Dr GRPS NEYYATTINKARA

FIRST TERM EXAM 2022-23

XII.D ACCOUNTANCY MARK: 80

TIME: 3 hrs

Instructions
1. Capital employed in a business is Rs. 2,00,000. Normal Rate of Return on capital employed is 15%.
During the year, the firm earned a profit of Rs. 48,000. Calculate goodwill on the basis of 3 years’
purchase of Supper Profit.
(A) Rs. 54,000 (B) Rs. 60,000 (C) Rs. 50,000 (D) None of these
2. If, at the time of admission, the revaluation A/c shows a profit, it should be credited to:
(A) Old partners’ capital accounts in the old profit-sharing ratio.
(B) All partners’ capital accounts in the new profit-sharing ratio.
(C) Old partners’ capital accounts in the new profit-sharing ratio.
(D) Old partners’ capital accounts in the sacrificing ratio.
3. Sacrificing ratio is the difference between:
A. New ratio and old ratio C. New ratio and gaining ratio
B. Old ratio and new ratio D. Old ratio and gaining ratio
4. If Goodwill is appearing in the balance sheet it will be Credited to:
(A) Gaining partner (B) Retiring partners (C) All partners (D) Remaining
5. If the Partners are maintaining the capital account on Fixed basis, partner’s capital account will have:
(A) Credit balance. (B) Debit balance. (C) Credit or Debit balance. (D) May have Nil balance
6. P, Q, and R are partners in 6: 4: 2. 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 4: 2. 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
7. At what rate is interest payable on the amount remaining unpaid to the executer of deceased partner,
In the absence of any agreement among partners, when he opts for interest and not share of profit:
(A) 6% (B) 12% (C) 7.5% (D) 8%
8. In case of admission of a partner, the entry for unrecorded investments will be:
(A) Debit Partners Capital A/cs and Credit Investments A/c
(B) Debit Revaluation A/c and Credit Investment A/c
(C) Debit Investment A/c and Credit Revaluation A/c
(D) None of the above
Read the following hypothetical paragraph and answer the questions from 9-12
Abhishek and Aishwarya were partners in a fast-food corner. They sold fast food items across
the counter and did home delivery too. For this purpose, they needed a delivery van, a few scooties
and an additional person to support. Their initial fixed capital contribution was 3,50,000 and 2,00,000
respectively. Abhishek spends twice time that of Aishwarya to the business. He wants a salary of Rs.
10,000 per month for extra time spend by him. Aishwarya has advanced 1,00,000 to the firm and want
6% interest per annum. They both have withdrawn 20,000 from the business for personal use for
which Abhishek was asking to interest on drawing @ 5% to the business. They earned annual profit
of Rs. 2,00,000.
9. Interest on drawing charged to Abhishek and Aishwarya are :
A) 5% C) 1000 each
B) 6% D) No interest on drawing will be charged
10. Profit shared by Abhishek and Aishwarya are :
A) 1,00,000 each C) 50,000 each
B) Equally D) None of these
11. Abhishek spends twice time that of Aishwarya to the business”, for this purpose Abhishek will be
given a salary of :
A) 10,000 per month C) No salary will be given
B) Equal for both of them D) 5,000 per month
12. “Aishwarya has advanced 1,00,000 to the firm and want 6% interest per annum”, interest received
by Aishwarya on advances will be :
A) 6,000 C) 8,000
B) 7,000 D) 9,000
Read the following hypothetical paragraph and answer the questions from 13-16
A , B and C are partners sharing profit in the ratio 3:2:1. Their capital contribution being Rs
40,000, 30,000 and 20,000 respectively. The partners wanted to expand their business so they
decided to double their capital. It was duly followed by A and B. But due to financial problem C was
unable to follow the decision. So, the partners decided to admit a new partner D who will bridge the
shortfall of capital. The new partner will get half of the share of C’s capital which will be sacrificed by
C alone. The new partner brings in the required capital and 10,000 for his share of premium.
13. What will be the new profit-sharing ratio?
a. 6:4:1:1 c. 5:4:2:2
b. 3:2:1:1 d. None of these
14. What amount of capital bought in by the new partner
a. 20.000 c. 30,000
b. 40,000 d. 10,000
15. What is the value of goodwill of the firm?
a. 1,00,000 c. 1,20,000
b. 1,50,000 d. 50,000
16. What will be entry for distribution of premium.
a. Debit premium account, credit A.s capital, B’s capital c’s capital
b. Debit premium account, credit C’s capital
c. Debit D’s capital and credit C’s capital
d. Debit D’s capital, credit A.s capital, B’s capital c’s capital
17. Rakhi and Shikha are partners in a firm, with capitals of Rs 2,00,000 and Rs 3,00,000 respectively.
The profit of the firm, for the year ended 2016-17 is Rs 23,200. As per the Partnership agreement,
they share the profit in their capital ratio, after allowing a salary of Rs 5,000 per month to Shikha and
interest on Partner’s capital at the rate of 10% p.a. During the year Rakhi withdrew Rs 7,000 and
Shikha Rs 10,000 for their personal use. You are required to prepare Profit and Loss Appropriation
Account
18. A and B are sharing profits and losses equally. With effect from 1st April, 2019, they agree to
share profits in the ratio of 4: 3. Calculate individual partner's gain or sacrifice due to the change
in ratio.
19. Discuss the main provisions of the Indian Partnership Act, 1932 that are relevant to partnership
accounts if there is no partnership deed.
20. Goodwill is to be valued at three years' purchase of four years' average profit. Profits for last four
years ending on 31st March of the firm were:
2016 − ₹ 12,000; 2017 − ₹ 18,000; 2018 − ₹ 16,000; 2019 − ₹ 14,000.
Calculate amount of Goodwill.
21. Verma and Sharma are partners in a firm sharing profits and losses in the ratio of 5:3. They
admitted Ghosh as a new partner for 1/5 share of profits. Ghosh is to bring in Rs. 20,000 as
capital and Rs. 4,000 as his share of goodwill premium. Give the necessary journal entries:
 a) When the amount of goodwill is retained in the business.

