| Board | CBSE |
| Textbook | NCERT |
| Class | Class 12 |
| Subject | Accountancy |
| Chapter | Questions for Chapter-Reconstitution of a Partnership Firms-Retirement and Death of a Partner |
| Chapter Name | Reconstitution of a Partnership Firms-Retirement a |
| Category | CUET (Common University Entrance Test) UG |
MCQ-Based Questions for CUET Accountancy chapter-Reconstitution of a Partnership Firms-Retirement and Death of a Partner
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Practice Questions for CUET Accountancy chapter-Reconstitution of a Partnership Firms-Retirement and Death of a Partner SET-1
Accounts - MCQ on Reconstitution of a Partnership Firms – Retirement and Death of a Partner
Class XII
Q.1 Which one of the following is the formula for calculating new-profit sharing ratio ?
a. New-profit sharing ratio = old share + acquired share
b. New-profit sharing ratio = acquired share + new share
c. New-profit sharing ratio = old share – new share
d. None of the above
Answer:
(a)New-profit sharing ratio = old share + acquired share
Explanation- New-profit sharing ratio = old share + acquired share is the formula for calculating new-profit sharing ratio.
Q.2 The ratio in which the containing partners acquire the outgoing partner’s share is called-
a. Sacrificing ratio b. New ratio
c. Gaining ratio d. Old ratio
Answer:
(c)Gaining ratio
Explanation- The ratio in which the containing partners acquire the outgoing partner’s share is called gaining ratio.
Q.3 When sacrificing ratio is calculated?
a. At the time of retirement of a partner.
b. At the time of admission of a new partner
c. At the time of death of a partner.
d. None of the above
Answer:
(b)At the time of admission of a new partner
Explanation- At the time of admission of a new partner and change in profit sharing ratio
Q.4 Name the unit from in which the Retirement and Death of a Partner is there –
a. Accounting for Not-for-Profit Organisation.
b. Accounting for Partnership
c. Reconstitution of Partnership Firm
d. None of the above
Answer:
(c) Reconstitution of Partnership Firm
Explanation- The name of the unit which the Retirement and Death of a Partner is termed as Reconstitution of Partnership Firm- Retirement and Death of a Partner.
Q.5 Which one of the following is the methods of payment to retiring partner?
a. Adjustment of Capital Accounts.
b. Treatment of goodwill
b. Purchasing the retiring partners share
d. Revaluation of assets and liabilities
Answer:
(c)Purchasing the retiring partners share
Explanation- Purchasing the retiring partners share is one of the method of payment to retiring partners.
Q.6 When premium is treated as business expense it is a method of :
a. Revaluation A/c
b. Joint life policy
c. Dissolution of partnership firm
d. None of the above
Answer:
(b) Joint Life Policy
Explanation- Following are the methods of treatment of joint life policy: -
(a) When premium is treated as business expense
(b) When premiums is treated as on asset
(c) When premium is treated as on asset and joint life policy reserve a/c in maintained.
So, treatment of business expense is one of the method of the same.
Q.7 Name the ratio in which the remaining partners will share future profits after the retirement or death of any partner-
a. Old profit sharing ratio
b. Gaining ratio
c. Sacrificing ratio
d. New profit sharing ratio
Answer:
(d)New profit sharing ratio
Explanation- New profit sharing ratio is the ratio in which the remaining partners will share future profits after the retirement or death of any partner.
Q.8 When the value of assets increase which of the following account is credited?
a. Revaluation A/c
b. Assets A/c
c. Liabilities A/c
d. None of the above
Answer:
(a)Revaluation A/c
Explanation- For increase in the value of assets following journal entry will be passed-
Assets A/c’s (Individually) Dr.
To Revaluation A/c
(Increase in the value of assets )
Q.9 When the value of assets decrease which of the following account is credited?
a. Revaluation A/c
b. Assets A/c
c. Liabilities A/c
d. None of the above
Answer:
(b)Assets A/c
Explanation- For decrease in the value of assets following journal entry will be passed-
Revaluation A/c Dr.
