Accounts KV Material

REGION : CHANDIGARH REGION
STUDY MATERIAL
CLASS XII
SUBJECT: ACCOUNTANCY
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Accountancy (Code No. 055)
(2021-22)
CLASS XII - CURRICULUM (TERM-WISE)
TERM -1 (MCQ BASED QUESTION PAPER) MARKS

Theory:40 Marks Duration: 90 minutes
Part A
ACCOUNTING FOR PARTNERSHIP FIRMS:
1 FUNDAMENTALS
2 CHANGE IN PROFIT SHARING RATIO 18
3 ADMISSION OF A PARTNER
COMPANY ACCOUNTS:
1 ACCOUNTING FOR SHARES 12
PART B
ANALYSIS OF FINANCIAL STATEMENTS:
FINANCIAL STATEMENTS OF A COMPANY
1 (i) Statement of Profit and Loss and Balance Sheet in prescribed
form with major headings and sub headings (as per Schedule III to 10
the Companies Act, 2013)
2 (ii) Tools of Analysis - Ratio Analysis
ACCOUNTING RATIOS
OR
COMPUTERISED ACCOUNTING
1 OVERVIEW OF COMPUTERISED ACCOUNTING SYSTEM 10
2 ACCOUNTING APPLICATION OF ELECTRONIC
SPREADSHEET
Total 40
Project Work (Part -1): 10 Marks
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INDEX
SR.NO NAME OF THE CHAPTER PAGE.NO
1. FUNDAMENTALS OF PARTNERSHIP 04-28
2. NATURE AND VALUATION OF GOODWILL 29-38
3. CHANGE IN PROFIT SHARING RATIO AMONG 39-49

THE EXISTING PARTNERS
4 ADMISSION OF A PARTNER 50-56
5 COMPANY ACCOUNTS – ACCOUNTING FOR SHARE CAPITAL 57-78
6 FINANCIAL STATEMENT – STATEMENT OF PROFIT & LOSS 79-88

ACCOUNT AND BALANCE SHEET
7 ACCOUNTING RATIOS 89-110
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Chapter 1 – PARTNERSHIP FUNDAMENTALS (MCQs)
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
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. Pick the odd one out:
a. Rent to Partner
b. Manager’s Commission
c. Interest on Partner’s Loan
d. Interest on Partner’s Capital
Q4. Amit, a partner in a partnership firm withdrew Rs. 7,000 in the beginning of each quarter. For how
many months would interest on drawings be charged?
a. 6 months
b. 6½ months
c. 7 ½ months
d. 5 ½ months
Q5. One of the partners in a partnership firm has withdrawn Rs. 9,000 at the end of each quarter,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
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Q6. In case the partners’ capitals are fixed, in which account will the withdrawal of capital be recorded?
a. Partners’ Capital Account

b. Partners’ Current Account
c. Either in Partners’ Capital or Current Account
d. Profit and Loss Appropriation Account
Q7. Ram, Mohan and Sohan were partners sharing profits in the ratio of 2 : 1 : 1. Ram withdrew Rs. 3,000
every month and Mohan withdrew Rs. 4,000 every month. Interest on drawings @ 6% p.a. was charged,
whereas the partnership deed was silent about interest on drawings. Showing your working clearly, pass
the necessary adjustment entry to rectify the error.
Dr. Cr.
Particulars L.F.
Rs. Rs.
a. Ram’s Capital A/c - Dr. 200
Sohan’s Capital A/c- Dr. 610
To Mohan’s Capital A/c

810
(Being Interest on drawings charged)
Dr. Cr.
Particulars L.F.
Rs. Rs.
b. Ram’s Capital A/c - Dr. 100

810
Dr. Cr.
Particulars L.F.
Rs. Rs.
c. Ram’s Capital A/c - Dr. 180

810
d. None of the above
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Q8.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
Q9. The capital accounts of Alka and Archana showed credit balances of Rs.4,00,000 and Rs.3,00,000
respectively, after taking into account drawings and net profit of Rs.2,00,000. The drawings of the
partners during the year 2018-19 were:
Alka withdrew Rs.10,000 at the end of each quarter.Archana’s drawings were:
Rs.
31st May, 2018 8,000
1st November, 2018 7,000
1st February, 2019 5,000
Archana’s drawings were:
Calculate interest on partners’ drawings @ 6% p.a. for the year ended 31st March, 2019.
a. Alka – Rs.900 , Archana - Rs.625

b. Alka - Rs.900, Archana - Rs.600
c. Alka - Rs.925, Archana - Rs.600
d. Alka - Rs.625 , Archana - Rs.900
Q10.Fill in the blanks for the transaction ‘Interest on drawings’ Rs. 4,000.
Journal
Dr. Cr.
Date Particulars L.F.
Rs. Rs.
...................................... Dr. 4,000
To .............................
4,000
a. Interest on drawings – Dr. and Drawings Cr.
b.Profit and Loss Appropriation A/c – Dr. and Interest on drawings Cr.
c.Drawings – Dr. and Interest on Drawings Cr.
d None of the above
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Q11. 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:
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
Q12.Mohit, Shobhit and Rohit are partners sharing profits and losses in the ratio 2 : 1 : 1. Rohit is
guaranteed 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
Q13. 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
Q14. Chhavi and Neha were partners in a firm sharing profits and losses equally. Chhavi withdrew a fixed
amount at the beginning of each quarter. Interest on drawings is charged @ 6% p.a. At the end of the year,
interest on Chhavi’s drawings amounted to Rs.900. Pass necessary journal entry for charging interest on
drawings.
Date Particulars Dr.(Rs.) Cr.(Rs.)
a. Chhavi's Capital/ Current Account- Dr. 900 -
To interest on drawings A/c - 900
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b. Chhavi's Capital/ Current Account- Dr. 900 -
To Drawings A/c - 900
d. Chhavi's Current Account – Dr. 900 -
c. Chhavi's Capital Account – Dr. 900 -
Q 15. Do all firms need a Deed and registration?

a. Yes
b. No
c. Can’t say
d. Its optional but its better to have a registered firm to avoid any kind of conflicts
Q 16. Can a partner be exempted from sharing the losses in a firm?
a. Yes
b. No
c. Yes , if partnership deed provides so
d. Never
Q17. 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
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Q18. Where would you record the interest on Drawings when capitals are fixed?
a. Partners’ Fixed Capital A/c
b. Partners’ Current A/c
c. Either of the two
d. Partners’ Capital A/c
Q19. 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
Q20. A and B are partners in a firm without a Partnership Deed. A is Active partner and claims a salary of
Rs.18,000 per month. Whether this claim is valid or not?
a. No
b. May or may not be
c. Can’t say
d. Yes
Q21. Give the average period in months for charging interest on drawings for the same amount withdrawn
at the beginning of each quarter.
a. 6 ½ Months
b. 5 ½ Months
c. 7 ½ Months
d. 6 Months
Q22. What is the purpose of charging interest on Drawings of a Partner?
a. When there is no limits fixed for the partners for drawings

b. When amount withdrawn by the partners as drawing is unequal
c. When partners’ require it to fulfil their personal needs
d. Both a and b
Q23. 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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Q24. 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.
Q25. Interest on Partners’ Loan is to treated as –
a. An appropriation out of profits

b. a charge against profits
c. Both (a) and (b)
Q26. 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
Q27. 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
Q28. What is the maximum number of partners that a partnership firm can have?
a. 20
b. 10
c. 50
d. 100
Q29. A partner who has invested more capital in the firm is entitled to get interest on the excess
amount of capital. (True/ False)
Q30. If all the partners agree, a minor may be admitted for the benefit of partnership. (True/False)
Q31. ---------------------------- 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
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Q 32. 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
Q33. Ritesh and Hitesh are childhood friends. Ritesh is a consultant whereas Hitesh is an architect.
They contributed equal amounts and purchased a building for Rs.2 crores. After a year, they sold it
for Rs.3 crores and shared profits equally. Are they doing business in partnership?
a. Yes
b. No
c. Quite possible
d. Can’t Say
Q 34.Kajal, Neerav and Alisha are partners in a firm sharing profits in the ratio of 3 : 2 : 1.They
decided to admit Venus, their landlord as a partner in the firm. Venusbrought sufficient amount of
capital and her share of goodwill premium. The accountant of the firm passed the entry of rent paid
for the building to Venus in ‘Profit and Loss Appropriation Account’. Is he correct in doing so ?
a. Yes
b. No
c. May or may not be
d. Difficult to determine whether he is correct or not
Q35. Sohan and Mohan are partners sharing profits and losses in the ratio of 2:3 with the capitals of
Rs.5,00,000 and Rs 6,00,000 respectively. On 1st Jan 2006 ,Sohan and Mohan granted loans of Rs.
20,000and Rs. 10,000 respectively to the firm. Show the distribution of profit and losses for the
year ended 31st March 2006 if the loss before interest for the year amounted toRs.2,500.
a. Share of Loss Sohan –Rs.1,250 Mohan – Rs. 1,250
b. Share of Loss Sohan –Rs.1,000 Mohan – Rs. 1,500
c. Share of Loss Sohan –Rs.820 Mohan – Rs. 1,230
d. Share of Loss Sohan –Rs.1,180 Mohan – Rs. 1,770
Q.36 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
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Q37. 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
Q38. 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
Q39. 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
Q40. 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
Q41. 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
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Q42. 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
Q43. 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
Q44. Which of the following is not incorporated in the Partnership Act?
a. Profit and loss are to be shared equally
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
Q45.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
Q46. 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
Q 47. 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
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Q48. 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
Q49.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
Q 50. 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 51. 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
Q52. 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
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Q 53. 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
Q54. 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
Q55.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
Q56. 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
Q57. P, Q and R are equal partners with fixed capitals of rs.5,00,000, rs.4,00,000 and rs.3,00,000
respectively. After closing the accounts for the year ending 31st March 2019 it was discovered that
interest on capitals was provided @ 7% instead of 9% p.a. In the adjusting entry :
a. P will be credited by rs.2,000 and Q will be debited by rs.2,000.
b. P will be debited by rs.2,000 and Q will be credited by rs.2,000.
c. P will be debited by rs.2,000 and R will be credited by rs.2,000.
d. P will be credited by rs.2,000 and R will be debited by rs.2,000.
Q58. X is a partner in a firm. He withdrew regularly rs.1,000 at the beginning of every month for the
six months ending 31st March, 2019. If interest on drawings is charged @ 8% p.a. then interest
charged will be ------------
a. rs.240
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b. rs.140
c. rs.100
d. rs.120
Q59. What should be the minimum number of persons to form a Partnership :
a. 2
b. 7
c. 10
d. 20
Q60. Interest on Partner’s drawings will be debited to ---------
c. Partner’s Current Account
d. Interest Account
Q 61. 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 62. 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 63. 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?
a. rs.77,500
b. rs.73,750
c. rs.75,000
d. rs.72,500
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Q 64. 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
Q65. Interest on partner’s drawings will be credited to -
c. Partner’s Capital Accounts
d. None of the Above
Q 66. 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
Q67.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 68.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 69. 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
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Q70. Bipasa 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
Q71. 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
c. X rs.14,400; Y rs.9,600
d. No Interest will be allowed
Q72. 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
Q73. 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
Q74. 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
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Q75. 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
Q76. 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
Q77. 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
Q78. 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
Q79. 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
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.
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Q80. 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
Q81. 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 capitals is allowed @ 8% p.a. Firm earned a profit of rs.15,000 for the year
ended 31st March 2019. Interest on Capital will be :
a. X rs.16,000; Y rs.8,000
b. X rs.9,000; Y rs.6,000
c. X rs.10,000; Y rs.5,000
Q82. 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 capitals is allowed @ 8% p.a. Firm incurred a loss of rs.1,00,000 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
c. X rs.14,400; Y rs.9,600
Q83. P, Q, and R sharing profits in the ratio of 2 : 1 : 1 have fixed capitals of rs.4,00,000, rs.3,00,000
and rs.2,00,000 respectively. After closing the accounts for the year ending 31st March 2019 it was
discovered that interest on capitals was provided @ 6% instead of 8% p.a. In the adjusting entry :
a. Cr. P rs.1,000; Dr. Q rs.1,500 and Cr. R rs.500
b. Dr. P rs.500; Cr. Q rs.1,500 and Dr. R rs.1,000
c. Cr. P rs.500; Dr. Q rs.1,500 and Cr. R rs.1,000
d. Dr. P rs.1,000; Cr. Q rs.1,500 and Dr. R rs.500
Q84. C and D started a partnership firm on 1st April 2013 with capitals of rs. 1,50,000 and rs.
2,50,000 respectively. On 1st July 2013,they decided that their capitals should be rs.2,00,000 each.
The necessary adjustments in the capitals are made by introducing or withdrawing cash. Interest on
capital is to be allowed @ 15 % per annum. Interest on partners capital will be :
a. rs.28,125 forC ,rs.31,875 for D
b. rs.27,525 for C ,rs.31,875 for D
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c. rs. 28,025 for C ,rs.31,875 for D
Q85. 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
Q86.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
Q87. 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
Q88. P, Q and R are partners in a firm in 3 : 2 : 1. R is guaranteed that he will get minimum of
rs.20,000 as his share of profit every year. Firm’s profit was rs.90,000. Partners will get:
a. P rs.40,000; Q rs.30,000; R rs.20,000;
b. P rs.42,500; Q rs.27,500; R rs.20,000;
c. P rs.45,000; Q rs.30,000; R rs.15,000;
d. P rs.42,000; Q rs.28,000; R rs.20,000;
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
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Q90. P and Q are partners sharing profits in the ratio of 1 : 2. R was manager who received the salary
of rs.10,000 p.m. in addition to commission of 10% on net profits after charging such commission.
Total remuneration to R amounted to rs.1,80,000. Profit for the year before charging salary and
commission was :
a. rs.7,20,000
b. rs.6,00,000
c. rs.7,80,000
d. rs.6,60,000
Q91. True/ False

a. It is compulsory to have a partnership agreement in writing.
b. If a partner devotes more time to the firm, he will be entitled to more salary.
c. There is no restriction on the number of partners in a firm.
In absence of date of drawings, interest on drawings is charged for six months
d. Interest on Partners’ Loan is always credited to Partners’ Capital Account.
e. Registration of a partnership firm is compulsory.
Q92. Match the columns.
Q (1) Match the columns.
I Interest on Capital A Cr. Side of Profit & Loss
Appropriation A/c
II Interest on Drawings B Dr. Side of Profit & Loss
Appropriation A/c
III Interest on Partners’ Loan C Dr. Side of Profit & Loss A/c
Q (2) Match the columns.

