Admission of a Partner with Answers

Question 1.
Goodwill is nothing more than probability that the old customer will resort to the old
place. This definition of goodwill was given by:
(a) Spicer and Pegler
(b) ICAI
(c) Lord Elton
(d) AICPA

Question 2.
Goodwill is to be calculated at one and half year’ purchase of average profit of last 5
years. The firm earned profits during 3 years as ₹ 20,000 ₹ 18,000 and ₹ 9,000 and
suffered losses of ₹ 2,000 and ₹5,000 in last 2 years. The amount of goodwill will
be :
(a) ₹ 12,000
(b) ₹ 10,000
(c) ₹ 15,000
(d) None of these

Question 3.
When there is no Goodwill Account in the books and goodwill is raised,
…………….account will be debited :
(a) Partner’s Capital
(b) Goodwill
(c) Cash
(d) Reserve

Question 4.
The amount of goodwill is paid by new partner :
(a) for the payment of capital
(b) for sharing the profit
(c) for purchase of assets
(d) None of these
Question 5.
At the time of admission of a new partners general reserve appearning in the old
Balance Sheet is transferred to:
(a) All Partner’s Capital Accounts
(b) New Partner’s Capital Account
(c) Old Partners’. Capital Accounts
(d) None of these

Question 6.
Profit or Loss on Revaluation is borne by:
(a) Old Partners
(b) New Partners
(c) All Partners
(d) Only Two Partners

Question 7.
Share of goodwill brought by new partner in case is shared by old partners in :
(a) Sacrificing Ratio
(b) Old Ratio
(c) New Ratio
(d) Equal Ratio

Question 8.
A, Band Care three partners sharing profits and losses in the ratio of 4:3:2. D is
admitted for 1/10 share, the new ratio will be :
(a) 10 : 7 : 7 :4
(b) 5 : 3 : 2 : 1
(c) 4 : 3 : 2 : 1
(d) None of these
Question 9.
A and B are partners in a firm sharing profits in the ratio of 3:2. They admit C as a
new partner for 1/3 rd share in the profits of the firm. The new profit sharing ratio of
A, B and C would be :
(a) 3 : 2 : 1
(b) 3 : 2 : 2
(c) 3 : 2 : 3
(d) 6 : 4 : 5

Question 10.
X and Y are partners sharing profits in the ratio of 1:1. They admit Z for 1/5 th share
who contributed ₹25,000 for his share of goodwill. The total value of goodwill of the
firm will be :
(a) ₹ 2,50,000
(b) ₹ 50,000
(c) ₹ 1,00,000
(d) ₹ 1,25,000

Question 11.
A, B and C are partners in a firm. If D is admitted as a new partner, then:
(a) Old firm is dissolved
(b) Old firm and old partnership is dissolved
(c) Old Partnership is reconsitituted
(d) None of these

Question 12.
In which ratio, the cash brought in for goodwill by the new partner is shared by the
existing partners :
(a) Profit sharing ratio
(b) Capital ratio
(c) Sacrificing ratio
(d) None of these

Question 13.
Sacrificing ratio is ascertained at the time of:
(a) Death of a partner
(b) Retirement of a partner
(c) Admission of a partner
(d) None of these

Question 14.
If at the time of admission of new partner, Profit and Loss Account balance appears
in the books, it will the transferred to:
(a) Profit & Loss Appropriation A/c
(b) All Partners’ Capital A/cs
(c) Old Partners’ Capital A/cs
(d) Revaluation A/c

Question 15.
State the ‘true’ statement:
(a) Profit & Loss Adjustment A/c is prepared for revaluated of assets and liabilities on
the admission of a partner
(b) The new partner is liable for the past losses of the firm
(c) In case the new partner is unable to bring in cash for goodwill, Goodwill Account
may be raised in the firm’s books as per AS-26
(d) When a partner is admitted, there is dissolution of firm

Question 16.
Excess of the credit side over the debit side of Revaluation account is:
(a) Profit
(b) Loss
(c) Gain
(d) Expense

Question 17.
Balance sheet prepared after new partnership agreement, assets and liabilities are
recorded at:
(a) Original Value
(b) Revalued Figure
(c) At Realisable Value
(d) Either of (a) or (b)

Question 18.
Assets and Liabilities are shown at their revalued values in :
(a) New Balance Sheet
(b) Revaluation A/c
(c) All Partner’s Capital A/c’s
(d) Realisation A/c