To Assets A/c’s (Individually)
(Decrease in the value of assets)
Q.10 When the value of liabilities increases which of the following account is credited?
a. Revaluation A/c
b. Assets A/c
c. Liabilities A/c
d. None of the above
Answer:
(c)Liabilities A/c
Explanation- For increase in the value of liabilities following journal entry will be passed-
Revaluation A/c Dr.
To Liabilities A/c (Individually)
(Increase in the amount of liabilities)
Q.11 When goodwill is raised in the books at full value as an asset. Which account will be debited ?
a. All Partner’s Capital A/c
b. Goodwill A/c
c. Revaluation A/c
d. None of the above
Answer:
(b)Goodwill A/c
Explanation- When goodwill is raised in the books at full value as an asset- In this case, goodwill is raised by crediting all the partners in the old ratio. The following entry is passed:
Goodwill A/c Dr.
To All Partners’ Capital A/cs (Old Ratio)
Q.12 When goodwill is raised in the books at full value but it is written off immediately. Which account will be debited ?
a. Continuing Partner’s Capital A/c
b. Goodwill A/c
c. Revaluation A/c
d. None of the above
Answer:
(a)Continuing Partner’s Capital A/c
Explanation- When goodwill is raised in the books at full value but it is written off immediately- In this case, goodwill is raised by crediting all the partners in the old ratio and written off in the new ratio. The following entry will be passed:
Continuing Partner’s Capital A/cs Dr. (New Ratio)
To Goodwill A/c (Full value)
Q.13 Which account is debited when the share of profit is paid upto the date of death?
a. Cash A/c
b. Executor’s A/c
c. Realisation A/c
d. Profit and Loss Suspense A/c
Answer:
(d)Profit and Loss Suspense A/c
Explanation- Journal entry for the same will be:
Profit and Loss Suspense A/c Dr.
To Deceased Partner’s Capital A/c
Q.14 If the amount is paid in cash or in installment at the time of Settlement of a Deceased Executor’s Account. How many entries will be passed ?
a. One b. Two
c. Four d. No entry will be passed
Answer:
(b)Two
Explanation- If the amount is paid in cash or in installment at the time of Settlement of a Deceased Executor’s Account, the following entries will be passed ;
Deceased Partner’s Executors’ A/c Dr.
To Cash/Bank A/c
Q.15 Which insurance policy is taken on the lives of the partners jointly ?
a. Joint Life Policy
b. Life Insurance Policy
c. TATA AIG Life Insurance
d. Max New York Life Insurance
Answer:
(a)Joint Life Policy
Explanation- Joint Life Policy is an insurance policy is taken on the lives of the partners jointly. Premium of the policy is paid by the firm. The sum assured of such policy is payable by the insurance company either on the death of any partner or on maturity, whichever is earlier.
Q.16 Diseased term is related to –
a. Retirement of a partner
b. Resignation of a partner
c. Death of a partner
d. None of the above
Answer:
(c)Death of a partner
Explanation- Diseased term is related to Death of a Partner.
Q.17 I am calculated at the time of retirement or death of a partner and change in profit sharing ratio. Who am I?
a. Gaining Ratio
b. Sacrificing Ratio
c. New profit sharing ratio
d. None of the above
Answer:
(a)Gaining Ratio
Explanation- Gaining ratio is calculated to determine the amount of compensation to be paid by each of the continuing partners to the outgoing partner in the form of goodwill.
Q.18 Reserve fund comes on which side of Balance Sheet ?
a. Assets side
b. Debit side
c. Liabilities side
d. Credit side
Answer:
(c)Liabilities side
Explanation- Reserve fund comes on Liabilities side of Balance Sheet as it is not a part of owner’s fund.
Q.19 At the time of loss in the business, how many entries will be passed ?
a. Three b. Two
c. Four d. No entry will be passed
Answer:
(a)Three
Explanation- At the time of loss in the business the following journal entry will be passed-
Continuing partners’ capital accounts Dr.
Remaining partners’ capital A/c Dr.
