CSS Accountancy & Auditing Partnership Accounts

Adam’s Learning Centre, Lahore

CSS Accounting & Auditing
Topic Vise Past Papers (Unsolved)

Partnership Accounts
Q. 1 (CSS – 2004, Paper # 1, Q. # 4) Admission of a Partner (20 Marks)
A and B were in partnership sharing profit and losses in the proportion of three fourth and one fourth
respectively. Their Balance Sheet stood as follows on 31st December 2003.
Liabilities Rs. Assets Rs.
Creditors 37,500 Cash at bank 22,500
Capital Account Bill Receivable 3,000
A 40,000 Book Debts 16,000
B 10,000 Stock 20,000
Furniture 1,000
Building 25,000
87,500 87,500
st
They admitted C into partnership 1 January 2004 on the following terms:
(a) That C pays Rs. 10,000 as his capital for 1/5 share in the future profits.
(b) That goodwill for Rs. 20,000 is raised in the books of the new firm.
(c) That stock and furniture are reduced by 10% and that a 5% provision is made for likely bad debts
(d) That the value of the buildings is increased by 20% and
(e) That the capital Accounts of A and B are readjusted on the basis of their profit sharing ratios.
Required:
Pass the necessary journal entries and give the ledger Accounts and opening Balance Sheet of the new firm.

Q. 2 (CSS – 2005, Paper # 1, Q. # 4) Dissolution of a Partnership (20 Marks)

S & Y are partners with profit sharing ratio as 2 : 1. The position of the firm as on 31st December 2004 when they
decided to dissolve the business was as follows:
Liabilities Rs. Assets Rs.
Sundry Creditor 1,50,000 Plant & 2,50,000
Machinery
General Reserve 1,00,000 Furniture 40,000
Capital Accounts: Stock 1,00,000
S 2,20,000 Debtors 2,00,000
Y 2,20,000 4,40,000 Cash at bank 1,00,000
Total 6,90,000 Total 6,90,000
The details or realization was as follows:
1. S took over plant and machinery and furniture at book value less 10%.
2. Y took over the stock at Rs.1,75,000.
3. Debtors realized Rs.1,85,000.
4. Sundry creditors were settled at a discount of 5%.
Required:
Prepare necessary journal entries and ledger accounts to close the books of the firm.

Q. 3 (CSS – 2007, Paper # 1, Q. # 5) Admission of a Partner (25 Marks)

Ahmad and Bilal carry on business in partnership, sharing profits and losses in the proportion of 2/3 and 1/3
respectively. The Balance Sheet at 31st December, 2006 was as follows:
1|P a g e By: Asif Masood Ahmad Adam’s Learning Centre, Lahore
0321 9842495 0333 4169258
CSS Accountancy & Auditing Partnership Accounts

