,80,000. The normal rate of return is
10%
a) 1,80,000
b) 90,000
c) 81,000
d) 1,08,000
74. . From the following information, calculate value of goodwill of the firm by
capitalization method. Total capital of the firm Rs. 8,00,000 Normal rate of return
10%. Profit for the year Rs. 1,00,000
a) 2,00,000
b) 50,000
c) 1,00,000
d) 1,25,000
75, Calculate the value of firm goodwill on the basis of one and half years’ purchase of
the average profit of the last three years, The profit for first year was Rs. 50,000 profit
for the second year was twice the profit of the first year and for the third year profit
was one and half time of the profit of the second year.
a) Rs. 1,00,000
b) Rs. 1,50,000
c) Rs. 3, 00,000
d) Rs. 1,25,000
42 | P a g e
UNIT – 1I SET – II
TOPIC-CHANGE IN PROFIT SHARING RATIO
MCQ:-
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)Realisation 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
(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
(c) Gaining ratio
(d) New profit-sharing ratio
5. Increase and decrease in the value of assets and liabilities are recorded through:
(a) Partners' Capital Account
(b) Revaluation Account
(c) Profit and Loss Appropriation Ne
(d) Balance Sheet
6. In which of the following case, is the revaluation account debited?

(a) Increase in value of asset
(b) Decrease in value of asset
(c) Decrease in value of liability
(d) No change in value of assets
7. In which of the following cases, a revaluation account is credited?

(a) Decrease in value of liability
(b) Increase in value of liability
(c) Decrease in value of asset
(d) No change in value of liability
8. Partner's capital account is credited when there is

(a) Profit on revaluation
43 | P a g e
(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 profits equally. Calculate A’s gain or sacrifice
(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 partners by paying the proportional amount of
(a)capital
(b)cash
(c)goodwill
(d) none of the above
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 R; S and T sharing profits and losses in the ratio of 1:2:3, decided to share future
profit and losses equally. They also decided to adjust the following accumulated
profits, losses and reserves without affecting their book figures, by passing a single
adjustment entry:
General Reserve 40000
Profit and Loss A/c 30000
Share .Issue expenses 10000
The necessary .adjustment entry will be:
a. Dr. R and Cr. T by < I 0,000

b. Dr. T and Cr. R by < 10,000
c. Dr. S and Cr. R by < 10,000
d. Dr.R and Cr. S by < 10,000
14. X,Y and 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
44 | P a g e
c) Distributed among the partners in capital ratio
d)Carried forward to new balance sheet without any adjustment
15. A,B and C were 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 the credit balance of 96,000.instead of closing the profit and loss account
,it was decided to record an adjustment entry reflecting the change in profit sharing
ratio .In the journal entry:
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
FILL IN THE BLANKS
16 . ……..should compensate …………..in the case of reconstitution of the firm.
17. Increase in the value of assets and decrease in the value of liabilities result in ……..for
the existing partners and should be ……….to P/L Adjustment a/c
18. In the case of downward revaluation of an asset, the Revaluation account is

__________.
19. In case of upward revaluation of a liability, Revaluation Account is ___________.
20. At the time of admission, if the claim of Workmen Compensation is more than the
Workmen Compensation Reserve, the amount of Workmen Compensation Reserve
and the claim is transferred to ________ account.
21. At the time of admission, if the book value and the market value of investment is
same , the Investment Fluctuation Reserve is transferred to _____ account of the old
partners in their ____ ratio.
22. For the distribution of revaluation profit in case firm is following Fixed Capital
Accounts method is transferred to ________ accounts.
23. An amount previously written off as bad debt is promised to be paid by the debtor.
The promised amount will not be credited to _________________ Account.
24. The newly admitted partner brings his / her share of capital for which he will get
_______ in firm.
25. Balance sheet prepared after the new Partnership Deed, the assets and liabilities are
shown at __________ if Revaluation Account is prepared.
26. In valuation of Goodwill, the Weighted Average Profit Method is preferred over
average method when profits are _____________.
27. U V and W are partners sharing profits in the ratio of 2:3:5. They also decide to record
the effect of the following revaluations and reassessments without affecting the book
values of assets and liabilities by passing a single adjustment entry:
45 | P a g e
The single adjustment entry will
(a) Dr. W and Cr. U by 10,500
(b) Dr. U and Cr. W by Rs. 10,500
(c) Dr. V and Cr. U by Rs. 10,500
(d) Dr. W and Cr. V by Rs. 10,500
28. Match the following items :
(i) Ratio in which partners share profit (a New profit sharing

and loss before reconstitution of ) ratio
firm
(ii Ratio in which partners surrender their (b Gaining ratio

share
) of profit in favour of other )
partner’s
(iii) Ratio in which all the partners share (c) Sacrificing ratio
the future profit and losses
(iv) Ratio in which partners acquire the (d) Old Ratio

share from other
29. The following question consists of two statements, one labelled as the ‘Assertion
(A)’ and the other as ‘Reason (R)’. You are to 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, the firm pays such interest on the
partner's capital.
Reason (R): Interest on capital is treated as a charge against profit.
46 | P a g e
30. 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
31. Gagandeep, a partner advanced a loan of Rs.60,000 to the firm on 30th

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
32. 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:
(a) 7 : 5 : 3
(b) 7 : 3 : 5
(c) 5 : 7 : 3
(d) 3 : 5 : 7
33. P, Q and R are partners in a firm. Net profit before appropriations is Rs. 7,87,000.
Total interest on capital and salary to the partners amounted to Rs.40,000 and Rs.
75,000 respectively. P and Q are entitled to receive a commission @ 6% each on net
profit after taking into consideration interest on capital salaries and all commission.
Calculate commission payable to P and Q.
(a) Rs.18,000 each
(b) Rs. 40,320 each
(c) Rs.36,000 each
(d) Rs.24,000 each
47 | P a g e
34. Charvi and Vaanya were partners sharing Profit and Losses in 3 : 2 with affect
from 1st April 2021, they decided to share future profits equally. On that date,
following journal entry was passed by the firm:
Which of the following balances 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 Rs. 3,00,000
(d) Advertisement Suspense Account Rs.2,00,000.
CASE STUDY QUESTIONS
Read the following paragraph and answer the following Question from 1 to 5.
35. Any changes in the relations of partnership will 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 revolution account to make the revaluation of assets and reassessment
of liabilities
With a motive to calculate actual economic benefits.
Q.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 Above
Q.2 Revaluation Account is a:
(A) Real Account (B) Nominal Account (C) Personal Account (D) None of the
Above
Q.3Any 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

48 | P a g e
(b) Reconstitution of partnership
(c) Realization of partnership
Q.4 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
Q.5 Increase and decrease in the value of assets and liabilities are recorded
through:
(a) Partners' Capital Account
(b) Revaluation Account
(c) Profit and Loss Appropriation
(d) Balance Sheet
36. Bhavya and Naman were partner in a firm carrying on a tiffin service in
Hyderabad. Bhavya noticed that a lot of food is left at the end of the day. To avoid
wastage, she suggested that it can be distributed to the needy. Naman wanted that It
should be mixed with the food being served the next day. Naman then give a
personal that if his share in the profit increased, he will not mind free distribution of
leftover food. Bhavya happily agreed. So they decided to change their profit sharing
ratio 1:2 with immediate effect. On that date revaluation of assets and reassessment
of liability was carried out that resulted into a gain of Rs. 18,000.
Based on the above information you are required to answer the following
questions.
Q.1 sacrificing ratio equal to:
(A) Old ratio minus new ratio
(B)New share minus old share
(C) Old share plus new share
(D) Old share
Q.2 sacrificing /gain of Bhavya and Naman will be
(A) Bhavya sacrifice 1/6 , Naman gains 1/6
(B) Bhavya gains 1/6 , Naman sacrifice 1/6
49 | P a g e
(C) Only Bhavya gains 1/6
(D) Only Naman sacrifice ⅙
37. Amalgamation of two partnership firms leads to reconstitution of partnership

firm.
(a) True
(b) False
(c) Partially true
(d) Can’t say
38. Aggregate amount of gain by the partners is not necessary equal to the aggregate
amount of sacrifice made by other partners in change in profit sharing ratio.
(a) True
(b) False
(c) Partially true
(d) Can’t say
39. At the time of change in profit sharing ratio, P and Q to revalue the assets and
liabilities. The stock appeared in balance sheet at Rs. 7,00,000 on their revaluation,
they found that stock was over valued by Rs. 80,000, their capital account will be
______ by ______ to adjust this revaluation.
(a) Debited, 6,20,000

(b) Debited , 80,000
(c) Credited , 6,20,000
(d) Credited , 80,000
40. At the time of change in profit sharing ratio, what will be the impact on
revaluation account if investment depreciates in value by 20% assuming the existing
book value of investments in Balance Sheet is Rs. 80,000 and there is an investment
fluctuation reserve existing in the balance sheet at Rs. 10,000 ?
(a) Debit 10,000

(b) Debit 16, 000
(c) Debit 6,000
(d) None of these.
41. In case of depreciation provided on plant and machinery (at the time of change
in profit sharing ratio), which account is debited ?
(a) Plant and machinery

(b) Revaluation account
(c) Partners capital account
42. Partners whose share in profit has been ______ as a result of change is known
as sacrificing partner :
(a) Increased
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(b) Decreased
(c) Both (a) and (b)
43. Machinery replacement fund is transferred to partners’ capital account at the

time of change in profit sharing ratio:
(a) True
(b) False
(c) Partially false
(d) Partially true
44. Any profit from the revaluation account is _____ in the partner's capital account
in the ____ ratio.
(a) Debited; new

(b) Debited ; old
(c) Credited ; new
(d) Credited ; old
45. If the claim on account of workmen’s compensation is more than the workmen
compensation reserve, which account(s) is/are debited initially ?
(a) Workmen Compensation Reserve

(b) Revaluation account
46. At the time of change in profit sharing ratio, advertisement expenditure (deferred revenue)
is ______ and partners’ capitals are _______ .
(a) credited , debited

(b) Debited , credited
(d) None of these
47. A and B are partners in a firm sharing profit and losses 2:3 with effect from 1st April,
2021, they decided to share profits and loss equally. What will be B’s gain/sacrifice ?
(a) Gain ⅕
(b) Sacrifice ⅕
(c) Gain 1/10
(d) Sacrifice 1/10
48. A, B, and C are partners in profit sharing ratio 2:3:4 with effect from 1st April 2021,
they decided to share profits in 4:3:3. What is B’s gain or sacrifice ?
(a) No gain / sacrifice

(b) Sacrifice 1/30
(c) Gain 3/100
(d) Gain 1/30
51 | P a g e
49. A, B, and C are partners in a firm sharing profits in ratio 2:1:3. They decided to share
profits in ratio of 4:5:3. What was A’s gain / sacrifice ?
(a) No gain / sacrifice

(b) Sacrifice 2/6
(c) Gain 2/12
(d) Gain 2/6
50. Revaluation account is prepared to ____ the assets and liabilities.
(a) Distribute
(b) Be write off
(c) Upscale
(d) Revise
51. If the total of ___ side of revaluation account in more than ____ side, it’s profit.
(a) Debit ; credit

(b) Credit ; debit
(c) None of the above
52. In case of increase in the amount of liability, revaluation account is ____ and liabilities
account is ____ .
(a) debited ; credited

(b) Credited ; debited
(c) Both (a) and (b) are possible
(d) Can't say
53. Investment fluctuation reserve is a reserve created out of profit to meet the _____ value
of assets.
(a) Rise; book

(b) Fall ; book
(c) Rise ; market
(d) Fall ; market
54. In case the claim on account of workmen compensation is equal to workmen

compensation reserve, there is no treatment in the revaluation account.
(a) True
(b) False
(c) Partially false
(d) Can’t say
55. When a revaluation account is prepared , the assets and liabilities appear in the balance sheet
of the new firm at their revised figures.
(a) False
(b) Partially false
(c) True
52 | P a g e
(d) Can’t say
A Employees Provident Fund (i) Accumulated loss
B Advertisement expenditure (ii) Statutory liability
C Machinery Replacement (iii) Accumulated profit

Fund
D General Reserve (iv) Accumulated depreciation
(a) A: (iii) ; B (ii) ; C (i) ; D (iv)

(b) A: (iii) ; B (ii) ; C (iv) ; D (i)
(c) A: (ii) ; B (i) ; C (iv) ; D (iii)
(d) A: (i) ; B (ii) ; C (iv) ; D (iii)
Case based MCQs

Read the following case study and answer the following questions.
DIRECTION :
Kamini and Mohini, are partners sharing in the ratio 2:3. Balance sheet given below.
BALANCE SHEET
Liabilities Amount Assets Amou

nt
Bills payable 6,20,000 B/R

3,60,000
creditors 1,80,000 Stock

16,00,000
Capital a/c Machinery

18,40,000
16,00,000 Land and 10,00,000

Kamini Building
24,00,000
Mohini
The partners decided the share profits in equal ratio with effect from 1st April 2020.
The following adjustments were agreed upon.
53 | P a g e
1. Land and Building was valued at 16,00,000 and Machinery at 16,40,000 and were to
appear at value amounts in the balance sheet.
Answer the following questions no. 56 to 58 based on the sum (Direction : Kamini,
Mohini) given above
56. What was the entry passed in revelation of account with respective machinery account.
(a) Debit machinery account 2,00,000, Credit revaluation account 2,00,000.
(b) Debit revaluation account 2,00,000, Credit Machinery account 2,00,000
(c) Debit machinery account 16,40,000, Credit revaluation account 16,40,000
(d) Debit revaluation account 16,40,000 Credit machinery account 16,40,000
57. What was the final profit or loss of the revaluation account?
(a) Loss 8,00,000
(b) Profit 8,00,000
(c) Profit 4,00,000
(d) Loss 4,00,000
58. What was the gain or sacrifice of share for Kamini

(a) Gain 1/10
(b) Sacrifice 1/10
(c) Sacrifice ⅕
(d) Gain 1/5
DIRECTION
Read the following case study and answer the questions 59 to 63 on the basis of the
same.
A,B and C partners sharing profits equally, They decided that infeature C will get
1/5th share in profits. On the day of the change the following is the balance sheet.
BALANCE SHEET
Liabilities Amount Assets Amou

nt
Creditors 12,000 Cash 5,400
Capital Accounts Debtors 12,000

A. 9,000 14,400
B. 9,000 Provision
C. 5,400 23,400 (2,400)
Cash 5,400 Stock 7,500
Machinery 4,500
Building 6,000
54 | P a g e
Total 35,400 Total 35,400
On this date, Buildings have been valued at 9,000, Stock to be reduced by 300 and provision
for doubtful debts to be reduced by 900.
59. What was the profit on revaluation account?

(a) 2,100
(b) 2,400
(c) 3,600
(d) 4,200
60. What was the profit amount transferred to C’s account?
(a) 1,200
(b) 720
(c) 1,440
(d) None of these.
61. What was the B’s Capital balance after the change?
(a) 9,000
(b) 10,200
(c) 6,600
(d) None of these.
62. What was the debtor's position in the balance sheet and the change?
(a) 12,000
(b) 12,900
(c) 13,600
(d) None of these.
63. What was the balance sheet of the total after the change?
(a) 35,400
(b) 39,900
(c) 39,000
(d) None of these.
DIRECTION:
Reena, Meena and Teeka are partners sharing profit and loss equally. From 1st april
2019, they decided to share the profits in the ratio of 2:1:1. Reena share has been
increased because she introduced additional capital of Rs. 1,50,000. At the time of
reconstitution the following assets and liabilities are revalued and reassessed.
Read the following case study and answer the question no. 64 to 68 on the basis of
the same.
55 | P a g e
Items Book Figure Revised Figure
Free hold 7,50,000 8,00,000

premises
Stock 2.25.000 2,00,000
Debtors 75,000 72,500
Furniture 1,00,000 90,000
Creditors 30,000 25,000
64. When the profit or loss on revaluation of assets and reassessment of liabilities is adjusted
through capital account only, the assets and liabilities appear in the balance sheet of
the new firm at their old figures?
(a) True
(b) False
(c) Partially true
(d) Partially false
65. What is the net effect of revaluation?

(a) Profit 37,500
(b) Loss 37,500
(c) Profit 17,500
(d) Loss 17,500
66. Which of the partner made the gain?

(a) Reena
(b) Meena
(c) Teeka
(d) Both A and B
67. What was the sacrificing ratio?
(a) 2:1
(b) 1:1
(c) 1:2
(d) None of these.
68. Reena’s account will be ---------- by ------------- in the adjustment entry.
(a) Debited 1,458
(b) Credited 1,458
(c) Debited 2,916
(d) Credited 2,916
69. At the time of changing profit sharing ratio, a debtor whose dues of Rs 20,000 where return
of as bad debts paid Rs. 15,000 in full settlement. Journalise ignoring cash entry.
a)Bad debts A/c Dr. 5,000
56 | P a g e
To Revaluation A/c. 5,000
b)Revaluation A/c Dr. 5,000

To Bad debtors A/c 5,000
c)Bad debts recovered Dr.15,000

A/c 15,000
To Revaluation A/c
d)Bad Debts recovered Dr. 15,000

A/c Dr. 5,000
Bad Debts A/s 20,000
To Debtors A/c
70. Extract of Balance Sheet
Liabilities Amount (Rs.) Assets Amount (Rs.
Debtors
4,00,000 3,80,000
(-) Provision for Doubtful
Debts (20,000)
Provision to be maintained @ 5% at the time of change in profit sharing ratio. What

is the amount credited/debited in revaluation account?
(a) Debit Rs. 20,000

(b) Credit Rs. 20,000
(c) No adjustment required
(d) None of these.
71. Das and Sinha are partners in a firm sharing profits in 4:1 ratio. They admitted Pal as a new
partner for ¼ share in the profits, which he acquired wholly from Das. New Profit sharing ratio
of the partners is:-
(a) 4:1:1
(b) Equally
(c) 11:4:5
(d) None of these above
72. A and B are partners sharing profits in the ratio of 3:1. They admit C for ¼ share in the
future profits. The new profit sharing ratio will be:-
(a) A(9/16), B(3/16), C(4/16)

(b) A(8/16), B(4/16), C(4/16)
(c) A(10/16), B(2/16), C(4/16)
(d) A(8/16), B(9/16), C(10/16)
57 | P a g e
73. X and Y share profits in the ratio of 3:2. Z was admitted as a partner who gets 1/5th share.
New profit sharing ratio, if Z acquires 3/20 from X and 1/20 from YT would be:
(a) 9:7:4
(b) 8:8:4
(c) 6:10:4
(d) 10:6:4
74. A and B share profits and losses in the ratio of 3:1. C is admitted into partnership for 1/4th
share. They sacrificing ratio of A and B is:
(a) Equal
(b) 3:1
(c) 2:1
(d) 3:2
75. A and B are partners sharing profits in the ratio of 5:3. C is admitted with 1/4th share in
profits, the new profit sharing ratio will be:
(a) 4:2:1
(b) 5:3:4
(c) 15:9:8
(d) None of these
GOODWILL
MARKING SCHEME
Question Answer Clue for the answers
No. Key
1 (b)
2. (d) 25,000/2=12,500
3. (d) 30,000-25,000=5000*3=15,000
4. (a)
5. (b) 85,000-5000-30,000= 50000
Normal profit =
50,000*10/100=5000
Actual – Normal = 8,000-5000=3000
3000*100/10=30000
6. (d)
7. (c )
8. (d)
9. (d)
58 | P a g e
10. (a)
11. (b)
12. (b)
13. (a) Normal profit=
5,00,000*10/100=50000
Average profit +abnormal loss=
68,000
68,000-50,000=18000
Goodwill = 18000*4=72,000
14. (a)
15. (c)
16. a) 3 b)
1 C) 4
D2
17. ( a)
18. (a) 1,80,000-80,000=1,00,000*10/100
19. (d)
20. (c ) 60,000-50000=10,000*3
21. (a )
22. (b)
23. (b)
24. (a)
25. ( d)
26. (b)
27. (d)
28. (a) 570000/3=190000
1,90,000-60,000=1,30,000
1,30,000*3
29. (c) Normal profit = 1,10,000

Average profit = 1,90,000-
60000=130000
20,000*3
30. (b) Super profit= 20,000 goodwill +
20,000/11*100=1,81,818
31. (d) Average profit =
1,30,000*11/100=1,81,818
32. (b)
33. (b) 60,000-50000=10,000
34. (d)
35. (a)
36. (b)
37. (b)
38. (c) 120,000-1,20,000=nil
39. ( c) 60,000-60,000=nil
40. (b) 80,000-10,000=70,000-
60,000=10,000*2
59 | P a g e
41. (d) Normal rate of return
5,00,000*10/100=50,000
42. (d) 5,000/10*100