I Rent paid to a Partner A Appropriation of Profit
II Salary paid to a Partner B Charge against Profits
III C Both
Q 93. Match the columns.
Q(1)Match the columns.
I When drawings are made in the A 6 Months
beginning of every quarter
II When drawings are made in the B 4.5 Months
middle of every quarter
III When drawings are made at the C 7.5 Months
end of every quarter
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Q(2)Match the columns.
I Permanent Drawings A Credit side of Partners’ Current A/c
II Partners’ Salary B Debit side of Partners’ Capital A/c
III Fresh Capital Introduced C Debit side of Partners’ Current A/c
IV Interest on Drawings D Credit side of Partners’ Capital A/c
Q94.Match the columns.
I Partnership Deed A 50
II Maximum number of partners B 6% p.a.
III Interest on Partners’ Loan C A Statement
IV Balance Sheet D Written Agreement
Assertion Based Questions
Q95. 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
Q 96. 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.
Q 97. 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.
Q98. Assertion (A) : A firm can change its existing agreement.
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Reason (R) : Any change in its partnership agreement, will be treated as punishable offence.
Q99. 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 Partners’ Capital.
Reason (R) : Interest on Capital is treated as a charge against profits.
Q100.Anu and Baatish started a new business in partnership and decided to share profits and losses in
the ratio of 3 : 1. They contributed Capitals of rs. 50,000 and rs.30,000 respectively on April 1 , 2018
.Anu is a sleeping partner whereas Baatish is a full time working partner.During the year ended 31st
March, 2019 they earned a net profit of rs. 50,000. The terms of partnership are:
(a) Interest on capital is to allowed @ 6% p.a.
(b) Anu will get a commission @ 2% on turnover.
(c) Baatish will get a salary of rs. 500 per month.
(d) Baatish will get commission of 5% on profits after deduction of all expenses including such
commission.
Partners’ drawings for the year were: Anurs. 8,000 and Baatishrs. 6,000. Turnover for the year was rs.
3,00,000.On the basis of the information given above , answer the following questions -
(1) What will be Anu’sandBaatish’sCommission ?
a. Anurs.6,000 ,Baatish- rs.1,660
b. Anurs.30,000 ,Baatish- rs.1,660
c. Anurs.6,000 ,Baatish- rs.1,660
d. Anurs.6,000 ,Baatish- rs.1,581
(2) How much share of profits will be given to Anu and Baatish?
a. Anurs.23714 , Baatishrs.7,905
b. Anurs.15809.5 ,Baatishrs. 15,809.5
c. Anurs.22,000 , Baatishrs.7,000
(3) What will be the balance in Partners’ Capital Account at the end of the year?
a. Anurs.74,000 ,Baatishrs. 43,000
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b. Anurs.74,714 ,Baatishrs. 41,286
c. Anurs.74,147 ,Baatishrs. 41,826
d. Anurs.70,714 ,Baatishrs. 41,286
(4) Baatish wants that his share in profits should be higher than Anu as he is putting more efforts to
carry on the business. Is he correct in saying so?
a. Yes
b. No
c. Can’t say
d. May or may not be
ANSWER KEY
1 (a) Interest on Partners’ Loan

2 (d) rs.2,000
3 (d) Interest on Partners’ Capital
4 (c)7 ½ months
5 (d) rs.810
6 (a) Partners’ Capital Account
7 Dr. Cr.
Particulars L.F.
rs. rs.
(c)Ram’s Capital A/c - Dr. 180

810
8 (d) rs.6,000
9 (a) Alka – rs.900 , Archana - rs.625
10 (c) Drawings – Dr. and Interest on Drawings Cr.
11 (c)Saara’s Current A/c – Dr. 9,000 To Neena’s Current A/c 9,000
12 (d)Mohit rs.6,000 and Shobhit rs.3,000
13 (c ) rs.15,000
14
Date Particulars Dr.(rs.) Cr.(r
a. Chhavi's Capital/ Current Account Dr. 900 -
To interest on drawings A/c - 900
15 (d) Its optional but its better to have a registered firm to avoid any kind of conflicts
16 (c) Yes , if partnership deed provides so
17 (d) Partners’ Capital A/c
18 (d) Partners’ Current A/c
19 (d) No
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20 (a ) No
21 (c)7 ½ Months
22 (d) Both a and b
23 (c) 5 ½ Months
24 (b) At 6% per annum
25 (b) charge against profits
26 (d ) Ratio of Interest on Capital
27 (b) rs.10,000
28 (c)50
29 False
30 True
31 (b) Profit and Loss Appropriation Account
32 (a) Fluctuating Capital System
33 (b) No
34 (b) No
35 (d)Share of Loss Sohan –rs.1,180 Mohan – rs. 1,770
36 (b) 6½ months
37 (d) 41,000
38 (c)On loan given by partners to the firm
39 (a) rs.26,267 for Partner B and C and rs.27,466 for Partner A.
40 (b) Profit and Loss Appropriation Account
41 (d) None of the above
42 (c)Either Debit or Credit balances
43 (c) Equally
44 (d)All drawings are to be charged interest
45 (a) Provided , Agreement
46 (c )5½ months
47 (b) Additional capital introduced by the partner in the firm
48 (a) rs.78,000
49 (d) rs.1,800
50 (d)rs.1,34,000
51 (c ) 3 ½ months
52 (c ) Rent paid to a partner
53 (b)rs.1,950
54 (d)All of the above
55 (d) rs.9,600
56 (c) On the credit side of Partners’ Current Account
57 (d ) P will be credited by rs.2,000 and R will be debited by rs.2,000.
58 (b )rs.140
59 ( a) 2
60 (c )Partner’s Current Account
61 (b) rs.2,400
62 (c) rs.400 (Debit)
63 (c) rs.75,000
64 (a)rs.3,54,000
65 (b)Profit and Loss Appropriation Account
66 (b)It is not appropriation of profit
67 (c)rs.3,240
68 (c)Partners who give the guarantee
69 (b) It is not a separate legal entity
70 (a)rs.900
71 (d) No interest will be allowed
72 (c) rs.1,500
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73 (d)Loss rs.4,000
74 (c)rs.400 for X , rs.5,200 for Y and rs.400 for Z
75 (d) rs.2,00,000 to each of the partners
76 (b)Zero
77 (b) rs.1,500.
78 (b) rs.2,400
79 (d) A rs.50,000; B rs.50,000 and C rs.50,000
80 (a) rs.4,950
81 (c)X rs.10,000; Y rs.5,000
82 (d) No Interest will be allowed
83 (d)Dr. P rs.1,000; Cr. Q rs.1,500 and Dr. R rs.500
84 (a) rs.28125 for C , rs.31875 for D
85 (d) rs.7,000
86 (d) Right to receive salary at the end of every year
87 (c ) In case of loss or insufficient profits, ‘A’ will withdraw the minimum guarantee
amount
88 (d) P rs.42,000; Q rs.28,000; R rs.20,000;
89 (a) rs.1,00,000
90 (c ) rs.7,80,000
91 F , F, F, Y, F, F
92 (1) I –B , II – A , III- C ; (2) I – B , II - B
93 (1) I – C , II – A , III – B ; (2) I-B, II-A,III-D ,IV-C
94 I- D , II- A, III-B , IV- C
95 (d) , A is false , but R is true
96 (d), A is false , but R is true
97 (b) , Both A and R are true and R is not the correct explanation of A
98 (c) , A is true , but R is false
99 (c), A is true , but R is false
100 (1) (d) Anu -rs.6,000 , Baatish- rs.1,581

(2) (a ) Anu rs. 23714 , Baatish rs.7,905
(3) (b) Anu rs.74,714 ,Baatishrs. 41,286
(4) No
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CHAPTER 2- NATURE AND VALUATION OF GOODWILL
1. Goodwill may be defined as excess amount paid for a business over and above its ------------.
(a) Tangible assets
(b) Current assets
(c) Total assets
(d) Net worth
2. Goodwill is an intangible asset but not a ------------- assets.
(a) Fixed
(b) Current
(c) Fictitious
(d) Saleable
3. Goodwill of a firm is affected by its:
(a) Location
(b) Nature of business
(c) Degree of competition
(d) All of above
4. 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
5. Who defines "goodwill is nothing more than the probability that the old customer will resort to the old
place."
(a) Lord Eldon
(b) Disksee
(c) Sir James Wilson
(d) None of above
6. Need for revaluation of goodwill arises at the time of
(a) Change in profit sharing ratio
(b) Admission of new partner
(c) Retirement / death of partner
(d) All of the above
7. Goodwill can be classified into:
(a) Purchased goodwill
(b) Self generated goodwill
(c) Both (a) and (b)
(d) None of the above
8. Methods of valuation of goodwill is/are
(a) Average profit method
(b) Super profit method
(c) Capitalisation method
9. At the time of calculation of average profit
(a) Abnormal profit will be deducted
(b) Abnormal profit will be added
(c) Above (a) and (b) both
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10. The formula of average profit is
(a) Total of profits ÷ Number of years
(b) Total of profits × Number of years
11. Formula of find of Normal profit is
(a) Total profits ÷Number of years
(b) Capital employed × Normal rate of profit ÷ 100
(c) Total of profits × Number of years
12. Capital employed calculated by
(a) Capital + Reserve - Fictitious Assets - Non Trade Investment
(b) All Real Assets - Goodwill - Non Trade Investment - Outside liabilities
13. A business has earned an average profit of Rs.1,00,000during the last few years and the normal profits
are Rs.82000. The required rate of return is10. The value of goodwill of the firm will be
(a) Rs. 18000
(b) Rs. 1,80,00
© Rs. 1,00,000
(d) Rs. 82,000
14. Purchased goodwill arises at the time of
(a) Closer of business
(b) Purchase of business
(c) Opening of new business
15. Which of the following factors decreases the value of goodwill
(a) Favourable location
(b) Favourable contracts
(c) Customer satisfaction
(d) Continuously incurring losses
16. As per accounting standard 26, which goodwill is shown in the accounting books
(a) Purchased goodwill
(b) Self generated goodwill
(c) above (a) and (b) both
17. Which of the following is not a method of valuation of goodwill
(a) Average profit method
(b) Super profit method
(c) Capitalisation method
(d) Discounted Cash flow method
18. Super profit means
(a) Average profit
(b) Excess of average profit over normal profit
(c) Excess of normal profit over average profit
(d) Excess of capital employed over average profit
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19. The excess amount which the firm gets on selling its business over and above the net value is
(a) Surplus
(b) Super profit
(c) Capital Reserve
(d) Goodwill
20. Goodwill of the firm is not affected by
(a) Location of the firm
(b) Favourable contracts
(c) Better customer services
(d) None of these
21. Average profit earned by a firm is Rs. 75,000 which includes undervaluation of stock of Rs. 5,000 on
average basis. The capital invested in the business is Rs. 7,00,000 and the normal rate of return is 7%.
What will be the amount of goodwill on the basis of 5 times the super profit?
(a) Rs. 1,55,000
(b) 31,000
(c) 1,30,000
(d) 1,05,000
22. Which of the following statement is correct?
(a) Goodwill is fictitious Asset
(b) Goodwill is a current asset
(c) Goodwill is a wasting asset
(d) Goodwill is an intangible asset
23. When goodwill is not a purchased goodwill, Goodwill
(a) is not shown in the balance sheet
(b) is shown in the balance sheet
(c) many or may not be shown in the balance sheet
(d) is partly shown in the balance sheet
24. 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) Rs. 50,000
(b) Rs. 10,000
(c) Rs. 6,000
(d) 56,000
25. It is very difficult to calculate Goodwill because;
(a) Goodwill is an intangible asset
(b) various methods have been advocated for the valuation of goodwill
© goodwill calculated by one method may differ from the goodwill calculated by another method
(e) All of the above
26. Following are the factors affecting goodwill except
(a) Nature of the business
(b) Location of the customers
(c) Technical know-how
(d) Efficiency of management
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27. 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 3 years' 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
28. Under Capitalisation Method of valuation of goodwill, the formula for calculating goodwill is
(a) Super profit multiplied by the rate of return
(b) Average profit multiplied by the rate of return
(c) Super profit divided by the rate of return
(d) Average profit divided by the rate of return
29. Net assets of a firm including fictitious assets of Rs. 5,000 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 Capitalisation of super profit method will be
(a) Rs. 20,000
(b) Rs. 30,000
(c) Rs. 25,000
(d) Rs. 15,000
30, 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 Capitalisation Method would be
(a) Rs. 8,20,000
(b) Rs. 1,20,000
(c) Nil
(d) Rs. 4,20,000
31. Average capital employed of a firm is Rs. 4,00,000 and the normal rate of return is 15%. Average
profit 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 will be
(a) Rs. 10,000
(b) Rs. 20,000
(c) Rs. 60,000
(d) Rs. 80,000
32. A firm earns profit of Rs. 1,10,000. The Normal Rate of Return is 10%. Assets of the firm are Rs.
11,00,000 and liabilities Rs. 1,00,000. Value of goodwill by capitalisation of average profit will be
(a) Rs. 2,00,000
(b) Rs. 10,000
(c) Rs. 5,000
(d) Rs. 1,00,000
33. Under super profit method, goodwill is calculated by
(a) Number of years' purchase × Average profit
(b) Number of years' purchase × super profit
(c) Super profit ÷ Normal rate of return
(d) Super profit - Normal profit
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34. Net profit during the last three years of a firm are
Year First Second Third
Profit (Rs.) 18,000 20,000 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
35. M/s. Supertech India has assets of Rs. 5,00,000, whereas liabilities are: Partners' Capitals - Rs.
3,50,000, General Reserve - 60,000 and Sundry Creditors - Rs. 90,000. If Normal Rate of Return is 10%
and Goodwill of the firm is valued at Rs. 90,000 at 2 years’, purchase of super profit, the Average Profit
of the firm will be
(a) Rs. 46,000
(b) Rs. 86,000
(c) Rs. 1,63,000
(d) Rs. 23,000
36. 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 Rs. 2,40,000. Find the value of goodwill by Capitalisation of
average profit method.
(a) Rs. 2,40,000
(b) Rs. 1,80,000
(c) Rs. 1,20,000
(d) Rs. 60,000
37. Jagat and Kamal are partners in a firm. Their capitals are: Jagat Rs. 3,00,000 and Kamal Rs. 2,00,000.
During the year ended 31st March, 2021 the firm earned a profit of Rs. 1,50,000. The normal rate of return
is 20%. Calculate the value of Goodwill of the firm by Capitalisation Method.
(a) Rs. 2,00,000
(b) Rs. 5,00,000
(c) Rs. 3,50,000
(d) Rs. 2,50,000
38. 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
39. 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. In the same type of business, the normal rate of return is 20% of the
capital employed. Calculate the value of goodwill by Capitalisation of super profit method
(a) Rs. 10,00,000
(b) Rs. 5,00,000
(c) Rs. 2,50,000
(d) Rs. 15,00,000
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40. Ram and Prem are partners in retail business. Balances in Capital and Current Accounts as on 31st
March, 2021 were
Capital Account (Rs.) Current Account (Rs.)
Ram 2,00,000 50,000
Prem 2,40,000 10,000 (Dr.)
The firm earned an average profit of Rs. 90,000. If the normal rate of return is 10%. Find the value of
Goodwill by Capitalisation Method.
(a) Rs. 4,20,000
(b) Rs. 2,10,000
(c) Rs. 1,10,000
(d) Rs. 2,20,000
41. Average profit earned by a firm is Rs. 75,000 which includes undervaluation of stock of Rs. 5,000 on
average basis. The capital invested in the business is Rs. 7,00,000 and the normal rate of return is 7%.
Find the value of goodwill of the firm on the basis of 5 times the super profit.
(a) Rs. 80,000
(b) Rs. 1,55,000
(c) Rs. 49,000
(d) Rs. 31,000
42. Average profit earned by a firm is Rs. 2,50,000 which includes overvaluation of stock of Rs. 10,000
on average basis. Capital invested in the business is Rs. 14,00,000 and the normal rate of return is 15%.
Find the value of Goodwill of the firm on the basis of 4 times the super profit.
(a) Rs. 1,20,000
(b) Rs. 2,10,000
(c) Rs. 2,40,000
(d) Rs. 2,00,000
43. Read the following information carefully and answer the question number 43 to 46 on that basis
Information:
The profit for the last five years were:
Year Ended Profits (Rs.)
31st March,2017 2,00,000 (including gain of Rs. 25,00,000 from sale of fixed
assets
31st March,2018 1,70,000 (Including abnormal loss of Rs. 50,000)
31st March,2019 2,10,000
31st March,2020 2,30,000
31st March,2021 2,50,000
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Capital employed in the firm is Rs. 15,00,000 and normal rate of return in similar businesses is 10%
What is the amount of Actual Average Profit
(a) Rs. 2,50,000
(b) Rs. 1,20,000
(c) Rs. 2,17,000
44. What is the amount of Normal profit
(a) Rs. 1,50,000
(b) Rs. 15,00,000
(c) Rs. 2,50,000
(d) Rs. 1,00,000
45. What is the amount of Super profit
(a) Rs. 60,000
(b) Rs. 55,000
(c) Rs. 62,000
(d) Rs. 67,000
46. Value of Goodwill at 3 years' purchase by super profit method
(a) Rs. 2,00,000
(b) Rs. 2,01,000
(c) Rs. 2,50,000
(d) Rs. 1,50,000
47 .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
48. A firm’s goodwill is not affected by

A) Location of the firm
B) The reputation of the Firm
C) Better Customer Service
D) None of the Above
49. The total capital employed in the company is Rs.8,00,000 a reasonable rate of return is 15% and the
profit of the year is 12,00,000. The value of goodwill of the company as per the capitalisation method will
be
A) Rs. 82,00,000
B) Rs. 12,00,000
C) Rs. 72,00,000
D) Rs. 42,00,000
.From the following information of M/s Sharma and Gupta give the answer of question number 50 to 53
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INFORMATION:
(a) Average capital employed - Rs. 10,00,000