b) When the amount of goodwill is fully withdrawn.

c) When 50% of the amount of goodwill is withdrawn.

d) When goodwill is paid privately

22. On March 31, 2017 after the close of accounts, the capitals of Mountain, Hill and Rock stood in the
books of the firm at Rs 4,00,000, Rs 3,00,000 and Rs 2,00,000, respectively. Subsequently, it was
discovered that the interest on capital @ 10% p.a. had been omitted. The profit for the year amounted
to Rs 1,50,000 and the partner’s drawings had been Mountain: Rs 20,000, Hill Rs 15,000 and Rock
Rs 10,000. Calculate interest on capital.
23. Menon and Thomas are partners in a firm. They share profits equally. Their monthly drawings are Rs
2,000 each. Interest on drawings is to be charged @ 10% p.a. Calculate interest on Menon’s drawings
for the year 2006, assuming that money is withdrawn: (i) in the beginning of every month, (ii) in the
middle of every month, and (iii) at the end of every month.
24. The net profit of X, Y and Z for the year ended March 31, 2016 was Rs 60,000 and the same
was distributed among them in their agreed ratio of 3 : 1 : 1. It was subsequently discovered
that the under mentioned transactions were not recorded in the books :
(i) Interest on Capital @ 5% p.a.
(ii) Interest on drawings amounting to X Rs 700, Y Rs 500 and Z Rs 300.
(iii) Partner’s Salary : X Rs 1000, Y Rs 1500 p.a.

The capital accounts of partners were fixed as : X Rs 1,00,000, Y Rs 80,000 and Z Rs 60,000.
Record the adjustment entry.
25. Nitin, Tarun and Amar are partners sharing profits equally and decide to share profits in the ratio of 2
: 2 : 1 w.e.f. 1st April, 2019. The extract of their Balance Sheet as at 31st March, 2019 is as follows:
Liabilities ₹ Assets ₹
Investments Fluctuation Investments (At
60,000 4,00,000
Reserve Cost)

Pass the Journal entries in each of the following situations:

(i) When its Market Value is not given;
(ii) When its Market Value is ₹ 4,00,000;
(iii) When its Market Value is ₹ 4,24,000;
(iv) When its Market Value is ₹ 3,70,000;