Rs. Rs.
Ahmad’s Capital 15,000 Plant and Machinery 4,000
Bilal’s Capital 10,000 Stock 22,000
Creditors 2,000 Debtors 15,000
Bank Overdraft 15,000 Cash 1,000
42,000 42,000
They agreed to admit Saeed into partnership and give him ¼ share in the profits on the following terms:
(1)Saeed should bring Rs. 3,000 for Goodwill and Rs. 20,000 as Capital.
(2)The plant and machinery to be reduced by 10 per cent, and a provision to be created for bad debts to the
extent of Rs. 440. The stock to be taken at a valuation of Rs. 25,000.
(3)The Capital Accounts of Ahmad & Bilal be adjusted on the basis of their profit sharing ratio.
No account of Goodwill is to be opened in the books of the firm.
Required: Make Journal Entries to record the above transactions. Also prepare the Partners’ Capital
Accounts and Opening Balance Sheet of the new Firm.
Q. 4 (CSS – 2009, Paper # 1, Q. # 5) Retirement of a Partner (25 Marks)
Saeed and Rasheed carried on business in partnership. On 31st December 2007 Saeed retired. Their Balance
Sheet at that date was as follows
Liabilities and Capital Rs. Assets Rs.
Accounts Payable 10,000 Land and Building 5,000
Notes Payable 8,000 Plant and Machinery 12,000
Saeed – Capital Account 21,000 Loose Tools 4,000
Rasheed – Capital 14,000 Patterns and Models 2,000
Account
Inventory 15,000
Accounts Receivable 11,000
Notes Receivable 2,500
Cash 1,500
53,000 53,000
Profits and Losses were shared in the proportions of Saeed two-thirds, and Rasheed one-third. Rasheed agreed to
take over the business on the following terms:-
The Land and Building were to be taken over by Saeed at the amount stated in the Balance Sheet, and Rasheed
was to rent the premises at Rs. 250 per annum.
Revaluations were to be made which resulted as follows:
Plant and Machinery, Rs. 10,000; Loose Tools, Rs. 4,400; Patterns and Models, Rs. 1,800; and Inventory, Rs.
12,000.
Saeed agreed to allow the amount due to him (Less Rs. 300 which was to be paid to him in cash) to remain as a
loan to Rasheed at 5 per cent interest.
Required: Make necessary Journal entries to give effect to the above transactions and prepare Rasheed’s Balance
Sheet.

Q. 5 (CSS – 2011, Paper # 1, Section – B, Q. # 6) Partnership Dissolution (18 Marks)

The CDE partnership is being liquidated. After all liabilities have been paid and all assets sold, the balances of the
partner’s capital accounts are as follows: Ahmad, Rs. 42,000 credit balance; Jawad, Rs. 16,000 debit balance; Ali,
Rs. 53,000 credit balance. The partners share profits and losses: Ahmad 10%; Jawad, 60%; Ali, 30%.
(a) How should the available cash (the only remaining asset) be distributed if it is impossible to determine at this
date whether Jawad will be able to pay Rs. 16,000 he owes to the firm? Draft the journal entry to record
payment of all available cash at this time.
(b) Draft the journal entries to record a subsequent partial payment of Rs. 13,000 to the firm by Jawad, and the
distribution of this cash. Prepare a schedule (similar to the one prepared in part a) showing computation of
amount to be distributed to each partner.

2|P a g e By: Asif Masood Ahmad Adam’s Learning Centre, Lahore

0321 9842495 0333 4169258
CSS Accountancy & Auditing Partnership Accounts
Q.6 (CSS – 2012, Paper # 1, Section – B, Q. # 6) Retirement of a Partner (18 Marks)
(A) A partnership is considering the possibility of liquidation because one of the partners, Stewart, is insolvent.
Capital balances at the current time are as follows, and profits and losses are divided on a 6:3:1 basis,
respectively.
George, Capital Rs. 70,000
Stewart, Capital 50,000
Thomas, Capital 80,000
Stewart’s creditors have filed a Rs. 60,000 claim against the partnership’s assets. The partnership currently
holds assets reported at Rs. 300,000 and liabilities of Rs. 100,000. If the assets can be sold for Rs. 105,000,
what is the minimum amount that Stewart’s creditors would receive? (09)
(B) The following condensed balance sheet is for the partnership of Andrews, Carroll, and Murray, who share
profits and losses in the ratio of 6:2:2, respectively.
Cash Rs. 70,000
Other assets 130,000
Total assets Rs. 200,000
Sundry Liabilities Rs. 160,000
Andress, Capital 25,000
Carroll, Capital 10,000
Murray, Capital 5,000
Total Liabilities and partner’s equity Rs. 200,000
Which partner is most vulnerable to a loss? (09)
Q.7 (CSS – 2014, Paper # 1, Section – B, Q. # 5) Retirement of a Partner (20 Marks)