(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 as a charge on profit - 2,500 per month
50. 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
(d) None of the above.
51. 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
52. Value of Goodwill on the basis of Capitalisation of Super Profit
(a) Rs. 60,000
(b) Rs. 1,81,818
(c) Rs. 3,90,000
(d) Rs. 40,000
53. Value of Goodwill on the basis of Capitalisation of Average Profit
(a) Rs. 40,000
(b) Rs. 60,000
(c) Rs. 300,000
(d) Rs. 1,81,818
54. Assertion(A): Average Normal Profit as Calculated is multiplied by number of years' purchase to
determine the value of goodwill.
Reason(R ): Number of years' purchase means the number of years for which the firm is likely to earn
different amount of profit after change in ownership becomes of the efforts put in the past
(a) R is correct but A is not correct
(b) Both A and R are incorrect
(c) A is correct R is not correct
(d) Both A and R are correct
55. 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
56. Assertion(A): any abnormal gain is excluded by deducting from and any abnormal loss is included by
adding to the pasts
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Reason(R): Normal business profits earned by the business for the specified number of years are
considered
(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
57.Assertion (A): large customer base results in higher valuation of Goodwill
Reason(R): If a customer is large in size then they demand more of goods and ultimately goodwill of that
product increases
(a) Both A and R are true and R is correct explanation of A
(b) Both A and R are true and R is not correct explanation of A
(c) A is true but R is not correct
(d) R is true but A is not true
58. 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
59. Assertion(A): Both purchase and shelf 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. Shelf
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
60. 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 profit and thus, increase in the 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
(c) A is correct but R is not correct
(d) R is correct but A is not correct
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ANSWER KEY OF VALUATION OF GOODWILL
Question 1 2 3 4 5 6 7 8 9 10
Answer d c D d a d c d c a
Question 11 12 13 14 15 16 17 18 19 20
Answer b c B b d a d b d d
Question 21 22 23 24 25 26 27 28 29 30
Answer a d A b a b c c b c
Question 31 32 33 34 35 36 37 38 39 40
Answer b d B b b c d a a a
Question 41 42 43 44 45 46 47 48 49 50
Answer b a C a d b b d c a
Question 51 52 53 54 55 56 57 58 59 60
Answer c b D d b d a d b a
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Chapter 3- Change in Profit Sharing Ratio among the existing partners
1. Recording of an unrecorded liability on the reconstitution firm will be-

(a) gain to the existing partners
(b) a loss to the existing partners
(c) neither a gain nor a loss to the existing partners
2. Recording of an unrecorded asset on the reconstitution of partnership firm will be-
(a) A gain to the existing partners
(b) a loss to the existing partners
3. Increase in the value of assets on reconstitution of the partnership firm result into-
(a) Gain to the existing partners
(b) loss to the existing partners
4. The reconstitution of a firm may be-
(a) In case of change in profit and loss sharing ratio among the existing partners
(b) In case of admission of a new partners
(c) Retirement or death of an existing partners
(d) In case of all of the above conditions
5. The value of goodwill is effected-
(a) According to the place of business
(b) according to the profits for the last years
(c) according to the efficiency of the management
(d) all of the above conditions
6. Goodwill is a …………………..
(a) Current asset
(b) fictitious asset
(c) intangible asset
(d) none of the above
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7. 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
(d) none of the above
8. Goodwill of the firm is not affected by
(a) Location of the firm
(b) better customer services
(c) reputation of the firm
(d) none of these
9. Goodwill is_____
(a) tangible asset
(b) intangible asset
(c) fictitious asset
(d) both (b) & (c)
10. What are super profits

a) Actual profit – Normal Profit
b) Normal Profit- Actual profit
c) Actual profit + Normal Profit
d) None of the above
11. 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
12. 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
13. 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
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14. The excess amount which the firm can get on selling its assets over and above the sale able value of its
assets is called:
a) Surplus
b) Super profits
c) Reserve
d) Goodwill
15. 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
(d) Be raised as per the agreement of the partner
16. Sacrificing Ratio :
(A) New Ratio – Old Ratio
(B) Old Ratio – New Ratio
(C) Old Ratio – Gaining Ratio
(D) Gaining Ratio – Old Ratio
17. Gaining Ratio :
(A) New Ratio – Sacrificing Ratio
(B) Old Ratio – Sacrificing Ratio
(C) New Ratio – Old Ratio

(D) Old Ratio – New Ratio
18. A and B were partners in a firm sharing profit or loss equally. With effect from 1st April 2019 they
agreed to share profits in the ratio of 4 : 3. Due to change in profit sharing ratio, A’s gain or sacrifice will
be :
(A) Gain 1/14
(B) Sacrifice 1/14
(C) Gain 4/7
(D) Sacrifice 3/7
19. A and B were partners in a firm sharing profit or loss equally. With effect from 1st April, 2019 they
agreed to share profits in the ratio of 4 : 3. Due to change in profit sharing ratio, B’s gain or sacrifice will
be :
(A) Gain 1/14
(B) Sacrifice 1/14
(C) Gain 4/7
(D) Sacrifice 3/7
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20. A and B were partners in a firm sharing profit or loss in the ratio of 3 : 5. With effect from 1st April,
2019, they agreed to share profits or losses equally. Due to change in profit sharing ratio, A’s gain or
sacrifice will be:
21. A and B were partners in a firm sharing profits and losses in the ratio of 2: 1. With effect from 1st
January 2019 they agreed to share profits and losses equally. Individual partner’s gain or sacrifice due to
change in the ratio will be:
22. A and B share profits and losses in the ratio of 3: 2. With effect from 1st. January, 2019, they agreed to
share profits equally. Sacrificing ratio and Gaining Ratio will be:
23. A and B were partners in a firm sharing profit or loss in the ratio of 3 : 1. With effect from Jan. 1, 2019
they agreed to share profit or loss in the ratio of 2 : 1. Due to change in profit-loss sharing ratio, B’s gain or
sacrifice will be :
(A) Gain 1/12
(B) Sacrifice 1/12
(C) Gain 1/3
(D) Sacrifice 1/3
24. A, B and C were partners sharing profit or loss in the ratio of 7 : 3 : 2. From Jan. 1,2019 they decided to
share profit or loss in the ratio of 8 : 4 : 3. Due to change in the profit-loss sharing ratio, B’s gain or
sacrifice will be :
(A) Gain 1/60
(B) Sacrifice 1/60
(C) Gain 2/60
(D) Sacrifice 3/60
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25. X, Y and Z are partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. The partners decide
to share future profits and losses in the ratio of 3:2:1. Each partner’s gain or sacrifice due to change in the
ratio will be :
26. A, B and C were partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. The partners decide
to share future profits and losses in the ratio of 2:2:1. Each partner’s gain or sacrifice due to change in ratio
will be :
27. A, B and C were partners in a firm sharing profits and losses in the ratio of 4 : 3 : 2. The partners decide
to share future profits and losses in the ratio of 2:2: 1. Each partner’s gain or sacrifice due to change in the
ratio will be :
28. A, B and C were partners in a firm sharing profits in 4 : 3 : 2 ratio. They decided to share future profits
in 4 : 3 : 1 ratio. Sacrificing ratio and gaining ratio will be :
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29. X, Y and Z were partners sharing profits in the ratio 2:3:4 with effect from 1st January, 2019 they
agreed to share profits in the ratio 3:4:5. Each partner’s gain or sacrifice due to change in the ratio will be :
30. X, 7 and Z were in partnership sharing profits in the ratio 4 : 3 : 1. The partners agreed to share future
profits in the ratio 5 : 4 : 3. Each partner’s gain or sacrifice due to change in ratio will be :
31. A, B and C are equal partners in the firm. It is now agreed that they will share the future profits in the
ratio 5:3:2. Sacrificing ratio and gaining ratio of different partners will be :
32. Capital employed by a partnership firm is 5,00,000. Its average profit is 60,000. The normal rate of
return in similar type of business is 10%. What is the amount of super profits?
(A) 50,000 (B) 10,000 (C) 6,000 (D) 56,000
33. The purpose of revaluation account is to ascertain the
A. Reassessment
B. None
C. Both A and B
D. Revaluation Profit/Loss
34. The profits earned by a business over the last 5 years are as follows: 12,000; 13,000; 14,000; 18,000
and 2,000 (loss). Based on 2 years purchase of the last 5 years profits, value of Goodwill will be :
(A) 23,600 (B) 22,000 (C) 1,10,000 (D) 1,18,000
35. The average profit of a business over the last five years amounted to 60,000. The normal commercial
yield on capital invested in such a business is deemed to be 10% p.a. The net capital invested in the
business is 5,00,000. Amount of goodwill, if it is based on 3 years purchase of last 5 years super profits
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will be :
(A) 1,00.000 (B) 1,80,000 (C) 30.000 (D) 1,50,000
36. Under the capitalisation method, the formula for calculating the goodwill is :
(A) Super profits multiplied by the rate of return (B) Average profits multiplied by the rate of return
(C) Super profits divided by the rate of return (D) Average profits divided by the rate of return
37. The net assets of a 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 capitalisation of super profits.
(A) 20,000 (B) 30,000 (C) 25,000 (D) None of these
38. The average capital employed of a firm is 4,00,000 and the normal rate of return is 15%. The average
profit of the firm is 80,000 per annum. If the remuneration of the partners is estimated to be 10,000 per
annum, then on the basis of two years purchase of super-profit, the value of the Goodwill will be :
(A) 10,000 (B) 20,000 (C) 60,000 (D) 80,000
39. A firm earns 1,10,000. The normal rate of return is 10%. The assets of the firm amounted to 11,00,000
and liabilities to 1,00,000. Value of goodwill by capitalisation of Average Actual Profits will be :
(A) 2,00,000 (B) 10,000 (C) 5,000 (D) 1,00,000
40. Capital invested in a firm is 5,00,000. Normal rate of return is 10%. Average profits 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) 72,000 (B) 40,000 (C) 2,40,000 (D) 1,80,000
41. P and Q were partners sharing profits and losses in the ratio of 3 : 2. They decided that with effect from
1st January, 2019 they would share profits and losses in the ratio of 5 : 3. Goodwill is valued at 1,28,000.
In adjustment entry :
(A) Cr. P by 3,200; Dr. Q by 3,200 (B) Cr. P by 37,000; Dr. Q by 37,000
(C) Dr. P by 37,000; Cr. Q by 37,000 (D) Dr. P by 3,200 Cr. Q by 3,200
42. A, B and C are partners sharing profits in the ratio of 4 : 3 : 2 decided to share profits equally. Goodwill
of the firm is valued at 10,800. In adjusting entry for goodwill :
(A) A’s Capital A/c Cr. by 4,800; B’s Capital A/c Cr. by 3,600; C’s Capital A/c Cr. by 2,400.
(B) A’s Capital A/c Cr. by 3,600; B’s Capital A/c Cr. by 3,600; C’s Capital A/c Cr. by 3,600.
(C) A’s Capital A/c Dr. by 1,200; C’s Capital A/c Cr. by 1,200;
(D) A’s Capital A/c Cr. by 1,200; C’s Capital A/c Dr. by 1,200
43. A, B and C were partners sharing profits and losses in the ratio of 7 : 3 : 2. From 1st January, 2019 they
decided to share profits and losses in the ratio of 8:4:3. Goodwill is 1,20,000. In Adjustment entry for
goodwill:
(A) Cr. A by 6,000; Dr. B by 2,000; Dr. C by 4,000
(B) Dr. A by 6,000; Cr. B by 2,000; Cr. C by 4000
(C) Cr. A by 6,000; Dr. B by 4,000; Dr. C by 2,000
(D) Dr. A by 6,000; Cr. B by 4,000; Cr. C by 2,000
44. P, Q and R were partners in a firm sharing profis in 5 : 3 : 2 ratio. They decided to share the future
profits in 2 : 3 : 5. For this purpose the goodwill of the firm was valued at 1,20,000. In adjustment entry for
the treatment of goodwill due to change in the profit sharing ratio :
44 | P a g e
(A) Cr. P by 24,000; Dr. R by 24,000 (B) Cr. P by 60,000; Dr. R by 60,000
(C) Cr. P by 36,000; Dr. R by 36,000 (D) Dr. P by 36,000; Cr. R by 36,000
45. A, B and C are partners in a firm sharing profits in the ratio of 3 : 4 : 1. They decided to share profits
equally w.e.f. 1st April, 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
46. A, B and C are partner sharing profits in the ratio of 1 : 2 : 3. On 1-4-2019 they decided to share the
profits equally. On the date there was a credit balance of 1,20,000 in their Profit and Loss Account and a
balance of 1,80,000 in General Reserve Account. Instead of closing the General Reserve Account and
Profit and Loss Account, it is decided to record an adjustment entry for the same. In the necessary
adjustment entry to give effect to the above arrangement:
(A) Dr. A by 50,000; Cr. B by 50,000 (B) Cr. A by 50,000; Dr. B by 50,000
(C) Dr. A by 50,000; Cr. C by 50,000 (D) Cr. A by 50,000; Dr. C by 50,000
47. X, Y and Z are partners in a firm sharing profits in the ratio 4 : 3 : 2. Their Balance Sheet as at 31-3-
2019 showed a debit balance of Profit & Loss A/c 1,80,000. From 1-4-2019 they will share profits equally.
In the necessary journal entry to give effect to the above arrangement when A Y and Z decided not to close
the Profit & Loss Acccount:
(A) Dr. X by 20,000; Cr. Z by 20,000 (B) Cr. X by 20,000; Dr. Z by 20,000
(C) Dr. X by 40,000; Cr. Z by 40,000 (D) Cr. X by 40,000; Dr. Z by 40,000
48. Aran and Varan are partners sharing profits in the ratio of 4: 3. Their Balance Sheet showed a balance
of 56,000 in the General Reserve Account and a debit balance of 14,000 in Profit and Loss Account. They
now decided to share the future profits equally. Instead of closing the General Reserve Account and Profit
and Loss Account, it is decided to pass an adjustment entry for the same. In adjustment entry :
(A) Dr. Aran by 3,000; Cr. Varan by 3,000 (B) Dr. Aran by 5,000; Cr. Varan by 5,000
(C) Cr. Aran by 5,000; Dr. Varan by 5,000 (D) Cr. Aran by 3,000; Dr. Varan by 3,000
49. X, Y and Z are partners in a firm sharing profits in the ratio of 3:2: 1. They decided to share future
profits equally. The Profit and Loss Account showed a Credit balance of 60,000 and a General Reserve of
30,000. If these are not to be shown in balance sheet, in the journal entry :
(A) Cr. X by 15,000: Dr. Z by 15,000
(B) Dr. X by 15,000; Cr. Z by 15,000
(C) Cr. X by 45,000; Cr. Y by 30,000; Cr. Z by 15,000
(D) Cr. X by 30,000; Cr. Y by 30,000; Cr. Z by 30,000
50. X Y and Z are partners sharing profits and losses in the ratio 5 : 3 : 2. They decide to share the future
profits in the ratio 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 to the partners in old profit sharing ratio
(B) Distributed to the partners in new profit sharing ratio
(C) Distributed to the partners in capital ratio
(D) Carried forward to new balance sheet without any adjustment
51. Any change in the relationship of existing partners which results in an end of the existing agreement
and enforces making of a new agreement is called:
(A) Revaluation of partnership (B) Reconstitution of partnership. (C) Realization of partnership.
(D) None of the above.
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52. The partner whose share decrease as a result of change in profit sharing ratio are known as
(a) Sacrificing partner (b) Gaining partner (c) Sleeping partner (d) None of these
53. The partner whose share increase as a result of change in profit sharing ratio are known as
(a) Sacrificing partner (b) Gaining partner (c) Sleeping partner (d) None of these
54. Gaining ratio is a ratio by which profit share of the partner
(a) increase (b) decrease (c) no change (d) none of these
55. Sacrificing ratio is a ratio by which profit share of the partner
(a) increase (b) decrease (c) no change (d) none of these
56. On the reconstitution of a firm change in the value of assets is called ___
(a) Revaluation of assets (b) Reassessment of assets (c) Devaluation of assets
(d) Reassessment of liabilities
57. Any change in the relations of partners without affecting the existing of partnership firm is called ____
(a) Reassessment (b) Retirement (c) Revaluation (d) Reconstitution
58. Reassessment of liabilities means:
(a) Only increase in the values of liabilities (b) Change in the values of liabilities
© Change in the values of assets (d) Only decrease in the values of liabilities
59. Accounting Standard ____ requires goodwill should be recorded in the books of accounts only when
some money or money’s worth is paid for it.
(a) 26 (b) 23 (c) 27 (d) 10
60. An account prepared to carry out the scheme of revaluation of assets and reassessment of liabilities:
(a) Revaluation account (b) Memorandum of revaluation (c) Memorandum of valuation(d) none of the
above
61. Revaluation of assets on the reconstitution of partnership is necessary because their present value may
be different from their _____
(a) Market Value (b) Net Value (c) Place Value (d)Book Value
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Answer Key
1. B
2. A
3. A
4. D
5. D
6. C
7. B
8. D
9. B
10. A
11. B
12. D
13. D
14. D
15. A
16. B
17. C
18. A
19. B
20. B
21. B
22. C
23. A
24. A
25. D
26. A
27. C
28. D
29. A
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30. A
31. C
32. B
33. D
34. B
35. C
36. C
37. B
38. B
39. D
40. D
41. D
42. D
43. A
44. C
45. B
46. C
47. A
48. D
49. A
50. A
51. B
52. A
53. B
54. A
55. B
56. A
57. D
58. B
59. A
60. A
61. D
48 | P a g e
CHAPTER 4 Admission of a Partner
Sr.No. Questions
1. A new partner may be admitted into a 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
2 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
3 A and B are partners sharing profit in the ratio of 2 :1. They admit C as a partner by giving
him 1/4 share in future profits. The new ratio will be :--
(A) 12 : 8 : 5 (B) 8: 12 : 5 (C) 5 : 5 : 12 (D) None of the Above
4 X and Y are partners sharing profit in the ratio of 3 : 2. Z was admitted with 1/4 share in
profits which he acquires equally from X and Y. The new ratio will be:
(A) 9 : 6 : 5 (B) 19 : 11 : 10 (C) 3 : 3 : 2 (D)3:2:4
5 A and B share profits in the ratio of 2 : 1. C is admitted with 1/4 share in profits. C acquires
3/4 of his share from A and 1/4 of his share from B. The new ratio will be:
(A) 2 : 1 : 1(B) 23 : 13 : 12(C) 3 : 1 : 1(D) 13 : 23 : 12
6 B and N are partners in a firm sharing profits in the ratio of 3 : 2. They admit S as a partner
for l/4th share in the profits. S acquires his share from B and N 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
7 A and B are partners sharing profits and losses in the ratio of 3 : 2. They agree to admit C,
their manager, into partnership who is to get 1/6th share in the profits. He acquires this share
as 1/24th from A and 1/8th from B, The new profit sharing ratio will be :
(A) 67 : 33 :20(B) 7 : 13 : 4(C) 7 : 5 : 6(D) 5 : 7 : 6
8 A and B share profits in the ratio of 2 :3. They agreed to admit C on the condition that A will
sacrifice 1/25th of his share of profit in favour of C and B will sacrifice 3/25th of his profits
in favour of C. The new profit sharing ratio will be :
(A) 12 : 9:4(B) 3 : 2 : 4(C) 66 : 48 : 11(D) 48 : 66 : 11
9 A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. A new partner C
is admitted. A surrenders 1/15th share of his profit in favour of C and B surrenders 2/15th of
his share in favour of C. The new ratio will be :
(A) 8 : 4 : 3(B) 42 : 26 : 7(C) 4 : 8 : 3(D) 26 : 42 : 7
10 A and B are partners sharing profit or loss in the ratio of 2: 1. A surrenders ½ of his share and
B surrenders 1/4 of his share in favour of C, a new partner. What will be the C’s share?
(A) 5/12 (B)1/5 (C) 1/10 (D) 3/10
11 A and B are partners in a business sharing profits and losses in the ratio of 3 :7 respectively.
They admit C as a new partner. A sacrificed 1/3rd share of his profit and B sacrificed 1/7th of
his share in favour of C. The new profit sharing ratio of A, B and C will be :--
(A) 1 :3 : 1(B) 2 : 1 : 1(C) 2 : 2 : 1(D) None of the above
12 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 profit and B sacrifices 1/4 of his share in
favour of C. What will be the C’s share in the firm?
(A)1/5 (B) 2/5 (C) 3/10 (D) None of these
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13 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 B. the new profit sharing ratio
after C’s admission will be :
(A) 1 : 3 : 3(B) 3 : 1 : 1(C) 2 : 2 : 1(D) 1 : 3 : 1
14 A and B are partners sharing profits in the ratio of 4: 3. They admitted C 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
15 A and B are in partnership sharing profits and losses as 3: 2. C is admitted for 1/4th share.
Afterwards, D enters for 20 paisa in the rupee. The new profit sharing ratio after D’s
admission will be :
(A) 9 : 6 : 5 : 5(B) 6 : 9 : 5 : 5(C) 3 : 2 : 4 : 5(D) 3 : 2 : 5 : 5
16 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
17 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
18 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
19 X and Y are partners sharing profits in the ratio of 3: 2. Z is admitted as a partner. Calculate
sacrificing ratio if new profit-sharing ratio is 9:6: 5.
(A) 3: 1(B) 3: 2(C) 1:3(D) 9: 7
20 A and B are partners sharing profits in the ratio of 5: 3. A surrenders 1/5th of his share and B
surrenders 1/4 of his share in favour of C, a new partner. What is the sacrificing ratio?
(A) 4 : 3(B) 5 : 4(C) 12 : 25(D) 25 : 12
21 A and B are partners sharing profits in the ratio of 11: 4. C was admitted. A
surrendered 1/11th of his share and B1/4th of his share in favour of C. The sacrificing ratio
will be :
(A) 11 : 4(B) 1 : 1(C) 4:11(D) 7 : 4
22 P and Q are partners sharing profits in the ratio of 9: 7. R is admitted as a partner with 9/20th
share in the profits, which he takes 1/5th from P and 1/4th from Q Sacrificing ratio will be:
(A) 5 : 4(B) 9 : 7(C) 7 : 9(D) 4 : 5
23 A, B and C are partners sharing in the ratio of 5:4: 3. They admit D for 1/7th share. It is
agreed that C would retain his original share. Sacrificing ratio will be :
(A) A, B and C — 5 : 4 : 3(B) A and C — 4 : 3
(C) A and B — 5 : 4(D) Z and C — 5 : 3
24 A and B are partners sharing profits and losses in the ratio of 5: 4. C is admitted for 1/4th
share. A and B decide to share equally in future. Sacrificing
ratio will be :-
(A) 5 : 4(B) 2 : 7(C) 13: 5(D) 1 : 1
25 A and B are partners. They admit C for 1/3rd share. In future the ratio between A and B
would be 2: 1. Sacrificing ratio will be:
(A) 2: 1(B) 1: 1(C) 5:1(D) 1: 5
26 A and B were Partners in a firm with capital of Rs 6,00,000 and Rs.4,00,000 respectively. C
was admitted as a new partner for 1/4th share in the profit of the firm. C brought Rs. 2,40,000
for her share of Goodwill Premium and Rs. 1,20,000 for her share of Capital . The amount of
Goodwill Premium credited to A will be:---
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(A) Rs. 80,000 (B) Rs.60,000 (C)Rs. 72,000 (D) Rs. 60,000
27 A and B are partners sharing profits and losses as 2: 1. C is admitted and profit-sharing ratio
becomes 4:3: 2. Goodwill is valued at Rs.189000. C brings required goodwill in cash.
Goodwill amount will be Credited to :
(A) A Rs.14,000 and B Rs.7,000(B) A Rs.12,000 and B Rs.9,000
(C) A Rs.42,000(D) A Rs.1,89,000
28 X and Y are partners sharing profits and losses in the ratio of 5: 3. They admit Z into
partnership with 15th 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
29 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 Rs.1,00,000 as goodwill. The ratio of the
partners A, B and C in the new firm would be 2:2: 1. Goodwill will be credited to:
(A) Only A Rs.1,00,000(B) Only B Rs.1,00,000(C) A Rs.60,000; B Rs.40,000
(D) A Rs.75,000; B Rs.25,000
30 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
31 P and S are partners sharing profits in the ratio of 3: 2. R is admitted with 1/5th share and he
brings in Rs.42,000 as his share of goodwill which is Credited to the Capital Accounts of P
and S respectively with Rs.31,500 and Rs.10,500. New profit sharing ratio will be :
(A) 3 : 1 : 5(B) 9 : 7 : 4(C) 3 : 2 : 5(D) 7 : 9 : 4
32 A and B are partners sharing profits and losses as 2: 1. C and D are admitted and profit-
sharing ratio becomes 6: 4:4: 1. Goodwill is valued at Rs.9,000. C and D bring required
goodwill in Cash. Credit will be given to :
(A) A Rs.2400 ; B Rs.600(B) A Rs.6600; B Rs.2400(C) A Rs.3300; B Rs.1200
(D) A Rs.2700; B Rs.1800
33 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 surrender 1/3rd of his share and B surrenders 1/4th of his
share in favour of C. Goodwill of the firm is valued at Rs.6,00,000 but C is unable to bring
his share of goodwill in cash. Credit will be given to :
(A) A Rs.108,000; B Rs.72,000(B) A Rs.1,20,000; B 60,000
(C) A 4,00,000; B Rs.2,00,000(D) A Rs.1,80,000; 5 Rs.1,20,000
34 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
35 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
36 Goodwill already appearing in the Balance Sheet at the time of admission of a Partner is
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transferred to:--- New Partners Capital A/c (B) Old Partners’ Capital A/c (C) Revaluation
A/c (D) None of the above
37 Goodwill already appearing in the Balance Sheet at the time of admission of a Partner is
transferred to old Partners’ capital A/c in ---- Ratio.
(A) New Ratio (B) Old Ratio (C) Sacrifice Ratio (D) None of the Above
(B)
At the time of admission of a new partner, the balance of Workmen Compensation