To P/L A/c
(Being loss in the business debited to partner’s capital accounts)
Q.20 If Provision for Bad Debt is there then it will be put on which side ?
a. Liabilities side
b. Debit side
c. Credit side
d. Assets side
Answer:
(d)Assets side
Explanation- If Provision for Bad Debt is there then it will be put on assets side and will be subtracted from Debtors.
Q.21 If Depreciation is there then it will be put on which side ?
a. Assets side
b. Debit side
c. Credit side
d. Liabilities side
Answer:
(a)Assets side
Explanation- If Depreciation is there then it will be put on Assets side and will be subtracted from Fixed Assets.
Q.22 When the Bad Debts are written off which account is credited?
a. Bad Debts A/c
b. Debtors A/c
c. Creditor A/c
d. None of the above
Answer:
(b)Debtor A/c
Explanation- The following entry is passed when the Bad Debts are written off-
Bad Debts A/c Dr.
To Debtors A/c
(Being Bad Debts written off )
Q.23 When the claim is due from Insurance Company which account is credited ?
a. Fire Insurance Policy A/c
b. Insurance company’s A/c
c. Joint Life Policy A/c
d. None of the above
Answer:
(c)Joint Life Policy A/c
Explanation- The following entry is passed when the Insurance Company account is credited -
Insurance company’s A/c Dr
To Joint Life Policy A/c
(Being the claim due from insurance company )
Q.24 Executor’s Account is made at the time of –
a. Retirement of a partner
b. Resignation of a partner
c. Death of a partner
d. None of the above
Answer:
(c)Death of a partner.
Explanation- Executor’s Account is made at the time of Death of a partner for the settlement of Diseased Partner’s Account.
Q.25 Outstanding repairs are shown in which account?
a. Cash A/c
b. Profit and Loss Suspense A/c
c. Realisation A/c
d. Revaluation A/c
Answer:
(d)Revaluation A/c
Explanation- Outstanding repairs are shown in Revaluation A/c on the debit side.
Practice Questions for CUET Accountancy chapter-Reconstitution of a Partnership Firms-Retirement and Death of a Partner SET-2
Q.26 If Profit and loss A/c is given on the assets side of Revaluation A/c then where it will be shown in Partner’s Capital Account ?
a. Credit side
b. Debit side
c. Liabilities side
d. Assets side
Answer:
(b)Debit side
Explanation- If Profit and loss A/c is given on the assets side of Revaluation A/c then where it will be shown on Debit side of Partner’s Capital Account. It is because loss is always come on debit side of Partner’s Capital Account.
Q.27 Which one of them is the treatment of joint Life policy?
a. When premium is treated as business expense
b. If relative ratio between remaining partners remains unchanged
c. If gain of remaining partners are separately given.
d. If remaining partners take certain part of retiring partners share.
Answer:
(a)When premium is treated as business expense
Explanation- Methods of treatment of joint life policy: -
a· When premium is treated as business expense
b· When premiums is treated as on asset
c· When premium is treated as on asset and joint life policy reserve a/c in maintained
Q.28 State the different cases for calculation of new and gaining ratio.
a. When premium is treated as business expense
b. When premiums is treated as on asset
c. When premium is treated as on asset and joint life policy reserve a/c in maintained.
d. If entire share of retiring partners is taken by only one partner.
Answer:
(d)If entire share of retiring partners is taken by only one partner.
Explanation- Different cases for calculation of new and gaining ratio
a· If relative ratio between remaining partners remains unchanged
b· If gain of remaining partners are separately given
c· If remaining partners take certain part of retiring partners share
d· If entire share of retiring partners is taken by only one partner
Accounts - MCQ on Reconstitution of a Partnership Firm – Retirement and Death of a Partner
Class XII
Q.1. The increased part of the profit is known as
a. sacrificing ratio.
b. new- profit sharing ratio.
c. old ratio.
d. gaining ratio.
Answer:
(d)
Explanation: The increased part of profit is known as gaining ratio.
Q.2. The other name for goodwill is
a. discount.
b. premium.
c. grant.
d. redemption.
Answer:
(b)
Explanation: The other name of goodwill is premium.