A, B, and C were partners sharing profits and losses in the ratio of 2:2:1. C decided to retire on December 31,
2013. The following is the balance sheet of partnership firm
BALANCE SHEET
December 31, 2013
Liabilities Rs. Assets Rs.
Sundry Creditors 10000 Stock of goods 10000
Reserve account 2000 Sundry Debtors 10000
Capital account A 24000 Bills receivable 4000
Capital account B 16000 Bank A/C 10000
Capital account C 12000 Land and building 30000
64000 64000
A and B decided to share profits and losses in the ratio of 3:2 in future. Goodwill is valued at Rs. 10000. Land
and building was appreciated by Rs.6000 and stock by Rs.2000. There was bad debt loss of Rs.1000 but not
recorded in books. A and B decided to bring sufficient cash to settle the account of C and to make their capital
proportionate. They also decided to maintain Rs.15000 bank balances for meeting the day to day business
expenses. Prepare necessary journal entries and prepare balance sheet of newly constituted firm.

Q.8 (CSS – 2015, Paper # 1, Section – B, Q. # 5) Partnership Dissolution (20 Marks)

Piers, Quick, Right and Squires were in partnership, sharing profits and losses in the ratio 4:3:2:1. They
decided to dissolve the partnership on 31st December, 2012 at which date the balance sheet of the partnership
was as follow:
£ £ £
Capital accounts Goodwill 20,000
Piers 60,000 Land and
Quick 30,000 Buildings 110,000
Right 60,000 Stock 20,000

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CSS Accountancy & Auditing Partnership Accounts
Squires 20,000 170,000 Debtors 40,000
Creditors 30,000 Balance at Bank 10,000
£200,000 £200,00
The assets were realized as follows:
5th Jan. Stock 18,000
th
8 Jan. Debtors (part) 16,000
2nd Feb. Good will 6,000
nd
2 Feb. Land and buildings (part) 22,000
st
1 Mar. Debtors (balance) 20,000
st
1 Mar. Land and buildings (balance) 120,000
The partners decided that, as soon as the creditors were paid, any cash received should be immediately
distributed to the partners.
All the creditors were paid on 11th January, after deducting cash discounts of £2,000.
On 1st March it was decided that the remaining debts were irrecoverable and that the dissolution should be
considered as being completed.
Required: Prepare a schedule setting out the payments that could be made to the partners subject to
the provision that there should be no possibility that any of the partners would be called upon to repay cash.
Realization expenses should be ignored.

Q.9 (CSS – 2016, Paper # 1, Section – B, Q. # 3(a) Partnership Dissolution (10 Marks)
Pool and Burns, who share profits and losses equally, decide to dissolve their partnership at
June 30, 2015. Their balance sheet on that date was as follows:
(Rs.) ( Rs.)
Buildings 80,000
Tools and fixtures 2,900
82,900
Debtors 8,400
Cash 600
9,000
Sundry creditors ( 4,100 )
Net current assets 4,900
Total Assets 87,800
Capital account. Pool 52,680
Burns 35,120 87,800

The debtors realized Rs. 8,200, the building Rs. 66,000 and tools and fixtures Rs. 1,800. The expenses of
dissolution were Rs. 400 and discounts totaling Rs. 300 were received from creditors.
Required: Prepare the accounts necessary to show the results of the realization and of the disposal of the cash.

Q.10 (CSS – 2021, Paper # 1, Part – II, Section – I, Q. # 3 Admission of a Partner (20 Marks)

A, B are two partners sharing profits and losses in the ratio of 3:1. They admit K as a partner and he pays Rs.
30,000 as capital. The new ratio is to be 3:1:1. The goodwill of the firm is to be based on 3 years’ purchase of
the average 4 years’ profits which are Rs. 15,000, 12,000, 18,000, 19,000.
Required:
Show the journal entries, if:
(A) K pays for the goodwill in cash. (10)
(B) He is unable to bring the cash for the goodwill. (10)

4|P a g e By: Asif Masood Ahmad Adam’s Learning Centre, Lahore

0321 9842495 0333 4169258