Question 19.
Which of the following assets is compulsorily revalued at the time of admission of a
new partner :
(a) stock
(b) Fixed Assets
(c) Investment
(d) Goodwill

Question 20.
A and B are partners. C is admitted with 1/5 share. C brings 7 1,20,000 as his share
towards capital. The total net worth of the firm is :
(a) ₹ 1,00,000
(b) ₹ 4,00,000
(c) ₹ 1,20,000
(d) ₹ 6,00,000

Question 21.
A and B share profits and losses in the ratio of 3:4. C was admitted for 1/5 th share.
New profit sharing ratio will be:
(a) 3 : 4 : 1
(b) 12 : 16 : 7
(c) 16 : 12 : 7
(d) None of these

Question 22.
The opening balance of Partner’s Capital Account is credited with:
(a) Interest on Capital
(b) Interest on Drawings
(c) Drawings
(d) Share in loss

Question 23.
Share of goodwill brought in cash by the new partner is called:
(a) Assets
(b) Profit
(c) Premium
(d) None of these

Question 24.
If the incoming partner brings the amount of goodwill in cash and also a balance
exists in Goodwill A/c, then the Goodwill A/c is written off among the old partners:
(a) In new profit-sharing ratio
(b) In old profit-sharing ratio
(c) In sacrificing ratio
(d) In gaining ratio

Question 25.
A and B share profits and losses in the ratio of 3 : 1.C is admitted into partnership for
1/4 share. The sacrificing ratio of A and B is :
(a) Equal
(b) 3 : 1
(c) 2 : 1
(d) 3 : 2

Question 26.
A and B are partners sharing profites in the ratio of 3 : 1. They admit C for 1/4 share
in future profits. The new profit sharing ratio will be:
(a) A916, B316, C416
(b) A816, B416, C416
(c) A1010, B216, C416
(d) A816, B916, C1016

Question 27.
Formula of Sacrificing ratio is:
(a) New Ratio – Old Ratio
(b) Old Ratio – New Ratio
(c) Gain Ratio – Sacrificing Ratio
(d) New Ratio – Sacrificing Ratio .

Question 28.
The accumulated profits and reserves are transferred to:
(a) Realisation A/c
(b) Partner’s Capital A/cs
(c) Bank A/c
(d) Savings A/c
Question 29.
A, B and C are equal partners. D is admitted to the firm for non-ourth share. D brings
₹ 20,000 as capital and ₹ 5,000 being half of the premium for goodwill. The value of
goodwill of the firm is :
(a) ₹ 10,000
(b) ₹ 40,000
(c) ₹ 30,000
(d) None of these

Question 30.
On the admission of a new partner, increase in the value of assets is debited to
which account ?
(a) Revaluation Account
(b) Assets Account
(c) Old Partners’ Capital Accounts
(d) None of these

Question 31.
Z is admitted in a firm for a 1/4 share in the profit for which he brings 7 30,000 for
goodwill. It will be taken away by the old partners X and Y in :
(a) Old profit-sharing ratio
(b) New profit-sharing ratio
(c) Sacrificing ratio
(d) Capital ratio

Question 32.
On the admission of a new partner, the decrease in the value of assets is debited to:
(a) Revaluation Account
(b) Assets Account
(c) Old Partners’ Capital Accounts
(d) None of these
Question 33.
When the new partner pays for goodwill in cash, the amount should be debited in the
firm’s book to:
(a) Goodwill Account
(b) Cash Account
(c) Capital Account of new partner
(d) None of these

Question 34.
The balance of Revaluation Account or Profit & Loss Adjustment Account is
transferred to Old Partners’ Capital Accounts in their :
(a) Old profit-sharing ratio
(b) New profit-sharing ratio
(c) Equal ratio
(d) Capital ratio

Question 35.
X and Y share profits in the ratio of 3 : 2 Z was admitted as a partner who gets 1/5
share. Z acquires 3/20 from X and 1/20 from Y. The new profit sharing ratio will be :
(a) 9 : 7 : 4
(b) 8 : 8 : 4
(c) 6 : 10 : 4
(d) 10 : 6 :4

Question 36.
The opening balance of Partner’s Capital Account is credited with:
(a) Interest on Capital
(b) Interest on Drawings
(c) Drawings
(d) Share in loss
Question 37.
At the time of admission of a new partner, Undistributed Profits appearing in the
Balance Sheet of the old firm is transferred to the Capital Account of:
(a) Old partners is old profit-sharing ratio
(b) Old partners in new profit-sharing ratio
(c) All the partners in the new profit-sharing ratio
(d) None of these