Q.3. In case of retirement of a partner, the new ratio is equal to
a. old plus sacrifice.
old plus gain.
old minus sacrifice.
old minus gain.
Answer:
b
Explanation: In case of retirement, remaining partners gain by the share of retiring partner.
Q.4 When the value of assets increases, the account to be credited is
a. revaluation account.
b. liabilities account.
c. assets account.
d. profit and loss account.
Answer:
(a)
Explanation: The entry will be:
Assets A/c Dr.
To Revaluation A/c
Q.5. Some times there are unrecorded assets in the books of accounts, it will be recorded at the time of retirement of a partner in
a. credit side of revaluation account.
b. debit side of revaluation account.
c. continuing partners’ capital accounts.
d. all partners’ capital accounts.
Answer:
(a)
Explanation: An unrecorded asset will be shown on the credit side in the Revaluation A/c.
Q.6. In case of retirement of a partner, if the value of liabilities increases, the account to be credited, is
a. liability.
b. assets.
c. revaluation.
d. realisation.
Answer:
a.
Explanation: The entry will be:
Revaluation A/c Dr.
To Liability A/c
Q.7. When, one partner retires or dies and nothing is mentioned about the new ratio between the remaining partners, then remaining partners are presumed to share profits, in the
a. old ratio.
b. new ratio.
c. equal proportions.
d. capital ratio.
Answer:
(a)
Explanation: In the absence of any information, the remaining partners take the share of retiring partner in the old ratio.
Q.8. A, B and C are partners sharing profit equally. On C’s retirement, his share is acquired by A and B in the ratio of 3:2. The new profit sharing ratio between A and B will be
a. 8:7.
b. 4:5.
c. 3:2.
d. 2:3.
Answer:
(b)
Explanation:The new profit sharing ratio between A and B will be 3:2.
1/3rd is acquired by A and B in the ratio 3:2.
Q.9. Abhishek, Rajat and Vivek are partners sharing profits in the ratio of 5:3:2. If Vivek retires, the new profit sharing ratio between Abhishek and Rajat, will be
a. 3:2.
b. 5:3.
c. 5:2.
d. 1:1.
Answer:
(b)
Explanation: If no further information is given to us, we will remove the retiring partners share and get the new or gaining ratio.
Q.10. On the retirement/death of a partner, the retiring/deceased partner’s capital account will be credited with
a. his/her share of goodwill.
b. goodwill of the firm.
c. share of goodwill of the remaining partners.
d. total reserve fund.
Answer:
(a)
Explanation: His/her share of goodwill will be credited to the account.
Q.11. A, B and C are partners. A retired. The goodwill in the balance sheet is Rs. 24,000. The goodwill will be written off by
a. debiting all partner’s capital accounts in their old ratio.
b. debiting remaining partner’s capital accounts in new ratio.
c. debiting retiring partner’s capital account with his share of goodwill.
d. debiting retiring partner and crediting remaining partners.
Answer:
(a)
Explanation: The entry will be as follows:
All partner’s capital accounts ……………..Dr. (In old ratio)
To goodwill account A/c
Q.12. On retirement/death of a partner, the remaining partner(s) who have gained due to change in profit sharing ratio should compensate the
a. retiring partners only.
b. remaining partners (who have sacrificed) as well as retiring partners.
c. remaining partners only (who have sacrificed).
d. new partner.
Answer:
(b)
Explanation: Gaining partners compensate the sacrificing partners. The compensation is for share sacrificed.
Q.13. The old profit sharing ratio among A, B and C was 2:2:1. The new profit sharing ratio after B’s retirement is 3:2. The gaining ratio will be
a. 3:2.
b. 2:1.
c. 1:1.
d. 2:3.
Answer:
(c)
Explanation: Gaining ratio is equal to new share minus old share.
Q.14. C, D and E are partners sharing profits and losses in the proportion of 1/2, 1/3 and 1/6. D retired and new profit sharing ratio between C and E is 3:2. Divide the reserve of Rs. 12,000 among the partners.
a. Rs. 7,200 and Rs. 4,800 will be given to C and E respectively.
b. Rs. 6,000, Rs. 4,000 and Rs. 2,000 will be given to C, D and E respectively.
c. Rs. 4,000 each will be given to each partner.
d. Rs. 2,000, Rs. 4,000 and Rs. 6,000 to C, D and E respectively.
