SCH. NO.
78, VIJAY NAGAR, INDORE VARMECHA CLASSES
… Experience in Action
88393 89003, 89898 32300 Email- varmechaclasses@gmail.com
Practice Test
Accountancy
Class – 12
Change in Profit Sharing Ratio among the Existing Partners
Time Allowed: 90 Minutes Max. Marks: 40
Multiple Choice Questions (ONE MARK EACH)
Question – 1
A and B are partners who share profit equally. They decided to share future profit in
the ratio of 3: 1. If the goodwill is valued at ₹ 60,000, A's capital account will be
debited by:
(a) ₹ 45,000 (b) ₹ 15,000
(c) ₹ 30,000 (d) ₹ 10,000
Question – 2
During the reassessment of assets and liabilities, an unrecorded asset is discovered.
Due to this item, partners' capital account will:
(a) Increase (b) Decrease
(c) Remain same (d) All of these
Question – 3
Goodwill at the time of change in profit sharing ratio, is valued to:
(a) Compensate the sacrificing partner (b) Compensate the gaining partner
(c) Ascertain the firm's profitability (d) Calculate the payment to creditors
Question – 4
Anand and Mangal were partners in a firm sharing profits and losses in the ratio of
3:2. With effect from 1st April, 2024 they agreed to share profits and losses equally.
On the date of reconstitution of partnership firm goodwill values at ₹ 3,00,000. The
necessary journal entry for the goodwill will be:
(a) 1st April, 24 Mangal’s Capital A/c … ₹ 30,000
Dr. ₹ 30,000
To Anand’s Capital A/c
(b) 1st April, 24 Mangal’s Capital A/c … ₹ 3,000
Dr. ₹ 3,000
To Anand’s Capital A/c
(c) 1st April, 24 Anand’s Capital A/c … Dr. ₹ 3,000
To Mangals Capital A/c ₹ 3,000
(c) 1st April, 24 Anand’s Capital A/c … Dr. ₹ 30,000
To Mangals Capital A/c ₹ 30,000
PRADEEP VARMECHA / ACCOUNTANCY/ 9425104917 Page 1
SCH. NO. 78, VIJAY NAGAR, INDORE VARMECHA CLASSES
… Experience in Action
88393 89003, 89898 32300 Email- varmechaclasses@gmail.com
Question – 5
At the time of change in profit sharing ratio among the existing partners, accumulated
profits are distributed in old ratio because:
(a) They were earned prior to change in profit sharing ratio
(b) They were bought before change in profit sharing ratio
(c) Their value have become zero
(d) All of the above
Assertion and Reason Type Questions (ONE MARK EACH)
Directions (Q Nos. 6-7) Each of the following questions consists of two statements,
one is Assertion (A) and the other is Reason (R).
Give answer
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct
explanation of Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false.
(d) Assertion (A) is false, but Reason (R) is true
Question – 6
Assertion (A): A gaining partner always gains bigger share in accumulated profit.
Reason (R): Accumulated profits are distributed among the partners in old profit
sharing ratio.
Question – 7
Assertion (A): Deferred revenue expenditure is debited to partners' capital accounts.
Reason (R): Deferred revenue expenditure is shown in the assets side of the Balance
Sheet as accumulated loss.
Case Study Based Question (ONE MARK EACH)
Read the following hypothetical text and answer the given questions:
Bhavya and Naman were partners in a firm carrying on a tiffin service in Hyderabad.
Bhavya noticed that a lot of food is left at the end of the day. To avoid wastage, she
suggested that it can be distributed to the needy, Naman wanted that it should be
mixed with the food being served the next day. Naman, then, give a proposal that if his
share in the profit increased, he will not mind free distribution of leftover food. Bhavya
happily agreed. So, they decided to change their profit sharing ratio 1:2 with
immediate effect. On that date, revaluation of assets and reassessment of liabilities
was carried out that resulted into a gain of ₹ 18,000. On that date, the goodwill of the
firm was valued at ₹ 1,20,000.
PRADEEP VARMECHA / ACCOUNTANCY/ 9425104917 Page 2
SCH. NO. 78, VIJAY NAGAR, INDORE VARMECHA CLASSES
… Experience in Action
88393 89003, 89898 32300 Email- varmechaclasses@gmail.com
Question – 8
Sacrifice/Gain of Bhavya and Naman will be:
(a) Bhavya sacrifice 1/6. Naman gains 1/6 (b) Only Bhavya gains 1/6
(c) Bhavya gains 1/6. Naman sacrifice 1/6 (d) Only Naman sacrifice 1/6
Question – 9
At the time of change in profit sharing ratio, gaining partner capital account is and
sacrificing partner is for adjustment of goodwill.
(a) Credited, Debited (b) Debited, Credited
(c) Increased, Increased (d) No change in Capital Accounts
Question – 10
Pass the journal entry for gain on revaluation.
Very Short Answer Type Questions (ONE MARK EACH)
Question – 11
What is the effect of change of profit sharing ratio on the partnership agreement?
Question – 12
What entries are made for goodwill appeared in the balance sheet, at the time of
change in profit sharing ratio?
Question – 13
Why is revaluation profit distributed in old ratio?
Question – 14
How will you treat workmen compensation fund given in liabilities side of Balance
Sheet?
Question – 15
What is the effect of unrecorded asset and liability on the profit of Revaluation
Account?
Short Answer Type Questions (THREE MARKS EACH)
Question – 16
X and Y were partners in a firm sharing profits and losses in the ratio of 3: 2. From 1st
April, 2024, they decided to share profits equally. On that date, their Balance Sheet
showed a credit balance of ₹ 35,000 in workmen compensation fund and ₹ 40,000 in
general reserve. The goodwill of the firm on that date was valued at ₹ 50,000. The firm
accepted a claim of ₹ 40,000 for workmen compensation.