38 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
39 A, B and C were partners in a firm sharing profit and losses in the ratio 2:2:1. D is admitted
as a new partner The partners decide to share future profit and loss in the ratio 4:3:2:1.Their
Balance sheet as on that date showed a balance of Rs.45,000 in Advertisement Suspense
account. The amountto be debited respectively to Capital acc of A, B and C for writing off
advertisementSuspenseacc will be:--
(a) Rs.18,000 , 18000 and 9000 ( b) 15000,15000 and 15000
(c)21000, 15000 and 9000 (d) 22500, 22500 and nil
40 The firm of P, Q and R with profit sharing ratio of 6:3:1, had the balance in General
Reserve Account amounting Rs. 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 Rs. 54,000
(b)P will be debited by Rs. 54,000
(c)P will be credited by Rs. 36.000
(d)P will be credited by Rs. 36,000
41 The amount of dr. balance of Profit and Loss account as appearing in the Balance Sheet
at the time of admission of a new partner is transferred to
(A) Revaluation A/c (B) New Partners Capital A/c (C) Old Partners’ Capital A/c (D)
All Partners Capital A/c
42 A Firm ‘s Balance Sheet had a workmen Compensation Reserve of Rs.30,000. Ram, a

new Partner admitted. The Liability against Workmen Compensation Reserve was
determined to be Rs.18000. What amount of workmen Compensation Reserve is
distributed among old partners?
(A)12,000 (B) 30,000 (C) 18000 (D) None of the Above
43 A Firm ‘s Balance Sheet had a workmen Compensation Reserve of Rs.30,000. R, a new

Partner admitted. The Liability against Workmen Compensation Reserve was
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determined to be Rs. 45000. The Extra amount of Liability against workmen
Compensation Reserve is Transferred to which A/C
(A) Revaluation A/c (B) New Partners Capital A/c (C) All Partners Capital A/c (D)
Cash A/c
44 A Firm ‘s Balance Sheet had a Investment Fluctuation Reserve of Rs.30,000. Ram, a

new Partner admitted. Investment in the Books is 5,00,000. Market Price of investment
is Rs.5,40,000. What amount of Investment Fluctuation Reserve is distributed among
old partners?
(A)40,000 (B) 30,000 (C) 70,000 (D) 10,000
45 Revaluation Account is a ------------ Account.

(A)Real (B)Nominal (C)Personal (D)Liability
46 A and B are partners sharing profit in the ratio 2:3. Their balance sheet showsmachinery at
Rs.2,00,000 ; Stock at Rs. 80,000; and debtors at Rs. 1,60,000. C was admittedand new profit
sharing Ratio is agreed at 6:9:5. Machinery is revalued at Rs 140000 and aprovision is made
for doubtful debts @5%. A’s Share in Loss on revaluation amount toRs.20,000. Revalued
value of stock will be:-
(A) Rs.62000 (B) Rs.1,00,000 (C) 60,000 (D) Rs.98,000
47 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 Rs. 10,000 and the provision for doubtful debts appeared at Rs.
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 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(D)None of the above
48 In which of the following case, revaluation account is debited?
(A) Increase in value of asset (B) Decrease in value of asset
(C) Decrease in value of liability(D) No change in value of assets
49. Partner’s capital account is credited when there is
(a) Profit on revaluation
(b) transfer of general reserve
(c) transfer of accumulated profits
50 Increase in the value of liabilities at the time of admission of a Partner is
(A) Debited to Revaluation A/c (B) Credited to Revaluation A/c (C) Credited to Partner’s
Capital A/c (D) Debited To partner’s Capital A/c
51 In case of admission of a partner, the entry for unrecorded investment will be
(A) Debited Partners’ Capital a/cs and credited Investment A/C
(B) Debited Revaluation a/c and credited investment A/Cs
(C) Debited Investment a/c and Revaluation A/c
(D) None of the above
52 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 Value
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53 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
54 Assertion A new Partner may be admitted into partnership firm :--

Reasoning:-1With the consent of all old partner
Reasoning 2. With the consent of any one partner
(A) only 1 correct (B) Only 2 is correct (C) Both 1 and 2 are correct but 1 is proper
explanation of A (D) Both 1 and 2 are correct but 2 is proper explanation of A
55. Assertion :-Revaluation a/c is prepared.
Reason 1. When a new partner is admitted
Reason 2. When Partnership firm is reconstituted
(A)only 1 correct (B) Only 2 is correct (C) Both 1 and 2 are correct but 1 is proper
56 Assertion :- on the admission of a new partner
Reason 1 Old Partnership is Dissolved
Reason 2 Firm is reconstituted.
only 1 correct (B) Only 2 is correct (C) Both 1 and 2 are correct but 1 is proper
57. Assertion :- Assets and Liabilities are revalued on the admission of a new partner.
Reason1 the entire profit and loss belongs to the period prior to Admission
Reason2 To Divide the profit and loss among old partners
only 1 correct (B) Only 2 is correct (C) Both 1 and 2 are correct but 1 is proper
58 A,B and C were Partners in a firm sharing profit and losses in the ratio 3:2:1 . At the
time of admission of a partner, the goodwill of the firm is valued at Rs. 3,00,000. The
accountant of the firm passed the entry in the books of account and thereafter he
showed the Goodwill Rs.3,00,000 as an asset in the balance sheet of the company. Is it
correct to show the Goodwill in the books? Why?
59 A, B and C were Partners in a firm sharing profit and losses in the ratio 3:2:1. At the
time of admission of a partner D, the of the firm has Profit & Loss a/c showing Dr
balance Rs. 30,000 . The accountant of the firm passed the entry in the books of account
by crediting Partners’ Capital A/c . Did the accountant give correct treatment? Give
reasons.
was admitted as a new partner. C brought Rs. 2,40,000 for her share of Goodwill Premium
and Rs. 12,00,000 for her share of Capital. There is no partnership deed. At the end of
accounting Year C demands more share as his capital is more than other partners. Is she
correct.
61 A and B were Partners in a firm Sharing Profit in the ratio 3:2. C was admitted as a new
partner for 1/4th share in the profit of the firm. On that date, Balance Sheet of the firm
showed Rs. 25,000 as workmen compensation Reserve against which a liability of
Rs.150,000. AandB were of the opinion that excess liability Rs.1,00,000 should be borne by
all partners including C in their new profit-sharing ratio whereas C says it is the liability of
old firm so it should be borne by old partners in old ratio. tell who is correct.
.62 A and B were Partners in a firm with capital of Rs 6,00,000 and Rs.4,00,000 respectively. C
was admitted as a new partner for 1/4th share in the profit of the firm. C brought Rs. 2,40,000
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for her share of Goodwill Premium and Rs. 1,20,000 for her share of Capital. He gave his
share of Goodwill to the Partners Privately. The accountant of the company records this
Goodwill in the books of Firm. Is the accountant treatment of premium for Goodwill
Correct?
was admitted as a new partner for 1/4th share in the profit of the firm. On this day the firm
has a reserve of Rs. 60,000. A says that reserve should be divided in proportion of capital
whereas B says it should be divided equally as there is no partnership deed. A agrees with B .
why.
64 A and B were Partners in a firm with combined capital of Rs10,00,000 after all adjustments.
C was admitted as a new partner for 1/5th share in the profit of the firm. C brought Rs.
4,00,000 for her share of Capital. Calculate the value of c’s share of Goodwill on the basis of
his capital.
65 A newly admitted partner has
(A) Right to share Asset of the firm
(B) Right to share future profit of the firm
(C) Both A and B
(D) None of these
END OF the Chapter
Answer Key
1(C) 2(B) 3(D) 4(B) 5(B) 6(D) 7(A) 8(D) 9(B) 10(A)
11(A) 12(C) 13(C) 14(C) 15(A) 16(C) 17(A) 18(B) 19(B) 20(A)
21(B) 22(D) 23(C) 24(C) 25(D) 26(A) 27(C) 28(A) 29(A) 30(D)
31(B) 32(A) 33(B) 34(C) 35(C) 36( B) 37(B) 38(A) 39(A) 40(A)
41(C) 42(A) 43(A) 44(C) 45(B) 46(D) 47(C) 48(B) 49(D) 50(A)
51(C) 52(D) 53(C) 54(A) 55(D) 56(D) 57(C)
58. No . only purchased Goodwill can be shown in the books
59. No. it is a Loss so Partners Capital are to debited
60.No Profit is shared equally in absence of partnership deed.
61. C is correct as it is liability before his admission
62.No Privately paid goodwill is not shown in the books of accounts.
63.this is past profit. And in absence of partnership deed profit are divided equally.
64 Rs. 120000
65 (C)
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Chapter 5- ACCOUNTING FOR SHARE CAPITAL
SHARE AND SHARE CAPITAL- NATURE AND ITS TYPES