Answer:
(b)
Explanation: It will be divided among all partners in old ratio, as it belongs to all of them.
Q.15. A, B and C are partners sharing profits in the ratio of 2:2:1. On retirement of B, goodwill was valued at Rs. 30,000. The contribution of A and C to compensate B, is
a. Rs. 15,000 each.
b. Rs. 20,000 and Rs. 10,000 respectively.
c. Rs. 12,000, Rs. 12,000 and Rs. 6,000 respectively.
d. Rs. 10,000 and Rs. 20,000 respectively.
Answer:
(b)
Explanation: Goodwill is divided between remaining partners in their gaining ratio.
Q.16. If, the amount due to the outgoing partner is transferred to his loan account, then he is entitled to interest at the rate of
a. 0% p.a.
b. 5% p.a.
c. 6% p.a.
d. market rate of interest.
Answer:
(c)
Explanation: If, there is no agreement regarding interest on partner’s loan he will be given interest at the rate of 6% p.a.
Q.17. On the death of a partner, his executor is paid the share of profits of the deceased partner for the relevant period. This payment is recorded in
a. profit and loss suspense.
b. profit and loss adjustment.
c. profit and loss appropriation.
d. reserve account.
Answer:
(a)
Explanation: It is transferred to profit and loss suspense account, as the exact amount of profit is not known.
Q.18. The decreased part of the profit is known as
a. sacrificing ratio.
b. new-profit sharing ratio.
c. old ratio.
d. gaining ratio.
Answer:
(a)
Explanation: The decreased part of the profit of the continuing partners is known as ‘sacrificing ratio’.
Q.19. The profit or loss on revaluation is shared among the partners in
a. old profit sharing ratio.
b. new profit sharing ratio.
c. capital ratio.
d. equal proportions.
Answer:
( a )
Explanation: Profit or loss on revaluation is shared among old partners in old ratio.
Q.20. In the balance sheet prepared after the retirement of a partner, assets and liabilities are recorded at
a. original value.
b. revalued figures.
c. realisable value.
d. current cost.
Answer:
b
Explanation: In the balance sheet prepared after the retirement of a partner, assets and liabilities are recorded at revalued figures.
Q.21. Decrease in provision for doubtful debts, is
a. debited to revaluation account.
b. credited to revaluation account.
c. shown in the capital accounts.
d. not shown in the revaluation account.
Answer:
b
Explanation: Provision for doubtful debts is deducted from sundry debtors, so its treatment is opposite of assets.
Q.22. The revaluation of assets on the reconstitution of the partnership is necessary, because their present value may be different from
a. future value.
b. book value.
c. new value.
d. existing partners.
Answer:
b
Explanation: Revaluation of assets on the reconstitution of partnership is required, because of difference in their books value and present value.
Q.23. On the retirement of a partner, increase in the value of an asset is
a. debited to revaluation account.
b. credited to revaluation account.
c. credited to capital accounts.
d. debited to capital accounts.
Answer:
b
Explanation: Increase in value of asset is credited to the revaluation account. Revaluation account is prepared for this purpose only.
Q.24. At the time of retirement, the outgoing partner’s account is credited with
a. full value of goodwill.
b. his share of goodwill.
c. remaining partner’s share of goodwill.
d. goodwill already appearing in the books.
Answer:
(b)
Explanation: At the time of retirement of a partner, the outgoing partner’s account is credited with only his share of goodwill.
Q.25. The formula for gaining ratio, is
a. new share minus old share.
b. old share minus new share.
c. old share plus new share.
d. new share minus gain.
Answer:
(a)
Explanation: Gaining ratio equals new share minus old share. It is calculated at the time of retirement/death of a partner.
Q.26. If, the amount due to the retiring partner is not paid in cash, then it is transferred to
a. loan account.
b. sundry creditors account.
c. partner’s loan account.
d. bank overdraft account.