43. (b) Average profit 20,000 Normal profit
6,000 Super profit = 14,000*3
44. (a) 10,000-3000=7,000*3 =21,000
45. (b) 40,000-30000=10,000-5000=5000*2
46. (c ) 7,20,000-
2,40,000=4,80,000*10=48,000
60,000-48,000=12000
Goodwill = 12000*100/10
47. (d) 3,60,000-1,20,000=2,40,000*10=
24,000
30,000-24,000=6000
Goodwill = 6,000*10/100
48. (a) 14,00,000-4,00,000
49. (a) 7,00,000-2,00,000
50. (a)
51. (a)
52. ( b)
53. (d)
54. (a)
55. (a)
56. (a) 5,00,000-4,00,000
57. (b)
58. (b)
59. (b)
60. (a)
61. ( c)
62. ( c)
63. ( c)
64. (b)
65. (a)
66. (d) 5,00,000-2,00000
67. (b) 60,000-60,000
68. ( b)
69. (a)
70. (a)
71. (b) Profit for 2 nd year 2,00,000 3 rd
year = 2,00,000*1.5=3,00,000
72. (a)
73. (a) 10,00,000-8,20,000=1,80,000
74. (a)
75. (b) Profit for 2 nd year Rs. 1,00,000 3 rd
year = 1,00,000+1.5=1,50,000
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UNIT – II SET – 2
TOPIC : CHANGE IN PROFIT SHARING RATIO
1. B
2. B
3. D
4. A
5. B
6. B
7. A
8. D
9. B
10. D
11. C
12. B
13. A(Add reserves and profit and loss,deduct expenses)
14. A
15. B(Pass adjusting journal entries)
16. Gaining partner, sacrificing partner
17. Gain, credited
18. Debited
19. Debited
20. Compensation liability
21. Capitals, old
22. Current
23. Debtors
24. Profit share
25. Revised values
26. Trends
27. B
28. B, C, A, B
29. A is true but R is false
30. 98,000
31. 1,200
32. 7 : 5 : 3
33. 36,000
34. B (Profit and Loss (Dr.) Balance Rs. 3,00,000 )
35. 1 : B 2: B (Nominal account) 3 : B (Reconstitution of partnership) ; 4 : C (Sacrificing
ratio ) 5 : B (Revaluation)
36. 1 : A (Old ratio - new ratio) ; 2 : A ;
37. B
38. B
39. B9Working note to be prepared to know the balane of capital account)
40. C
41. B
42. B
61 | P a g e
43. B
44. D
45. C
46. A
47. D
48. B(Old ratio -new ratio-if there is minus figure it is gaining ratio and vice versa0
49. A
50. D
51. C
52. A
53. D
54. A
55. C
56. B(Theory of revaluation account is applicable)
57. C
58. A
59. C
60. A
61. B
62. B
63. C
64. A
65. C
66. A
67. B
68. C
69. C
70. C
71. C(new ratio=Old raio -share surrendered)
72. A(1-1/5=4/5,
A”s share =8/5x4/5=32/75
B’s share=7/15x4/5=28/75
73. A(X new share=3/5-3/20=9/20
Y new share=2/5-1/20=7/20
74. B(Formula)
75. C
62 | P a g e
SET – 1
UNIT – 3
ADMISSION OF A PARTNER
Multiple Choice Questions/Objective Type Questions:
Q. 1 Which of the following is not the reconstitution of partnership?
a) Admission of a partner
b) Dissolution of Partnership
c) Change in Profit Sharing Ratio
d) Retirement of a partner
Q. 2 On the admission of a new partner:
a) Old partnership is dissolved

b) Both old partnership and firm are dissolved
c) Old firm is dissolved
Q. 3 Sacrificing ratio is used to distribute ------------------ in case of admission of a
partner. a) Goodwill
b) Revaluation Profit or Loss

c) Profit and Loss Account (Credit Balance)
d) Both b and c
Q. 4 “At the time of admission, old partnership comes to an end”. Is the statement true or
false?
Q. 5 Himanshu and Naman share profits & losses equally. Their capitals were ₹1,20,000 and ₹
80,000 respectively. There was also a balance of ₹ 60,000 in General reserve and
revaluation gain amounted to ₹ 15,000. They admit friend Ashish with 1/5 share. Ashish
brings ₹90,000 as capital. Calculate the amount of goodwill of the firm. a. ₹1,00,000
b. ₹ 85,000
c. ₹20,000
Q. 6 Yash and Manan are partners sharing profits in the ratio of2:1. They admit Kushagra into
partnership for 25% share of profit. Kushagra acquired the share from old partners in the
ratio of 3:2. The new profit sharing ratio will be:
a) 14:31:15
b) 3:2:1
c) 31:14:15
d) 2:3:1
Q. 7 A and B are partners sharing profit and losses in ratio of 5:3. C is admitted for 1/4th
share.
On the date of reconstitution, the debtors stood at Rs 40,000, bill receivable stood at ₹
10,000 and the provision for doubtful debts appeared at ₹ 4000. A bill receivable, of Rs
10,000 which was discounted from the bank, earlier has been reported to be dishonored.
The firm has sold, the debtor so arising to a debt collection agency at a loss of 40%. If
bad debts now have arisen for Rs 6,000 and firm decides to maintain provisions at same
63 | P a g e
rate as before then amount of Provision to be debited to Revaluation Account would be:
a) Rs 4,400
b) Rs 4,000
c) Rs 3,400
Q. 8 Heena and Sudha share Profit & Loss equally. Their capitals were ₹1,20,000 and ₹ 80,000
respectively. There was also a balance of ₹ 60,000 in General reserve and revaluation gain
amounted to ₹ 15,000. They admit friend Teena with 1/5 share. Teena brings ₹90,000 as
capital. Calculate the amount of goodwill of the firm.
a) ₹85,000
b) ₹1,00,000
c) ₹20,000
Q. 9 “As per Section 26 of the Indian Partnership Act, 1932, a person can be admitted as a
new partner if it is agreed in the Partnership Deed”. Is the statement True or False? Q. 10
Which of the following is not true with respect to Admission of a partner?
a) A new partner can be admitted if it is agreed in the partnership deed.

b) If all the partners agree, a new partner can be admitted.
c) A new partner has to bring relatively higher capital as compared to the existing
partners
d) A new partner gets right in the assets of the firm
Q. 11 As per ---------, only purchased goodwill can be shown in the Balance
Sheet. a) AS 37
b) AS 26
c) Section 37
d) AS 37
Q. 12 “A newly admitted partner cannot pay his share of the goodwill to the sacrificing
partners privately”. Is the statement True or False?
Q. 13 “Unless agreed otherwise, Sacrificing Ratio of the old partners will be the same as their
Old Profit Sharing Ratio”. Is the statement True or False?
Q. 14 A, and B are partners sharing profits in the ratio of 2:3. Their balance sheet shows
machinery at ₹2,00,000; stock ₹80,000, and debtors at ₹1,60,000. C is admitted and the
new profit sharing ratio is 6:9:5. Machinery is revalued at ₹1,40,000 and a provision is
made for doubtful debts @5%. A’s share in loss on revaluation amount to ₹20,000.
Revalued value of stock will be:
a) ₹62,000
b) ₹1,00,000
c) ₹60,000
d) ₹98,000
Q. 15 At the time of admission of a partner, Employees Provident Fund is:

a) Distributed to partners in the old profit sharing ratio
b) Distributed to partners in the new profit sharing ratio
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c) Adjusted through gaining ratio
Q. 16 If at the time of admission if there is some unrecorded liability, it will be ------------- to
-- ------------ Account.
a) Debited, Revaluation
b) Credited, Revaluation
c) Debited, Goodwill
d) Credited, Partners’ Capital
Q. 17 At the time of admission of a new partner, the balance of Workmen Compensation

Reserve will be transferred to:
a) Old partners in the old profit sharing ratio

b) Sacrificing partners in the sacrificing ratio
c) Revaluation Account
d) All partners in the new profit sharing ratio
Q. 18 The firm of P, Q and R with profit sharing ratio of 6:3:1, had the balance in General
Reserve Account amounting ₹ 1,80,000. S joined as a new partner and the new profit
sharing ratio was decided to be 3:3:3:1. Partners decide to keep the General Reserve
unchanged in the books of accounts. The effect will be:
a) P will be credited by ₹ 54,000
b) P will be debited by ₹ 54,000
c) P will be credited by ₹ 36.000
d) P will be credited by ₹ 36,000
Q. 19 Which statement is true with respect to AS-26?

a) Purchased goodwill can be shown in the Balance Sheet
b) Revalued goodwill can be shown in the Balance Sheet
c) Both purchased goodwill and revalued can be shown in the Balance Sheet
Q. 20 Premium brought by newly admitted partner should be:
a) Credited to sacrificing partners

b) Credited to all partners in the new profit sharing ratio
c) Credited to old partners in the old profit sharing ratio
d) Credited to only gaining partners
Q. 21 Sacrificing ratio is calculated because:
a) Profit shown by Revaluation Account can be credited to sacrificing partners

b) Goodwill brought in by the incoming partner can be credited to the new partner
c) Goodwill brought in by the incoming partner can be credited to the sacrificing partners
d) Both a and c
Q. 22 Aryaman and Bholu are partners sharing profit and losses in ratio of 5:3. Chirag is
admitted for 1/4th share. On the date of reconstitution, the debtors stood at Rs 40,000, bill
receivable stood at ₹ 10,000 and the provision for doubtful debts appeared at ₹ 4000. A
bill receivable, of Rs 10,000 which was discounted from the bank, earlier has been
reported to be dishonored. The firm has sold, the debtor so arising to a debt collection
agency at a loss of 40%. If bad debts now have arisen for Rs 6,000 and firm decides to
65 | P a g e
maintain provisions at same rate as before then amount of Provision to be debited to
Revaluation Account would be:
a. Rs 4,400
b. Rs 4,000
c. ₹3,400
Q. 23 Revaluation Account is a ------------ Account.
a) Real
b) Nominal
c) Personal
d) Liability
Q. 24 Match the following:
i. Sacrificing Ratio A Nominal Account

ii. Gaining Ratio B Reconstitution of Partnership
iii. Revaluation Account C New Ratio – Old Ratio
iv. Admission of a Partner D Old Ratio – New Ratio
a) i- B, ii-C, iii-A, iv-D

b) i- D, ii-B, iii-A, iv-C
c) i- D, ii-C, iii-A, iv-B
d) i- D, ii-C, iii-B, iv-A
Q. 25 Match the following with respect to journal entries for treatment of goodwill.
i. Incoming partner brings his share of A No Entry

goodwill
ii. Incoming partner does not bring his B Premium for Goodwill A/c Dr.
share
of goodwill Incoming Partner’s Capital A/c Dr.
To Sacrificing Partners Capital A/c
iii. Incoming partner pays his share of C Premium for Goodwill A/c Dr.
goodwill privately To Sacrificing Partners Capital A/c
iv. Incoming partner brings only a part of D Incoming Partner’s Capital A/c Dr.
his share of goodwill To Sacrificing Partners Capital A/c
a) i- B, ii-C, iii-A, iv-D

b) i- C, ii-D, iii-A, iv-B
c) i- D, ii-C, iii-A, iv-B
d) i- D, ii-C, iii-B, iv-A
26. A new partner may be admitted into partnership:
a) With the consent of any one partner

b) With the consent of majority of partners
c) With the consent of all old partners
d) With the consent of 2/3rd of old partners
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27. On the admission of a new partner:
a) Old firm is dissolved
b) Old partnership is dissolved
c) Both old partnership and firm are dissolved
d) Neither partnership nor firm is dissolved.
28. Alpha and Beta are partners sharing profit in the ratio of 3:2. They admit Canon as a
partner by giving him 1/3 share in future profits. The new ratio will be:
a) 12:8:5
b) 8:12:5
c) 5:5:12
29.Sun and Moon are partners sharing profit in the ratio of 3:2. Earth was admitted with ¼
share in profits which he acquires equally from Sun and Moon. The new ratio will be: a) 9:6:5
b) 19:11:10
c) 3:3:2
d) 3:2:4
30. Arjun and Beem share profits in the ratio of 2:1. Nakul is admitted with ¼ share in profits.
Nakul acquires ¾ of his share from Arjun and ¼ of his share from Beem. The new ratio will
be: a) 2:1:1
b) 23:13:12
c) 3:1:1
d) 13:23:12
31. Benny and Nancy are partners in a firm sharing profits in the ratio of 3:2. They admit Sandy
as a partner for 1/4th share in the profits. Sandy acquires his share from Benny and Nancy
in the ratio of 2:1. The new profit sharing ratio will be:
a) 2:1:4
b) 19:26:15
c) 3:2:4
d) 26:19:15
32. North, East and West are partners sharing in the ratio of 5;4:3. They admit South for 1/7 th
share. It is agreed that East would retain his original share. Sacrificing ratio will be:
a) North, East, and West – 5:4:3
b) North and West – 4:3
c) North and West – 5:4
d) North and West -5:3
33. Aster and Booster are partners sharing profits and losses in the ratio of 5:4. Champ is
admitted for 1/5th share. Aster and Booster decide to share equally in future. Sacrificing
ratio will be:
a) 5:4
b) 2:7
c) 7:2
d) 1:1
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34. Anu and Banu are partne₹ They admit Cini for 1/3rd share. In future the ratio between Anu
and Banu would be 2:1. Sacrificing ratio will be:
a) 2:1
b) 1:1
c) 5:1
d) 1:5
35. Milk and Curd are partners sharing profits and losses as 2:1. Ghee is admitted and profit
sharing ratio becomes 4:3:2. Goodwill is valued at ₹94,500. Ghee brings required goodwill
in cash. Goodwill amount will be credited to:
a) Milk ₹14,000 and Curd ₹7,000
b) Milk ₹12,000 and Curd ₹9,000
c) Milk ₹21,000
d) Milk ₹94,500
36. Lion and Tiger are partners sharing profits and losses in the ratio of 3:2. They admit Zebra
into partnership with 1/5th share in profits which he acquires equally from Lion and Tiger.
Zebra brings in ₹40,000 as goodwill in cash. Goodwill amount will be credited to:
a) Lion ₹20,000; Tiger ₹20,000
b) Lion ₹25,000;Tiger ₹15,000
c) Lion ₹24,000; Tiger ₹16,000
d) Lion ₹4,000 ; Tiger ₹4,000
37. A and B are partners sharing profits and losses in the ratio of 3:2. C is admitted into
partnership for 1/5th share in profit. He pays ₹1,00,000 as goodwill. The ratio of the partners
A,B and C in the new firm would be 3:1:1. Goodwill will be credited to:
a) Only A ₹1,00,000
b) Only B ₹1,00,000
c) A ₹60,000; B ₹40,000
d) A ₹75,000 ; B ₹25,000
38. Success and Confidence are partners in a firm sharing profits in the ratio of 2:1. Attitude is
admitted as a partner. Success and Confidence surrender ½ of their respective share in
favour of Attitude. Attitude is to bring his share of premium for goodwill in cash. The
goodwill of the firm is estimated at ₹60,000. Credit will be given to:
a) Success ₹15,000; Confidence ₹15,000
b) Success ₹40,000; Confidence ₹20,000
c) Success ₹30,000; Confidence ₹30,000
d) Success ₹20,000 ; Confidence ₹ 10,000
39. Punjab and Sikkim are partners sharing profits in the ratio of 3:2. Rajasthan is admitted with
1/5th share and he brings in ₹84,000 as his share of goodwill which is Credited to the Capital
Accounts of Punjab and Sikkim respectively with 63,000 and 21,000. New profit sharing
ratio will be:
a) 3:1:5
b) 9:7:4
c) 3:2:5
d) 7:9:4
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40. When a new partner brings his share of goodwill in cash, the amount is debited to: a)
Goodwill A/c
b) Capital A/c of the new partner
c) Cash A/c
d) Capital A/cs of the old partners
41. Assertion: At the time of admission of a new partner assets and liabilities are revalued and
profit or loss on revaluation is transferred to partners’ capital accounts in their old ratio.
Reason:
Any increase or decrease in the value of assets and liabilities up to the date of admission of
a new partner is for the period before the change in profit sharing ratio. Therefore it is
shared by the partners in their old profit sharing ratio.
a) Both assertion and reason are individually true and reason is the correct explanation of
assertion.
b) Both assertion and reason are individually true and reason is not the correct
explanation of assertion.
c) Assertion is true but reason is false.
d) Assertion is false but reason is true.
42. Assertion: New profit sharing ratio is calculated at the time of admission of a partner.
Reason: at the time of admission of a partner new or incoming partner acquires his share
from old partners, therefore, it is necessary to determine new profit sharing ratio.
a) Both assertion and reason are individually true and reason is the correct explanation of
assertion.
b) Both assertion and reason are individually true and reason is not the correct
explanation of assertion.
c) Assertion is true but reason is false.
d) Assertion is falls but reason is true
43. Amit and Mahesh were partners in our fast Food corner sharing profits and losses
in the ratio 3:2. They sold fast food items across the counter and did home delivery
too. Their initial fixed capital contribution was ₹1,20,000 and ₹80,000 respectively.
At the end of first year their profit was ₹1,20,000 before allowing the remuneration of
₹3000 per quarter to Amit and ₹2000 per half year to Mahesh. Such a promising
performance for first year was encouraging, therefore, they decided to expand the
area of operations.
For this purpose they needed a delivery van and an additional person to support. Six
months into the accounting year they decided to admit Sundaram as a new partner
and offered him 20% as a share of profits along with monthly remuneration of ₹2500.
Sundaram was asked to introduce ₹1,30,000 for capital and ₹70,000 for premium for
Goodwill. Besides this Sundaram was required to provide ₹1,00,000 as loan for two
yea₹ Sundaram readily accepted the offer. The terms of the offer were duly executed
and he was admitted as a partner.
Read the above case carefully and answer the question from 43 to 46
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Q43. Remuneration will be transferred to – – – of Amit and Mahesh at the end of the
accounting period
a. Capital account
b. Loan account
c. Current account
44. Upon the admission of Sundaram the sacrifice for providing his share of profits would be
done:
a. By Amit only
b. By Mahesh only
c. By Amit and Mahesh equally
d. By Amit and Mahesh in the ratio of 3:2
45. Sundaram will be entitled to remuneration of rupees – – – at the end of the year.
a. ₹2500
b. ₹25000
c. ₹15,000
d. ₹30,000
46. While taking up the accounting procedure for this reconstitution the accountant of the firm
Mr Suraj Marwaha faced a difficulty. Solve it by answering the following:
For the amount of loan that Sundaram has agreed to provide, he is entitled to interest thereon
at the rate of – – –
a. @12%
b. At the market rate
c. @ 6%
d. None of the aboveNone of the above
47. Mohit, Nishant, and Tanishq did their B.Com from Delhi University. They decided
to start a textile manufacturing business with the capital of ₹5,00,000 each. They
decided to take profits and losses in the ratio of 5:3:2. After two years of their business
they decided to share future profits and losses in the ratio of 2:3:5 with effect from 1
April 2021. They consulted with their CA and also decided to record the effect of the
following revaluation without affecting the book values of the assets and liabilities by
passing an adjustment entry:
Book value. Revised value
Land and Building. 5,00,000. 5,50,000
Plant and Machinery. 2,50,000. 2,40,000
Sundry credito₹ 60,000. 55,000
Outstanding Expenses. 60,000. 75,000
General reserve at the time of change in profit sharing ratio was ₹20, 000.They decided not to
show General reserve in the books of the new firm.
Read the above case carefully and answer the question from 47 to 50
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Q47. Gain or loss on revaluation will be amounted to
a. Loss on revaluation ₹15,000

b. Loss on revaluation ₹30,000
c. Gain on revaluation ₹ 30,000
d. No gain, no loss
48. Gain or sacrifice of the partners will be
a. Nishant gain 1/10 and Tanishq gain 2/10, Mohit sacrifice 3/10
b. Mohit gain 3/10 ,Tanishq sacrifice 3/10
c. Tanishq Gain 3/10, Mohit sacrifice 3/10
d. Tanishq Gain 1/2, Mohit sacrifice ½
49. The journal entry for the general reserve will be:
a. Tanishq A/c Dr.Rs 6,000 Mohit A/c credit ₹ 6,000
b. Tanishq A/c Dr.Rs 4,000 Nishant A/c Dr.₹ 2,000 Mohit A/c credit ₹ 6,000
c. General reserve A/c Dr.₹ 20,000 Mohit A/c credit ₹10,000,Nishant A/c credit ₹6,000
and Tanishq A/c credit ₹ 4,000
e.
50.The journal entry for the adjustment of profit/ loss on revaluation will be:
a. Tanishq A/c Dr.Rs 9,000 Mohit A/c credit ₹ 9,000

b. Mohit A/c Dr.Rs 9,000 Tanishq A/c credit ₹ 9,000
c. Revaluation A/c Dr.₹ 30,000 Mohit A/c credit ₹15,000,Nishant A/c credit ₹9,000 and
Tanishq A/c credit ₹ 6,000
51. Given below are two statements, one labelled as Assertion (A) and the other labelled as
Reason (R)
Assertion (A): Transfer to reserves is shown in P & L Appropriation A/c.
Reason (R): Reserves are charge against the profits.
In the context of the above statements, which one of the following is correct?
Codes:
a) (A) is correct, but (R) is wrong.
b) Both (A) and (R) are correct.
c) (A) is wrong, but (R) is correct.
d) Both (A) and (R) are wrong.
52. Revaluation Account or Profit and Loss Adjustment A/c is a:

a. Real Account
b. Personal Account
c. Nominal Account
d. Asset Account
53. X and Y are partners sharing profits in the ratio of 4:3. Z is admitted for 1/5th share and he
brings in ₹1,40,000 as his share of goodwill in cash of which ₹1,20,000 is credited to X
and remaining amount to Y. New Profit sharing ratio will be:
a. 4:3:5
b. 2:2:1
c. 1:2:2
d. 2:1:2
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54. Assertion: (A) A minor can become a partner of a firm.
Reason (R) As Indian partnership act provide that minor can be admitted to the benefit to the
firm.
a. Both A and R are true
b. A is false, R is true
c. Both A and R are false
55. Assertion: (A) Revaluation A/c is prepared at the time of Admission of a partner.
Reason: (R ) : It is required to adjust the values of assets and liabilities at the time of
admission of a partner, so that the true financial position of the firm is reflected. In the context
of the above two statements, which of the following is correct?
a. Both (A) and (R) are correct and (R) is the correct reason of (A)
b. Both (A) and (R) are correct but (R) is not the correct reason of (A)
c. Only (R) is correct
d. Both (A) and (R) are wrong.
56. If the incoming partner brings the amount of goodwill in Cash and also a balance exists in
goodwill account, then this goodwill account is written off among the old partners in
a. The new profit sharing ratio

b. The old profit sharing ratio
c. The sacrificing ratio
d. The gaining ratio
57. If at the time of admission, there is some unrecorded liability, it will be:
a. Debited to Revaluation A/c
b. Credited to Revaluation A/c
c. Debited to Goodwill A/c
d. Credited to Partners’ capital A/c
58. The formula for calculating the sacrificing ratio is:

a. New share- Old share
b. Old share – New Share
c. Gaining Ratio – Old ratio
d. Old ratio – Gaining ratio
59. Roshan and Lakshman are partners sharing profits in the ratio of 3:2. Akshai is admitted
as a partner. Calculate sacrificing ratio if new profit sharing ratio is 9:7:4.
a. 3:1
b. 3:2
c. 1:3
d. 9:7
60. Awsome and Blossom are partners sharing profits in the ratio of 5:3. Awsome surrenders
1/4th of his share and Blossom surrenders 1/5th of his share in favour of ‘Classic’, a new
partner. What is the sacrificing ratio?
a. 4:5
b. 5:4
c. 12:25
d. 25:12
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61. Hasanthigaa and Tanisha are partners sharing profits in the ratio of 11:4. Shrimathie was
admitted. Hasanthigaa surrendered 1/11th of her share and Tanisha ¼ of her share in
favour of Shrimathie. The Sacrificing ratio will be:
a. 11:4
b. 1:1
c. 4:11
d. 7:4
62. Chocolate and Vanilla are partners sharing profits in the ratio of 9:7. Strawberry is
admitted as a partner with 9/20th share in profits, which he takes 1/5th from Chocolate and
1/4th from Vanilla. Sacrificing ratio will be:
a. 5:4
b. 9:7
c. 7:9
d. 4:5
63. Tarun and Varun are in partnership sharing profits and losses as 3:2. Harun is admitted
for 1/4th share. Afterwards Arun enters for 20 paisa in the rupee. The new profit sharing
ratio after Arun’s admission will be:
a. 9:6:5:5
b. 6:9:5:5
c. 3:2:4:5
d. 3:2:5:5
64. Alpha and Beta are partners sharing profits in the ratio of 4:3. They admitted Gama as a
new partner who gets 1/5th share of profit, entirely from A. The new profit sharing ratio
will be: a) 20:8:7
b) 13:15:15
c) 13:15:7
d) 15:13:5
65. Savi and Kavi are partners sharing profit or loss in the ratio of 3:2. Ravi is admitted into
partnership as a new partner. Savi sacrifices 1/3rd of her share and Kavi sacrifices 1/4th of
her share in favour of Ravi. What will be the Ravi’s share in the firm?
a. 1/5
b. 2/10
c. 3/10
66. Amar and Akbar were partners sharing profits and losses in the ratio of 7:5. They agree to
admit Antony, their manager, into partnership who is to get 1/6th share in the profits. He
acquires this share as 1/24th from Amar and 1/8th from Akbar. The new profit sharing
ratio will be: a) 13:7:4
b) 7:13:4
c) 7:5:6
d) 5:7:6
67. Hari and Giri share profits in the ratio of 3:2. They agreed to admit Siri on the condition
that Hari will Sacrifice 3/25th of his share of profit in favour of Siri and Giri will sacrifice
1/25th of his profits in favour of Siri. The new profit sharing ratio will be:
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a. 12:9:4
b. 3:2:4
c. 66:48:11
d. 48:66:11
68. P and S are partners sharing profits in the ratio of 3:2. R is admitted with 1/5th share and
he brings in ₹84,000 as his share of goodwill which is Credited to the Capital Accounts of
P and S respectively with ₹63,000 and ₹21,000. New profit sharing ratio will be: a) 3:1:5
b) 9:7:4
c) 3:2:5
d) 7:9:4
69. Partners A, B and C share the profits of a business in the ratio of 3:2:1 respectively. They
admit D who brings in ₹60, 000 for his share of goodwill. A,B,C and D decide to share
the profits respectively in the ratio of 5:3:2:2. Credit will be given to:
a. A ₹6000; B ₹6,000
b. A ₹30,000; B ₹18,000; C ₹12,000
c. A ₹30,000; B ₹20,000 ; C ₹10,000
d. A ₹30,000; B ₹30,000
70. P and Q are partners sharing profits and losses as 2:1. R and S are admitted and Profit
sharing ratio becomes 3:2:4:1. Goodwill is valued at ₹90,000. R and S bring required
goodwill in cash. Credit will be given to:
a. P ₹30,000; Q ₹15,000
b. P ₹66,000; Q ₹24,000
c. P ₹33,000; Q ₹12,000
d. P ₹27,000 ; Q ₹18,000
71. A and B are partners sharing profits and losses in 3:2. They admit C into partnership for
3/10th share in the profits. A surrenders 1/3rd of his share and B Surrenders 1/4th of his
share in favour of C. Goodwill of the firm is valued at ₹3,00,000 but C is unable to bring
his share of goodwill in cash. Credit will be given to :
a. A ₹54,000; B ₹36,000
b. A ₹60,000; B ₹ 30,000
c. A ₹2,00,000; B ₹1,00,000
d. A ₹1,80,000; B ₹1,20,000
72. Arijit and Barui are partners sharing profits in the ratio of 7:5. Chitti is admitted into the
partnership for 1/6th share which he acquires 1/24th from Arijit and 1/8th from Barui.
Chitti does not pay anything for his share of goodwill. On Chitti’s admission firm’s
goodwill was valued at ₹ 1,80,000. Credit will be given to:
a. Arijit ₹22,500; Barui ₹7,500
b. Arijit ₹ 7,500; Barui ₹22,500
c. Arijit ₹ 45,000; Barui ₹ 1,35,000
d. Arijit ₹ 1,35,000; Barui ₹45,000
73. If at the time of admission, the revaluation A/c shows a profit, it should be credited to:
a. Old partners capital accounts in the old profit sharing ratio
b. All partners capital accounts in the new profit sharing ratio
c. Old partners capital accounts in the new profit sharing ratio
d. Old partners capital accounts in the sacrificing ratio.
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74. If, at the time of admission, some profit and loss account balance appears in the books, it
will be transferred to:
a. Profit & Loss Adjustment Account
b. All Partner’s Capital Account
c. Old partner’s Capital Accounts
d. Revaluation Account
75. When a new partner does not bring his share of goodwill in cash, the amount is debited
to: a) Cash A/c
b) Premium A/c
c) Current A/c of the new partner
d) Capital A/cs of the old partners
SET - 2
UNIT – III ADMISSION OF A PARTNER
Assertion reason Questions
Read the following statements – Assertion (A) and Reason(R), and select the
correct alternative in each case:
1. Assertion (A): At the time of admission, the gain or loss on revaluation is transferred
to old partner’s capital account in their old profit-sharing ratio.
Reason (R): All partners have the right to share the assets and liabilities of the
partnership firm.
a) Both (A) and (R) are true and (R) is the correct explanation of (A).
b) Both (A) and (R) are true and (R) is not the correct explanation of (A).
c) Assertion (A) is true and Reason (R) is false.
d) Assertion (A) is false and Reason (R) is true.
2. Assertion (A ): At the time of admission of partners if there is any general reserve,
reserve fund or the balance of profit & loss account appearing in the balance sheet, it
should be transferred to old partners’ capital/current accounts in their old profit
sharing ratio.
Reason (R): The general reserve, reserve fund or the balance of profit & loss
account are the result of the past profits before the admission of a new partner.
a) Both Assertion (A) and Reason (R) are true, and reason (R) is the correct
b) Both Assertion (A) and the reason (R) are true, but the reason (R ) is not the
correct explanation of Assertion (A)
c) Assertion (A) is true, but Reason ( R) is false
d) Assertion (A) is false, but Reason (R) is True
3. Assertion (A): At the time of admission of a new partner, unrecorded liabilities are
debited to Revaluation account.
Reason(R): Unrecorded liabilities are the gain for the partnership firm.
a) Both Assertion (A) and Reason (R) are true.
b) Both Assertion (A) and Reason (R) are false.
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4. Assertion (A): At the time of admission of a partner the goodwill already existing in
the book of accounts, the goodwill is written off by all partners including new
partner.
Reason(R): When goodwill already exists in books at the time of admission, the
existing goodwill must be written off by debiting the old partners in their old profit
sharing ratio.
a) Both Assertion (A) and Reason (R) are true.
b) Both Assertion (A) and Reason (R) are false.
5. Assertion (A): At the time of admission of a new partner, advertisement suspense
account is transferred to old partner’s capital account in their old profit-sharing ratio
Reason(R): Advertisement suspense account is a part of accumulated losses

therefore like any other losses it should be transferred to old partners’ capital
account.
a) Both Assertion (A) and Reason (R) are true, and reason (R) is the correct
b) Both Assertion (A) and the reason (R) are true, but the reason (R ) is not
the correct explanation of Assertion (A)
Case Study Problems
Read the following hypothetical text and answer the given questions:
Motherland enterprises are a partnership business with Manu, Mohan and Sanjay as
partners engaged in production and sales of electrical items and equipment.
Their capital contributions were Rs.50,00,000, Rs.50,00,000 and Rs.80,00,000

respectively with the profit the sharing ratio of 5:5:8. As they are now looking forward
to expanding their business, it was decided that they would bring in sufficient cash to
double their respective capitals.
This was duly followed by Manu and Mohan but due to unavoidable reasons Sanjay
could not do so and ultimately it was agreed that to bridge the shortfall in the required
capital a new partner should be admitted who would bring in the amount that Sanjay
could not bring and that the new partner would get share of profits equal to half of
Sanjay's share which would be sacrificed by Sanjay only.
Consequent to this agreement Malini was admitted and he brought in the required
capital and Rs.30,00,000 as premium for goodwill.
6. What will be the new profit-sharing ratio of Manu, Mohan, Sanjay and Malini? (1)
a. 1:1:1:1 c) 5:5:4:4
b. 5:5:8:8 d) None of the above
7. What is the amount of capital brought in by the new partner Malini? (1)
a. ₹ 50,00,000 c) ₹ 40,00,000
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b. ₹ 80,00,000 d) ₹ 30,00,000
8. What is the value of the goodwill of the firm? (1)
a. ₹ 1,35,00,000 c) ₹ 1,50,00,000
b. ₹ 30,00,000 d) Cannot be determined from the given data
9. What will be correct journal entry for distribution of Premium for Goodwill brought in
by Malini? (1)
(a) Malini’s Capital A/c . . ............ ....Dr. 30,00,000
To Sanjay's Capital A/c 30,00,000

(Being. .......................... )
(b) Premium for Goodwill A/c......Dr. 30,00,000
(Being. ........................... )
(c) Premium for Goodwill A/c......Dr 30,00,000
To Manu's Capital A/c 8,33,333
To Mohan’s Capital A/c 8,33,333
To Malini Capital A/c 13,33,333

(Being. ................................... )
(d) Premium for Goodwill A/c......Dr 30,00,000

To Manu's Capital A/c 10,00,000
To Mohan’s Capital A/c 10,00,000

To Malini's Capital A/c 10,00,000
(Being. ................................... )
Answer the following questions based on the paragraph.

Kiran and kanu were good friends. They contributed Rs. 25, 00,000 each and purchased a
building. Kiran put forth an idea of real estate business but kanu was not interested. Gouri,
another friend, agreed with Kiran’s Idea and introduced ₹ 20,00,000 as capital for a share
of profit in the ratio of 2:1 . The business was going on well. Kiran introduced a further
capital of ₹ 5,00,000 in addition to his initial capital of Rs. 20,00,000. On 31st March 2020
Profit of the firm is calculated as Rs. 5,70,000. Now kiran is arguing for an Interest on
Capital @5% pa where as Gouri demands for a salary of Rs, 10,000 per month since she
has been managing the day to day affairs of the business. In addition to this, Gouri demanded
for an interest @ 12% p.a for the loan of Rs.3,00,000 granted by her to the firm.
10. The relationship between kiran and kanu is that of:
a. Friends c) Partners
b. Association of persons d) All of the above
11. What should be the share of profit of Gouri?
a. ₹ 2,85,000 c) ₹ 3,80,000
b. ₹ 1,90,000 d) No Profit is allowed.
12. At what rate, interest can be allowed to Gouri on her loan to the firm?
a. 12% c) 5%
b. 6% d) No interest on loan shall be allowed
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13. Can Kiran 's claim on interest on capital is valid? Why?
a. Yes, because he contributed more capital.
b. No, because his initial capital of the partners are same.
c. No, in the absence of partnership deed no interest on capital is allowed.
d. Yes, in the absence of partnership deed interest on capital is to be allowed
@5%
Answer the following questions based on the paragraph.

On 1st September 2020, twenty students of Modern College started their Partnership Firm in
the name of “Be Safe” for selling sanitizers on digital mode. Since they were good friends of
each other, they were not having any explicit agreement in place. All of them have agreed to
invest ₹15,000/- each as capital. The books were closed on 31st March 2021, on which date
the following information was provided by the firm:
PARTICULARS AMOUNT (₹)

Sale of Sanitizers 1,20,000
Cost of goods sold 50,000
Total Remuneration to partners 2,000 per month
Rent to a partner 1,000 per month
Manager's Commission 5,000
Closing Stock as on March 31,2021 9,000
6% Fixed Deposit (made on 31.3.2021) 20,000
14. Calculate the amount of profits to be transferred to Profit and Loss Appropriation Account. –
a. Profit ₹58,000
b. Profit ₹44,000
c. Profit ₹59,200
d. Profit ₹58,700
15. On 31st March 2021, Remuneration to Partners will be provided to the partners of “Be Safe”
but only out of:
a. Profits for the accounting year
b. Reserves
c. Accumulated Profits
d. Goodwill
16. On 01st December 2020 one of the partners of the firm introduced additional capital of
₹30,000 and also advanced a loan of ₹40,000 to the firm. Calculate the amount of interest
that Partner will receive for the current accounting period-
a. ₹4,200
b. ₹1,400
c. ₹ 1575
d. ₹ 800
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Read the following hypothetical text and answer the given questions:
Rajendra and Prakash are two partners into a firm sharing profits equally . On 1st
January , 2020, they decided to admit Vikas as a new partner into the firm for 1/5th
share. Vikas brings Rs 10,00,000 for his share to capital and premium of goodwill in
cash . Half goodwill is withdrawn by the old partners. Goodwill of the firm is valued
on the basis of one year purchase of profits or losses of preceding last 3 years. Profits
of last four years are Rs 6,00,000 in 2016; Rs 7,00,000 in 2017; Rs 8,00,000 in 2018
and Rs 15,00,000 in 2019.
17. The value of goodwill of the firm:
a. Rs 7,00,000
b. Rs 8,00,000
c. Rs 9,00,000
d. Rs 10,00,000
18. The amount of capital brought in by Vikas into the Firm is:
a. Rs 2,00,000
b. Rs 8,00,000
c. Rs 10,00,000
d. Can’t be determined from the given data
19. The goodwill share given to Prakash is:
a. Rs 1,00,000
b. Rs 2,00,000
c. Rs 4,00,000
d. Can’t be determined from the given data
20. Which account will be debited when the goodwill is withdrawn by partners?
a. Goodwill a/c
b. Premium for goodwill a/c
c. partner’s capital a/c
d. cash/bank a/c
21. Arrange in correct sequence the treatment of admission of a partner.
i) Preparation of partners’ capital A/c
ii) Calculation of sacrificing ratio
iii) Adjustment of goodwill
iv) Preparation of revaluation A/c
a) iii , I , ii , iv
b) ii , iii , iv , i
c) iv , ii, iii,i
d) I , ii, iii,iv
22. Anand and Ananya were partners sharing profits and losses in the ratio of 5:3. On Ist
April 2019 their capital Accounts shows a balance of Rs. 3,00,000 and 2,00,000
respectively. calculate the amount to be distributed as interest on capital among
partners ,if the partnership deed provides for interest on capital @ 10% pa and the firm
earned a profit of Rs. 45,000 for the year ended 31 st march 2020.
a. Anand ₹ 30,000 and ₹ Ananya 20,000
b. Anand ₹ 27,000 and ₹ Ananya 18,000
c. No interest on capital is to be allowed
23. Mona and Tina were partners in a firm sharing profits in the ratio of 3 : 2. Naina was
admitted with th 1/6 share in the profits of the firm. At the time of admission, Workmen’s
Compensation Reserve appeared in the Balance Sheet of the firm at ₹ 32,000. The claim
on account of workmen’s compensation was determined at ₹ 40,000. Excess of claim over
the reserve will be :
a. Credited to Revaluation Account.
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b. Debited to Revaluation Account.
c. Credited to old partner’s Capital Account.
d. Debited to old partner’s Capital Account.
24. Sun and Star were partners in a firm sharing profits in the ratio of 2 : 1. Moon was
admitted as a new partner in the firm. New profit sharing ratio was 3 : 3 : 2. Moon brought
the following assets towards his share of goodwill and his capital : Machinery ₹
2,00,000 Furniture ₹ 1,20,000 Stock ₹ 80,000 Cash ₹ 50,000 If his capital is
considered as ₹ 3,80,000, the goodwill of the firm will be :
a. ₹ 70,000
b. ₹ 2,80,000
c. ₹ 4,50,000
d. ₹ 1,40,000
25. Ashok and Sudha were partners in a firm sharing profits and losses in the ratio of 3 : 1.
They admitted Bani as a new partner. Ashok sacrificed 1/4th of his share and Sudha
sacrificed 1/4th of her share is favour of Bani. Bani’s share in the profits of the firm will
be : (1)
a. 5/8
b. 1/8
c. ¼
d. 7/16
26. For which of the following situations, the old profit sharing ratio of partners is used at the
time of admission of a new partner?
a. When new partner brings only a part of his share of goodwill.
b. When new partner is not able to bring his share of goodwill.
c. When, at the time of admission, goodwill already appears in the balance sheet.
d. When new partner brings his share of goodwill in cash.
27. Which of the following statement is correct?
a. Goodwill is a wasting asset
b. Goodwill is a current asset
c. Goodwill is an intangible asset
d. Goodwill is a fictitious asset
28. When a new partner is admitted, the balance of General Reserve appearing in the Balance
Sheet at the time of admission is credited to :
a. Profit and Loss Appropriation Account
b. Capital Accounts of all the partners
c. Capital Account of old partners
d. Revaluation Account
29. At the time of reconstitution of a partnership firm, recording of an unrecorded liability will
lead to:
a. Gain to the existing partners
b. Loss to the existing partners
c. Neither gain nor loss to the existing partners
30. At the time of admission of a partner, what will be the effect of the following information?
Balance in Workmen compensation reserve ₹40,000. Claim for workmen compensation
₹45,000
a. ₹45,000 Debited to the Partner’s capital Accounts.
b. ₹40,000 Debited to Revaluation Account.
c. ₹5,000 Debited to Revaluation Account.
d. ₹5,000 Credited to Revaluation Account.
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Balance in Workmen compensation reserve ₹50,000. Claim for workmen compensation
₹45,000
a. ₹ 45,000 Debited to the Partner’s capital Accounts.
b. ₹ 40,000 Debited to Revaluation Account.
c. ₹ 5,000 Debited to Revaluation Account.
d. ₹ 5,000 Credited to Partners capital Account.
Balance in Workmen compensation reserve ₹ 50,000. Claim for workmen compensation is Nil
a. ₹ 45,000 Debited to the Partner’s capital Accounts.
b. ₹ 40,000 Debited to Revaluation Account.
c. ₹ 5,000 Debited to Revaluation Account.
d. ₹ 50,000 credited to Partners capital Account.
33. Revaluation of assets at the time of reconstitution is necessary because their present value may
be different from their:
a. Market Value.
b. Net Value.
c. Cost of Asset
d. Book Value.
34. Kalki and Kumud were partners sharing profits and losses in the ratio of 5:3. On 1st
April,2021 they admitted Kaushtubh as a new partner and new ratio was decided as 3:2:1.
Goodwill of the firm was valued as ₹3,60,000. Kaushtubh couldn’t bring any amount for
goodwill. Amount of goodwill share to be credited to Kalki and Kumud Account’s will be: -
a. ₹ 37,500 and ₹22,500 respectively
b. ₹ 30,000 and ₹30,000 respectively
c. ₹ 36,000 and ₹24,000 respectively
d. ₹ 45,000 and ₹15,000 respectively
35. Ananya and Cirle ware partners in a firm. Their Balance Sheet showed Furniture at ₹
2,00,000; Stock at ₹1,40,000; Debtors at ₹ 1,62,000 and Creditors at ₹60,000. Square was
admitted and new profit-sharing ratio was agreed at 2:3:5. Stock was revalued at ₹ 1,00,000,
Creditors of ₹ 15,000 are not likely to be claimed, Debtors for ₹2,000 have become
irrecoverable and Provision for doubtful debts to be provided @ 10%. Ananya’s share in loss
on revaluation amounted to ₹ 30,000. Revalued value of Furniture will be:
a. ₹2,17,000
b. ₹1,03,000
c. ₹3,03,000
d. ₹1,83,000
36. Devu and Ponnu are partner’s sharing profits in the ratio of 2:1. Kashish was admitted for 1/4
share of which 1/8 was gifted by Asha. The remaining was contributed by Nisha. Goodwill of
the firm is valued at ₹ 40,000. How much amount for goodwill will be credited to Nisha’s
Capital account?
a. ₹2,500.
b. ₹5,000.
c. ₹20,000.
d. ₹ 40,000.
37. At the time of admission of new partner Kasi, Old partners Abhi and Archa had debtors of
₹6,20,000 and a provision for doubtful debts of ₹20,000 in their books. As per terms of
admission, assets were revalued, and it was found that debtors worth ₹15,000 had turned bad
and hence should be written off. Which journal entry reflects the correct accounting treatment
of the above situation.
(A) Bad Debts A/c Dr. 15,000

15,000
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To Sundry Debtors Dr. 15,000
Provision for Doubtful Debts A/c 15,000
To Bad Debts A/c