Pass the necessary journal entries for the above transactions on the reconstitution of
the firm.
PRADEEP VARMECHA / ACCOUNTANCY/ 9425104917 Page 3
SCH. NO. 78, VIJAY NAGAR, INDORE VARMECHA CLASSES
… Experience in Action
88393 89003, 89898 32300 Email- varmechaclasses@gmail.com
Question – 17
A, B and C were partners in a firm sharing profits in the ratio of 2:3:5. From 1st April,
2024, they decided to share the profits in the ratio of 1:2:2. On this date, the Balance
Sheet showed a credit balance of ₹ 1,17,000 in General Reserve and a debit balance of
₹ 35,000 in Profit and Loss Account. The goodwill of the firm was valued at ₹ 5,00,000.
The revaluation of assets and reassessment of liabilities resulted into a gain of
₹ 30,000. Partners decided to write off undistributed losses from gain on revaluation.
Pass the necessary journal entries for the above transactions on the reconstitution of
the firm if partners do not want to distribute general reserve.
Question – 18
Aman, Bobby and Chandani were partners in a firm sharing profits and losses in the
ratio of 5:4:1 with capitals of ₹ 3,00,000, ₹ 2,50,000 and ₹ 1,50,000 respectively. From
1st April, 2024, they decided to share profits equally. The revaluation of assets and
reassessment of liabilities resulted in a loss of ₹ 5,000. The goodwill of the firm on its
reconstitution was valued at ₹ 1,20,000. The firm had a balance of ₹ 20,000 in general
reserve. Partners decided to maintain their adjusted capital in proportion to their new
profit sharing ratio.
Prepare Partners’ Capital Account
Short Answer Type Questions (FOUR MARKS EACH)
Question – 19
X, Y and Z were partners in a firm sharing profits in the ratio of 1:2:2. From 1st April,
2024, they decided to share the profits in the ratio of 5:3:2.
Partnership firm earned net profit during the last three years as follows:
Year Net Profits / Losses
2021-22 ₹ 1,90,000
2022-23 ₹ 2,20,000
2023-24 ₹ 2,05,000
The capital employed in the firm throughout the above mentioned period has been
₹ 4,00,000. Having regard to the risk involved, 15% is considered to be a fair return
on the capital including risk factors.
The remuneration of all partners during this period estimated to be ₹1,00,000 per
annum.
On 1st October 2023 a computer purchased for ₹ 50,000 recorded under the head of
office expenses. Depreciation to be charged @ 20% p.a.
Calculate the value of the goodwill on the basis of two years’ purchase of super profits.
PRADEEP VARMECHA / ACCOUNTANCY/ 9425104917 Page 4
SCH. NO. 78, VIJAY NAGAR, INDORE VARMECHA CLASSES
… Experience in Action
88393 89003, 89898 32300 Email- varmechaclasses@gmail.com
Long Answer Type Questions (SIX MARKS EACH)
Question – 20
A, B, C and D were partners in a firm sharing profits in the ratio of 3:2:3:2. On 1st
April, 2024, their Balance Sheet was as follows:
Liabilities Amount Assets Amount
Capitals: A - 2,00,000 Building 4,00,000
B - 2,50,000 Machinery 3,50,000
C - 2,50,000 Furniture 75,000
D - 3,10,000 10,10,000 Current Assets 3,00,000
Sundry Creditors 90,000
Workmen Compensation Reserve 25,000
11,25,000 11,25,000
From the above date, the partners decided to change their profit sharing ratio. A gave
1/3 of his share to B and C gave 1/2 of his share to D. For this purpose, the goodwill
of the firm was valued at ₹ 2,70,000. It was also considered that:
The claim against Workmen Compensation Reserve has been estimated at ₹ 37,000
and machinery will be depreciated by ₹ 25,000.
A creditor of ₹ 3,000 has left his claim while a Liability of ₹ 6,000 is found out.
Building was undervalued by 20%.
Partners decided to maintain their capital at ₹ 10,00,000.
Prepare revaluation account, partners' capital accounts and the revised balance sheet.
Question – 20
Anant, Akshay and Ankit are partners sharing profits and losses in the ratio of 5 : 3 : 2.
Their Balance Sheet as at 31st March, 2024 was as follows:
Liabilities ₹ Assets ₹
Capital A/cs Computers 1,50,000
Anant 1,50,000 Furniture 25,000
Akshay 90,000 Stock 1,00,000
Ankit 60,000 3,00,000 Debtors 55,000
Profit & Loss Account 15,000 Less: PFDD 5,000 50,000
General Reserve 40,000 Bank Balance 1,10,000
Sundry Creditors 95,000 Cash in Hand 15,000
4,50,000 4,50,00
Profit-sharing ratio among the partners was agreed to be 2:2:1 w.e.f.1st April, 2024.
They agreed to the followings:
Stock found a defective item of ₹ 10,000, to be written off completely.
Bad-debts amounted ₹10,000 and Provision to be maintained with same amount.
Furniture to be reduced by 20%.
Computers to be reduced to ₹ 1,35,000.
Goodwill of the firm is valued at ₹ 1,00,000.
The partners decided to carry the General Reserve, and Profit & Loss at the same
values in the Balance Sheet of the new firm.
Anant to be paid ₹ 50,000 in cash which is to be brought in by Akshay and Ankit in
such a manner that their capitals are to be in their profit sharing ratio and cash
remains in hand ₹10,000.
Prepare revaluation account, partners' capital accounts and the revised balance sheet.
PRADEEP VARMECHA / ACCOUNTANCY/ 9425104917 Page 5