1. An artificial person created by Law is called :
(A) Sole Tradership
(B) Partnership Firm
(C) Company
(D) All of the Above
2. 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
3. Maximum number of members in a private company is :
(A) 7
(B) 200
(C) 20
(D) No Limit
ISSUE AND ALLOTMENT OF EQUITY AND PREFERENCE SHARES (AT PAR AND AT
PREMIUM)
4. Equity shares cannot be issued for the purpose of:
(A) Cash Receipts
(B) Purchase of assets
(C) Redemption of debentures
(D) Distribution of dividend
5. A company cannot issue :
(A) Redeemable Equity Shares
(B) Redeemable Preference Shares
(C) Redeemable Debentures
(D) Fully Convertible Debentures
6. Preference shares, in case the holders of these have a right to convert their preference shares into equity
shares at their option according to the terms of issue, such shares are called :
(A) Cumulative Preference Share

(B) Non-cumulative Preference Share
(C) Convertible Preference Share
(D) Non-convertible Preference Share
7. The following statements apply to equity/preference shareholders. Which one of them applies only to
preference shareholders?
(A) Shareholders risk the loss of investment
(B) Shareholders bear the risk of no dividends in the event of losses
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(C) Shareholders usually have the right to vote
(D) Dividends are usually given at a set amount in every’ financial year.
8. Which shareholders have a right to receive the arrears of dividend from future profits :
(A) Redeemable Preference Shares
(B) Participating Preference Shares
(C) Cumulative Preference Shares
(D) Non-Cumulative Preference Shares
Meaning, Nature and Types of Share Capital
9. The portion of the capital which can be called-up only on the winding up of the Company is called
(A) AuthorisedCapital
(B) Called up Capital
(C) Uncalled Capital
(D) Reserve Capital
10. 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
11. Which of the following statements is true?
(A) Authorised Capital = Issued Capital
(B) Authorised Capital > Issued Capital
(C) Paid up Capital > Issued Capital
12. In case of private placement of shares, the lock in period is :
(A) 1 Year
(B) 2 Years
(C) 3 Years
13. 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
14. Authorised Capital of a Company is mentioned in :
(A) Memorandum of Association
(B) Articles of Association
(C) Prospectus
(D) Statement in lieu of Prospectus
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15Which 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) (B) Share forfeiture
(C) Share trading
(D) Share Purchase
16According to Companies Act, Minimum Subscription has been fixed at ……….. of the issued amount.
(A) 25%
(B) 50%
(C) 90%
(D) 100%
17. 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%
18. 4,000 Equity Shares of Rs.10 each were issued at 8% premium to the promoters of a company for their
services. Which account will be debited?
(A) Share Capital Account
(B) Goodwill Account/Incorporation Cost Account
(C) Securities Premium Reserve Account
(D) Cash Account
19. If vendors are issued fully paid shares of Rs.1,25,000 in consideration of net assets of Rs.1,50,000, the
balance of Rs.25,000 will be credited to
(A) Statement of Profit & Loss
(B) Goodwill Account
(C) Security Premium Reserve Account
(D) Capital Reserve Account
20. Issue of shares at a price higher than its face value is called :
(A) Issue at a Profit
(B) Issue at a Premium
(C) Issue at a Discount
(D) Issue at a Loss
21.Maximum limit of Premium on shares is:
(A) 5%
(B) 10%
(C) No Limit
(D) 100%
22. For what purpose securities premium reserve account cannot be utilized?
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(A) Amortization of preliminary expenses
(B) Distribution of dividend
(C) Issue of fully paid bonus shares
(D) Buy Back of own shares
23. A Company issued 50,000 shares of Rs.20 each at 5% premium. Rs.10 were payable on application
and balance on allotment. What will be the allotment amount?
(A) Rs.5,00,000
(B) Rs.4,75,000
(C) Rs.5,50,000
(D) Rs.5,25,000
CALLS IN ARREARS AND CALLS IN ADVANCE
24. As per Table F, the Company is required to pay …………. interest on the amount of calls in advance
(A) 12% p.a.
(B) 5% p.a.
(C) 10% p.a.
(D) 6% p.a.
25. 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
(B) Rs.2,800
(C) Rs.1,800
(D) Rs.6,200
26. 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
27. 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
28. Authorised capital of a Company is div ided 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
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29.E 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
30. 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
31. 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
32.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

33. 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
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34. 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
35.The subscribed share capital of Mukand 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
36. 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. Manoranjan 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
37. Zen Ltd purchased the sundry assets of M/s Surat 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
38. 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
Read the statement and answer the following questions (Q 39-42)
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A company issued 4,000 equity shares of rupees 10 each at par payable as under:
On application rupees 3 , on allotment rupees 2; on first call rupees 4 and on final call rupees 1 per share.
Applicants were received for 16,000 share . Application for 6,000 shares were rejected and pro-rata
allotment was made to the applicants for 10,000 shares .
Q 39 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.) Rupees 6.000
(B.) nil
(C.) Rupees 16,000
(D.) Rupees 10,000
Q 40 How much amount will be received on allotment l,when excess application money is adjusted
(A.) Rupees 6.000
(B.) Rupees 16,000nil
(C.) nil
(D.) Rupees 10,000
Q 41 How much amount will be received in cash on final call,when excess application money is adjusted
(A.) Rupees 6.000
(B.) nil
(C.) Rupees 16,000
(D.) Rupees 4,000
Q 42 How much amount will be adjusted towards first call,when excess application money is adjusted
(A.) Rupees 6.000
(B.) nil
(C.) Rupees 16,000
(D.) Rupees 10,000
Ques.43. Match the following :
a) Cumulative Pref. Share i)Repaid after some time
b) Participating Pref. Share ii) converts into equity shares
c) Redeemable Pref. shares iii) Dividend accumulates if not paid
d) Convertible Pref. shares iv) Gets share in surplus profit
The correct match is:
A) a-ii ,b-i, c-iii, d-iv
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B) a-iii, b-iv, c-i, d-ii
C) a-iii, b-iv, c-ii ,d-i
D) a-ii, b-iv, c-iii, d-i
Q 44 XYZ Company goes for a public issue each share of face value Rs.10 .The application money is
Rs.2, allotment Rs.3, first call Rs.4, final call Rs.1. Is this valid
A. Can’t say
B. To some extent
C. Yes
D. No
Q 45 A company can issue share at discount if
A. The resolution specifies the maximum rate of discount at which share are to be issued
B. The shares are of a class already issued
C. All
D. Issue share at discount is authorized by resolution passed by company
Q 46 Which of the following statement is false
A. A company is legal entity distinct from its owner

B. A company can buy its own share
C. Company is managed by all the members
D. Company is not affected by the death of its member
Q47 Which statement is false
A. All
B. Called up share capital is that part of subscribed capital that has been called up
C. A company can not raise fund beyond its authorized capital
D. Payment of interest on calls-in-advance is at the desecration of the company
Q48 Amount of money not received out of called up capital is :
(A.) Added to share capital

(B.) Subtracted from share capital
(C.) Shown as current liabilities
(D.) Shown as current asset
Q 49 When a company issues fully paid shares to promoters
for their services, the journal entry will be:
(a) Bank A/c Dr.
To Share Capital A/c
(b) Good will A/c Dr.
(c) Promoters Personal A/c Dr.
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(d) Promotion Expenses A/c Dr.
To Share Capital A/C
Q 50 A joint stock company is :
(a) An artificial legal person
(b) Natural person
(c) A general person
(d) None of these
51 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.) 3,800
(B.) 2,800
(C.) 1,800
(D.) 6,200
State whether the following statements are True or False
(i) Authorised Capital is shown in the Note to Accounts on Share Capital
(ii) Authorised Capital for Equity Share Capital and Preference Share Capital is not shown
separately in the Note to Accounts on Share Capital.
(iii) Issued Share Capital is that part of Authorised Share Capital that is issued for subscription
whether subscirbed or not.
(iv) Issued Share Capital can be more than the Authorised Share Capital
(v) Subscribed Capital is the part of Issued Capital that is subscribed.
(vi) Subscribed Captial need not be shown separately for Equity Share Capital and Preference
Share Capital.
(vii) Shares on which the company has received the entire nominal (face) value, whether called or not, are
shown as Subscribed and Fully Paid-up.
viii) Shares on which the company has not received the call made are shown as Subscribed but not
Fully Paid-up.
(ix) A company, at its discretion may or may not prepare Note to Accounts on line item of the Balance
Sheet.
x) Authorised Capital cannot be more than Issued Share Capital.
xi) Subscribed Share Capital can be less than or equal to the Issued Share Capital but cannot be more.
xii) A part of share capital that will be called -up at the of winding up of the company is Reserve Capital.
(xiii) Shares can be issued to public at a discount.
(xiv) Shares can be issued to employees at a discount.
(xv) Shares are always issued at par.
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(xvi) Securities Premium received on issue of shares is credited to Securities Premium Reserve Account.
(xvii) Securities Premium Reserve cannot be used for writing off Loss on Issue of Debentures.
(xviii) Securities Premium Reserve can be used for issuing Partly Paid Bonus Shares.
(xix) Securities Premium Reserve can be used for writing off preliminary expenses.
(xx) Pro rata allotment is made in the event shares are undersubscribed.
(xxi) Shares cannot be issued unless minimum subscription is received by the company.
(xxii) If a company does not receive the amount called by it on shares, it can forfeit the shares.
ANSWER KEY
1 C
2 C
3 B
4 D
5 A
6 C
7 D
8 C
9 D
10 B
11 B
12 C
13 C
14 A
15 A
16 C
17 C
18 B
19 C
20 B
21 C
22 B
23 C
24 A
25 B
26 D
27 B
28 A
29 D
30 C
31 A
32 C
33 B
34 B
35 B
36 B
37 D
38 B
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39 A
40 C
41 D
42 D
43 B
44 C
45 B
46 C
47 D
48 B
49 D
50 A
51 B
(i) True (ii) False (iii) True (iv) False (v)
True (vi) False (vii) False (viii) True (ix)
False (x) False (xi) True (xii) True (xiii)
False (xiv) True (xv) False (xvi) True (xvii)
False (xviii) False (xix) True (xx) False
(xxi) True (xxii) True
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ACCOUNTING FOR SHARE CAPITAL-FORFEITURE AND RE-ISSUE OF
SHARES, DISCLOSURE OF SHARECAPITAL IN COMPANY’S BALANCE
SHEET
1 Shares can be forfeited: 1
i) For non-payment of call money

ii) For failure to attend meetings
iii) For failure to repay loan to the bank
iv) For pledging the shares as a security
2 ‘Forfeited shares can not be re-issued at a discount.’ 1

a) True
b) False
c) Partially True
3 The balance of shares forfeited account after the re-issue of shares is transferred to: 1
i) Reserve Capital
ii) Capital Reserve
iii) Capital Redemption Reserve
iv) Share Capital
4 The balance of shares forfeited account after the re-issue of shares is shown in the 1
Balance Sheet under:
i) Reserve Capital
ii) Capital Reserve
iii) Capital Redemption Reserve
iv) Share Capital
5 A company forfeited 100 Equity Shares of Rs.10 each, issued at a premium of 20%, 1
for the non-payment of final call of Rs.5 including premium. Tell the amount with
which Securities Premium Reserve Account will be debited?
a) Rs.200
b) Rs.500
c) Rs.1000
d) Rs.1500
6 If a Share of Rs. 10 on which Rs. 8 is called-up and Rs. 6 is paid ,is forfeited. 1
State with what amount the Share Capital account will be debited.
a) Rs.8 b)Rs.6 c)Rs.10 d) Rs.100
7 If a Share of Rs. 10 on which Rs. 6 has been paid is forfeited, at what minimum 1
price it can be reissued?
a)Rs.8 b)Rs.6 c)Rs.4 d) Rs.100
8 The directors of a company forfeited 200 equity shares of Rs. 10 each on which 1
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.
e) Rs.200
f) Rs.500
g) Rs.1000
h) Rs.1500
9 ‘The forfeited shares can be re-issued at a discount.’ 1
a) True
b) False
c) Partially True
10 What is the maximum rate of discount at which the forfeited shares can be re-issued? 1
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a) Amount not yet received on those shares
b) Amount due on those shares
c) Both a) and b) above
11 Kishna Ltd issued 15,000 shares of Rs.100 each at a premium of Rs.10 per 1
share, payable as follows:
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 Neha as fully paid share at Rs.120 each.
What is the amount of premium on re-issue of shares to Neha?
a)Rs.2000 b)Rs.3,000 c)Rs.10,000 d) Rs.1500
12 When all of the forfeited shares are not re-issued, it is called ________________ re- 1
issue of shares.
a)Full Re-issue b) Partial Re-issue c) Both (a) and (b) d) None
13 State whether the following statement is true: 1
Re-issue of shares is said to be made at a premium when the re-issue price is more
than the paid up value of shares.
14 Issue of share at a discount 1
a) Section 53
b) Section 52
c) Section 79
d) None of the options
15 A Forfeited Share can : 1

(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.
16 1
Question: 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
17 When nominal (face) value of a share is called up by the company but as some 1
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
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D) Subscribed but not called up
18 Zee Ltd issued 15,000 equity shares of Rs.20 each at a premium of Rs.5 payable 1
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
19 Balance in Securities Premium Reserve Account is shown in the balance sheet 1

under the head of :
(a) Reserves and Surplus
(b) Long-term Borrowings
(c) Share Capital
(d) Other Current Liabilities
20 The subscribed share capital of Mukand Ltd is Rs.1,00,00,000 of Rs.100 each. 1
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 per
share final call was :
A)Rs.20
B)Rs.35
C)Rs.25
D)Rs.45
21 A company forfeited 3,000 shares of Rs.10 each(which were issued at par) held by 1
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
22 Z limited issued shares of Rs.100 each at a premium of 10%. Mr. Q purchased 1

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
23 Deepak Ltd. offered for subscription 5,50,000 equity shares of Rs. 10 each.The 1
public applied for 5,00,000 shares.
The call ( Rs. 8 per share) was received except from Gopal, who holds 4,000
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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.
24 Daisy Limited forfeited 200 shares Rs.10 each who had applied for 500 shares, 1
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
B) Rs. 6400
C) Rs. 300
D) Rs. 400
25 When shares are forfeited. Share Capital Account is debited with 1