(B) Bad Debt A/c Dr. 15,000
15,000
To Sundry Debtors
15,000
Revaluation A/c Dr. 15,000
To Provision for Doubtful Debts A/c
(C) Revaluation A/c Dr. 15,000
15,000
To Sund ry Debtors A/c
(D) Bad Debt A/c Dr. 15,000
15,000
To Revaluation A/c
38. Anubhav, Shagun and Pulkit are partners in a firm sharing profits and losses in the ratio of
2:2:1. On 1st April 2021, they decided to change their profit-sharing ratio to 5:3:2. On that
date, debit balance of Profit & Loss A/c ₹30,000 appeared in the balance sheet and partners
decided to pass an adjusting entry for it. Which of the under mentioned options reflect correct
treatment for the above treatment?
a. Shagun's capital account will be debited by ₹3,000 and Anubhav’s capital account
credited by ₹3,000
b. Pulkit's capital account will be credited by ₹3,000 and Shagun's capital account will be
c. Shagun's capital account will be debited by ₹30,000 and Anubhav’s capital account
d. Shagun's capital account will be debited by ₹3,000 and Anubhav’s and Pulkit’s capital
account credited by ₹2,000 and ₹1,000 respectively.
39. Ganga and Avanthi are partners in the ratio of 3:2. Gokul is admitted as a partner and he
takes ¼th of his share from Ganga. Avanthi gives 3/16 from her share to Gokul. What is the
share of Gokul?
a. 1/4
b. 1/16
c. 1/6
d. 1/16
40. Increase in the value of assets at the time of admission of a partner is:
a) Debited to Revaluation A/c
b) Credited to Partners’ capital A/c
c) Credited to Revaluation A/c
d) Debited to Profit and Loss Appropriation A/c
41. Increase in the Provision at the time of admission of a partner is:
a. Debited to Revaluation A/c
b. Credited to Partners’ capital A/c
c. Credited to Revaluation A/c
d. Debited to Profit and Loss Appropriation A/c
42. Admission of a partner results in:
a) Revaluation of partnership
b) Realization of partnership
c) Reconstitution of partnership
d) None of these
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43. At the time of admission, profit on revaluation of assets and reassessment of liabilities is
transferred to:
a) Capital A/c of all partners
b) Capital A/c of old partners
c) Capital A/c of new partners
d) Liability side of balance sheet
a) Revaluation A/c i) Personal A/c
b) Partners’ Capital A/c ii) Real A/c
c) Goodwill iii) Revaluation A/c
d Profit and loss iv) Nominal A/c

adjustment A/c
a) a-ii) b- iv) c - i) d – iii)
b) a- iv) b – iii) c – i) d – i)
c) a – iv) b – i) c – ii) d – iii)
d) a- iii) b – i) c – iv) d – ii)
45. Hemant and Nishant were partners in a firm sharing profits in the ratio of 3:2. Their capitals
were ₹1,60,000 and ₹ 1,00,000 respectively. They admitted Somesh on 1st April, 2013 as a
new partner for 1/5 th share in the future profits. Somesh brought₹1,20,000 as his capital. The
amount of Goodwill brought by Somesh will be:
a. ₹ 2,20,000
b. ₹ 44,000
c. ₹ 73,333
d. ₹ 34000
46. Sacrificing ratio is used to distribute………….in case admission of partner.
a. Reserves
b. Goodwill
c. Revaluation profit
d. Balance in profit and loss account
47. Can employee provident fund be distributed among old partner in their old ratio at the time of
admission of partner.
a. It can be distributed
b. It can’t be distributed
c. Can be distributed if there is no claim.
48. Kumar, Bhanu and Charu are partner’s in a firm. If Charu is admitted as a new partner, the
effect of admission will be:
a. Old firm is dissolved
b. Old firm and old partnership is dissolved
c. Old partnership is reconstituted
49. When the balance sheet is prepared after the new partnership agreement, the assets and
liabilities are recorded at:
a. Historical cost
b. Current cost
c. Realisable value
d. Revalued figures
50. A and B are partners sharing profits in the ratio of 2 : 3. Their Balance Sheet shows Machinery
at ₹2,00,000; Stock at ₹80,000 and Debtors at ₹1,60,000. C is admitted and new profit sharing
ratio is agreed at 6 : 9 : 5. Machinery is revalued at ₹1,40,000 and a provision is made for
doubtful debts @5%. A’s share in loss on revaluation amount to ₹20,000. Revalued value of
Stock will be:
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a. ₹ 62,000
b. ₹ 1,00,000
c. ₹ 60,000
d. ₹ 98,000
51. In India, partnership firms are governed by the Indian partnership Act in the year:
a. 1932
b. 1936
c. 1992
d. 1956
52. A and B are partners sharing profits in the ratio of 5: 3. C was admitted for 1/4th share of
profits. On the date of C’s admission, the Balance Sheet of A and B showed a General Reserve
of ₹ 60,000 and a balance of ₹ 20,000 in the Profit and loss Account on the asset side of
Balance sheet. The net amount to be transferred to partners’ capital accounts will be:
a. ₹ 40,000 to be credited to Partners capital account
b. ₹ 40,000 to be debited to Partners capital account
c. ₹ 80,000 to be credited to Partners capital account
d. ₹ 80,000 to be debited to Partners capital account
53. Sonu, Sumit and Sahil sharing profits and losses in the ratio of 4:3:2, decided to admit Suhil as
a new partner with effect from 1st April, 2021. Their Balance Sheet as at 31st March showing
an investment of ₹ 2,00,00 and Investment Fluctuation Reserve ₹ 18,000.If the market value of
investment is ₹ 2,00,000, What would be the accounting treatment?
a. ₹ 18,000 can distribute among partners and debit to their capital account.
b. ₹ 18,000 can distribute among partners and credit to their capital account.
c. ₹ 18,000 should transferred to Revaluation account
d. ₹ 18,000 should show in the Reconstituted firms’ Balance sheet
54. Ramesh, Sumesh and Girish sharing profits and losses in the ratio of 4:3:2, decided to admit
Manish as a new partner with effect from 1st April, 2021. Their Balance Sheet as at 31st March
showing an investment of ₹ 2,00,00 and Investment Fluctuation Reserve ₹ 18,000.If the
market value of investment is ₹ 1,91,000, What would be the accounting treatment?
c. ₹ 9,000 should transferred to Investment account
d. ₹ 18,000 should show in the Reconstituted firms’ Balance sheet
55. Rani, Priya and Neethu sharing profits and losses in the ratio of 4:3:2, decided to admit Nimmi
as a new partner with effect from 1st April, 2021. Their Balance Sheet as at 31st March
showing an investment of ₹ 2,00,00 and Investment Fluctuation Reserve ₹ 18,000.If the
market value of investment is ₹ 1,73,000, What would be the accounting treatment?
c. ₹ 27,000 should transfer to Investment account.
d. ₹ 18,000 should transfer to Revaluation account.
56. Aasa, Nirasa and Pratheeksha sharing profits and losses in the ratio of 4:3:2, decided to admit
Sowndarya as a new partner with effect from 1st April, 2021. Their Balance Sheet as at 31st
March showing an investment of ₹ 2,00,00 and Investment Fluctuation Reserve ₹ 18,000.If the
market value of investment is ₹ 1,73,000, which accounting treatment among the following is
wrong?
a. ₹ 18,000 can distribute among partners and credit to their capital account.
b. ₹ 18,000 should transfer to Investment account.
c. ₹ 18,000 should transfer to Revaluation account.
57. Excess of the credit side over the debit side of revaluation account
a. Profit
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b. Loss
c. Gain
d. Expense
58. Share of goodwill brought in by new partner in cash is called :
a. Premium
b. Profit
c. Assets
d. Liabilities
59. When is brought in cash by the new partner, then the method is known as :
a. Revaluation Method
b. Premium Method
c. Memorandum Revaluation Method
d. None of the options
60. At the time of admission of a new partner, Which adjustments are required
a. Accounting treatment of Goodwill.
b. Accounting treatment of accumulated profit.
c. Calculation of new profit sharing ratio and sacrificing ratio.
d. All of the options
61. When the incoming partner pays his share of goodwill privately to the sacrificing partner
outside the business Which account should be debited in the books of account
a. No entry should be recorded
b. Premium for goodwill A/c
c. Partners’ capital A/c
62. Which of following account is prepared at the time of admission of a new partner?
a. Revaluation Account
b. Realisation Account
c. Profit & loss A/c
63. Goodwill of a firm of A and B is valued at Rs.30,000. It is appearing in the books at Rs.
12,000. C is admitted for 1/4 share. What amount he is supposed to bring for goodwill?
a. Rs.3,000
b. Rs.4,500
c. Rs.7,500
d. Rs. 10,500
64. When the new partner brings cash for goodwill, the amount is credited to
a. Revaluation Account.
b. Cash Account.
c. Premium for Goodwill Account.
d. Realisation Account
65. Revaluation Account or Profit and Loss Adjustment A/c is a
a. Real Account
b. Personal Account
c. Nominal Account
d. Asset Account
66. In case of admission of a partner, the entry for unrecorded investments will be:
a. Debit Partners Capital A/cs and Credit Investments A/c
b. Debit Investment A/c and Credit Revaluation A/c
c. Debit Revaluation A/c and Credit Investment A/c
67. A and B are partners in a firm sharing profits and losses in the ratio of 2 : 3. C is admitted for
1/5 share in the profits of the firm. If C gets it wholly from A, the new profit sharing ratio after
C’s admission will be :
a. 1 : 3 : 3
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b. 3 : 1 : 1
c. 2 : 2 : 1
d. 1 : 3 : 1
68. A and B are partners sharing profit or loss in the ratio of 3 : 2. C is admitted into partnership as
a new partner. A sacrifice 1/3 of his share of B sacrifice 1/4 of his share in favour of C. What
will be the C’s share in the firm?
a. 1/5
b. 2/10
c. 3/10
69. A and B are partners in a firm sharing profits in the ratio of 2 : 1. C is admitted as a partner. A
and B surrender 1/2 of their respective share in favour of C. C is to bring his share of premium
for goodwill in cash. The goodwill of the firm is estimated at Rs. 60,000. Credit will be given
to :
a. A Rs. 15,000; B Rs. 15,000
b. A Rs.40,000; B Rs. 20,000
c. A Rs.30,000; B Rs. 30,000
d. A Rs.20,000; B Rs. 10,000
70. . At the time of admission, if the profit-sharing ratio among the old partners does not change
then sacrificing ratio will be
a. Equal.
b. According to the contribution of capital.
c. Their old profit-sharing ratio.
d. According to new partner
71. Unrecorded assets or liabilities are transferred to:
a. Partners’ Capital Account
b. Revaluation Account
c. Profit and Loss Account
d. Profit and loss Appropriation Account
72. Increase in the value of liability at the time of admission of a partner will be :
a. Debited to Revaluation Account.
b. Credited to Revaluation Account
c. Debited to Partners Capital Account
d. Credited to Partners Capital Account
73. X and Y are partners sharing profits and losses in the ratio of 3 : 2. They admit Z into
partnership with the share in profits which he acquires equally from X and Y. Z brings in
Rs.40,000 as goodwill in cash. Goodwill amount will be credited to :
a. X Rs.20,000; Y Rs.20,000
b. X Rs.25,000; Y Rs.15,000
c. X Rs.24,000; Y Rs. 16,000
d. X Rs. 4,000; Y Rs. 4,000
74. A and B are sharing profits and losses in the ratio of 3: 2. They admit C as a partner and give
him 2/10th share in the profits. The new profit-sharing ratio will be
a. 12:8:5.
b. 3:2:2.
c. 3:2:5.
d. 2:1:2.
75. Profit or Loss on revaluation of assets and reassessment of liabilities is transferred to Partners'
Capital Accounts in their
a. Capital Ratio.
b. Equal Ratio.
c. Old Profit-sharing Ratio.
d. Gaining Ratio.
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UNIT – 3SET – 1
ANSWER KEY
Answers
1. b
2. a
3. a
4. True
5. b
6. c
7. c
8. a
9. False
10.c
11.b
12. False
13. True
14.c
15.d
16.a
17.a
18.a
19.a
20.a
21.c
22.c
23.b
24.c
25. b
26. c
27.b
28. d
29. b
30. b
31. d
32. d
33. c
34. d
35. c
36. a
37. b
38. d
39. b
40. c
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41. a
42. a
43. c
44. d
45. c
46. c
47. c
48. c
49. c
50. c
51. d
52. c
53. b
54. b
55. a
56. b
57. a
58. b
59. a
60. d.
61. b
62. d
63. a
64. c
65. c
66. a
67. c
68. b
69. d
70. b
71. b
72. b
73. a
74. c
75. c
SET – II
UNIT – 3
Q.No Answers
1 B.) Both (A) and (R) are true and (R) is not the correct
explanation of (A).
2 A) Both Assertion (A) and Reason (R) are true, and reason
(R) is the correct explanation of Assertion (A)
3 c) Assertion (A) is true and Reason (R) is false.
4 d) Assertion (A) is false and Reason (R) is true
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5 d) Assertion (A) is false and Reason (R) is true
6 c) 5:5:4:4
7 c) ₹ 40,00,000, (80,00,000/2)
8 a. ₹ 1,35,00,000 (30,00,000/4*18)
9 Premium for Goodwill A/c......Dr. 30,00,000
(Being. ........................... )
10 a. Friends
11 ₹ 1,90,000
12 b. 6%
13 No, in the absence of partnership deed no interest on capital
is allowed
14 a. Profit ₹58,000
15 d. Goodwill
16 ₹ 800
17 d. Rs 10,00,000
18 b. Rs 8,00,000
19 d. Can’t be determined from the given data
20 c. partner’s capital a/c
21 c) iv , ii, iii,i
22 b. Anand ₹ 27,000 and ₹ Ananya 18,000
23 b. Debited to Revaluation Account.
24 b. ₹ 2,80,000
25 c. ¼
26 c. When, at the time of admission, goodwill already appears
in the balance sheet
27 c. Goodwill is an intangible asset
28 c. Capital Account of old partners
29 c. Neither gain nor loss to the existing partners d
30 c. ₹5,000 Debited to Revaluation Account
31 d. ₹ 5,000 Credited to Partners capital Account.
32 d. ₹ 50,000 credited to Partners capital Account.
33 A )Market Value.
34 d. ₹ 45,000 and ₹15,000 respectively
35 d. ₹1,83,000
36 b. ₹5,000.
37 (A)
38 a. Shagun's capital account will be debited by ₹3,000 and
Anubhav’s capital account credited by ₹3,000
39 a. 1/4
40 c) Credited to Revaluation A/c
41 a. Debited to Revaluation A/c
42 c) Reconstitution of partnership
43 b) Capital A/c of old partners
44 c) a – iv) b – i) c – ii) d – iii)
45 b. ₹ 44,000
46 b. Goodwill
47 b. It can’t be distributed
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48 c. Old partnership is reconstituted
49 d. Revalued figures
50 ₹ 98,000 (68000-50000*= 18000, 18000+80000) *
20000/2*5
51 a. 1932
52 ₹ 40,000 to be credited to Partners capital account
53 b. ₹ 18,000 can distribute among partners and credit to their
capital account.
54 c. ₹ 9,000 should transferred to Investment account
55 c. ₹ 27,000 should transfer to Investment account.
56 b. ₹ 18,000 should transfer to Investment account
57 a. Profit
58 a. Premium
59 b. Premium Method
60 d. All of the options
61 a. No entry should be recorded
62 a. Revaluation Account b
63 c. Rs.7,500
64 c. Premium for Goodwill Account.
65 c. Nominal Account
66 b. Debit Investment A/c and Credit Revaluation A/c
67 d. 1 : 3 : 1
68 c. 3/10
69 d. A Rs.20,000; B Rs. 10,000
70 c. Their old profit-sharing ratio.
71 b. Revaluation Account
72 a. Debited to Revaluation Account.
73 a. X Rs.20,000; Y Rs.20,000
74 a. 12:8:5.
75 c. Old Profit-sharing Ratio.
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TOPIC : ACCOUNTING FOR SHARE CAPITAL
1. Company receives more application than shares issued in?

(a) Under subscription
(b) Over subscription
(c) Nominal subscription
(d) Routine subscription
2. The maximum amount of share that may be issued according to the corporation’s
charter is referred to as the?
(a) Authorized share
(b) Issued share
(c) Unissued share
(d) Outstanding share
3. Ordinary shares are also called?

(a) Equity shares
(b) Founders shares
(c) Deferred shares
(d) Preference shares
4. If a share of Rs. 10 is issued at 10% premium, then issue price of share will be?
(a) Rs. 09
(b) Rs. 11
(c) Rs. 12
(d) Rs. 10
5. The face value of a share is also known as?

(a) Market value
(b) Par value
(c) Book value
(d) All of above
6. Shared offered to general public for contribution are called?
(a) Authorized shares

(b) Called up shares
(c) Issued shares
(d) Subscribed shares
7. Authorized capital is also called?
(a) Registered capital

(b) Nominal capital
(c) Working capital
(d) option a and b
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8. The portion of called up capital which has been actually paid by shareholders is called?
(a) Called up capital

(b) Issued capital
(c) Paid up capital
(d) Reserve capital
9. The sum of the par value of the shares of a company is called?

(a) Shares
(b) Working capital
(c) Reserve capital
(d) Share capital
10. Shared offered to general public for contribution are called?
(a) Authorized shares

(b) Called up shares
(c) Issued shares
(d) Subscribed shares
11. The value which is printed on shares is called?
(a) Face value

(b) Market value
(c) Book value
(d) Purchase value
12. Reserve share capital means :
(a)Part of authorised capital to be called at the beginning

(b)Portion of uncalled capital to be called only at liquidation
(c) Over subscribed capital
(d)Under subscribed capital
13. Shareholders get:
(a)Interest
(b)Dividend
(c) Commission
14. ProfitPremium on issue of shares is a :
(a)Capital Gain
(b)Capital Loss
(c)General Profit
(d)General Loss
15. The difference between subscribed capital and called up capital is called :
(a) Calls-in-arear
(b) Calls-in-advance
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(c) Uncalled capital
(d) None of these
16. Which statement is issued before the issue of shares ?
(a) Prospectus
(b) Articles of Association
(c) Memorandum of Association
(d) All of these
17. Company can utilise securities premium for :
(a) Writing off loss incurred on revaluation of asset
(b) Issuing fully paid bonus shares
(c) Paying divided
(d) Writing off trading loss
18. Securities Premium cannot be applied :
(a) For paying dividend to members
(b) For issuing bonus shares to members
(c) For writing off preliminary expenses of company
(d) For writing off discount on issue of debentures
19. Share Application Account is :
(a) Personal Account
(b) Real Account
(c) Nominal/ Account
(d) None of these
20. A preference share which does not carry the right of sharing in surplus profits is called
……………
(a) Non-Cumulative Preference Share
(b) Non-participating Preference Share
(c) Irredeemable Preference Share
(d) Non-convertible Preference Share
21. Which of the following is not shown under the heading ‘Share Capital’ in a Balance
Sheet:
(a) Subscribed Capital
(b) Issued Capital
(c) Reserve Capital
(d) Authorised Capital
22. As per SEBI Guidelines, Application money should not be less than ……………. of
the issue price of each share.
(a) 10%
(b) 15%
(c) 25%
(d) 50%
23. Which of the following is not a capital profit?

(a) Profit prior to incorporation
(b) Profit from the sale of fixed assets
(c) Premium on issue of shares
(d) Interest received
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24. Calculate the amount of second & final call when Abhijit Ltd, issues Equity shares of
₹10 each at a premium of 40% payable on
Application ₹3, On Allotment ₹5, On First Call ₹2.
(a) Second & final call ₹3.
(b) Second & final call ₹4.
(c) Second & final call ₹1.
(d) Second & final call ₹14.
25. Anish Ltd, issued a prospectus inviting applications for 2,000 shares. Applications were
received for 3,000 shares and pro- rata allotment was made to the applicants of 2,400
shares. If Dhruv has been allotted 40 shares, how many shares he must have applied
for?
(a) 40
(b) 44
(c) 48
(d) 52
26. Anand Ltd offered 2,00,000 Equity Shares of ₹10 each, of these 1,98,000 shares
were subscribed. The amount was payable as ₹3
on application, ₹4 an allotment and balance on first call. If a
shareholder holding 3,000 shares has defaulted on first call, what is
the amount of money received on first call?
(a) ₹9,000.
(b) ₹5,85,000.
(c) ₹5,91,000.
(d) ₹6,09,000.
27. What will be the correct sequence of events?

(i) Forfeiture of shares.
(ii) Default on Calls.
(iii) Re-issue of shares.
(iv) Amount transferred to capital reserve.
Options:
(a) (i), (iv), (ii), (iii)
(b) (ii), (iv), (i), (iii)
(c) (ii), (i), (iii), (iv)
(d) (iii), (iv), (i) (ii)
28. ASSERTION:As per Section 52 of Companies Act 2013, Securities
Premium Reserve can be utilised for issuing Bonus shares.
REASON : The above statement is true.
(a) Both assertion and reason are correct and reason is the correct
explanation for assertion
(b) Both assertion and reason are correct and reason is not the correct
(c) Assertion is True but reason is False
(d) Assertion is False but reason is True.
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29. In which of the following situation Companies Act 2013 allows for
issue of shares at discount?
(a) Issued to vendors.
(b) Issued to public.
(c) Issued as sweat equity.
(d) None of the above.
30. Which of the following statement is/are true?
(i) Authorized Capital < Issued Capital
(ii) Authorized Capital ≥ Issued Capital
(iii) Subscribed Capital ≤ Issued Capital
(iv) Subscribed Capital > Issued Capital
(a) (i) only
(b) (i) and (iv) Both
(c) (ii) and (iii) Both
(d) (ii) only
31. A preference share which cannot be converted into equity shares are called
……………
(a) Non-Cumulative Preference Share
(b) Non-participating Preference Share
(c) Irredeemable Preference Share
(d) Non-convertible Preference Share
32. Section 53 of the companies Act 2013 does not allow issue of shares at ------------------
(a) Par
(b) Premium
(c) Discount
(d) All of the above.
33. When shares are issued to promoters which account should be debited?
(a) Share capital a/c
(b) Promoters a/c
(c) Assets a/c
(d) Goodwill a/c
34. The part of share capital which can be called only at the time of winding up of the
company is called --------------
(a) Authorised capital
(b) Reserve capital
(c) Called up capital
(d) Issued capital
35. Given below are two statements, one labelled as Assertion (A) and the other labelled as
Reason (R):
Assertion (A): if a shareholder does not pay the call amount due on
Allotment or on any calls according to the terms the amount not so received
is called calls in arrears account.
Reason (R): the unpaid amount on allotment or calls may or may not be
transferred to calls in arrears account.
Codes:
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(a) Both (A) and (R) are true, but (R) is not the correct explanation of (A)
(b) Both(A) and (R) are true and (R) is a correct explanation of (A).
(c) Both (A) and (R) are false.
(d) (A) is false, but (R) is true.
36. Ordinary shares are also called
(a) Equity shares
(b) Preference shares
(c) Founders shares
(d) Deferred shares
37. The maximum amount with which the company is registered is called
(a) Authorised capital
(b) Issued capital
(d) Paid up capital.
38. When shares are issued at a premium the amount of premium is credited to
(a) Share allotment a/c
(b) Share I call a/c
(c) Share II call a/c
(d) Securities premium a/c
39. Shareholders are :

(A) Customers of the Company
(B) Owners of the Company
(C) Creditors of the Company
(D) None of these
40. A company has ……………

(A) Separate Legal Entity
(B) Perpetual Existence
(C) Limited Liability
(D) All of the Above
41. A Company may issue ……………….