Answer:
(c)
Explanation: Retiring partner is either paid in cash or amount due to him is transferred to his loan account.
Q.27. A, B and C are partners sharing profits and losses in 2:2:1. B died on 31st March 2007. The profit earned during the year 2006 was Rs. 1,20,000. Book are closed on 31st December. B’s share of profit is
a. Rs. 12,000.
b. Rs. 6,000.
c. Rs. 24,000.
d. Rs. 8,000.
Answer:
(a)
Explanation: 1,20,000 x 2/5 x 3/12
= Rs. 12000/-
Q.28. Chaman, Raman and Suman are partners sharing profits in the ratio of 5:3:2. When Raman retires, the new profit sharing ratio between Chaman and Suman became 1:1. The goodwill of the firm is valued at Rs. 1,00,000. Raman’s share of goodwill will be adjusted by debiting
(a) Chaman’s capital account and Suman’s capital account with Rs. 15,000 each.
(b) Chaman’s capital account and Suman’s capital account with Rs. 21,429 and 8,571 respectively.
(c) only Suman’s capital account with Rs. 30,000.
(d) only Raman’s capital account with Rs. 30,000.
Answer:
(c)
Explanation: Chaman has not gained anything: his share remains the same. Only Suman has gained, so Suman’s share will be debited with Rs. 30,000 (Raman’s share of goodwill).
Q.29. P, Q and R are partners with profit sharing ratio 4:3:2. Q retires and his share of goodwill is Rs. 3,600. The total goodwill of the firm, is
(a) Rs. 1,200.
(b) Rs. 1,080.
(c) Rs. 10,800.
(d) Rs. 21,600.
Answer:
(c)
Explanation: Total goodwill of firm will be 3,600 x9/3= Rs. 10,800.
Q.30. Time basis and turnover basis are the terms related to
(a) calculation of deceased partner’s share of profits.
(b) calculation of deceased partner’s share of goodwill.
(c) retirement of a partner.
(d) goodwill and profits respectively.
Answer:
(a)
Explanation: Time basis and turnover basis are the terms related to calculating deceased partner’s share of profits.
Q.31. A and B are partners sharing profits and losses in 3:2. C joins for 1/6th share. A sacrifices 1/8th from his share and B sacrifices 1/24th from his share. The sacrificing ratio of A and B, is
(a) 3:2
(b) 3:1
(c) 1:1
(d) 1:3
Answer:
(b)
Explanation: 1/8: 1/24. is the ratio of sacrifice. The sacrificing ratio of A and B will be 3:1.
Q.32. A gaining partner is defined as the one
a. whose share has increased.
b. whose share has decreased.
c. who has given his share.
d. who receives goodwill from other partners.
Answer:
( a )
Explanation: Gaining partner is a partner, whose share increases due to retirement or death of a partner.
Q.33. If, the first part of a memorandum revaluation account shows loss, then the second part must show a
a. loss.
b. profit.
c. zero balance.
d. deficit
Answer:
(b)
Explanation: If, the first part of memorandum revaluation account shows a profit, the second part will show a loss and vice verse. As both the parts are just reverse of each other.
Q.34. The value of buildings had decreased from by Rs. 2000.The journal entry for this transaction is
a. debit buildings account and credit Revaluation account.
b. debit Revaluation account and credit buildings account.
c. debit Revaluation account and credit capital account.
d. debit current account and credit buildings account.
Answer:
b
Explanation: All the reduction in assets will be debited to Revaluation and credited to respective assets account.
Q.35. The creditors have increased from Rs. 9,000 to Rs.10,000. The amount for creditors on the debit side of Revaluation account will be shown as
a. Rs.10,000.
b. Rs. 9,000.
c. Rs. 1,000.
d. Rs. 19,000.
Answer:
c
Explanation: The difference (Increase in Liabilities) is shown in Revaluation account.
Q.36. Goodwill already appearing in the books of accounts will be written off in
a. old ratio.
b. new ratio.
c. sacrificing ratio.
d. capital ratio.
Answer:
( a )
Explanation: Goodwill already appearing in the books is written off in the old ratio.