(a) nominal (face) value of shares.
(b) called-up share capital.
(c) paid-up value of shares.
(d) market value of shares.
26 Mithas Limited was formed with share capital of Rs. 50,00,000 divided into 1
50,000 shares of Rs.100 each. 9,000 shares were issued to the vendor as fully
paid for purchase consideration of a furniture acquired. 30,000 shares were
allotted in payment of cash on which Rs.70 per share was called and paid . State
the amount of subscribed capital :
A) Rs. 50,00,000
B) Rs. 30,50,000
C) Rs. 30,00,000
D) Rs. 20,00,000
27 Share capital of a company can be divided into 1

a) All of the options
b) Authorised Capital
c) Issued Capital
d) Subscribed Capital
28 What type of shares can be issued at discount? 1

a) Preference Shares
b) Equity Shares
c) Sweat Equity Shares
d) None of the options
29 Reserve Capital is : 1
a) Subscribed Capital
b) Capital Reserve
c) Uncalled Capital
d) Part of the uncalled capital which may be called only at the time of liquidation of
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the Company
30 A Company issued 50,000 shares of Rs.20 each at 5% premium. Rs.10 were 1

payable on application and balance on allotment. What will be the allotment
amount?
a) Rs.5,00,000b) Rs.4,75,000
c) Rs.5,50,000d) Rs.5,25,000
31 The maximum capital that the company can issue during its lifetime is ______ . 1
b) Authorised Capital
c) Issued Capital
d) All of the options
32 The part of issued capital which is not subscribed by the general public is called 1
_________
b) Capital Reserve
c) Uncalled Capital
d) Unsubscribed capital
33 Amount of money not received out of called up capital is : 1

(A.) Added to share capital
(B.) Subtracted from share capital
(C.) Shown as current liabilities
(D.) Shown as current asset
34 The portion of the authorised capital which can be called-up only on the 1
liquidation of the company is called
a) Reserve capital
b) Authorised capita
c) Issued capital
d) Called up capital
35 Following amounts were payable on issue of shares by a company : Rs.3 on 1

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.) 3,800
(B.) 2,800
(C.) 1,800
(D.) 6,200
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36 When forfeited shares are re-issued the amount of discount allowed on these 1
shares cannot exceed :
(a) 10% of called-up capital per share
(b) 6% of paid-up capital per share
(c) The amount received per share on forfeited shares
(d) The unpaid amount per share on forfeited shares.
37 ‘Securities premium account is shown on the assets side of the balance sheet.’ 1
a) True
b) False
c) Partially True
38 150 shares of Rs.10 each issued at a premium of Rs.4 per share payable with 1
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
39 400 share of Rs.50 each issued at par were forfeited for non-payment of final 1
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
40 Sun and Moon Ltd. Invited applications for 25,000 Equity Shares of Rs.10 each and 1
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 c) All of the above
b) Both (i) and (iii) above d) only (ii) above
41 If a shareholder does not pay his dues on allotment, for the amout due, there will be 1
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
42 At the time of re-issue of all forfeited shares: 1
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
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Account.
43 On a share of Rs.20 issued at a premium of Rs.4 on which Rs.16 (including 1
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
44 On a share of Rs.10 issued at a premium of Rs.2 on which whole amount is called- 1
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
45 MIG Ltd. Forfeited 40 shares of Rs.10 each issued at a premium of 40% to Raj who 1
had applied for 48 shares. After having paid Rs.6 (including Rs.2 premium), he did
not pay allotment money of Rs.2 (including Re.1 premium) and on his subsequent
failure to pay the first call of Rs.3 (including Re.1 premium) his shares were
forfeited. The amount to be credited to forfeited Shares Account is:
a) Rs.288 b) Rs.200 c) Rs.192 d) Rs.160
46 Mohan ltd. Forfeited 160 shares of Rs.10 each on which the holder had paid only the 1
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
47 ‘Calls-in-Advance is shown in the other Current Liabilities under Current 1
Liabilities.’
a) True
b) False
c) Partially True d) None of the above
48 Aman , Mohan , Madan and Neeraj are directors of a company. The company had 1
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. Amanwas 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.
Where, 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
49 A company has issued 10000 Equity Shares of Rs.10 each and it has called the total 1
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
50 Star ltd. Issued 10,000 equity shares of Rs. 100 each at a premium of 20%. Mamta 1
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
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Questions from 51 to 54 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 :
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.
51 What is the amount of discount on re-issue of shares?

a) Rs.1200 b) Rs.800 c) Rs.600 d) 14,400
52 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
53 How much will be transferred to Capital Reserve Account out of Shares Forfeited
Account?
a) Rs.1200 b) Rs.800 c) Rs.600 d) 14,400
54 The total Calls in Arrears are for_________________

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
55 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
56 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
57 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
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58 What amount of share forfeiture would be reflected in the balance sheet?
a. Rs.600 b. Rs.900 c. Rs.200 d. Rs. 300
Alfa Ltd. invited applications for issuing 75,000 equity shares of 10 each. The
amount was payable as follows:
On application and allotment: 4 per share,
On first call: 3 per share,
On second and final call: BALANCE
Applications for 1,00,000 shares were received. Shares were allotted to all the
applicants on pro rata basis and excess money received with applications was
transferred towards sums due on first call. Vibha who was allotted 750 shares failed
to pay the first call. Her shares were immediately forfeited. Afterwards the second
call was made. The amount due on second call was also received except on 1,000
shares applied by Monika. Her shares were also forfeited. All the forfeited shares
were reissued to Mohit for 9,000 as fully paid-up.
59 What amount is received on share first call?

a) Rs.2,25,000
b) Rs.1,25,750
c) Rs.1,23,750
60 Amount due on Share second and Final Call is:
a) Rs.2,27,750
b) Rs.1,23,750
c) Rs.2,25,000
61 How many shares are allotted to Monika?
a) 750 b) 1000 c)1500 d) None of the above
62 How many shares were applied by Vibha?
750 b) 1000 c)1500 d) None of the above
Amisha Ltd inviting application for 40,000 shares of Rs.100 each at a premium
of Rs.20 per share payable; on application Rs.40 ; on allotment Rs.40
(Including premium): on first call Rs.25 and Second and final call Rs.15.
Application were received for 50,000 shares and allotment was made on prorata
basis. Excess money on application was adjusted on sums due on allotment.
Rohit to whom 600 shares were allotted failed to pay the allotment money and
his shares were forfeited after allotment. Ashmita, who applied for 1000 shares
failed to pay the
Two calls and his shares were forfeited after the second call. Of the shares
forfeited, 1200 shares were sold to Kapil for Rs.85 per share as fully paid, the
whole of Rohit’s shares being included.
63 What kind of subscription is it?

a) Over subscription c) Under subscription
b) Full subscription d) None of the above
64 An amount of ___________ remains unpaid on allotment by Rohit.
a) 18,000 b)1,00,000 c)15,000 d) None
65 On Ashmitas’s shares the called up amount is:
a)80,000 b)1,00,000 c)15,000 d) None of the above
66 The amount to be transferred to Capital Reserve after re-issue of shares is:
a) 40,000 c) 50,000
b) 48,000 d) None of the above
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ANSWER KEY
1. i) for non-payment of call money
2. False
3. ii) Capital Reserve
4. iv) Share Capital
5. Rs.200
6. Rs.8
7. Rs. 4
8. b) Rs.500
9. True
10. d) None of the above, as the maximum discount on forfeited shares is amount originally received on
those shares
11 Rs.3000
12. Partial Re-issue of shares
13. True
14. a) Section 53
15 (c) be re-issued at a maximum discount equal to the amount forfeited.

16. D All of the above
17B) Subscribed but not fully paid up
18 C
19 a
20B)Rs.35
21 b 24000
22 d Rs.3000
23. B) Rs. 39,74,000
24. A Rs.700
25. Bcalled-up share capital
26. c
27. a
28. c
29 d
30 c
31 Authorised capital
32 Unsubscribed Capital
33 B.) Subtracted from share capital
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34 A) Reserve Capital
35. b
36. (c) The amount received per share on forfeited shares
37. False
38. Rs.600
39. Rs.2,000
40. c) All of the above
41. d) debit balance in the Shares Allotment Account
42. Capital reserve is credited with the credit balance left in the Shares Forfeited Account.
43. b) Rs.12
44. Rs.10
45.b) Rs.200
46. c) Rs.40
47. True
48. Neeraj is correct
49. Subscribed but not Fully paid Capital
50. d) Nil
51. Rs.14400
52. Rs.NIL
53. Rs.14400
54. Rs.19200
55( c) Issue for consideration other than cash.
56 ( c) Rs.2,99,800
57 ( c) Rs.400
58(a) Rs. 600
59. Rs.1,23,750
60. Rs.2,27,750
61.a)750
62. 1000 shares
63. Over subscription
64. Rs.18,000
65. a)80,000
66. 48,000
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CHAPTER 6 - Financial Statements of a Company
(Statement of Profit and Loss and Balance Sheet)
1. Balance sheet of a company is required to be prepared in the format given in
………………….
(A) Schedule III Part II
(B) Schedule III Part I
(C) Schedule III Part III
(D) Table A
2. As per Companies Act, the Balance Sheet of a company is required to be presented in
………………………
(A) Horizontal Form
(B) Vertical Form
(C) Either Horizontal or Vertical Form
(D) Neither of the above
3. Which of the following is not required to be prepared under the Companies Act
(A) Statement of Profit and Loss
(B) Balance Sheet
(C) Report of Director’s and Auditor’s
(D) Funds Flow Statement
4. According to prescribed order of assets in a Company’s Balance Sheet ………………………
assets should be shown first of all.
(A) Non-Current Assets
(B) Current Assets
(C) Current Investments
(D) Loans and Advances
5. In a Company’s Balance Sheet …………………. appear under the head ‘non-current assets’.
(A) Goodwill
(B) Patents
(C) Vehicles
(D) All of the above
6. Calls in Arrears appear in a Company’s Balance Sheet under ………………..
(A) Reserve & Surplus
(B) Shareholder’s Funds
(C) Contingent Liabilities
(D) Short-term Borrowings
7. Calls in advance appear in a Company’s Balance Sheet under ………………..
(A) Share Capital
(B) Current Liability
(C) Long-term Borrowings
(D) Reserve & Surplus
8. Short-term Borrowings appear in a Company’s Balance Sheet under the head
…………………..
(A) Current Asset
(B) Current Liabilities
(C) Non-Current Liabilities
(D) Non-CurrentAssets
9. Fixed Deposits appear in a Company’s Balance Sheet under :
(A) Current Assets
(B) Current Liabilities
(C) Long-term Provisions
(D) Long-term Borrowings
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10. Goodwill appears in a Company’s Balance Sheet under the Sub-head ………………….
(A) Unamortized Assets
(B) Non-Current Investment
(C) Intangible Assets
(D) Tangible Assets
11. Share Forfeiture Account appears in a Company’s Balance Sheet under the Sub-head
……………….
(A) Share Capital
(B) Reserve & Surplus
(C) Contingent Liability
(D) Commitments
12. Expenses allowed on issue of shares appears in a Company’s Balance Sheet under :
(A) Share Capital
(B) Current Liability
(C) Unamortized Expenditure
(D) Contingent Liability
13. Securities Premium Reserve appears in a Company’s Balance Sheet under :
A) Share Capital
(B) Long-term Provision
(C) Short-term Provision
(D) Reserve & Surplus
14. Prepaid Expenses appear in a Company’s Balance Sheet under the Sub-head ………………
(A) Other Current Assets
(B) Short-term Loans & Advances
(D) Other Non-CurrentAssets
15. . ……………… appear in a Company’s Balance Sheet under the Sub-head Short-term
Provision
(A) Interest Accrued but not due on Borrowings
(B) Provision for Tax
(C) Unpaid Dividend
(D) Calls in Advance
16. Provision for Tax appears in a Company’s Balance Sheet under the Sub-head
……………………
(A) Short-term Provisions
(B) Reserves and Surplus
(C) Long-term Provisions
(D) Other Current Liabilities
17. Bills Receivables appear in a Company’s Balance Sheet under the Sub-head
……………………..
(A) Current Investments
(B) Cash Equivalents
(C) Trade Receivables
(D) Short term Loans and Advances
18. Trade Investments appear in a Company’s Balance Sheet under the Sub-head
………………….
(A) Current Investments
(B) Non-Current Investments
(D) Short-term Loans and Advances
19. Claims against the Company not acknowledged as debts’ is shown under the head
……………….
(A) CurrentLiabilities
(B) Non-CurrentLiabilities
(C) Commitments
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(D) Contingent Liabilities
20. Unclaimed dividend appears in a Company’s balance Sheet under the Sub-head
………………
(A) Short-term Borrowings
(B) Trade Payables
(C) Other Current Liabilities
(D) Short-term Provisions
21. Interest accrued and due on debentures appear in a Company’s Balance Sheet under the Sub-
head ……………..
(B) Trade Payables
22. Interest accrued but not due on loans appear in a Company’s Balance Sheet under the Sub-
head ………………
(B) Trade Payables
23. 6% Debentures appear in a Company’s Balance Sheet under the Sub-head ………………….
(A) Long-term Provisions
(B) Long-term Borrowings
(D) Other Long-term Liabilities
24. Interest accrued on Investments appear in a Company’s Balance Sheet under the Sub-head
………………….
(A) Non-Current Investments
(B) Current Investments
(C) Other Current Assets
(D) Other Non-Current Assets
25. 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
26. 50,000, 9% Debentures redeemable within 12 months of the date of Balance Sheet will be
shown under :
(B) Short-term Provision
(C) Other Current Liability
(D) Trade Payables
27. Which one of the following is Commitment?
(A) Proposed Dividend
(B) Interim Dividend
(C) Unpaid/Unclaimed Dividend
(D) Dividend Arrears on Cumulative Preference Shares
28. Which of the following items is shown under the head ‘Current Assets’ while preparing the
Balance Sheet of a company?
(A) Trade Investment
(B) Underwriting Commission
(C) Inventories
(D) Livestock
29. While preparing the Balance Sheet of a company ‘Underwriting Commission’ is shown under
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which head?
(A) Unamortized Expenditure
(B) Current Assets
(C) Non-Current Assets
(D) Current Liability
30. Which of the following items is shown under the head ‘Current Liabilities’ while preparing
the Balance Sheet of a company?
(A) Securities Premium Reserve
(B) Debentures
(C) Livestock
31. While preparing the Balance Sheet of a company ‘Securities Premium’ is shown under :
(B) Share Capital
(C) Long-term Borrowings
32. Which of the following items is shown under the head ‘Non-Current Assets’ while preparing
the Balance Sheet of a company?
(A) Underwriting Commission
(B) Current Investment
(C) Inventory
(D) Patents
33. Under which heading the item ‘Bills Discounted but not yet matured’ will be shown in the
(B) Current Assets
(C) Contingent Liabilities
(D) Unamortized Expenditure
34. Which one of the following items is shown under the heading ‘current liabilities’ in the
(A) Investments
(B) Reserve Fund
(C) Unclaimed Dividend
(D) Livestock
35. While preparing the Balance Sheet of a Company which item is shown under the head ‘Long
term Borrowings’?
(A) 6% Debentures
(B) Security Premium Reserve
(C) Trade Payables
36. 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
(B) Subscribed but not fully paid
(C) Any of the above
37. Which item is not a part of Reserve and Surplus
a) Accumulated Depreciation
b) Capital Reserves
c) General Reserves
d) All the options
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38. Preliminary expenses are required to be written off within ______________ from the date of
incurring.
a) One year
b) Five years
c) Same year
d) Three years
39. In notes to accounts, share capital in which company has not called the entire face value of
shares is shown under the notes to accounts.
a) Subscribed and fully paid up capital
b) Subscribed but not fully paid up capital
c) Reserve Capital
d) None of these
40. The debentures to be redeemed within 12 months from the date of balance sheet is shown
under
a) Short term borrowings
b) Long term borrowings
c) Other current liabilities
d) Long term liabilities
41. Which of the following item will not appear under short term provisions
a) Provision for tax
b) Proposed dividend
c) Provision for retirement benefits.
d) Provision for doubtful debts
42. Capital Reserve will be shown under
a) Current liabilities
b) Share capital
c) Reserves and surplus
d) Deferred tax liabilities
43. Dividend is paid on
a) Authorised capital
b) Issued capital
c) Called up capital
d) Paid up capital
44. Claims against the company not acknowledged as debts is shown under
a) Current liabilities
b) Noncurrent liabilities
c) Commitments
d) Contingent liabilities
45. The maximum amount of capital mentioned in the Memorandum of Association is known as:
b) Authorised capital
c) Called-up capital
d) Paid-up Capital
46. Profit earned during the year by the company is shown under:
a) Share capital
b) Reserves and Surplus
c) Current Liabilities
d) Current Assets
47. ‘Trade payables’ include
a) Creditors
b) Bills Payable
c) All of the above
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48. Which of the following is added to ‘Subscribed Share Capital’?
a) Calls-in-advance
b) Calls-in-Arrear
c) Forfeited Share Account
d) All of the above
49. Which of the following is not classified as ‘Non-Current Assets’?
a) Vehicles
b) Trade Receivables
c) Investments in Property
d) Patents
50. Proposed dividend is a:

a) Provision
b) Surplus
c) Non-current liability
d) Long-term loan
51. Calls-in-Arrears are deducted from:

a) Authorised capital
b) Issued capital
c) Subscribed capital
d) All of the above
52. Stores and spares are classified in Balance Sheet under:

a) Intangible Assets
b) Current Investments
c) Inventories
d) Cash and cash equivalents
53. Cash and cash equivalents do not include:
a) Cheques, draft on hand
b) Bank deposits
c) Bank overdraft
54. Which of the following is not a subhead of Current Liabilities?
a) Short term Provision
b) Trade Payables
c) Deferred tax liabilities
d) Other current liabilities
55. 1,000, 9% debentures of Rs 100 each are to be redeemed within 12 months of the date of
Balance Sheet. They will be shown in current liabilities as:
a) Short term Borrowings
b) Other Current Liabilities
c) Current Liabilities
d) Short term provisions
56. Which of the following is not a component of ‘Other Current Liabilities’?
a) Current maturity of long term debts
b) Calls-in-advance
c) Loan repayable on demand
d) Interest accrued and due on borrowings
57. Which of the following is not a component of other income?
a) Dividend income
b) Interest income
c) Proceeds from sale of scrap
d) Gain on sale of investment
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58. Which of these is not a component of ‘Reserves and Surplus’?
a) Statement of Profit and loss (dr. balance)
b) Capital reserve
c) Reserve capital
d) Securities Premium Reserve
59. Land, Building are:
a) Fixed Tangible Asset
b) Fixed Intangible Asset
c) Current Asset
d) Fictitious Asset
60. While preparing the balance sheet of a company, 6% debentures is shown under which head?
a) Share capital
b) Long term borrowings
c) Short term borrowings
d) None of these
61. If the operating Cycle cannot be identified, it is assumed to be a period of
a) 10 months
b) 11 months
c) 9 months
d) 12 months
62. The Profit and Loss Statement is also known as the
a) All the options
b) Income Statement
c) Statement of Earning
d) Statement of Operation
63. Inventories include the following are

a) All the options
b) Raw Material
c) Work in progress
d) Goods acquired for trading
64. Revenue earned from the sale of ‘Stock-in-trade’ is shown in the Statement of Profit and Loss
as:
a) Revenue from operations
b) Other Incomes
c) Any of the above
65. Interest earned on Bank deposits by a company engaged in manufacturing electronical

appliances is shown in the statement of Profit and Loss as:
b) Other Incomes
c) All of the above
66. Interest received on investments by a financial company will be classified in Statement of

Profit and Loss as:
b) Other Income
c) All of the above
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67. Electricity and telephone expenses paid by the company are shown in Statement of Profit &
Loss as:
a) Cost of material consumed
b) Employee benefit expenses
c) Other expenses
d) Finance cost
68. Purchase of goods for resale is shown in Statement of Profit & Loss as:
a) Revenue from Operations
b) Cost of material consumed
c) Purchase of Stock-in-trade
d) Change in inventories
69. Interest and dividend earned by a financial company is shown in Statement of Profit & Loss
under the sub-head:
b) Other income
c) Either a) or b)
d) Neither a) nor b)
70. Which of the following is not the limitation of financial statements?
a) Ignore qualitative aspects.
b) Personal bias.
c) Ignore price level change.
d) Provide information about the profitability of the business.
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ANSWERS
1. B SCHEDULE III PART1

2. B Vertical form
3. D FUND FLOW STATEMENT
4. A NON Current Asset
5. D
6. B SHAREHOLDERS FUND
7. B Current liability
8. B Current liability
9. D LONG TERM BORROWINGS
10. C Intangible Asset
11. A SHARE CAPITAL
12. C Unamortised expenditure
13. D Reserves and surpluses
14. A
15. B
16. A
17. C
18. B
19. D
20. C
21. C
22. C
23. B
24. C
25. C
26. C
27. D
28. C
29. A
30. D
31. D
32. D
33. C
34. C
35. A
36. B
37. A
38. C
39. B
40. C
41. C
42. C
43. D
44. D
45. B
46. B
47. C
48. C
49. B
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50. A
51. C
52. C
53. C
54. C
55. B
56. C
57. C
58. C
59. A
60. B
61. D
62. A
63. A
64. A
65. A
66. B
67. C
68. C
69. A
70. D
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Chapter – 7 RATIO ANALYSIS
(Liquidity Ratios & Solvency Ratios)

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
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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
(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. Proprietary 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
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
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(D) 0.37:1
14. On the basis of the following information received from a firm, its Proprietary Ratio will be:
Fixed Assets Rs.3,30,000; Current Assets Rs.1,90,000; Preliminary Expenses Rs. 30,000; Equity share
Capital Rs.2,44,000; Preference Share capital Rs.1,70,000; Reserve Fund Rs. 58,000.
(A) 70%
(B) 80%
(C) 85%
(D) 90%
15. A Current Ratio of Less than One means:
(a)Current Liabilities < Current Assets, (b) Fixed Assets > Current Assets, (c) Current Assets < Current
Liabilities, (d) Share Capital > Current Assets.
16. The formula for ascertaining Total Assets to Debt Ratio is:
17 Proprietory Ratio indicates the relationship between proprietor’s funds and….

(a) Reserve
(b) Share Capital
(c) Total Assets
(d) Debentures
18 Debt to Total Assets Ratio can be improved by:
(a)Borrowing less (b)Issue of Debentures, (c)Issue of Equity Shares, (d)Redemption of Debt
19 Which one of the following ratios is most important in determining the long-term solvency of a
company ?
(a) Profitability Ratio
(b) Debt-Equity Ratio
(c) Stock Turnover Ratio
(d) Current Ratio
20 Total Assets Rs. 8,10,000

Total Liabilities Rs. 2,60,000
Current Liabilities Rs. 40,000
Debt-equity ratio is:
(a) 0.05 : 1
(b) 0.4 : 1
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(c) 2.5 : 1
(d) 4 : 1
21 Equity share capital Rs. 15,00,000

Reserve and Surplus Rs. 7,50,000
Total Assets Rs. 45,00,000
ProperletoryRatio ?
(a) 50%
(b) 33.3%
(c) 200%
(d) 60%
22 Which of the following does not help to increase Current Ratio?
(a)Issue of Debentures to buy Stock, (b)Issue of Debentures to pay Creditors, (c)Sale of Investment to pay
Creditors, (d) Avail Bank Overdraft to buy Machine.
23 The ideal liquid ratio is :

(a) 2 : 1
(b) 1 : 1
(c) 5 : 1
(d) 4 : 1
24 ABC Ltd. has a Current Ratio of 1.5: 1 and Net Current Liabilities of Rs. 5,00,000. What are the
Current Assets?
(a)Rs. 5,30,000, (b)Rs. 7,60,000, (c)Rs. 6,50,000 (d) Rs. 7,50,000
25 The satisfactory ratio between internal and external equity is. :

(a) 1 : 2
(b) 2 : 1
(c) 3 : 1
(d) 4 : 1
26 Current Ratio includes:

(a) Stock
(b) Debtors
(c) Cash
(d) All the above
27 Which of the following are limitations of ratio analysis?
A) Ratio analysis may result in false results if variations in price levels are not considered.
B) Ratio analysis ignores qualitative factors
C) Ratio Analysis ignores quantitative factors
D) Ratio Analysis is historical analysis.
a) A, B and D
b) A, C and D
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c) A, B and C
d) A, B , C, D
28 Liquid Assets include :

(a) Bills Receivable
(b) Debtors
(c) Cash Balance
(d) All of these
29 Which of the following statements are true about Ratio Analysis?
A) Ratio analysis is useful in financial analysis.

B) Ratio analysis is helpful in communication and coordination
C) Ratio Analysis is not helpful in identifying weak spots of the business.
D) Ratio Analysis is helpful in financial planning and forecasting.
a) A, B and D
b) A, C and D
c) A, B and C
d) A, B , C, D
30 When Cash is 7 10,000 Stock is 7,15,000, B/R is 7 5,000 Creditors is 7 22,000 and Bank Overdraft is 7
8,000 then current ratio is :
(a) 2.7 : 1
(b) 1.7 :1
(c) 1.9 :1
(d) 2.9:1
31 Liquidity ratios are expressed in
a) Pure ratio form

b) Percentage
c) Rate or time
32 Liquidity Ratio:
33 The term ‘Current Liabilities’ does not include: .

(a) Sundry Creditors
(b) Debentures
(c) Bills Payable
(d) Outstanding Expenses
34 The term‘CurrentAssets’include
(a) Long-term Investment
(b) Short-term Investment
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(c) Furniture
(d) Preliminary Expenses
35 Liquid Ratio is also known as:

(a) Current Ratio
(b) Quick Ratio
(c) Capital Ratio
(d) None of these
36 To test the liquidity of a concern which of the following ratios is useful ?

(a) Capital Turnover Ratio
(b) Acid Test Ratio
(c) Stock Turnover Ratio
(d) Net Profit Ratio
37 Which of the following transactions will improve the current ratio, if Current Ratio is 2:1 ?
(a) Purchase of good for cash
(b) Cash received from customers
(c) Payment of creditors
(d) Credit purchase of goods
38 Debt-equity ratio is :
(a) Liquidity Ratio
(b) Activity Ratio
(c) Solvency Ratio
(d) Operating Ratio
39 The formula for finding out Debt-Equity Ratio is:

(a) Long-term Debts/Shareholders’ Funds
(b) Debentures/Equity Capital
(c) Net Profit/Total Capital
(d) None of these
40 Debt-equity ratio is a sub-part of

a) Short-term solvency ratio
b) Long-term solvency ratio
c) Debtors turnover ratio
41 Which ratio is considered as safe margin of solvency?

a) Liquid ratio
b) Quick ratio
c) Current ratio
42Collection of debtors
a) Decreases current ratio
b) Increases current ratio
c) Has no effect on current ratio
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43 Current ratio is stated as a crude ratio because
a) It measures only the quantity of current assets
b) It measures only the quality of current assets
c) Both a and b
d) Offerings dimension
44 Liquid ratio is also known as

a) Quick ratio
b) Acid test ratio
c) Working capital ratio
d) Stock turnover ratio
a) A and B
b) A and C
c) B and C
d) C and D
45Quick ratiosis 1.8:1, current ratio is 2.7:1 and current liabilities are Rs 60,000. Determine value of
stock.
a) Rs 54,000
b) Rs 60,000
c) Rs 1, 62,000
46. The most precise test of liquidity is
a) Quick ratio
b) Current ratio
c) Absolute Liquid ratio
47Which of the following is not included in current assets?

a) Debtors
b) Stock
c) Cash at bank
d) Furniture
48 Liquid assets is determined by

a) Current assets-stock-Prepaid expenses
b) Current assets +stock+ prepaid expenses
c) Current assets +Prepaid expenses
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CCT Based Questions
(49-53) Star Ltd has taken loan facility from the bank. In terms of the agreement, it has to give
information to the bank periodically. Information that is provided to the bank are:
(i) Current Assets of the Company

(ii) Current Liabilities of the Company
(iii) Current Ratio of the Company
(iv) Quick Ratio of the Company
The accountant of the company has given following information for the purpose of forwarding it to the
bank but it does not meet the Bank’s requirement. You are required to help the company & do needful.
The information is:
Bank Balance:Rs 5,80,000 Debtors Rs 1,00,000 Inventories (excluding Loose Tools of Rs

1,00,000):Rs 1,90,000; Prepaid Expenses Rs 10,000: working Capital Rs 4,40,000
49 Current Assets of the Company
(a) Rs 7,80,000
(b) Rs 8,80,000
(c) Rs 8,70,000
(d) Rs 7,70,000
50 Current Liabilities of the Company
(a) Rs 4,80,000
(b) Rs 5,80,000
(c) Rs 4,40,000
(d) Rs 5,40,000
51 Current Ratio of the Company
(a) 3:1
(b) 1:3
(c) 1:2
(d) 2:1
52Quick Ratio of the Company
(a) 2.55:1
(b) 1.55:1
(c) 0.55:1
(d) 3.55: 1
95 | P a g e
53Liquid Assets of the Company
(a) Rs 7,80,000
(b) Rs 8,80,000
(c) Rs 6,80,000
(d) Rs 5,80,000
(54-60)Debt Equity Ratio of Hitech Ltd is 2:1 as on March 31, 2021.The company has to enter into
following transactions. But before entering into these transactions, the management wants to know
their effects on this ratio as the bank insists that this ratio should not be negatively affected immensely.
Management has desired to know the impact of the transactions on Debt Equity Ratio.You are
required to help the company & do needful.
(i) Purchase of Fixed Assets of Rs 2,00,000 payable after 2 Months

(ii) Purchase of Fixed Assets of Rs 2,00,000 payable after 30 Months
(iii) Issue of 8 % Preference Shares of Rs 10,00,000 For Cash
(iv) Issue of Fully Paid Bonus Shares of Rs 5,00,000
(v) Depreciation Provided Rs 2,50,000
(vi) Sale of Marketable Securities of Rs 1,00,000 for Rs 1,20,000
(vii) Sale of Machinery of book value Rs 50,000 at a loss of Rs 5,000
54 Effect of transaction (i) on Debt Equity Ratio will be:

(a) Increase
(b) Decrease
(c) No change
(d) None of these
55 Effect of transaction (ii) on Debt Equity Ratio will be:
(a) Increase
(b) Decrease
(c) No change
(d) None of these
56 Effect of transaction (iii) on Debt Equity Ratio will be:
(a) Increase
(b) Decrease
(c) No change
(d) None of these
57 Effect of transaction (iv) on Debt Equity Ratio will be:
(a) Increase
(b) Decrease
(c) No change
(d) None of these
58 Effect of transaction (v) on Debt Equity Ratio will be:
(a) Increase
(b) Decrease
(c) No change
(d) None of these
59 Effect of transaction (vi) on Debt Equity Ratio will be:
(a) Increase
(b) Decrease
(c) No change
(d) None of these
96 | P a g e
60 Effect of transaction (vii) on Debt Equity Ratio will be:
(a) Increase
(b) Decrease
(c) No change
(d) None of these
Assertion & Reasoning
61 Assertion (A): Total long term debt includes Debentures, long term loans from banks and financial
institutions.
Reason (R): Shareholders funds includes Equity share capital, Preference share capital, Reserves and
surplus.
(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
62 Assertion (A): Liquid ratio reveals strength of liquidity of a business unit.
Reason (R): Liquid ratio analyses liquid assets and liquid liabilities of a business unit in order to assess the
extent of liquidity.
a) Both (A) and (R) are true and (R) is the correct explanation of (A)
63 Assertion (A): Prepaid Expenses are not considered as liquid assets
Reason (R): Prepaid Expenses cannot be converted into cash
64 Assertion (A) Current ratioestablishes relationship between Current Assets & Current liabilities.
Reason (R): Current Ratio is a part of Activity Ratios
97 | P a g e
ANSWER KEY
1 Ans:B
2 Ans:B
3 Ans:C
4 Ans:C
5 Ans:D
6 Ans:C
7 Ans:C
8 Ans:D
9 Ans:D
10 Ans:A
11 Ans:B
12 Ans:A
13 Ans:C
14 Ans:C
15 Ans:C
16 Answer: (a)
17 Answer: (c)
18 Answer: (b)
19 Answer: (b)
20 Answer: (c)
21 Answer: (a)
22 Answer: (d)
23 Answer: (b)
24 Answer: (d)
98 | P a g e
25 Answer: (b)
26 Answer: (d)
27 Answer: (a)
28 Answer: (d)
29 Answer: (a)
30 Answer: (c)
31 Answer: (a)
32 Answer: (c)
33 Answer: (b)
34 Answer: (b)
35 Answer: (b)
36 Answer: (b)
37 Answer: (c)
38 Answer: (c)
39 Answer: (a)
40Answer: (b)
41Answer: (a)
42Answer: (c)
43Answer: (c)
44Answer: (a)
45Answer: (a)
46Answer: (a)
47Answer: (d)
99 | P a g e
48Answer: (a)
49Answer: (b)
50Answer: (c)
51Answer: (d)
52Answer: (b)
53Answer: (c)
54Answer: (c)
55Answer: (a)
56Answer: (b)
57Answer: (c)
58Answer: (a)
59Answer: (b)
60Answer: (a)
61Answer: (b)
62Answer: (a)
63Answer: (a)
64Answer: (c
100 | P a g e
1 Current ratio of Vidurpvt. Ltd. Is 3:2. Accountant wants to maintain it at 2:1. 1
Following options are available :
1. He can repay bills payable
2. He can purchase goods on credit
3. He can take short term loan
Choose the correct option:
(a) Only(1) is correct.
(b) Only (2) is correct.
(c) Only (1) and (3) are correct.
(d) Only (ii) and (iii) are correct.
(e)
2 The --------- may indicate that the firm is experiencing stock outs and lost sales. 1
1. Average payment period
2. Inventory turnover ratio
3. Average collection period
4. Quick ratio
5.
3 Calculate fixed assets from the following : 1
Share capital 7,00,000
Reserve & surplus 3,00,000
Current assets 1,50,000
Proprietary ratio 0.8:1
(a) 12,50,000
(b) 11,00,000
(c) 14,00,000
(d) 6,50,000
4 Revenue from operations 8,00,000; inventory Turnover Ratio 5. Gross profit 25%. 1
Find out the value of closing inventory , if closing inventory is 20,000 more than the
opening inventory:
(a) 1,40,000
(b) 1,18,000
(c) 1,30,000
(d) 1,38,000
5 Operating ratio is : 1
(a) Cost of revenue from operations + selling Expenses/Net revenue from
operations
(b) Cost of revenue from operations + operating and non operating expenses/net
revenue from operations
(c) Cost of revenue from operations+ operating expenses/net revenue from
operatings
(d) Cost revenue from operations – operating expenses /Net revenue from
operations
6. Net profit after tax rs. 700000, 6 % Debentures rs. 2000000 and Tax rate 30 %. The 1
interest coverage ratio will be:
(a) 8 times
(b) 9.33 times
(c) 10.8 times
(d) None of above
7. Credit revenue from operations 9,00,000; Trade receivables Turnover ratio 6 times; 1
closing Trade receivebles were 1.5 times than that in the Beginning . closing Trade
receivables will be:
(a) 1,20,000
101 | P a g e
(b) 60,000
(c) 1,80,000
(d) 90,000
8. On the basis of following data , a company ‘s gross profit ratio will be: 1
Net profit 80,000; wages 10,000; office expenses 30,000; selling expenses 20,000;
total revenue from operations 5,00,000
(a) 28%
(b) 26%
(c) 4%
(d) 6%
9. A company’s liquid Assets are 4,00,000; inventory is 2,10,000; prepaid expenses are 1
30,000, patents are 15,000 and working capital is 4,80,000. Its current ratio will be
(a) 2.5 :1
(b) 3:1
(c) 4:1
(d) 1.33:1
10. Revenue from operations 9,60,000; current liabilities 20,000; working capital 1
turnover Ratio 8 times , current assets will be:
(a) 1,40,000
(b) 1,20,000
(c) 1,00,000
(d) 1,60,000
11. Calculate total assets to debt ratio from the following : 1