26. Following is the Balance Sheet of the firm, Ashirvad, owned by A, B and C who share profits and
losses of the business in the ratio of 3 : 2 : 1.
BALANCE SHEET as at 31st March, 2019
Liabilities ₹ Assets ₹
Capital A/cs: Furniture 95,000
A 1,20,000 Business Premises 2,05,000
B 1,20,000 Stock-in-Trade 40,000
C 1,20,000 3,60,000 Debtors 28,000
Sundry Creditors 20,000 Cash at Bank 15,000
Outstanding Salaries and 7,200 Cash in Hand 4,200
wages
 3,87,200 3,87,200

On 1st April, 2019, they admit D as a partner on the following conditions:

(a) D will bring in ₹ 1,20,000 as his capital and also ₹ 30,000 as goodwill premium for a quarter of
the share in the future profits/losses of the firm.
(b) Values of the fixed assets of the firm will be increased by 10% before the admission of D.
(c) Mohan, an old customer whose account was written off as bad debts, has promised to pay ₹
3,000 in full settlement of his dues.
(d) Future profits and losses of the firm will be shared equally by all the partners.
Prepare Revaluation Account
27. Iqbal and Kapoor are in partnership sharing profits and losses in 3 : 2. Kapoor died three months after
the date of the last Balance Sheet. According to the Partnership Deed, the legal heir is entitled to the
following:
(a) His capital as per the last Balance Sheet.
(b) Interest on above capital @ 3% p.a. till the date of death.
(c) His share of profits till the date of death calculated on the basis of last year's profits.
His drawings are to bear interest at an average rate of 2% on the amount irrespective of the period.
The net profits for the last three years, after charging insurance premium, were ₹ 20,000; ₹ 25,000
and ₹ 30,000 respectively. Kapoor's capital as per Balance Sheet was ₹ 40,000 and his drawings till
the date of death were ₹ 5,000.
Draw Kapoor's Capital Account to be rendered to his representatives.

28. The Balance Sheet of Madhu and Vidhi who are sharing profits in the ratio of 2 : 3 as at 31st March,
2016 is given below:

Liabilities ₹ Assets ₹
Madhu's Capital 5,20,000 Land and Building 3,00,000
Vidhi's Capital 3,00,000 Machinery 2,80,000
General Reserve 30,000 Stock 80,000
Bills Payable 1,50,000 Debtors 3,00,000
Less: Provision 10,000 2,90,000

Bank 50,000

10,00,000 10,00,000

Madhu and Vidhi decided to admit Gayatri as a new partner from 1st April, 2016 and their new
profit-sharing ratio will be 2 : 3 : 5. Gayatri brought ₹ 4,00,000 as her capital and her share of
goodwill premium in cash.
(a) Goodwill of the firm was valued at ₹ 3,00,000.
(b) Land and Building was found undervalued by ₹ 26,000.
(c) Provision for doubtful debts was to be made equal to 5% of the debtors.
(d) There was a claim of ₹ 6,000 on account of workmen compensation.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the
reconstituted firm.
29. The Balance Sheet of Rajesh, Pramod and Nishant who were sharing profits in proportion to their
capitals stood as on March 31, 2015:

Books of Rajesh, Pramod and Nishant

Balance Sheet as on March 31, 2015

Amount Amount
Liabilities Rs Assets Rs
Bills Payable 6,250 Factory Building 12,000
Sundry Creditors 10,000 Debtors 10,500
Reserve Fund 2,750 Less: Reserve 500 10,000
Capital Accounts: Bills Receivable 7,000
Rajesh 20,000 Stock 15,500
Pramod 15,000 Plant and Machinery 11,500
Nishant 15,000 50,000 Bank Balance 13,000
69,000 69,000

Pramod retired on the date of Balance Sheet and the following adjustments were made:
a) Stock was valued at 10% less than the book value.
b) Factory buildings were appreciated by 12%.
c) Reserve for doubtful debts be created up to 5%.
d) Reserve for legal charges to be made at Rs 265.
e) The goodwill of the firm be fixed at Rs 10,000.
f) The capital of the new firm be fixed at Rs 30,000. The continuing partners decide to keep their
capitals in the new profit-sharing ratio of 3:2.
Pass journal entries
MARKING SCHEME
Sl Value points Mark
No
.
1 (A) Rs. 54,000 1
2 (A) Old partners capital accounts in the old profit sharing ratio 1
3 B. Old ratio and new ratio 1
4 (C) All partners 1
5 (A) Credit balance. 1
6 A. Rs.1,00,000 1
7 (A) 6% 1
8 (C) Debit Investment A/c and Credit Revaluation A/c 1
9 D) No interest on drawing will be charged 1
10 B) Equally 1
11 C) No salary will be given 1
12 A) 6,000 1
13 a. 6:4:1:1 1
14 b. 40,000 1
15 b. 1,50,000 1
16 a. Debit premium account, credit A.s capital, B’s capital c’s capital 1
17 3

18 3

19 The following are the main provisions of the Indian partnership Act, 1932 that are 4
relevant to the partnership accounts in absence of partnership deed.