Question 38.
Z is admitted in a firm for al/4 share in the profit for which he brings 7 30,000 for
goodwill. It will be taken away by the old partners X and Y in :
(a) Old profit-sharing ratio
(b) New profit-sharing ratio
(c) Sacrificing ratio
(d) Capital ratio

Question 39.
General Reserval at the time of admission of a new partner is transferred to :
(a) Revaluation Account
(b) Old Partner’s Capital Account
(c) Profit and Loss Adjustment Account
(d) Realisation Account

Question 40.
Change in profit-sharing ratio of existing partners results in:
(a) Revaluation of Firm
(b) Reconstitutions of Firm
(c) Dissolution of Firm
(d) None of these
Question 41.
X, Y and Z are partners in a firm, they divided profit and loss in the ratio of 4:3:1.
They decided to share profit In the ratio 5:4:3. X’s and Y’s sacrifices are :
(a) 224:124
(b) 124:324
(c) 224:324
(d) None of these

Question 42.
On reconstitution of a partnership firm, recording of an unrecorded liability wil result
in:
(a) Gain to the existing partners
(b) Loss to the existing partners
(c) Neither gain nor loss to the existing partners
(d) None of these

Question 43.
Increase In the value of assets on reconstitution of the partnership firm results into :
(a) Gain to the existing partners
(b) Loss to the existing partners
(c) Neither gain nor loss to the existing partners
(d) None of these

Question 44.
The balance of Revaluation Account is transferred to old Partner’s Capital Accounts
in their:
(a) Old Profit-sharing Ratio
(b) New Profit-sharing Ratio
(c) Equal Ratio
(d) None of these
Question 45.
X and Y share profits in the ratio 2 :3. In future they have decided to share profits in
equal ratio. Which partner will sacrifice in which ratio ?
(a) X sacrifice 1/10
(b) Y sacrifice 1/5
(c) Y sacrifice 1/10
(d) None of these

Question 46.
Change in the partnership agreement results in:
(a) Reconstitution of Firm
(b) Dissolution of Firm
(c) Amalgamation of Firm
(d) None of these

Question 47.
Change in the partnership agreement:
(a) Changes the relationship among the partners
(b) Results in end of partnership business
(c) Dissolves the partnership firm
(d) None of these

Question 48.
Excess of credit side over the debit side in Revalution Account is:
(a) Profit
(b) Loss
(c) Receipt
(d) Expense
Question 49.
A, B and C are partners in a firm, if D is admitted as a new partner:
(a) Old firm is dissolved
(b) Old firm and old partnership are dissolved
(c) Old partnership is reconstituted
(d) None of these

Question 50.
Recording of an unrecorded asset on the reconstltutlam of a partnership firm will be:
(a) A gain to the existing partners
(b) A loss to the existing partners
(c) Neither a gain nor a loss to the existing partners
(d) None of these

Question 51.
Revaluation Account or Profit & Loss Adjustment Account is a:
(a) Personal Account
(b) Real Account
(c) Nominal Account
(d) None of these

Question 52.
A, B, C and D are partners sharing their profits and losses equally. They change
their profit sharing ratio to 2:2:1:1. How much will C sacrifice ?
(a) 1/6
(b) 1/12
(c) 1/24
(d) None of these

Question 53.
Sacrificing Ratio:
(a) New Ratio – Old Ratio
(b) Old Ratio – New Ratio
(c) Gaining Ratio – Old Ratio
(d) Old Ratio – Gaining Ratio

Question 54.
Gaining Ratio:
(a) New Ratio – Old Ratio
(b) Old Ratio – Sacrificing Ratio
(c) New Ratio – Sacrificing Ratio
(d) Old Ratio – New Ratio

Question 55.
X and Y share profit and loss in 3:2. From 1st January, 2017 they agreed to share
profit equally. Their sacrifice or gain will be :
(a) Sacrifice by X: 1/10
(b) Sacrifices by Y : 1/10
(c) Both (a) and (b)
(d) Non of these

Question 56.
At the time of admission of a new partner, General Reserve a appearing in the old
Balances Sheet is transferred to:
(a) All Partner’s Capital Accounts .
(b) New Partners’ Capital Accounts
(c) Old Partner’s Capital Accounts
(d) None of these

Question 57.
Change in profit-sharing ratio of existing partners results in:
(a) Revaluation of Firm
(b) Reconstitution of Firm
(c) Dissolution of Firm
(d) None of these