(A) Equity Shares
(B) Preference Shares
(C) Equity and Preference both shares
(D) None of the Above
42. A company cannot issue :

(A) Redeemable Equity Shares
(B) Redeemable Preference Shares
(C) Redeemable Debentures
(D) Fully Convertible Debentures
43. To whom dividend is given at a fixed rate in a company?

(A) To equity shareholders
(B) To preference shareholders
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(C) To debenture holders
(D) To promoter
44. Preference shareholders have

(A) Preferential right as to dividend only
(B) Preferential right in the management
(C) Preferential right as to repayment of capital at the time of liquidation of the
company
(D) Preferential right as to dividend and repayment of capital at the time of liquidation
of the Company
45. A preference share which does not carry the right of sharing in surplus profits is called
……………
(A) Non-Cumulative Preference Share
(B) Non-participating Preference Share
(C) Irredeemable Preference Share
(D) Non-convertible Preference Share
46. Nominal Share Capital is

(A) that part of authorised capital which is issued by the company
(B) the amount of capital which is actually applied by the prospective shareholders
(C) the amount of capital which is actually paid by the shareholders
(D) the maximum amount of share capital which a company is authorised to issue.
47. A Building was purchased for ₹9,00,000 and payment was made in ? 100 shares at 20%
premium. Securities Premium Reserve A/c will be ……………….
(A) Debited by ₹1,50,000
(B) Credited by ₹1,50,000
(C) Debited by ₹1,80,000
(D) Credited by ₹1,80,000
48. A company purchased machinery for ₹1,80,000 and in consideration issued shares at
20% premium. What will be the face value of shares issued :
(A) ₹1,50,000
(B) ₹1,44,000
(C) ₹1,80,000
(D) ₹2,16,000
49. The liability of members in a Company is :

(A) Limited
(B) Unlimited
(C) Stable
(D) Fluctuating
50. An artificial person created by Law is called :
(A) Sole Tradership
(B) Partnership Firm
(C) Company
(D) All of the Above
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51. Liability of a shareholder is limited to ………………… of the shares allotted to him :
(A) Paid up Value
(B) Called up value
(C) Face value
(D) Reserve Price
52. Capital of a Company is divided in units which is called :
(A) Debenture
(B) Share
(C) Stock
(D) Bond
53. Shareholders receive from the company :
(A) Interest
(B) Commission
(C) Profit
(D) Dividend
54. To whom dividend is given at a fixed rate in a company?
(A) To equity shareholders
(B) To preference shareholders
(C) To debenture holders
(D) To promoters
55. The shares on which there is no any pre-fixed rate of dividend is decided, but the rate
of dividend is fluctuating every year according to the availability of profits, such share
are called :
(A) Equity Share
(B) Non-cumulative preference share
(C) Non-convertible preference share
(D) Non-guaranteed preference share
56. Which shareholders are returned their capital after some specified time :
(A) Redeemable Preference Shares
(B) Irredeemable Preference Shares
(C) Cumulative Preference Shares
(D) Participating Preference Shares
57. Capital included in the Total of Balance Sheet of a Company is called :
(A) Issued Capital
(B) Subscribed Capital
(C) Called up Capital
(D) Authorised Capital
58. Reserve Capital is also known by :
(A) Capital Reserve
(B) Called up Capital
(C) Subscribed Capital
(D) None of the above
59. Reserve Capital is a part of:

(A) Paid-up Capital
(B) Forfeited Share Capital
(C) Assets
(D) Capital to be called up only on liquidation of company
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60. Which of the following statements is true?
(A) Authorized Capital = Issued Capital
(B) Authorized Capital > Issued Capital
(C) Paid up Capital > Issued Capital
61. Authorized Capital of a Company is mentioned in :

(A) Memorandum of Association
(B) Articles of Association
(C) Prospectus
(D) Statement in lieu of Prospectus
62. Shares issued by a company to its employees or directors in consideration of

‘Intellectual Property Rights’ are called:
(A) Right Equity Shares
(B) Private Equity Shares
(C) Sweat Equity Shares
(D) Bonus Equity Shares
63. A Company may issue the shares:

(A) By Private Placement of Shares
(B) By Public Subscription of Shares
(C) For Consideration other than cash
(D) By All of the Above
64. Which of the following will define, when appropriation of a certain number of shares is
made to an applicant in response to his application?
(A) Share allotment
(B) Share forfeiture
(C) Share trading
(D) Share Purchase
65. On issue of shares Premium is :

(A) Profit
(B) Income
(C) Revenue Receipt
(D) Capital Profit
66. When a company issues shares at a premium, the amount of premium should be
received by the company:
(A) Along with application money
(B) Along with allotment money
(C) Along with calls
(D) Along with any of the above
67. For what purpose securities premium reserve account cannot be utilized?
(A) Amortization of preliminary expenses
(B) Distribution of dividend
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(C) Issue of fully paid bonus shares
(D) Buy Back of own shares
68. A Company issued 50,000 shares of ₹20 each at 5% premium. ₹10 were payable on
application and balance on allotment. What will be the allotment amount?
(A) ₹5,00,000
(B) ₹4,75,000
(C) ₹5,50,000
(D) ₹5,25,000
69. Assertion : Shares cannot be issued at a discount.
Reason : Since Shares can be issued at a premium shares cannot be issued
at a discount.
70. Rajan limited is engaged in manufacture of automobiles. Considering the prospects of

high growth in this segment the company has decided to expand and for this purpose
additional investment of ₹20,00,00,000 is required. Directors have decided that 50% of
this requirement would be financed by raising long term debt and balance by issue of
Equity shares. As per memorandum of association of the company the face value of
Equity shares is ₹100 each. Also, considering the market standing of the company these
shares would be issued at a premium of 25%. Directors decided to issue sufficient shares
to collect the desired amount (including premium). The prospectus was issued to public,
and the issue was oversubscribed by 1,00,000 shares which were issued letters of regret.
Answer the below mentioned questions considering that the entire amount was payable
on application.
` What is the total amount collected by shares and debt?
(a) ₹42,50,00,000
(b) ₹20,00,00,000
(c) ₹32,00,00,000
71. How many Equity shares were offered for issue by Garv Ltd?
(a) 10,00,000 shares.
(b) 50,00,000 shares.
(c) 35,00,000 shares.
(d) 32,00,000 shares.
72. How many applications were received by Garv Ltd?
(a) 40,00,000 shares

(b) 21,00,000 shares
(c) 34,00,000 shares
(d) 35,00,000 shares
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73. Long term debt was raised for Rs.
(a) RS.10,00,00,000
(b) RS.12,00,00,000
(c) RS.15,00,00,000
(d) RS. 20,00,00,000
74. Assertion: Share holders are the owners of the company.

Reason : Since they are the owners they have the right to vote in the
meeting.
75. Assertion : Call money may be called by the company to be paid by the shareholders in
one or more instalments.
Reason : call money does not exist in shares.
SET - 2
UNIT – 4 ISSUE OF SHARES
Q 1. 4000 equity shares of ₹10 each were issued @ 8% premium to the promoters of a
company for their services. Which account will be debited?
(A) Share Cpital Account
(B) Incorporation Cost Account
(C) Securities Premium Reserve
(D) Cash Account
Q 2. As per SEBI Guidelines, Application money should not be less than ……………. of
the issue price of each share.
(A) 10%
(B) 15%
(C) 25%
(D) 50%
CALLS IN ARREARS AND CALLS IN ADVANCE

Q 3. Following amounts were payable on issue of shares by a Company :Rs.3 on
application, Rs.3 on allotment. Rs.2 on first call and Rs.2 on final call. X holding 500
shares paid only application and allotment money whereas Y holding 400 shares did
not pay final call. Amount of calls in arrear will be :
(A) Rs.3,800
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(B) Rs.2,800
(C) Rs.1,800
(D) Rs.6,200
Q 4. The subscribed capital of a company is rs.80,00,000 and the nominal value of the
share is rs.100 each. There were no calls in arrear till the final call was made. The final
call made was paid on,77,500 shares only. The balance in the calls in arrear amounted
to rs. 62,500. Calculate the final call on share.
(A) Rs.7
(B) Rs.20
(C) Rs.22
(D) Rs.25
OVERSUBSCRIPTION AND UNDER SUBSCRIPTION OF SHARES
Q 5. Pro-rata allotment of shares is made when there is :
(A) Under subscription
(B) Oversubscription
(C) Equal subscription
(D) As and when desired by directors
Q 6. Authorised capital of a Company is divided into 5,00,000 shares of Rs.10 each. It
issued 3,00,000 shares. Public applied for 3,60,000 shares. Amount of issued capital
will be :
(A) Rs.30,00,000
(B) Rs.36,00,000
(C) Rs.50,00,000
(D) Rs.6,00,000
Q 7. G Ltd. had allotted 10,000 shares to the applicants of 14,000 shares on pro-rata basis.
The amount payable on application was Rs.2. F applied for 420 shares. The number of
shares allotted and the amount carried forward for adjustment against allotment money
due from F will be
(A) 60 shares; Rs.120
(B) 340 shares; Rs.160
(C) 320 shares, Rs.200
(D) 300 shares; Rs.240
Q 8. If applicants for 80,000 shares were allotted 60,000 shares on prorata basis, the
shareholder who was allotted 1,200 shares must have applied for :
(A) 900 Shares
(B) 3,600 Shares
(C) 1,600 Shares
(D) 4,800 Shares
Q 9. A company issued 4,000 equity shares of Rs.10 each at par payable as under : On
application Rs.3; on allotment Rs.2; on first call Rs.4 and on final call Rs.1 per share.
Applications were received for 13,000 shares. Applications for 3,000 shares were
rejected and pro-rata allotment was made to the applicants for 10,000 shares. How
much amount will be received in cash on first call? Excess application money is
adjusted towards amount due on allotment and calls
(A) Rs.6,000
(B) Nil
(C) Rs.16,000
(D) Rs.10,000
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Q 10. A company issued 5.000 equity shares of Rs.100 each at par payable as to : Rs.40
on application; RS.50 on allotment and Rs.10 on call. Applications were received for
8,000 shares. Allotment was made on pro-rata. How much amount will be received in
cash on allotment?
(A) Rs.2,50,000
(B) Rs.1,20,000
(C) Rs.1,30,000
(D) Rs.50,000
ISSUE OF SHARES FOR CONSIDERATION OTHER THAN CASH

Q 11. A Company purchased a Building for Rs.12,00,000 out of which Rs.2,00,000 were
paid in cash. Balance amount was paid by issue of equity shares of Rs.10 each at
25% premium. How many shares will be issued by the Company :
(A) 1,00,000 Shares
(B) 80,000 Shares
(C) 1,20,000 Shares
(D) 96,000 Shares
Q 12. A Building was purchased for Rs.9,00,000 and payment was made in
RS. 100 shares at 20%
premium. Securities Premium Reserve A/c will be ……………….
(A) Debited by Rs.1,50,000
(B) Credited by Rs.1,50,000
(C) Debited by Rs.1,80,000
(D) Credited by Rs.1,80,000
Q 13. The subscribed share capital of MURALI Ltd is Rs.1,00,00,000 of Rs.100

each. There were no calls in arrear till the final call was made. The final call made
was paid on 97,500 shares. The calls in arrear amounted to Rs.87,500. The final
call on share :
A)Rs.20
B)Rs.35
C)Rs.25
D)Rs.45
Q 14. T Ltd had allotted 20,000 shares to the applicants of 24,000 shares on pro
rata basis. The amount payable on application is Rs.2. Manoj applied for 450
shares. The number of shares allotted and the amount carried forward for
adjustment against allotment money due from him is:
A) 150 shares,Rs.375
B) 375 shares,Rs.150
C) 400 shares,Rs.100
D) 300 shares,Rs.300
Q 15. ZOOM Ltd purchased the sundry assets of M/s Surya Industries for
Rs.28,60,000 payable in fully paid shares of Rs.100 each. State the number of
shares issued to vendor when issued at premium of 10%.
A)28,000
B)31,778
C)28,600
D)26,000
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CASE BASED QUESTION:
Read the statement and answer the following questions (Q 16-19)
A company issued 4,000 equity shares of Rs. 10 each at par payable as under:
On application RS.3, on allotment RS.2; on first call RS.4 and on final call RE1
per share. Applicants were received for 16,000 shares. Application for 6,000
shares were rejected and pro-rata allotment was made to the applicants for 10,000
shares.
Q 16. How much amount will be received in cash on first call,when excess
application money is adjusted towards amount due on allotments and calls :
(A) Rs. 6.000
(B) nil
(C) Rs. 16,000
(D) Rs. 10,000
Q 17. How much amount will be received on allotment, when excess application
money is adjusted towards amount due on allotments and calls :
(A) Rs. 6.000
(B) Rs. 16,000
(C) nil
(D) Rs. 10,000
Q 18. How much amount will be received in cash on final call, when excess
(A) Rs. 6.000
(B) nil
(C) Rs. 16,000
(D) Rs. 4,000
Q 19. How much amount will be adjusted towards first call, when excess
(A) Rs. 6.000
(B) nil
(C) Rs. 16,000
(D) Rs. 10,000
FORFEITURE AND RE-ISSUE OF SHARES
Q 20. When nominal (face) value of a share is called up by the company but as
some shareholders did not pay the money, the shares are forfeited. The share
capital is shown in the balance sheet (notes) of a company under the following
heading:
A) Subscribed and fully paid up
B) Subscribed but not fully paid up
C) Subscribed and called up
D) Subscribed but not called up
Q 21. Shares can be forfeited:

(A) For non-payment of call money
(B) For failure to attend meetings
(C) For failure to repay loan to the bank
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(D) For pledging the shares as a security
Q 22. ‘Forfeited shares cannot be re-issued at a discount.

(A) True
(B) False
(C) Partially True
Q 23. The proportionate amount of share forfeiture after the re-issue of shares is
transferred to:
(A) Reserve Capital
(B) Capital Reserve
(C) Capital Redemption Reserve
(D) Share Capital
Q 24. The balance in Share Forfeiture Account is shown in the Balance Sheet
under:
(A) Reserve Capital
(B) Capital Reserve
(C) Capital Redemption Reserve
(D) Share Capital
Q 25. A company forfeited 100 Equity Shares of Rs.10 each, issued at a premium
of 20%, for the non-payment of final call of Rs.5 including premium. State the
amount with which Securities Premium Reserve Account will be debited?
(A) Rs.200
(B) Rs.500
(C) Rs.1000
(D) Rs.1500
Q 26. If a Share of Rs. 10 on which Rs. 8 is called-up and Rs. 6 is paid ,is forfeited.
State with what amount the Share Capital account will be debited.
(A) Rs.8
(B) Rs.6
(C) Rs.10
(D) Rs.100
Q 27. If a Share of Rs. 10 on which Rs. 6 has been paid is forfeited, at what
minimum price it can be reissued?
(A)Rs.8
(B)Rs.6
(C)Rs.4
(D) Rs.100
Q 28. The directors of a company forfeited 200 equity shares of Rs. 10 each on
which Rs. 800 had been paid. The Shares were re-issued upon payment of Rs.
1,500. What is the amount of Discount on re-issue of shares.
(A) Rs.200
(B) Rs.500
(C) Rs.1000
(D) Rs.1500
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Q 29. ‘The forfeited shares can be re-issued at a discount.’
(A) True
(B) False
(C) Partially True
Q 30. What is the maximum rate of discount at which the forfeited shares can be
re-issued?
(A) Amount not yet received on those shares
(B) Amount due on those shares
(C) Both a) and b) above
Q 31. Kanha Ltd issued 15,000 shares of Rs.100 each at a premium of Rs.10 per
share, payable as follows:
On application Rs30
On allotment Rs 50 including premium
On first & final call Rs30
All the shares subscribed and the company received all the money due, With the
exception of the allotment and call money on 150 shares. These shares were
forfeited and reissued to Nancy as fully paid share at Rs.120 each. What is the
amount of premium on re-issue of shares to Nancy?
(A) Rs.2000
(B) Rs.3,000
(C) Rs.10,000
(D) Rs.1500
Q 32. When all of the forfeited shares are not re-issued, it is called
________________ re issue of shares.
(A) Full Re-issue
(B) Partial Re-issue
(C) Both (a) and (b)
(D) None
Q 33. A Forfeited Share can :

(a) not be re-issued at discount
(b) re-issued at a maximum discount of 10%
(c) be re-issued at a maximum discount equal to the amount forfeited
(d) None of the above.
Q 34. XY Limited issued 2,50,000 equity shares of Rs. 10 each at a premium of

Rs.1 each payable as Rs.2.5 on application, Rs.4 on allotment and balance on the
first and final call. Applications were received for 5,00,000 equity shares but the
company allotted to them only 2,50,000 shares. Excess money was applied
towards amount due on allotment. Last call on 500 shares was not received and
shares were forfeited after due notice. This is a case of:
a) Over subscription
b) Pro-rata allotment
c) Forfeiture of Shares
d) All of the above
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Q 35. SIDC Ltd issued 15,000 equity shares of Rs.20 each at a premium of Rs.5
payable Rs.5 on application, Rs.10 on allotment (including premium) and the
balance on first and final call. The company received applications for 22,500
shares and allotment was made pro rata. Bittoo to whom 1,200 shares were
allotted, failed to pay the amount due on allotment. All his shares were forfeited
after the call was made. The forfeited shares were reissued to Dheeraj at par.
Assuming that no other bank transactions took place, the bank balance of the
company after the above transactions is A) Rs.6,85,000
B) Rs.3,60,500
C)Rs.3,78,000
D)Rs.6,34,000
Q 36. Balance in Securities Premium Reserve Account is shown in the balance

sheet under the head of
(A) Reserves and Surplus
(B) Long-term Borrowings
(C) Share Capital
(D) Other Current Liabilities
Q 37. A company forfeited 3,000 shares of Rs.10 each (which were issued at par)
held by Kishore for non-payment of allotment money ofRs.5 per share. The called
up value per share was Rs.8. On forfeiture, the amount debited to share capital:
A) Rs.30,000
B) Rs.24,000
C) Rs.15,000
D) Rs.6,000
Q 38. Z limited issued shares of Rs.100 each at a premium of 10%. Mr. Q

purchased 500 shares and paid Rs.20 on application but did not pay the allotment
money of Rs.30. If the company forfeited his 30% shares, the forfeiture account
will be credited by
A) Rs. 4500
B) Rs. 3500
C) Rs. 1650
D) Rs. 3000
Q 39. Deepak Ltd. offered for subscription 5,50,000 equity shares of Rs. 10 each.
The public applied for 5,00,000 shares. The call (Rs. 8 per share) was received
except from Gopal, who holds 4,000 shares has not paid after application money of
Rs. 2 per share and from Shyam who holds 1,000 shares has paid only Rs. 6 per
share. Gopal’s shares were forfeited. The amount of subscribed capital to be
disclosed in the Balance Sheet is
(A) Rs.39,96,000.
(B) Rs.39,74,000.
(C) Rs.49,46,000.
(D) Rs.49,74,000
Q 40. Daisy Limited forfeited 200 shares Rs.10 each who had applied for 500
shares, issued at a premium of 10% for non-payment of final call of Rs.3 per share.
Out of these 100 shares were issued as fully paid up for Rs.15. The profit on
reissue is :
A ) Rs. 700
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B) Rs. 6400
C) Rs. 300
D) Rs. 400
Q 41. When shares are forfeited. Share Capital Account is debited with
(a) nominal (face) value of shares.
(b) called-up share capital.
(c) paid-up value of shares.
(d) market value of shares.
Q 42. 150 shares of Rs.10 each issued at a premium of Rs.4 per share payable with
allotment were forfeited for non-payment of allotment money of Rs.8 per share
including premium. The first and final call of Rs.4 per share were not made. The
forfeited share were reissued at Rs.15 per share fully paid-up. How much amount
will be debited to Securities Premium Reserve Account on forfeiture?
a) Rs.1200
b) Rs.800
c) Rs.600
d) None
Q 43. 400 share of Rs.50 each issued at par were forfeited for non-payment of final
call of Rs.10 per share. These shares were reissued at Rs.45 per share fully paid-
up. What is the amount of discount at which the shares have been re-issued?
a) Rs.2,000
b) Rs.800
c) Rs.600
d)None
Q 44. Sun and Moon Ltd. Invited applications for 25,000 Equity Shares of Rs.10
each and received 30,000 applications along with the application money of Rs.4
per share. Which of the following alternatives can be followed?
(i) Refund the excess application money and full allotment to the rest of the
applicants
(ii) Not to allot shares to some applicants, full allotment to some and pro-rata
allotment to some of the applicants.
(iii) Not to allot shares to some applicants and pro-rata allotment to some of the
applicants.
(iv) Make pro-rata allotment to all the applicants and adjust the excess money
received towards call money
(A) Only (i) above