1.Profit Sharing Ratio: If the partnership deed is silent on sharing of profit or losses
among the partners of a firm, then according to the Partnership Act of 1932, profits
and losses are to be shared equally by all the partners of the firm.

2.Interest on Capital: If the partnership deed is silent on interest on partner’s

capital, then according to the Partnership Act of 1932, no interest on capital should
 be given to the partners of the firm. However, interest on capital is given only out of
the profits, if mutually agreed by all the partners.

3.Interest on Drawings: If the partnership deed is silent on interest on partner’s

drawings, then according to the Partnership Act of 1932, no interest on drawing
should be charged from the partners of the firm for the amount of capital withdrawn
in the form of drawings.

4.Interest on Partner’s Loan: If the partnership deed is silent on interest on

partner’s loan, then according to the Partnership Act of 1932, the partners are
entitled for 6% p.a. interest on the loan forwarded by them to the firm.

5.Salary to Partner: If the partnership deed is silent on salary to a partner, then

according to the Partnership Act of 1932, no salary should be given to any partner.

20 4

21 4
Journal Entries
Debit Credit
Amount Amount
S.No. Particulars L.F. Rs Rs
Case (a)
Cash A/c Dr. 24,000
To Ghosh's Capital A/c 20,000
To Premium for Goodwill A/c 4,000
(Capital and Goodwill his share brought
by Ghosh)

Premium for Godwill A/c Dr. 4,000

To Verma's Capital A/c 2,500
To Sharma's Capital A/c 1,500
(Goodwill brought by Ghosh credited to Old Partners
in Sacrificing ratio)

Case (b) Cash A/c Dr. 24,000

To Ghosh Capital A/c 20,000
To Premium for Goodwill A/c 4,000
(Capital and Goodwill brought by Ghosh for (1/5)
share of profit)
 Premium for Goodwill A/c Dr. 4,000
To Verma's Capital A/c 2,500
To Sharma's Capital A/c 1,500
(Goodwill brought by Ghosh credited
in Old Partner in Sacrificing Ratio)

Verma's Capital A/c Dr. 2,500

Sharma's Capital A/c Dr. 1,500
To Cash A/c 4,000
(Amount of Premium for Goodwill withdrawn by
Old Partners)

Case (c) Cash A/c Dr. 24,000

To Ghosh's Capital A/c 20,000
To Premium for Goodwill A/c 4,000
(Capital and Goodwill brought by Ghosh for (1/5)
share of profit)

Premium for Goodwill A/c Dr. 4,000

To Verma's Capital A/c 2,500
To Sharma's Capital A/c 1,500
(Premium for Goodwill credited to Old Partner's
Captial Account in sacrificing ratio)

Verma's Capital A/c Dr. 1,250

Sharma's Capital A/c 750
To Cash A/c 2,000
(Half of the amount of premium for goodwill withdrawn by
old partners)

Case (d) No entry: Goodwill was not brought in to firm

22 4
23 4

24 4
25 6
26 Revaluation Account 6
Dr. Cr.
Amou
Amount
Particulars Particulars nt
(₹)
(₹)
Fixed Assets:
Furniture 95,000 × 9,500
10%
Profit transferred Business Prem 2,05,000 × 1 20,500
to ises 0%
A Capital 15,000
B Capital 10,000
C Capital 5,000

30,000 30,000

27 Kapoor’s Account 6
Dr. Cr.
Amoun
Amount
Particulars t Particulars
Rs
Rs
Drawings A/c 5,000 Balance b/d 40,000
Interest on Drawings A/c 100 Interest on 300
Capital A/c
Balance c/d 38,200 Profit and Loss 3,000
Adjustment A/c

43,300 43,300
28 8

29 8