Working capital 13,00,000
Shareholders fund 15,00,000
Total Debt 39,00,000
Reserve and surplus 5,00,000
12. On the basis of the following data , the proprietory ratio of a company will be : 1
Equity share capital 3,00,000; Debentures 90,000; current liabilities 30,000;
statement of profit & loss debit balance 20,000.
(a) 75%
(b) 80%
(c) 70%
(d) 82%
13. Opening inventory 2,00,000; closing inventory 2,40,000 purchases 42,00,000; wages 1
5,20,000 Carriage inwards 60,000; selling exp. 1,20,000; revenue from operations
60,00,000. Gross profit ratio will be:
(a) 26%
(b) 29%
(c) 21%
(d) 19%
14 Quick ratio of a company is 0.75:1. State giving reason whether sale of goods costing 1
rs. 1,50,000 for 1,40,000 would the ratio
(a)improve,
(b) reduce
© not alter
15. A company’s liquid assets are rs. 4,00,000, inventory is 2,10,000, prepaid expenses 1
are 30,000, Patents are 15,000 and working capital is 4,80,000. Its current ratio will
be :
(a) 2.5:1
(b) 3:1
(c) 4:1
102 | P a g e
(d) 1.33:1
16. Revenue from operations 9,60,000; current liabilities 20,000; working capital 1
turnover ratio 8 times, current assets will be:
(a) 1,40,000
(b) 1,20,000
(c) 1,00,000
(d) 1,60,000
17. Calculate total assets to debt ratio from the following : 1
Working capital 13,00,000
Shareholder’s funds 15,00,000
Total debt 39,00,000
Reserve and surplus 5,00,000
18 A company’s liquid assets are 4,00,000; inventory is 2,10,000; prepaid expenses are 1
30,000, patents are 15,000 and working capital is 4,80,000. Its current ratio will be
(a) 2.5 :1
(b) 3:1
(c) 4:1
(d) 1.33:1
19 On the basis of following data, the properitary ratio of a company will be: 1
Equity share capital 3,00,000
Debentures 90,000
Current liabilities 30,000
Statement of profit & loss debit balance 20,000.
20 Opening inventory 2,00,000; closing inventory 2,40,000; purchases 42,00,000; wages 1

5,20,000; carriage inwards 60,000; selling expenses 1,20,000; revenue from
operations 60,00,000. Gross profit Ratio will be:
(A) 26%
(B) 29%
(C) 21%
(D) 19%
21 Quick ratio of a company is .75:1. State giving reason whether sale of goods costing 1
1,50,000 for 1,40,000 would
(a) improve,
(b) reduce and
© not alter
22 Credit revenue from operations 6,00,000; Trade receivables Turnover Ratio 5; 1
Calculate opening Debtors , if closing debtors are two times in comparison to
opening debtors :
(a) 1,20,000
(b) 80,000
(c) 1,60,000
(d) 2,40,000
23 From the following given information , calculate the inventory turnover ratio: 1
Revenue from operations : 6,00,000
Gross profit : 20% on cost
Opening inventory was 2/3rd of the value of closing inventory . closing inventory was
25% of revenue from operations.
(a) 12 times
(b) 2 times
(c) 4.3 times
(d) 4 times
24 Quick ratio of a company is 1.6:1 , state giving reason whether the ratio will improve 1
103 | P a g e
, reduce or not alter because of B/R drawn on debtors for one month.
(a) No change
(b) Increase
(c) Decrease
25 Find out current ratio 1

Liquid assets: 1,00,000
Inventory: 90,000(including loose tools 15,000); prepaid expenses 5,000; working
capital 1,20,000
(a) 1.5:1
(b) 3.25:1
(c) 3:1
(d) 1.625:1
26 A company’s liquid assets are 6,00,000, inventory is 1,50,000 and its current 1
liabilities are 4,00,000. Subsequently , it purchased goods for rs. 1,00,000 on credit.
Quick ratio will be
(a) 1.5:1
(b) 1.2:1
(c) 1.4:1
(d) 1.7:1
27 Proprietory Ratio of a company is 0.4 :1, state giving reason , whether buy back of its 1
own shares by the company will
(a)increase ,
(b) decrease
© will not change this ratio.
X Ltd. Want to analyse its liquidity position along with assessment of inventory
position from the given information:
Inventory turnover ratio: 4 Times
Inventory in the beginning was RS. 20,000 less then inventoryat the end,
Revenue from the operations rs. 6,00,000, current liabilities rs. 60,000
Gross profit ratio 25% quick Ratio 0.75:1
Answer question 28 to 31 from above information.
28 State the amount of cost of Revenue from operations . 1
(a) 4,50,000
(b) 4,90,000
(c) 4,80,000
(d) 3,50,000
29 State the amount of average inventory. 1
(a) 1,25,000
(b) 1,12,500
(c) 2,50,000
(d) 1,52,000
30 State the amount of closing inventory. 1
(a)1,12,000
(b)1,12,500
(c) 1,67,500
(d) 1,22,500
31 State the account Ratio of X Ltd. 1
(a) 2.4:1
(b) 2.5:1
(c) 2.79:1
(d) 2.6:1
32 Current ratio of a company is 2.5:1. If its working capital is 6,00,000. Its current 1
assets will be:
(a) 4,00,000
104 | P a g e
(b) 3,60,000
(c) 10,00,000
(d) 2,40,000
33 On the basis of following data , the proprietory ratio of the company will be: 1
Equity share capital Rs.10,00,000 ; Debentures Rs. 5,00,000; Statement of
profit&loss Debit Balance Rs. 1,00,000; Current Liabilities Rs. 6,00,000, Current
Assets 8,00,000.
(A) 70%
(B) 50%
(C) 45%
(D) 75%
34 From the following information , calculate Inventory turnover Ratio: 1
Total sales Rs. 6,25,000; Sales return 25,000; Gross loss on sales 10%; closing
inventory 70,000; Excess of closing Inventory over Opening inventory 40,000
(a)3.2%
(b)3.2 times
(c)13.2%
(d) 13.2 times
35 Revenue from operations (Sales) 8,00,000 Gross Profit 25% on cost ; office exp. 1
25,000; selling expenses 15,000; loss on sale of plant Rs.10,000 . Operating Ratio
will be :
(a) 85%
(b) 86.25%
(c) 80%
(d) 81.25%
36 Current Ratio of a company is 1.2:1, state giving reason whether B/R endorsed to 1
creditors will
(a) Improve
(b) Reduce
(c) Not alter
37 9% debentures 1,00,000, Trade payables 4,00,000; Trade receivables 4,00,000, 1

Prepaid expenses 40,000, inventory 5,60,000; and goodwill is 2,00,000. Current ratio
will be
(a) 2:1
(b) 3:1)
(c) 2.5:1
(d) 2.4:1
38 Share capital rs.8,00,000; Reserve and surplus rs. 4,00,000; general reserve 1,00,000 1
and total Assets 20,00,000. Proprietory ratio will be:
(a) 0.4
(b) .55:1
(c) .6:1
(d) .65:1
39 Calculate working capital turnover ratio from the following : 1
Cost of revenue from operations 8,00,000; Current assets 6,00,000; Total Assets
24,00,000; non current liabilities 5,00,000 and shareholders fund 15,00,000. Gross
profit Ratio 20% on sales .
(a) 5 times
(b) 3 times
(c) 6 times
(d) 15 times
40 If company’s current liabilities are 1,20,000; working capital is 3,60,000 and 1
inventory is 60,000 , its quick ratio will be:
105 | P a g e
(a) 3:1
(b) 3.5:1
(c) 4:1
(d) 4.5:1
41 The formula for calculating Trade payables turnover ratio is 1
(a) Net credit purchases/ average creditors
(b) Net credit purchases/(Avg. creditors + Avg. bills payables)
(c) (Cash purchases+credit purchases)/(Avg creditors+ Avg. bills payables)
(d) Total purchases/ Average Creditors
42 Which ratio is shown in times? 1

(a) Quick ratio
(b) Properitory ratio
(c) Current ratio
(d) None of above.
43 Which ratio shows the relationship between long term debt and equity? 1
(a) Proprietory Ratio
(b) Debt to equity ratio
(c) Current ratio
(d) Turnover ratio
44 The debt equity ratio of X ltd. Is .5:1.if company issues equity shares what will be the 1
impact on the ratio?
(a) Increase
(b) Decrease
(c) No change
45 The ………… of business firm is measured by its ability to satisfy its short term 1
obligation as they become due.
(a) Activity
(b) Liquidity
(c) Debt
(d) Profitability
46 The two basic measures of liquidity are: 1

(a) inventory turnover and current ratio
(b) current ratio and liquid ratio
(c) gross profit margin and operating ratio
(d) current ratio and average collection period
47 The ………….ratio provides the information critical to the long run operations of the 1
firm.
(a) Liquidity
(b) Activity
(c) Solvency
(d) Profitability
48 The …… measures the activity of firm’s inventory. 1
(a) Average collection period
(b) Inventory turnover ratio
(c) Average collection period
(d) Quick ratio
49 ……….. are especially interested in the average payment period , since it provides 1
them with a sense of the bill paying pattern of the firm.
(a) Customers
(b) Stockholder
(c) Lender and supplier
(d) Borrowers and buyer
106 | P a g e
50 Y’s profit after tax was rs. 100000. Its current assets were rs. 400000 , current 1
liabilities rs. 200000 , fixe d assets rs. 600000 and 10 % long term debt rs. 400000.
The rate of tax was 20%. Return on investment will be:
(a) 18%
(b) 22.4%
(c) 20.63%
(d) None of above
107 | P a g e
Answers:
1. A.Only(1) is correct
2. (B)Inventory turnover ratio
3. (a) 11,00,000
4. (a) 1,30,000
5. (a) Cost of revenue from operations+ operating expenses/net revenue fromoperatings
6. (b) 9.33 times
7. (a) 1,80,000
8. (a) 26%
9. 4:1
10. 1,40,000
11. 1.8:1
12. (a) 70%
13. 21%
14 improve,
15. (a) 4:1
16. (a) 1,40,000
17. 1.8:1
18 (C )4:1
19 ( c) 70%
20 ( c) 21%
21 Improve
22 (a) 80,000
23 4 times
24 (a) No change
25 ( C) 3:1
26 (a) 1.2:1
27 Decrease
28 (a) 4,50,000
29 (a) 1,12,500
30 1,22,500
31 (a) 2.79:1
32 (a) 10,00,000
33 (A) 45%
34 (d)13.2
108 | P a g e
35 (a) 85%
36 (a) Improve
37 (a) 2.5:1
38 (a) .6:1
39 5 times
40 (a) 3.5:1
41 (a) Net credit purchases/(Avg. creditors + Avg. bills payables)
42 None of above.
43 (a) Debt to equity ratio
44 (a) Decrease
45 (a) Liquidity
46 (a) current ratio and liquid ratio
47 (a) Solvency
48 (a) Inventory turnover ratio

49 (c)Lender and supplier
50 (c ) 20.63 %
THANK YOU
109 | P a g e

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REGION : CHANDIGARH REGION

TERM -1 (MCQ BASED QUESTION PAPER) MARKS

Project Work (Part -1): 10 Marks

SR.NO NAME OF THE CHAPTER PAGE.NO

1. FUNDAMENTALS OF PARTNERSHIP 04-28

2. NATURE AND VALUATION OF GOODWILL 29-38

3. CHANGE IN PROFIT SHARING RATIO AMONG 39-49

5 COMPANY ACCOUNTS – ACCOUNTING FOR SHARE CAPITAL 57-78

6 FINANCIAL STATEMENT – STATEMENT OF PROFIT & LOSS 79-88

7 ACCOUNTING RATIOS 89-110

a. Interest on Partner’s Loan

c. Interest on Partner’s Capital

Q3. Pick the odd one out:

c. Interest on Partner’s Loan

d. Interest on Partner’s Capital

a. Partners’ Capital Account

a. Ram’s Capital A/c - Dr. 200

Sohan’s Capital A/c- Dr. 610

To Mohan’s Capital A/c

b. Ram’s Capital A/c - Dr. 100

Sohan’s Capital A/c- Dr. 710

To Mohan’s Capital A/c

c. Ram’s Capital A/c - Dr. 180

Sohan’s Capital A/c- Dr. 630

To Mohan’s Capital A/c

d. None of the above

Alka withdrew Rs.10,000 at the end of each quarter.Archana’s drawings were:

31st May, 2018 8,000

1st November, 2018 7,000

1st February, 2019 5,000

Archana’s drawings were:

a. Alka – Rs.900 , Archana - Rs.625

...................................... Dr. 4,000

a. Interest on drawings – Dr. and Drawings Cr.

c.Drawings – Dr. and Interest on Drawings Cr.

d None of the above

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

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

Date Particulars Dr.(Rs.) Cr.(Rs.)

a. Chhavi's Capital/ Current Account- Dr. 900 -

To interest on drawings A/c - 900

b. Chhavi's Capital/ Current Account- Dr. 900 -

To Drawings A/c - 900

Date Particulars Dr.(Rs.) Cr.(Rs.)

d. Chhavi's Current Account – Dr. 900 -

To Drawings A/c - 900

Date Particulars Dr.(Rs.) Cr.(Rs.)

c. Chhavi's Capital Account – Dr. 900 -

To Drawings A/c - 900

Q 15. Do all firms need a Deed and registration?

Q 16. Can a partner be exempted from sharing the losses in a firm?

b. Partners’ Current A/c

c. Either of the two

d. Partners’ Capital A/c

b. Partners’ Current A/c

c. Either of the two

d. Partners’ Capital A/c

b. May or may not be