Question 58.
Generally the interest on capital is considered as :
(a) An appropriation of profit
(b) An Asset
(c) An Expense
(d) None of these

Question 59.
Increase in the value of assets on reconstitution of the partnership firm results into:
(a) Gain to the existing partners
(b) Loss to the existing partners
(c) Neither a gain nor a loss to the existing partners
(d) None of these

Question 60.
Following are the factors affecting goodwill except:
(a) Nature of business
(b) Efficiency of Management
(c) Technical Knowledge
(d) Location of the Customers

Question 61.
The profit of the last three years are ₹ 42,000, ₹ 39,000 and ₹ 45,000. Value of
goodwill at two years purchases of the average profits will be :
(a) ₹ 42,000
(b) ₹ 84,000
(c) ₹ 1,26,000
(d) ₹ 36,000

Question 62.
Under average profit basis goodwill is calculated by :
(a) No. of years’ purchased x Average profit
(b) No. of years’ purchased x Super profit
(c) Super Profit -r Expected Rate of Return
(d) None of these

Question 63.
Goodwill is:
(a) Tangible Asset
(b) Intangible Asset
(c) Current Asset
(d) None of these

Question 64.
An asset which is not ficitious but intangible in nature, having realisable value is :
(a) Machinery
(b) Building
(c) Furniture
(d) Goodwill

Question 65.
Which of the following is not a method of valuation of Goodwill:
(a) Revaluation Method
(b) Average Profit Method
(c) Super Profit Method
(d) Capitalisation Method
Question 66.
The excess of average profits over the normal profits are called :
(a) Super Profits
(b) Fixed Profits
(c) Abnormal Profits
(d) Normal Profits

Question 67.
Goodwill is a…………….asset
(a) Useless
(b) Tangible
(c) Worthless
(d) Valuable

Question 68.
Under super profit basis goodwill is calculated by :
(a) No. of years’ purchased x Average Profit
(b) No. of years’ purchased x Super profit
(c) Super profit -r Expected rate of return
(d) None of these

Question 69.
Profits of the last three years were ₹ 6,000, ₹ 13,000 and ₹ 8,000 respectively.
Goodwill at two years purchase of the average net profit will be :
(a) ₹ 81,000
(b) ₹ 27,0000
(c) ₹ 9,000
(d) ₹ 18,000
Question 70.
What do you mean by Super Profit ?
(a) Total Profit/No. of Years
(b) Average Profit – Normal Profit
(c) Weighted Profit/No. of Years’ Purchase
(d) None of these

Question 71.
Capital employed in a business is ₹ 1,50,000. Profits are ₹ 50,000 and the normal
rate of profit is 20%. The amount of goodwill as per capitalisation method will be:
(a) ₹ 2,00,000
(b) ₹ 1,50,000
(c) ₹ 3,00,000
(d) ₹ 1,00,000

Question 72.
Weighted average method of calculating goodwill is used when:
(a) Profits are equal
(b) Profit has increasing trend
(c) Profit has decreasing trend
(d) Either (b) or (c)

Question 73.
The monetary value of reputation of the business is called:
(a) Goodwill
(b) Super Profit
(c) Surplus
(d) Abnormal Profit
Question 74.
A firm has an average profit of ₹ 60,000 Rate of return on capital employed is 12.5%
p.a. Total capital employed in the firm was ₹ 4,00,000. Goodwill on the basis of two
years purchase of super profit is :
(a) ₹ 20,000
(b) ₹ 15,000
(c) ₹ 10,000
(d) None of these

Question 75.
Under capitalisation method, goodwill is calculated by :
(a) Average Profit x No. of Years’ Purchase
(b) Super Profit x No. of Years’ Purchase
(c) Total of the discounted value of expected future benefits
(d) Super Profit -r Expected Rate of Return

Question 76.
“Goodwill is nothing more than probability that the old customer will resort to the old
place.” This definition of goodwill was given by :
(a) Spicer and Pegler
(b) ICAI
(c) Lord Eldon
(d) AICPA

Question 77.
What will be the value of goodwill at twice the average of last three years profit if the
profits of the last three years were ₹ 4,000, ₹ 5,000 and ₹ 6,000 ?
(a) ₹ 5,000
(b) ₹ 10,000
(c) ₹ 8,000
(d) None of these
Question 78.
The Valuation of Goodwill is not necessary in Sole Trading:
(a) On selling the Firm
(b) On making a partner
(c) On estimation of Assets
(d) On Closing the Firm