(B) Both (i) and (iii) above
(C) only (ii) above
(D) All of the above
Q 45. If a shareholder does not pay his dues on allotment, for the amout due, there
will be a :
a) credit balance in the Shares Allotment Account
b) debit balance in the Shares forfeiture Account
c) credit balance in the Shares forfeiture Account
d) debit balance in the Shares Allotment Account
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Q 46. At the time of re-issue of all forfeited shares:
a) General reserve is debited with the credit balance left in the Shares Forfeited
Account.
b) General reserve is credited with the credit balance left in the Shares Forfeited
Account.
c) Capital reserve is debited with the credit balance left in the Shares Forfeited
Account.
d) Capital reserve is credited with the credit balance left in the Shares Forfeited
Account.
Q 47. On a share of Rs.20 issued at a premium of Rs.4 on which Rs.16 (including

premium) is called-up and Rs.10 (including premium) paid is forfeited, the share
capital account is debited by :
a) Rs.20
b) Rs.12
c) Rs.10
d) Rs.16
Q 48. On a share of Rs.10 issued at a premium of Rs.2 on which whole amount is

called up and Rs.7 is received, is forfeited the share capital account is debited by :
a) Rs.7
b) Rs.12
c) Rs.10
d) Rs.16
Q 49. Mohan ltd. Forfeited 160 shares of Rs.10 each on which the holder had paid
only the application money of rs.2 per share. Out of these shares 40 shares were re-
issued to Gaurav as fully paid for Rs.9 per share. The gain on re-issue is:
a) Rs.320
b) Rs.160
c) Rs.40
d) None of these
Q 50. Aman , Mohan , Madan and Neeraj are directors of a company. The
company had issued 10000 Equity shares of Rs. 10 each at par to which 12000
shares were applied. The directors were thinking off the options to allot the shares.
Aman was of the view that only 10000 shares can be issued and the excess
application money has to be refunded . there is no other way.
Mohan propounded that we have to increase authorized capital to allot full 12000
shares.
Madan says that they could not allot shares in full to some applicants, Rather they
had to allot shares on prorata basis.
Neeraj insisted that they could make full allotment to some applications, rejecting
some applications and pro-rata allotment to some applications.
You are required to help the directors in choosing the correct decision for share
allotment.
a) Aman and Mohan are correct
b) Aman is correct
c) Neeraj is correct
d) None is correct
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Q 51. A company has issued 10000 Equity Shares of Rs.10 each and it has called
the total nominal value .it has received the total amount , except the final call of
Rs.3 on 500 equity shares. These 500 shares will be shown as:
a) Subscribed and Fully paid Capital
b) Subscribed but not Fully paid Capital
c) Issued Share Capital
d) None of these
Q 52. Star ltd. Issued 10,000 equity shares of Rs. 100 each at a premium of 20%.
Mamta who had been allotted 2,000 shares did not pay the first and final call of
Rs.5 per share. On forfeiture of Mamta’s shares, amount debited to Securities
Premium Reserve Account will be:
a) Rs.5,000
b)Rs.10,000
c)Rs.15,000
d) Nil
CASE BASED QUESTION

Questions from 53 to 56 are based on the following case:
Himalaya Company Limited issued for public subscription of 1,20,000 equity
shares of Rs.10 each at a premium of Rs.2 per share payable as under :
On application Rs3
On allotment Rs 5 including premium
On first call Rs2
On final call Rs2
Applications were received for 1,60,000 shares. Allotment was made on pro rata
basis. Excess money on application was adjusted against the amount due on
allotment. Rohan, whom 4,800 shares were allotted, failed to pay for the two calls.
These shares were subsequently forfeited after the second call was made. All the
shares forfeited were reissued to Teena as fully paid at Rs 7 per share.
Q 53. What is the amount of discount on re-issue of shares?

a) Rs.1200
b) Rs.800
c) Rs.600
d) 14,400
Q 54. What is the amount is left in Share forfeiture Account, which will be shown
in the Balance Sheet?
a) Rs.1200
b) Rs.800
c) Rs.600
d) NIL
Q 55. How much will be transferred to Capital Reserve Account out of Shares
Forfeited Account?
a) Rs.1200
b) Rs.800
c) Rs.600
d) Rs.14,400
Q 56. The total Calls in Arrears are for______
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a) Rs.19200
b) Rs.14400
c) Rs.1920
d) Rs15400
Q 57. Calculate the amount of second & final call when Abhijit Ltd, issues Equity
shares of ₹10 each at a premium of 40% payable on Application ₹3, On Allotment
₹5, On First Call ₹2.
(A) Second & final call ₹3.
(B) Second & final call ₹4.
(C) Second & final call ₹1.
(D) Second & final call ₹14
Q 58. Anish Ltd, issued a prospectus inviting applications for 2,000 shares.
Applications were received for 3,000 shares and pro- rata allotment was made to
the applicants of 2,400 shares. If Dhruv has been allotted 40 shares, how many
shares he must have applied for?
(A) 40
(B) 44
(C) 48
(D) 52
Q 59. Ambrish Ltd offered 2,00,000 Equity Shares of ₹10 each, of these 1,98,000
shares were subscribed. The amount was payable as ₹3 on application, ₹4 an
allotment and balance on first call. If a shareholder holding 3,000 shares has
defaulted on first call, what is the amount of money received on first call?
(A) ₹9,000.
(B) ₹5,85,000.
(C) ₹5,91,000.
(D) ₹6,09,000.
Q 60. What will be the correct sequence of events?

(i) Forfeiture of shares. (ii) Default on Calls.
(iii) Re-issue of shares. (iv) Amount transferred to capital reserve.
Options:
(A) (i), (iv), (ii), (iii)
(B) (ii), (iv), (i), (iii)
(C) (ii), (i), (iii), (iv)
(D) (iii), (iv), (i) (ii)
Q 61. Apaar Ltd forfeited 4,000 shares of ₹20 each, fully called up, on which only
application money of ₹6 has been paid. Out of these 2,000 shares were reissued and
₹8,000 has been transferred to capital reserve. Calculate the rate at which these shares
were reissued.
(A) ₹20 Per share
(B) ₹18 Per share
(C) ₹22 Per share
(D) ₹8 Per share
Q 62. Mohit had been allotted for 600 shares by a Govinda Ltd on pro rata basis which
had issued two shares for every three applied. He had paid application money of ₹3 per
share and could not pay allotment money of ₹5 per share. First and final call of ₹2 per
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share was not yet made by the company. His shares were forfeited. the following entry
will be passed:
Equity Share Capital A/c Dr ₹X
To share Forfeited A/c ₹Y
To Equity Share Allotment A/c ₹Z
Here X, Y and Z are:
(A) ₹ 6,000; ₹2,700; ₹3,000 respectively.
(B) ₹ 9,000; ₹2,700; ₹4,500 respectively.
(C) ₹ 4,800; ₹2,700; ₹2,100 respectively.
(D) ₹ 7,200; ₹2,700; ₹4,500 respectively.
Q 63. ASSERTION REASON BASED QUESTION

Given below are two statements, one labelled as Assertion (A) and the other labelled as
Reason (R):
Assertion (A): In case of shares issued on Pro–rata basis, excess money received at the
time of application can be utilised till allotment only.
Reason (R): Company has to pay interest on calls in advance @12% p.a. for amount
adjusted towards calls (if any).
In the context of the above two statements, which of the following is correct?
Codes:
(A) Both (A) and (R) are true, but (R) is not the explanation of working capital
management.
(B) Both(A) and (R) are true and (R) is a correct explanation of (A).
(C) Both (A) and (R) are false.
(D) (A) is false, but (R) is true.
Q 64. Newfound Ltd took over business of Old land ltd and paid for it by issue of 30,000,
Equity Shares of ₹100 each at a par along with 6% Preference Shares of ₹1,00,00,000 at a
premium of 5% and a cheque of ₹8,00,000. What was the total agreed purchase
consideration payable to Old Land ltd.
(A) ₹1,05,00,000.
(B) ₹1,43,00,000.
(C) ₹1,40,00,000.
(D) ₹1,35,00,000.
Q 65. Krishan Ltd has Issued Capital of 20, 00,000 Equity shares of ₹10 each. Till Date ₹8
per share have been called up and the entire amount received except calls of ₹4 per share
on 800 shares and ₹3 per share from another holder who held 500 shares. What will be
amount appearing as ‘Subscribed but not fully paid capital’ in the balance sheet of the
company?
(A) ₹ 2,00,00,000
(B) ₹ 1,95,99,000
(C) ₹ 1,59,95,300
(D) ₹ 1,99,95,300
CASE BASED QUESTION

Question no.’s 66 and 67 are based on the hypothetical situation given below.
Bright Star Limited is engaged in manufacture of high-end medical equipment.

Considering the prospects of high growth in this segment the company has decided to
expand and for this purpose additional investment of ₹50,00,00,000 is required. Directors
112 | P a g e
have decided that 20% of this requirement would be financed by raising long term debts
and balance by issue of Equity shares.
As per memorandum of association of the company the face value of Equity shares is
₹100 each. Also, considering the market standing of the company these shares would be
issued at a premium of 25%. Directors decided to issue sufficient shares to collect the
desired amount (including premium).
The prospectus was issued to public, and the issue was oversubscribed by 2,00,000 shares
which were issued letters of regret. Answer the below mentioned questions considering
that the entire amount was payable on application.
Q 66. What is the total amount collected on application?

(A) ₹42,50,00,000
(B) ₹40,00,00,000
(C) ₹32,00,00,000
Q 67. How many Equity shares were offered for issue by Bright Star Ltd?
(A) 40,00,000 shares.
(B) 50,00,000 shares.
(C) 35,00,000 shares.
(D) 32,00,000 shares.
CASE BASED QUESTION

Questions from 68 to 71 are based on the following case:
Bindiya limited was incorporated on 1stApril 2019 with registered office in Mumbai. The
capital clause of memorandum of Association reflected a registered capital of 8,00,000
equity shares of Rs.10 each and 1,00,000 preference shares of Rs.50 each. Since some
large investments were required for building and machinery the company in consultation
with vendors, M/S. VPS Enterprises, issued 1,00,000 equity shares and 20,000 preference
shares at par to them in full consideration of assets acquired.
Besides this the company issued 2,00,000 equity shares for cash at par payable as Rs 3 on
application, 2 on allotment, 3 on first call and 2 on second call. Till date second call has
not yet been made and all the shareholders have paid except Mr. Ajay who did not pay
allotment and calls on his 300 shares and Mr.Vipul who did not pay first call on his 200
shares. Shares of Mr. Ajay were then forfeited and out of them 100 shares were reissued at
Rs.12 per share.
Based on above information you are required to answer the following
Q 68. Shares issue to vendors of building and machinery, Ms. VPS Enterprises, would be
classified as:
a. Preferential Allotment
b. Employee Stock Option Plan
c. Issue for Consideration other than cash
d. Right Issue of Shares
Q 69. How many equity shares of the company have been subscribed?
a. 3,00,000
b. 2,99,500
c. 2,99,800
d. None of these
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Q 70. What is the amount of security premium reflected in the balance sheet at the end of
the year?
a. Rs.200
b. Rs.600
c. Rs.400
d. Rs. 1,000
Q 71. What amount of share forfeiture would be reflected in the balance sheet?
a. Rs.600
b. Rs.900
c. Rs.200
d. Rs. 300
ASSERTION REASON QUESTION

Q 72. Assertion: Call-in-advance account has a nil balance.
Reason: Calls-in-advance is credited in the entry when it is received and debited in the
entry when is supposed to be received.
(a) Assertion is true but reason is false.
(b) Reason is true but Assertion is false.
(c) Both the Assertion and Reason are true.
(d) Both the Assertion and Reason are false.
Q 73. Assertion: A company can give discount on reissue of the forfeited shares upto the
extent of amount already received on them.
Reason: It is the concept of Maximum Permissible Discount and the company always tries
to secure the face value of the share.
(a) Assertion is true but the reason is false.
(b) Reason is true but assertion is false.
(c) Both the assertion and the reason are false.
(d) Both the assertion and the reason are true.
Q 74. Assertion: A company can reject the applications and deny allotment of shares to
any shareholder.
Reason: On oversubscription of shares, a company may decide to make pro rata allotment,
reject the excess application or issue a combination of both the options.
(a) Assertion is true but Reason is false.
(b) Reason is true but assertion is false.
(c) Both the assertion and reason are true.
(d) Both the assertion and reason are false.
Q 75. Assertion: X ltd. forfeited 2,000 equity shares of ₹ 10 each on which it had received
₹ 10,000. The company can reissue these forfeited shares at ₹ 4 per share.
Reason: Forfeited shares cannot be issued at discount more than the amount received on
these shares.
(a) Assertion and reason both are incorrect.
(b) Assertion and reason both are correct.
(c) Assertion is correct but the reason is incorrect.
(d) Assertion is incorrect but the reason is correct.
Q 76. Assertion: Calls in Arrear is the amount which has not been called by the company
but has been paid by the shareholders.
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Reason: Calls in Arrear will been shown as a deduction from the subscribed but not fully
paid up capital.
(A) Both(A) and (R) are true and (R) is a correct explanation of (A).
(B) Both (A) and (R) are true, but (R) is not the explanation of working capital
management.
(C) (A) is false, but (R) is true.
(D) (A) is true, but (R) is false.
*****************************************************************
TOPIC : ACCOUNTING FOR SHARE CAPITAL
ANSWER KEY
1. (b) Over subscription. The company receives more application than the issued
shares.
2. (a) Authorized share capital is the maximum amount of share capital than can be
issued by the company.
3. (a) Equity shares holders are ordinary share holders.
4. (b) Rs. 11 (10 + 10 x 10/100 = 10 + 1 = 11)
5. (b) Par value is the face value of the share.
6. ( c ) Issued shares – share offered to the general public for subscription.
7. (d) option a & b Registered and Nominal capital – It is the capital mentioned in
the memorandum of association of the company.
8. (C) Paid up capital is the capital which is being paid by the shareholders.
9. (d) Share capital

10. (c) Issued shares
11. (a) Face value
12. (b)Portion of uncalled capital to be called only at liquidation
13. (b)Dividend
14. (a)Capital Gain
15. (c) Uncalled capital
16. (d) All of these
17. (b) Issuing fully paid bonus shares
18. (a) For paying dividend to members
19. (a) Personal Account
20. (a) Non-Cumulative Preference Share

21. (c) Reserve Capital
22. (c) 25%
23. (d) Interest received
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24. (b) Second & final call ₹4.
25. (c ) 48
26. (b) ₹5,85,000.
27. (c) (ii), (i), (iii), (iv)

28. (a) Both assertion and reason are correct and reason is the correct
29. (c) Issued as sweat equity
30. (c) (ii) and (iii) Both
31. (d) Non-convertible Preference Share
32. (c) Discount
33. (b) Promoters’ a/c
34. (b) Reserve capital
35. (a) Both(A) and (R) are true and (R) is a correct explanation of (A).
36. (a) Equity shares
37. (a) Authorised capital
38. (d) Securities premium a/c
39. (b) Owners of the Company

40. (d) All of the Above
41. (c )Equity and Preference both shares
42. (a) Redeemable Equity Shares
43. (b) To preference shareholders
44. (d) Preferential right as to dividend and repayment of capital at the time of
liquidation of the Company
45. (b) Non-participating Preference Share
46. (d)The maximum amount of share capital which a company is authorised to issue.
47. (b) Credited by ₹1,50,000

48. (a) ₹1,50,000
49. (a) Limited
50. (c) Company
51. (c) Face value
52. (b) Share
53. (d) Dividend
54. (b) To preference shareholders
55. (a) Equity Share
56. (a)Redeemable Preference Shares
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57. (b) Subscribed Capital
58. (d) None of the above
59. (d) Capital to be called up only on liquidation of company
60. (b) Authorized Capital > Issued Capital
61. (a) Memorandum of Association
62. (c) Sweat Equity Shares
63. (d) By All of the Above
64. (a) Share allotment
65. (d)Capital Profit
66. (d) Along with any of the above
67. (b) Distribution of dividend
68. (c)₹5,50,000
69. (c) Assertion is True but reason is False
70. (b) 20,00,00,000
71. (a) 10,00,000 shares.
72. (b )21,00,000 shares
73. (a) Rs.10,00,00,000
74. (a) Both assertion and reason are correct and reason is the correct
75. (c) Assertion is True but reason is False
*****************************************************************
SET – 2
UNIT – 4 ISSUE OF SHARES – ANSWER KEY With Hints
Q1 (B)
Q 2 (C)
Q 3 (B) [500x(2+2)]+[400x2]
Q 4 (D) 80000-77500-2500; 62500/2500=25
Q 5 (B)
Q 6 (A)
Q 7 (D); 420*10000/14000=300shares; 420-300=120excess shares; 120*2=₹240 adjusted against
allotment
Q 8 (C) 1200x80000/60000
Q 9 (A) – Amt due on Allotment = 4000x2=₹8000; Amt Due on first call = 4000x4=16000; Excess
money adjusted = 6000*3=18000. Amt received in cash for first call = 16000-(18000-8000)
Q 10 (C); (5000x50)-(3000x40)
Q 11 (B) – 1000000/12.5
Q 12 (B) – 900000/120=7500; 7500*20
Q 13 (B) – 100000-97500=2500; 87500/2500=35
Q 14 (B) – 450x20000/24000=375 applied; excess money = (450-375)x2 = ₹150
Q 15 (D) – 2860000/110=26000
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Q 16 (A) - Amt due on Allotment = 4000x2=₹8000; Amt Due on first call = 4000x4=16000; Excess
money adjusted = 6000*3=18000. Amt received in cash for first call = 16000-(18000-8000)
Q 17 (C) – FULLY ADJUSTED HENCE NIL
Q 18 (D) – 4000*1
Q 19 (D) – 18000-8000=10000
Q 20 (B)
Q 21 (A)
Q 22 (B)
Q 23 (B)
Q 24 (D)
Q 25 (A) – 100X2 = 200
Q 26 (A) – called up value
Q 27 (C) – as the maximum discount on forfeited shares is amount originally received on those
shares
Q 28 (B) – [200x10]-1500
Q 29 (A)
Q 30 (D) None of the above, as the maximum discount on forfeited shares is amount originally
received on those shares
Q 31 (B) – 150x20
Q 32 (B)
Q 33 (C)
Q 34 (D)
Q 35 (C) No. of shares applied by Bittoo = 22,500*1200/15,000 = 1800 shares
Total Money Received:
All shares were fully paid up after re-issue = 15000*20 = ₹3,00,000
+ Amount paid by Bittoo towards Application = 1800*5 = ₹ 9,000
+ Securities Premium Money Received = 13800*5 = ₹ 69,000
Adding Above Bank A/c = ₹3,78,000
Q 36 (A)
Q 37 (B) – 3000x8
Q 38 (D) – [500*30/100]*20
Q 39 (B) – 500000-4000-1000=495000. [495000x8]+[4000x2]+[1000x6]. Till shares are re issued,
forfeiture amount will be added to share capital
Q 40 (A) On 200 shares, non paymnt is ₹3. Hence ₹7 (10-3)is paid. 100 shares re issued at
premium. Profit on re issue = 100*7=700
Q 41 (B)
Q 42 (C) – 150x4
Q 43 (A) – 400x5
Q 44 (D)
Q 45 (D)
Q 46 (D)
Q 47 (B) called value = 16-4
Q 48 (C) called up value
Q 49 (C) Amt paid on forfeited shares = 160x2=320; discount on re issue = 40x1=40. Gain on re
issue = [320*40/160]-40.
Q 50 (C)
Q 51 (B)
Q 52 (D) because mamta has already paid premium amt
Q 53 (D) 4800x(10-7)
Q 54 (D) nil since all shares forfeited are re issued
Q 55 (D) Amt paid by rohan less discount given (amt not paid) to teena = [4800x6]-[4800*3]
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Q 56 (A) first & final call = 2+2 = 4; 4800*4
Q 57 (B) premium = ₹4. 10+4=14; 14-3-5-2=4
Q 58 (C) 40*2400/2000
Q 59 (B) First call rate = 10-(3+4)=3; Money received on firat call=[198000-3000]*3
Q 60 (C)
Q 61 (B) Share forfeiture credited in forfeiture entry = 4000x6. No. of shares re issued = 2000. Let
Rate of discount on re issue = x
2000*(6-x)=8000
X=2
Rate at which re issued = 20-2=18
Q 62 (C)
Equity Share Capital A/c Dr ₹4800
To share Forfeited A/c ₹2700
To Equity Share Allotment A/c ₹2100
Q 63 (D) Assertion is false, but Reason is true

Q 64 (B) =[30000*100]+[10000000+(10000000*5/100)]+800000
Q 65 (c) – [(2000000-1300)*8]+[800*4]+[500*5]
Q 66 (A) – Share capital =50crores x 80% = 40 crores; Premium = ₹25; Face value = ₹100; No. of
shares = 40crores/125= 32,00,000 eq sh. Applied for 3200000+200000 = 3400000shares. App
money = 3400000 x 125 = ₹42,50,00,000
Q 67 (D) Share capital =50crores x 80% = 40 crores; Premium = ₹25; Face value = ₹100; No. of
shares = 40crores/125= 32,00,000 eq sh. Applied for 3200000+200000 = 3400000shares.
Q 68 (C)
Q 69 (C)100000+200000-300+100
Q 70 (C) Called up value is ₹8; 100 shares re issued for ₹12. Premium rate = 12-8 = ₹4. Premium
amt = 100x4 = ₹400
Q 71 (A) Amt received from Ajay will be credited to share forfeiture = 300 x 3 = ₹900
Less amt transferred to capital reserve = 100 x 3 = ₹300
900-300 = ₹600
Q 72 (c) Both the Assertion and Reason are true. Since calls-in-advance is credited when it is
received and debited when is due so (c) option is correct.
Q 73 (d) Both the assertion and the reason are true. Because on reissue of the forfeited share
company tries not to issue the shares at a discount less than the actual face value of the
shares. So in order to get the face value only that much discount is permissible so as to make
a company secure its face value of the share.
Q 74 (c) Both the assertion and reason are true. A company makes allotment on pro rata basis, by
rejecting the excess applications or by adopting a combination of both, so (c) is correct.
Q 75 (d) Assertion is incorrect but the reason is correct.
Q 76 (C) Assertion is true, but Reason is false.
***********************************************************
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UNIT – V SET – 1
TOPIC : A) Financial Statement of Companies (As Per Schedule III) (B) Financial
Statement Analysis
1.. Which analysis is considered as dynamic?

(a) Horizontal Analysis
(b) vertical Analysis
(c) internal Analysis
(d) external Analysis
2.Main Objective of Analysis of Financial Statement is

(a) To know the financial strength
(b) To make a comparative study with other firms
(c) To know the efficiency of management
(d) All the above
3.Analysis of Financial Statement is significant

(a) For creditors
(b) For Managers
(c) For employees
(d) All the above
4.Which Analysis is based on one year’s data? (a) Horizontal Analysis

(c) Cash Flow Statement
(d) Dividend Analysis
5.Feature of financial analysis is to present the data contained in financial statements in

(a) Easy form
(b) Convenient and
rational groups
(c) Comparable form
(d) All of the above.
6. Which analysis is considered as Static?

(a) Horizontal Analysis
(c) internal Analysis
(d) external Analysis
7. Which of the following is not the limitation of financial statement analysis?

(a) Ignores price level changes (b) window dressing
(c) Qualitative aspect ignored (d) Inter firm comparison
8. Current maturities of long-term debt are shown under:
(a) Long term Provisions (b) Long term Borrowings
(c) Short term Borrowings (d) Other Current liabilities
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9. Financial Analysis becomes significant because it
(a) Ignores price level changes
(b) Measures the efficiency of business
(c) Lacks qualitative analysis
(d) Is affected by personal bias
10. Main limitation of Analysis of Financial Statement is

(a) Affected by window dressing
(b) Difficulty in forecasting
(c) Do not reflect changes in price level
(d) All the above
11. Indicate the item which appears as short-term provisions:
(a) Provision for doubtful debts (b) Provision for gratuity (c) Employee’s Provident fund
(d) Securities premium reserve
12.Financial Analysis becomes useless because it

(a) Measures the profitability
(b) Measures the solvency
(c) Lacks qualitative analysis
(d) Makes a comparative study
13. Which of the following are the sub headings of Current Liabilities?
i Short term borrowings ii. Trade payables iii. Short term provisions iv. Short term
Investment
v. Other current liabilities vi. Short term loans and advances Select the correct code:
(a) i, ii, iii, v (b) i, iv, v, vi
(c) iii, iv, v, vi (d)
ii, iv, v, vi
14. Which of the following is not included in sub heading ‘Inventory’?
(a) Stock of finished goods (b) Work in progress

(c) Stores and spares (d) Cheques in hand
15.When bad position of the business is tried to be depicted as good it is known as

(a) Personal bias
(b) Price level changes
(c) Window dressing
(d) All the above
16. For whom analysis of financial statements is not significant?

(a) Political Advisor of Prime Minister
(b) Investors
(c) Management
(d) Financial Institutions
17. Which one of the following items is shown under the heading “ Current Liabilities”
in the Balance Sheet of a company?
(a) Investments (b) Reserve Fund
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(c) Unclaimed Dividend (d) Live Stock
18. Which of the following is not included in sub heading ‘Cash and cash equivalents?
(a) Cash in hand (b) Marketable securities

(c) Cash at Bank (d) Cheques in hand
19.Which of the following statements are false?

a) When all the comparative figures in a balance sheet are stated as percentage
of the total, it is termed as horizontal analysis.
b) When financial statements of several years are analysed, it is termed as
vertical analysis.
c) Vertical Analysis is also termed as time series analysis.
Choose from the following options:
(A) Both (a) and (b)
(B) Both (a) and (c)
(C) Both (b) and (c)
(D) All three (a), (b), (c)
20. Match the following:

1. Short term loan (i) Other current liabilities
2. Short term loans and advances (ii) Short term borrowing
3. Debentures (iii) Long term borrowings
4. Debentures redeemable during current year (iv) Current investments
Select the correct code:

(a) 1 – iii, 2 – ii, 3 – iv, 4 – i (b) 1 – iii, 2 – iv, 3 – ii, 4 - i
(c) 1 – ii, 2 – iv, 3 – iii, 4 – i (d) 1 – i, 2 – ii, 3 – iii, 4 - iv
21. 50,000, 9% Debentures redeemable within 12 months of the date of Balance sheet will be
shown under :
(a) Short -term Borrowing (b) Short – term Provision
(c) Other Current Liability (d) Trade Payables
22.. Balance Sheet of company is required to be prepared in the format given in:
(a) Schedule II Part II (b) Schedule III Part III

(c) Schedule III Part I (d) Table A
23. As per Companies Act, the Balance Sheet of a company is required to be in:
(a) Horizontal Form (b) Vertical Form

(c) Either Horizontal or Vertical (d) Neither of the above
24. According to prescribed order of assets in a Company's Balance Sheet which
asset should be shown first of all:
(a) Non-Current Assets (b) Current Assets

(c) Current Investments (d) Loans and Advances
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25. Calls in Arrears appear in a Company's Balance Sheet under:
(a) Reserve & Surplus (b) Shareholders Funds

(c) Contingent Liabilities (d) Short-term Borrowings
26. Share capital of a company consists of 5,00,000 shares of Rs 10 each ,Rs 8
called up.
All the shareholders have duly paid the called up amount. Share capital will be
shown as :
(a) Subscribed and Fully paid up (b) Subscribed but not
Fully Paid (c) Any of the above (d) None of
the above.
27. Revenue from sales of goods is shown in the statement of profit and loss as- (a)
Other Income
(b) Revenue from operation

(c) Any of the above
28. Under which heading the item “Bills Discounted but not yet matured “will be shown in
the Balance Sheet of a Company?
(a) Current liability (b) Current Assets
(c) Contingent Liabilities (d) Unamortized Expenditure
29. Maximum amount of capital mentioned in the memorandum of association is known as

(a) Subscribed capital
(b) Authorised capital

(d) Paid up Capital
30. Which statement is not included in the final accounts of a company?
(a) Balance sheet

(b) Statement of profit and loss
(c) Both (a) & (b)
None of the above
31.State the item which is not shown under the head ‘Long term borrowings.
(a). Debentures (b). Bonds
(c). Long term loans from Bank (d) Share Application money pending
allotment
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32. Debenture redeemable after 12 years of the issue are shown as
(a) Long term borrowings
(b) Short term borrowings
(c) Other short-term liabilities
(d) Other long-term liabilities
33. As per companies act, the Balance sheet is required to be

presented(a) Vertical Form
(b) Horizontal Form
(c) Either Vertical Form or Horizontal Form
(d) Any of the above
34.Sales is termed as
(a) Employee benefit expenses
(b) Revenue from operation
(c) Cost of material Consumed
35.Income statement is termed as –
(a) Statement of profit and loss
(b) Trading Account
(c) Balance sheet

(d) Profit and loss Account
36. Provision for tax appears in a company’s Balance sheet under the sub head –
(a) Long term provision
(b) Short term provision

(c) Other current liability
37. Mention any one item that can not be shown under the heading ‘Reserves and surplus’ in a
company’s balance sheet
.
(a). Security premium reserve
(b). General Reserve
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(c).Debenture redemption reserve
(d). Short term loans and advances
38. Mention the sub heading which is not shown under the heading ‘Current Liabilities ‘as
per Schedule III part-1 of the companies Act.2013
Ans. (a) Short term borrowings
(b) Trade payables
(c) Overdraft or Cash Credit from Banks
(d) Money received against share warrants
39. Compute the change in Inventory of Stock in Trade if
Opening Inventory of stock in Trade ₹80,000
Closing Inventory of Stock in Trade
₹50,000 (a) Rs.30,000 (b) Rs.
80,000
(c) Rs.50,000 (d) None of the above.
40. Out of the following, Identify the item which is not shown in the Notes to accounts on
employee benefit expenses –
(a) Wages & Salaries (b) Entertainment expenses (c) Bonus (d) Gratuity Paid
41. Out of the following, Identify the item which is not shown in the Notes to accounts on
Finance Cost
(a) Interest paid on term loan (b) Interest paid on overdraft

(c) Bank Charges (d) Discount on Issue of debentures
written off
42. Identify which of the following item which is to be shown in the notes to accounts on
other expenses
(a) Wages and Salaries (b) Rent for Factory (c) Depreciation on furniture (d) Staff
welfare Expenses
43. Identify which of the following item which is not to be shown in the notes to accounts on
other expenses
(a) Internet expenses (b) Rent for Factory & Office (c) Staff Welfare Expenses
(d)Courier expenses
44. Interpretation of Financial Statements includes:

(a) Criticisms and Analysis
(b) Comparison and Trend Study
(c) Drawing Conclusion
(d) All the above
45. Comparative Statements are also known as :

(a) Dynamic Analysis
(b) Horizontal Analysis
(c) Vertical Analysis
(d) External Analysis
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46. Common-size Statement are also known as:
(a) Dynamic Analysis
(b) Horizontal Analysis
(c) Vertical Analysis
(d) External Analysis
47. The most commonly used tools for financial analysis are:
(a) Comparative Statements
(b) Common-size Statement
(c) Accounting Ratios
(d) All the above
48. Trend ratios and trend percentage are used in :

(a) Dynamic analysis
(b) Static analysis
(c) Horizontal analysis (d) Vertical Analysis
49. Which of these are not the method of financial statement analysis ?
(a) Ratio Analysis
(b) Comparative Analysis
(c) Trend Analysis
(d) Capitalisation Method
50. What is shown by Balance Sheet ?
(a) Accuracy of books of accounts
(b) Profit or loss of a specific period
(c) Financial position on a specific date (d) None of the above
51. Balance Sheet provides information about financial position of the enterprise :
(a) At a Point of Time
(b) Over a Period of Time
(c) For a Period of Time (d) None of the above
52. Which of the following statement is correct ?

(a) Assets = Liabilities + Shareholders funds (b) Assets = Total funds
(c) Assets = Funds of outsiders . (d) None of the above
53. In which meeting of company directors report is presented ?
(a) Directors Meeting
(b) Annual General Meeting
(c) Manager’s Meeting
(d) All of the above
54. When Financial Statements of two or more organisations are analysed, it is called :
(a) Intra-firm Analysis
(b) Inter-firm Analysis
(c) Vertical Analysis (d) None of these
55. Share capital is shown in Balance Sheet under. the head ?
(a) Authorised Capital
(b) Issued Capital
(c) Paid-up Capital
(d) Shareholders’ Funds
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56. Which Section of the Companies Act, 2013 requires that the Balance Sheet to be prepared in
prescribed form ?
(a) Section 128
(b) Section 130
(c) Section 129
(d) Section 212
57. Which of the following assets is not shown under the head ‘Fixed Asset’ in the Balance
Sheet ?
(a) Goodwill
(b) Trade Receivable
(c) Buildings (d) Vehicle
58. Financial Statements are :
(a) Anticipated facts
(b) Recorded facts
(c) Estimated facts
(d) None of these
59. Preliminary Expenses are shown in the Balance Sheet under which head ?
(a) Fixed Assets
(b) Reserves and Surplus
(c) Loans & Advances (d) None of these
60. Contingent Liabilities are exhibited under the heading:

(a) Fixed Liabilities
(b) Current Liabilities
(c) As a footnote
(d) None of these
61. Debit Balance of Profit & Loss Statement will be shown on:
(a) Assets Side of Balance Sheet
(b) Liabilities Side of Balance Sheet
(c) Under the head Reserve & Surplus
(d) Under the head Reserves and Surplus as a negative item
62. Equity ₹ 90,000 Liabilities ₹ 60,000 Profit of the year ₹ 20,000. Then total assets will
be :
(a) ₹ 1.70,000 (b) ₹ 1,50,000 (c) ₹1,10,000 (d) ₹ 80,000
63. Provision for employee benefits is shown under the sub-head _________.
(a) Long term provisions (b) Short term provisions (c)
Employee benefit Expenses (d) Current Liabilities.
64. Goodwill appears in a Company's Balance Sheet under:

(a) Current Assets (b) Non-Current Assets
(c) Long-term Provisions (d) Long-term Borrowing
65.‘Claim against the company not acknowledged as debts’ is shown under : (a)
Current Liabilities (b) Contingent Liabilities
(c) Non-current Liabilities (d) Capital Commitments
66. Intra – Firm Analysis is also known as :

(a) Cross- sectional Analysis (b) Trend analysis
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(c) Dividend decision Analysis (d) Debt Analysis
67. Inter – Firm Analysis is also known as :

(a) Cross- sectional Analysis (b) Trend analysis
(c) Dividend decision Analysis (d) Debt Analysis
68. Match the following.
(i) Share Option Outstanding (a) Other Long - term Liabilities

(ii) Money received against Share (b) Current Liabilities
warrants
(iii) Premium on Redemption of (c) Shareholders’ Funds
debentures
(iv) Provision for Tax (d) Shareholders’ Funds – Reserves &
Surplus
(I) (i) d; (ii) c; (iii) a; (iv) b ( II) (i) c; (ii) d; (iii) b; (iv) a;
(III) (i) a; (ii) b; (iii) c; (iv) d; (IV) (i) b; (ii) a; (iii) d (iv) c
69.” Accumulated Dividend Arrears” on preference shares is shown in the Company’s

Balance Sheet as:
(a) Current Liability (b) Contingent Liability
(c) Commitments (d) Short - term Provision
70. Given below are two statements, one labelled as Assertion (A) and the
other labelled as Reason (R)
Assertion (A) The objective of financial statement analysis is to measure the

earning capacity and financial strength of a business and to facilitate comparative
study.
Reason (R) Financial statements of a company are to be prepared as per format
prescribed in Schedule III of the Indian Companies Act, 2013
Codes:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation
of Assertion (A)
(c) Assertion (A) is false, but Reason (R) is true
(d) Assertion (A) is true, but Reason (R) is false
. 71. Given below are two statements, one labelled as Assertion (A) and the
other labelled as Reason (R)
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Assertion (A) In vertical analysis financial statements for a single year or on a
particular date are reviewed and analysed with the help of proper devices like
ratios.
Reason (R) Such type of analysis is based on data of a single year. As such it is
also called static analysis.
Codes:
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A)
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation
of Assertion (A)
(c) Assertion (A) is false, but Reason (R) is true
(d) Assertion (A) is true, but Reason (R) is false
72. Compute Cost of Materials Consumed from the following.
Items Amount (Rs)

Opening Inventory: Materials 12,50,000
Stock -in-Trade 4,00,000
Purchase of Materials 60,00,000
Purchase of Stock-in-Trade 10,00,000
Closing Inventory: Materials 15,00,000
Stock -in-Trade 5,20,000
What is the amount of Cost of Materials Consumed?

(a) Rs.60,00,000 (b)
Rs.57,50,000 (c) Rs.62,50,000
(d) Rs 65,00,000
73. From the following information for the year ended 31st March ,2015, prepare Notes to
Accounts on Employee Benefit Expenses :
(i) Wages Rs. 15,60,000; (ii) Bonus Rs. 2,80,000; (iii) Staff Welfare Expenses
Rs. 70,000;
(iv) Entertainment Expenses Rs. 50,000 (v) Travelling Expenses
Rs.40,000; (vi) Salaries Rs.12,10,000
What is the amount of Employee Benefit Expenses?
(a) Rs.32,00,000 (b) Rs.21,32,000
(c) Rs. 31,20,000 (d) Rs.32,10,000
74. Financial year of a company shall be from 1st January to 31st December every year.
(a) True (b) False
(c) Always true (d) Sometimes true
75. Proposed dividend for Current year is a contingent liability.

(a) True (b) False
(c) Always true (d) Sometimes true
******************************************************************
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UNIT – V SET - 2
RATIO ANALYSIS
1.Two basic measures of liquidity are:

(A) Inventory turnover and Current ratio
(B) Current ratio and Quick ratio
(C) Gross Profit ratio and Operating ratio
(D) Current ratio and average Collection period
2.Current ratio is:

(A) Solvency Ratio
(B) Liquidity ratio
(C) Activity Ratio
(D) Profitability Ratio
3.Current Ratio is :
(A) Liquid Assets/Current Assets
(B) Fixed Assets/Current Assets
(C) Current Assets/Current Liabilities
(D) Liquid assets/Current Liabilities
4.Liquid Assets do not include:

(A) Bills Receivable
(B) Debtors
(C) Inventory
(D) Bank Balance
5.Ideal Current Ratio is:

(A) 1:1
(B) 1:2
(C) 1:3
(D) 2:1
6. Working Capital is the :

(A) Cash and Bank Balance
(B) Capital borrowed from Banks
(C) Difference between Current Assets and Current Liabilities
(D) Difference between Current Assets and Fixed assets
7.Current assets include only those assets which are expected to be realized within……
(A) 3 months
(B) 6 months
(C) 1 year
(D) 2 years
8.A Company’s liquid assets are Rs.5,00,000 and its current liabilities are
Rs.3,00,000.Thereafter, it paid Rs.1,00,000 to its trade payables. Quick ratio will
be:
(A) 1.33:1
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(B) 2.5:1
(C) 1.67:1
(D) 2:1
9.A Company’s Quick Ratio is 1.5:1; Current Liabilities are Rs.2,00,000 and Inventory is
Rs.1,80,000.Current Ratio will be:
(A) 0.9:1
(B) 1.9:1
(C) 1.4:1
(D) 2.4:1
10.Fixed Assets Rs.5,00,000; Current Assets Rs.3,00,000; Equity Share Capital

Rs.4,00,000; Reserve Rs.2,00,000;Long –term debts Rs.40,000.Proprietory Ratio
will be:
(A) 75%
(B) 80%
(C) 125%
(D) 133%
11.If Debt equity ratio exceeds ……………., it indicates risky financial position.
(A) 1:1
(B) 2:1
(C) 1:2
(D) 3:1
12.Equity Share Capital Rs.20,00,000; Reserves Rs.5,00,000; Debentures

Rs.10,00,000; Current Liabilities Rs.8,00,000. Debt-equity ratio will be:
(A) 0.4 : 1
(B) 0.32 : 1
(C) 0.72 : 1
(D) 0.5 : 1
Ans:A
13. On the basis of following data, the Debt-Equity Ratio of a Company will be:
Equity Share Capital Rs.5,00,000; General Reserve Rs.3,20,000; Preliminary
Expenses Rs.20,000; Debentures Rs.3,20,000; Current Liabilities Rs.80,000.
(A) 1:2
(B) 0.52:1
(C) 0.4:1
(D) 0.37:1
14. Operating Profit=……………..
a. Current assets – Current liabilities
b. Capital employed – Debt
c. Revenue from operations - operating cost
d. Revenue from operations – Non-operating expenses
15. The …………….ratios provide the information critical to the long run
operations of the firm
a.Liquidity
b. Activity
c. Solvency
131 | P a g e
d. Profitability
16. Opening Inventory Rs.1,00,000; Closing Inventory Rs.1,50,000; Purchases
Rs.6,00,000; Carriage Rs.25,000; wages Rs.2,00,000. Inventory Turnover Ratio
will be:
(A) 6.6 Times
(B) 7.4 Times
(C) 7 Times
(D) 6.2 Times
17. Revenue from Operations Rs.2,00,000; Inventory Turnover ratio 5; Gross
Profit 25%. Find out the value of Closing Inventory, if Closing Inventory is
Rs.8,000 more than the Opening Inventory.
(A) Rs.38,000
(B) Rs.22,000
(C) Rs.34,000
(D) Rs.26,000
18.Total revenue from operations Rs.9,00,000; Cash revenue from operations
Rs.3,00,000; Debtors Rs.1,00,000; B/R Rs.20,000. Trade Receivables Turnover
Ratio will be:
(A) 10 Times
(B) 6 Times
(C) 7.5 Times
(D) 9 Times
19. A firm’s credit revenue from operations is Rs.3,60,000, cash revenue from
operations is Rs.70,000. Cost of revenue from operations is Rs.3,61,200. Its gross
profit ratio will be:
(A) 11%
(B) 15%
(C) 18%
(D) 16%
20. Revenue from Operations Rs.6,00,000; Gross Profit 20%; Office Expenses
Rs.30,000;Selling Expenses Rs.48,000.Calculate operating ratio.
(A) 80%
(B) 85%
(C) 96.33%
(D) 93%
21.Credit revenue from operations Rs.6,00,000; Cash revenue from operations
Rs.1,50,000; Debtors Rs.1,00,000; B/R Rs.50,000. Average collection period will
be :
a.2 months
b.2.4 months
c.3 months
d.1.5 months
22. On the basis of the following data, the working capital turnover ratio of a
company will be:
Liquid assets Rs.3,70,000; Inventory – Rs.80,000; Current liabilities Rs.1,50,000;
Cost of revenue from operations Rs.7,50,000.
a. 2.5 times
b.3 times
c.5 times
d.4 times
132 | P a g e
23.Patents and copy rights are
A .Liquid assets
b. Current assets
c. Tangible assets
d. Intangible assets
24. Fill in the blanks with appropriate word:
……………is the process of determining and interpreting numerical relationship
between figures of the financial statements.
a. Ratio Analysis
b. cross analysis
c. Horizontal analysis
d. vertical analysis
25. Revenue from operations = Cost of revenue from operations +…………….

a. Gross profit
b. Operating profit
c.Net profit
d. Non-operating profit
26. Working capital is the:

a. Cash and Bank balance
b. Capital borrowed from the banks
c. Difference between Current assets and Current Liabilities
d. Difference between Current assets and Fixed assets
27.Current assets do not include:

a. Prepaid expense
b. Inventory
c. Goodwill
d. Bills Receivable
28.The …………………of a business firm is measured by its ability to satisfy its

short term obligations as they become due.
a. Activity
b. Liquidity
c. Debt
d.Profitability
29.Long term solvency is indicated by :

a. Current ratio
b. Quick ratio
c. Net profit ratio
d. Debt/Equity ratio
30. Fixed assets Rs.5,00,000, Current assets Rs.3,00,000 Equity share capital
Rs.4,00,000 Reserves-Rs.2,00,000 Long -term debts Rs.40,000.
Proprietory ratio will be :
a. 75%
b.80%
c.125%
133 | P a g e
d.133%
31. If debt-equity ratio exceeds …………….., it indicates risky financial position

a. 1:1
b. 2:1
c.1:2
d.3:1
32. A company’s current ratio is 2.5:1 and it working capital is Rs.60,000. If its
inventory is Rs.52,000 what will be the liquid ratio?
a. 2.3:1
b.2.8:1
c.2.5:1
d.1.2:1
33. Total Revenue from operations Rs.15,00,000; Cost of revenue from operations
Rs.9,00,000 and operating expenses Rs.2,25,000. Calculate operating ratio:
a.75%
b.25%
c. 60%
d.15%
34. Cost of Revenue from operations =

a. Revenue from operations – Net profit
b. . Revenue from operations – Gross profit
c.. Revenue from operations – closing inventory
c.. Purchases – closing inventory.
35.Which of the following is not Operating expenses?

a. Office expense
b. Selling expense
c. Bad debts
d. Loss by fire.
36. Revenue from operations Rs.6,00,000; Gross profit 20%; Office expenses
Rs.30,000; Selling expenses Rs.48,000. Calculate Operating ratio.
a. 80% b. 85% c. 96.33% d. 93%
37. Operating ratio is
a. Cost of revenue from operations + Selling expenses/ Net revenue from
operations
b. Cost of production + Operating expenses/ Net revenue from operations
c. Cost of revenue from operations + Operating expenses/ Net revenue from
operations
b. Cost of production / Net revenue from operations
38. The area of interest for a long term lender while analysing financial statement
would be :
a. Liquidity
b. Activity
c. Solvency
d. Profitability
134 | P a g e
39. Which of the following is not an activity ratio:
a.Inventory turnover ratio
b. Interest coverage ratio
c. Working capital turnover ratio
d. Trade receivables turnover ratio.
40. Net profit Rs.1,60,000; wages Rs.80,000; Office expenses Rs.30,000; Selling
expenses Rs.10,000; Revenue from operationsRs.8,00,000. Gross profit ratio will
be:
a. 35%
b.25%
c.15%
d.5%
41.Long-term solvency is indicated by
a. Current ratio
b. Quick ratio
c. Net profit ratio
d. Debt/Equity ratio
42. Proprietary ratio is :

a. Long term debt/shareholders’funds
b.Short term debts/equity capital
c. Total assets/Long term debt
d. Shareholders’ funds/Total assets
43. Which of the following is not operating expense?

a. Office expense
b. Selling expense
c. Bad debts
d. Loss by fire
44. The area of interest for a long term lender while analysing financial statements
will be:
a. Liquidity
b. Activity
c. Solvency
d. Profitability
45. Current assets include only those assets which are expected to be realised
within ………………………
(A) 3 months
(B) 6 months
(C) 1 year
(D) 2 years
46. Which of the following transactions will improve the Current Ratio :
(A) Cash Collected from Trade Receivables
(B) Purchase of goods for cash
(C) Payment to Trade Payables
(D) Credit purchase of Goods
135 | P a g e
47. In debt equity ratio, debt refers to:
(A) Short Term Debts
(B) Long Term Debts
(C) Total Debts
(D) Debentures and Current Liabilities
48. What will be the amount of Gross Profit? If revenue from operations are
₹6,00,000 and Gross Profit Ratio is 20% of cost?
(A) ₹1,50,000
(B) ₹1,00,000
(C) ₹1,20,000
(D) ₹5,00,000
49. Opening Inventory ₹75,000; Closing Inventory ₹1,05,000; Inventory Turnover
Ratio 6; Gross Profit 20% on cost; what will be Gross Profit?
(A) ₹1,35,000
(B) ₹1,08,000
(C) ₹90,000
(D) ₹18,000
50.Debt equity ratio of a company is 1 : 2. Which of the following transactions will

increase it:
(A) Issue of new shares for cash
(B) Redemption of Debentures
(C) Issue of Debentures for cash
(D) Goods purchased on credit
51. The…………………is a measure of liquidity which

excludes……………generally the least liquid asset.
a. Current ratio, Accounts receivable
b. Liquid ratio, Accounts receivable
c. Current ratio, inventory
d. Liquid ratio, inventory
52. A company’s liquid assets are Rs.5,00,000 and its current liabilities are
Rs.3,00,000. Thereafter, it paid Rs.1,00,000 to its trade payables. Quick ratio will
be:
a. 1.33:1
b.2.5:1
c.1.67:1
d.2:1
53. Liquid assets:
a. Current assets-Prepaid expenses
b. Current assets -Inventory +Prepaid expense
c. Current Assets-Inventory-Prepaid expense
d. Current assets+ Inventory-Prepaid expense.
54.Trade payable is the sum total of creditors and…………….

a. Bills receivable
b. Bills payable
c. Bank overdraft
d. Outstanding expenses
136 | P a g e
55. ……………….is the time between the acquisition of assets for processing and
their realisation into cash and Cash equivalents .
a. Operating cycle
b. Accounting period
c. Financial year
d. Current year
56. List out the items that are excluded from the inventories while calculating the
current ratio:
a. Current investment, Prepaid expense
b. Loose tools, Spares and stores
c. Cash and Cash equivalents
d. Accrued income, marketable securities
57. Gross profit+ Other income - ……………=Net profit.

a. Direct expenses
b. Indirect expenses
c. Operating expense
d. Non - operating expenses
58. Debit balance in surplus i.e. Balance in statement of profit and loss is deducted
to calculate ……………while calculating debt to equity ratio.
a. Debt
b. Equity
c. Profit
d. Surplus
59. Capital employed =
a. Fixed assets-working capital
b. Fixed assets +Current assets
c. Current assets – Current liabilities
d. Fixed assets -Current liabilities.
60. If credit revenue from operations Rs.7,00,000, cash revenue from operations
Rs.1,00,000. Cost of revenue operations is Rs.6,40,000, then Gross profit ratio will
be:
a. 15%
b. 18%
c. 25%
d. 20%
61.Name the difference between Revenue from Operations and Operating profit.
a. Gross profit
b. Operating profit
c. Operating cost
d. Net profit before tax.
62. Name the aggregate of Shareholders’ funds and Total Debts.

a. Total Debts
b. Capital employed
c. Total Assets
d. Non-current assets
63. Name the difference between Cpital employed and Non-current liabilities.
a. Shareholders funds
b. Capital employed
137 | P a g e
c. Total debts
d. Total assets.
64. From the following information, calculate Proprietary ratio: Share capital
Rs.5,00,000, Non-current assets Rs.22,00,000, Reserves and Surplus Rs.3,00,000,
Current assets Rs.1,00,000.
a.100%
b.70%
c.40%
d.35%
65.Revenue from operations Rs.9,00,000, Gross profit 25% on cost, Operating
expenses Rs.90,000, Operating ratio will be
a.100%
b.50%
c.90%
d.Net profit before tax
66. Operating cost=…………..

a. Non-operating expenses +operating expenses
b. Total of Non -cash expenses
c. Cost of revenue from operations+ Operating expenses
d. Selling expenses + Administrative expenses
67.Assuming liquid ratio 1.2:1. Cash collected from debtors would :

a. Increase liquid ratio
b. Decrease liquid ratio
c. Have no effect on liquid ratio
d. increase gross profit ratio.
68.(A)Assertion - Profitability ratios are calculated to analyse the earning capacity

of the business
(R)Reason -Ratio analysis is helpful to take investment decision.
(a) Both (A) and (R) are true and (R) is the correct explanation of (A)
(b) Both (A) and (R) are true and (R) is not the correct explanation of A
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is true
69. (A) Assertion- Depreciation and Amortisation expenses are included in the
operating expenses
(R) Reason – They are costs incurred to earn revenue
70.(A)Assertion- Net Revenue from operations = Credit revenue from operations
+ cash revenue from operations – Revenue from operations Returns
( R) Reason – Operating cost is an important component of Operating ratio.
138 | P a g e
71. ( A) Assertion- Working capital turnover ratio has been calculated on the basis
of Revenue from operations.
( R) Reason – It shows the number of times working capital has been rotated in
producing Revenue from operations.
72.(A) Assertion- Loan on Mortgage and Bank loan are long term borrowings
( R) Reason – These should not be included in current liabilities.
73.(A) Assertion – Liquid assets will be converted into cash and cash equivalents
very shortly.
(R) Inventory is excluded from liquid assets because it has to be sold before it can
be converted into cash
74. (A) Assertion – A low inventory ratio indicates that inventory does not sell
quickly and remains lying in the godown for quite a long time.
(R ) Reason- Inventory turnover ratio is a profitability ratio
75.(A) Assertion – Net profit after tax means Net profit after interest and tax
(R )Reason – Interest is a tax deductible expense.
139 | P a g e
UNIT - 5 SET – I
(A) Financial Statement of Companies
(As Per Schedule III)
(B) Financial Statement Analysis
MARKING SCHEME
S.NO Answers and Explanation Marks
01 (a) Horizontal Analysis 1
02 (d) All the above – All three are the main 1
objectives of Analysis of Financial
Statements.
03 (d) All the above – All are interested users 1
of Accounting Information.
04 (b) Vertical analysis – one year data 1
analysis
05 (d) All the above. 1
06 (b) Vertical Analysis – Static analysis 1
07 (d) Inter Firm Comparison is not a 1
limitation
08 (d) Other Current Liabilities 1
09 (b) Measures the efficiency of the 1
business. All the other points are
limitations of Financial statement analysis.
10 (d) All the above. All three are the main 1
limitation Financial Statement Analysis
11 (a) Provision for doubtful debts – 1
Provision against which liability is likely
to arise within 12 months from the date of
Balance Sheet.
12 (c) Lacks Qualitative analysis – This is the 1
only limitation of Financial Statement
Analysis.
13 (a) (i) Short term Borrowings (ii) Trade 1
Payables (iii) Short term Provisions (V)
Other Current Liabilities will be shown
under Current Liabilities.
14 (d) Cheques in hand will not fall under 1
Inventory.
15 (c) Window Dressing – Correct meaning 1
of Window dressing is highlighted in the
statement.
16 (a) Political advisor of Prime Minister – 1
He will not be interested in financial
statement analysis.
17 (c) Unclaimed Dividend –Current Liability 1
is to be settled within the Company’s
normal operating cycle.
18 (b) Marketable Securities – Shall be shown 1
as Current Investment.
140 | P a g e
19 (d) All three (a) , (b), (c) – All three 1
statements are false. Because, one year
data analysed is termed as Vertical
Analysis.
20 (c) 1(ii) Short term Borrowing 2 (iv) 1
Current Investments 3 (iii) Long term
Borrowings 4 (i) Other Current Liabilities.
21 (c) Other Current Liability – It is treated as 1
current maturity of long term Debt
redeemable within 12 months.
22 (c) Schedule III Part I 1
23 (b) Vertical Form 1
24 (a) Non- Current Assets- Should be shown 1
first of all.
25 (b) Shareholders Funds - Calls in Arrears 1
will be subtracted from Subscribed but not
fully paid up Capital.
26 (b) Subscribed but not fully paid up i.e, 1
5,00,000X 8 = Rs.40,00,000 will be shown
under this head
27 (b) Revenue from Operation 1
28 (c) Contingent Liabilities 1
29 (b) Authorised Capital – It is mentioned in 1
the Capital Clause of
Memorandum of Association
30 (d) None of the above - Balance Sheet & 1
Statement of Profit and Loss are the
components of Financial statements/ Final
Accounts.
31 (d) Share Application money Pending 1
allotment – It is shown as a separate line
item under the head “Equity & Liabilities”
but not shown as a part of Share Capital.
32 (a) Long term borrowings. 1
33 (a) Vertical Form 1
34 (b) Revenue from Operations 1
35 (a) Statement of Profit and Loss 1
36 (b) Short term Provision – Provision 1
against which liability is likely to arise
within 12 months from the date of Balance
Sheet.
37 (d) Short term loans and advances – these 1
loans & advances are expected to be
realised within the operating cycle of the
business.
38 (d)Money Received against Share warrants 1
– These are not to be shown as a part of
Share capital but to be shown as a separate
line item under the head “Shareholders’
funds”.
141 | P a g e
39 (a) Rs. 30,000 i.e., Rs 80,000 – 50,000 = 1
Rs.30,000;
Change in the inventory = Opening
Inventory- Closing Inventory.
40 (b) Entertainment Expenses. All the other 1
items are treated as Employee Benefit
Expenses.
41 (c) Bank Charges – Other three items are 1
shown as Finance Costs.
42 (b) Rent for Factory 1
43 (c) Staff Welfare expenses. – All the other 1
expenses are treated as other expenses
44 (d) All the above – Interpretation of 1
Financial Statements means analysis,
comparison and arriving at conclusions
45 (b) Horizontal Analysis – It is 1
Comparative Statement Analysis.
46 (c) Vertical Analysis - Common Size 1
Statement analysis / one year data analysis.
47 (d) All the above – All are tools for 1
Financial Analysis
48 (c) Horizontal Analysis 1
49 (d) Capitalisation Method – It is a method 1
of Valuation of Goodwill
50 (c) Financial position on a specific date. – 1
Balance Sheet is prepared to determine the
financial position of the enterprise.
51 (a) At a point of time.- Balance Sheet is 1
prepared on a Particular date and not for a
Particular period.
52 (a) Assets = Liabilities + Shareholders 1
Funds (Equity)
53 (b) Annual General Meeting 1
54 (b) Inter firm Analysis – (Comparison in 1
between the companies)
55 (d) Shareholders’ funds 1
56 (c) Section 129 1
57 (b) Trade Receivable – It is a Current 1
Asset
58 (b) Recorded facts 1
59 (d) None of the above – Preliminary 1
Expenses not shown in Balance Sheet – as
per AS 26 these expenses are to be written
off in the year in which they are incurred.
60 (c) As a footnote – Contingent liabilities 1
are stated in notes to accounts below the
Balance Sheet.
61 (d) Under the Sub- head “Reserves and 1
surplus” as a negative item.- Net loss as
142 | P a g e
shown by Statement of Profit and loss will
be depicted as negative item.
62 (a) Rs.1,70,000 i.e., Equity + 1

Liabilities + Profit = Total assets
i.e., 90,000+60,000+20,000 = Rs.
1,70,000
63 (a) Long term Provisions – Provision for 1
Employee Benefits related claims are
expected to be settled beyond 12 months
after the preparation of Balance Sheet.
64 (b) Non – Current Assets – Goodwill is 1
shown under the head Non – Current
assets and Sub head “ Fixed Assets –
Intangible Assets.
65 (b) Contingent Liabilities 1
66 (b) Trend Analysis – Intra Firm (within the 1
firm) analysis is a comparison of financial
variables for two or more years.
67 (a) Cross- Sectional Analysis – Inter – 1
Firm Analysis is a comparison of financial
variables of two or more enterprises for the
same accounting period to determine their
competitive position.
68 (I) (i) d -Shareholders’ funds – Reserves 1
and Surplus (ii) c -Shareholders’ funds
(iii) a – Other long term liabilities (iv) b –
Current Liabilities
69 (c) Commitments – An agreement to 1
perform a particular activity at a certain
time in the future.
70 (b) Both Assertion & Reason are true but 1
reason is not the correct explanation of
Assertion
71 (a) Both Assertion & Reason are true but 1
reason is the correct explanation of
Assertion
72 (b) Rs.57,50,000 i.e., Opening inventory 1
of materials + Purchase of
Materials – Closing inventory of materials
i.e., Rs.12,50,000 + Rs.60,00,000-
Rs.15,00,000= Rs.57,50,000
73 (c) Rs.31,20,000 i.e., Wages + Bonus + 1
Staff Welfare expenses + Salaries
i.e., Rs,15,60,000 + Rs.2,80,000 + Rs.
70,000 + Rs. Rs.12,10,000= Rs. 31,20,000.
74 (b) False. – Financial year of a Company 1
shall be from 1st April to 31st March every
year.
75 (a) True. – Liability is uncertain. It may or 1
may not involve the payment of money.
143 | P a g e
UNIT - 5 SET – 2
TOPIC : RATIO ANALYSIS
1 B 1
2 B 1
3 C 1
4 C 1
5 D, 2:1 1
6 C 1
7 C 1
8 D. 5,00,000-1,00,000/3,00,000- 1
1,00,000=4,00,000/2,00,000 = 2:1
9 D. Liquid assets/2,00,000=1.5/1 so Liquid 1
assets=3,00,000
Current assets=Liquid assets+inventory
3,00,000+1,80,000=4,80,000/2,00,000=2.4:1
10 A.8,00,000/6,00,000 *100=75% 1
11 B . It is the standard debt equity ratio. 1
12 D. 10,00,000/20,00,000=.5:1 1
13 C. 3,20,000/8,00,000=.4:1 1
14 C. 1
15 C. Ability to pay long term obligations.is 1

assessed by solvency ratios
16. D. 7,75,000/1,25,000= 6.2 times 1
17 C. Gross profit=50,000, CRFO=1,50,000 1
Average inventory=30,000;
2x+8000/2=30,000
2x+8000=60,000, 2x=52,000; x(opening
inventory) =26,000 closing inventory is
26,000+8,000=34,000
18 A 1
60,000/6,00,000=10 times
19. D 1
68,800/4,30,000*100 = 16%
20 D 1
Cost of revenue from operations-4,80,000
144 | P a g e
Operating cost= 4,80,000+78000=5,58,000
Operating ratio=
5,58,000/6,00,000*100=93%
21 D 1
Trade receivable turnover
ratio=6,00,000/75,000=8 times
Average collection period = 12/8 = 1.5
monrths
22 A . 2.5 times 1
Working capital Rs.3,00,000
Working capital turnover
ratio=7,50,000/3,00,000=2.5 times
23. d. Intangible assets 1
24. A; Ratio analysis 1

25. a. Gross profit 1
26 C 1
27 B 1
28 B 1
29 D 1
30 D 1
31 B 1
32 D 1
33 A. 11,25,000/15,00,000*100=75% 1
34 B 1
35 D 1
36 D 1
37 C 1
38 C 1
39 B 1
40 B 1
41 D 1
42 D 1
43 D 1
44 C 1
45 C 1
46 D 1
47 B 1
48 D. 1/5th on cost= 1/6th on sales 1
49 B. Cost of revenue from 1
operations=5,40,000. Gross
profit=5,40,000*1/5= 1,08,000
50 C 1
51 D 1
52 D. 4,00,000/2,00,000=2:1 1
53 B 1
54 B 1
145 | P a g e
55 A 1
56 B 1
57 B 1
58 C 1
59 A 1
60 D 1
61 B 1
62 B 1
63 A 1
64 D 1
65 B 1
66 C 1
67 C 1
68 B 1
69 A 1
70 B 1
71 A 1
72 A 1
73 A 1
74 C 1
75 A 1
146 | P a g e

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CLASS – XII ACCOUNTANCY

IV ISSUE OF SHARES 91 - 119

V ANALYSIS OF FINANCIAL 120-146

3. In case of partnership the act of any partner is :

4. . Which of the following statement is true?

5. Oustensible partners are those who

6. Number of partners in a partnership firm may be :

7. In the absence of Partnership Deed, the interest is allowed on partner’s capital: a.

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

12. In the absence of agreement, partners are not entitled to :

17. In case of guarantee of minimum profit to a partner deficiency of guaranteed

18. Manager’s commission is a ___________ against profits

20. If average capital employed in a firm is Rs 12,00,000 , actual profit is Rs 1,50,000

22. Goodwill is an ________ asset , but not a _______ asset

a. Loss Rs. 87,000

24. Closing entry for interest on loan allowed to partners

25. Salary to a partner under fixed capital account is credited to

31. Match the following -

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

32. Interest on partner’s loan will be credited to___________

a) I-A; II-B; III-C

a) Interest on capital @ 6% per annum

Choose the correct option based on the above information:

51. What is the amount of interest on drawings of X and Y:

52. What is the amount of commission payable to Y?

53. What is X's share in the net divisible profit?

54. What will be the closing capital of X after all adjustments?

Choose the correct option based on the above information:

56. Net profit for the year is:

57. What will be the divisible profit?

58. What will be the total interest on drawings?

59. What will be the commission of B?

63. Assertion (A): Maximum number of partners in a partnership firm is 50.

69. Assertion (A): Guarantee of minimum profit may be given to a partner.

72. X, Y, and Z are partners in the ratio of 4 : 3 : 2. Salary to X Rs.15,000 and to Z

73. Assertion (A): A Firm should have a Partnership Deed.

Q11. Interest on Partners’ Loan is to treated as –

Q17. 1. ---------------------------- is an extension of Profit & Loss Account.

Q18. Under ----------------------------------------- system,the balance of capital

Q22. In the absence of express agreement, interest @ 6% p.a. is provided :

Q23. Interest on partner’s capitals will be debited to

Q25. Balance of Partner’s Current accounts have :

Q26. . In the absence of partnership deed, partners share profits or losses :

Q27. Which of the following is not incorporated in the Partnership Act?

Q 34. If equal amount is withdrawn by a partner in the beginning of each month

Q37. Which of the following statement is true?

Q39. Interest on Partner’s drawings will be debited to ---------

Q 40. A partner introduced additional capital of rs.30,000 and advanced a loan of

Q44 Interest on partner’s drawings will be credited to –

Q 47 .When a partner is given guarantee by other partners, loss on such guarantee

Q 48 . What is the nature of partnership from legal point of view?

Q51. Anuradha is a partner in a firm. She withdrew rs.6,000 in the beginning of

Q56. A partner introduced additional capital of rs.30,000 and advanced a loan of

Q58. Net profit of a firm is rs.49,500. Manager is entitled to a commission of 10%

Q59. Which one from the below is not a right of a partner?

Assertion (A): In order to compensate a partner for contributing capital to the

Q63. Assertion (A): Partner share profit and loss equally.

2. Interest on Partners drawings will be debited to

22. Goodwill is an __ asset , but not a _ asset