Q.37.A, B and C are partners sharing profits in the ratio of 5:3:2. The Goodwill already appears is Rs.15,000. The entry to write off this Goodwill is
|
Debit |
Credit |
|
|
a |
All partners’ account |
Goodwill account |
|
b |
Goodwill account |
All partners’ account |
|
c |
C’s capital account |
Goodwill account |
|
d |
A’s and B’s capitals account |
Goodwill account |
Answer:
( a )
Explanation: The already existing Goodwill is written off by debiting all the partners including retiring partner.
Q.38. Proportionate capital means
a. capital balances of the partners in accordance with the profit sharing ratio.
b. equal capital by all partners
c. calculation of capital of new partner on the basis of goodwill
d. capital for the purpose of new partner.
Answer:
(a)
Explanation: Proportionate capital implies capital balances of the partners in accordance with the profit sharing ratio.
Q.39.The debit side of revaluation account contains
a. decrease in assets and increase in liabilities.
b. increase in assets and liabilities.
c. decrease in assets and liabilities.
d. increase in assets and decrease in liabilities.
Answer:
( a )
Explanation: The debit side of revaluation account contains decrease in assets and increase in liabilities.
Q.40. Profit and Loss account shown in the assets side of the balance sheet is transferred to
a. revaluation account
b. credit side of the partner’s capital account
c. debit side of the partner’s capital account
d. new Balance sheet
Answer:
c
Explanation: Profit and loss account shown in the assets side of the balance sheet is transferred to the debit side of the partner’s capital account.
Q.41.In case of a change in profit sharing ratio of the existing partners, the gaining partners compensate
a. existing partners.
b. old partners.
c. sacrificing partners.
d. new partner.
Answer:
(c)
Explanation: The gaining partners should compensate the sacrificing partners in case of change in profit sharing ratio. The share will be purchased in exchange of goodwill.
Q.42. In case of fixed capital account, the number of accounts maintained for each partner, is
a. two.
b. six.
c. four.
d. eight.
Answer:
(a)
Explanation: Two accounts, namely fixed capital account and current account, are maintained for each partner in case of fixed capital account.
Q.43. X,Y and Z are partners in a firm. Their capital accounts and current accounts are shown below:
|
Partners |
Capital accounts |
Current accounts |
|
X |
Rs. 50,000 |
Rs. 15,600 |
|
Y |
Rs. 40,000 |
Rs. 11,200 |
|
Z |
Rs. 30,000 |
Rs. 9,000 |
Z decided to retire from the firm. The Z’s share of profit on Revaluation of assets and liabilities was calculated as Rs. 2,000. This profit will be transferred to
a. debit side of Z’s capital account.
b. credit side of Z’s capital account.
c. debit side of Z’s current account.
d. credit side of Z’s current account.
Answer:
(d)
Explanation: The details of partners show that they are maintaining capital accounts as well as current account. So any profit or loss will be transferred to current account only.
Q.44. On the death of a partner, the amount of joint life policy should be credited to the capital accounts of
a. all partners including the deceased partner in their profit sharing ratio.
b. only to the deceased partner’s capital account.
c. the remaining partners in their new profit sharing ratio.
d. the remaining partners in their sacrificing sharing ratio.
Answer:
(a)
Explanation: As premium of joint life policy is paid out of firm’s account, it will be credited to all partner’s capital accounts.
Q.45. Retiring partner’s share of goodwill is adjusted through remaining partner’s capital accounts in
a. sacrificing ratio.
b. new ratio
c. gaining ratio
d. capital ratio
Answer:
(c)
Explanation: Retiring partner’s share of goodwill is adjusted through remaining partner’s capital accounts in gaining ratio.
Q.46. The difference between the retirement of a partner and death of a partner, is regarding calculation of his share of
a. premium.
b. Revaluation profit.
c. profit.
d. reserve.
Answer:
(c)
Explanation: The only special point of distinction between retirement and death of a partner is that at the time of death of a partner his share of profit is calculated from the last balance sheet till the date of death. On the other hand, when a partner retires his share of profit is calculated from the available final accounts.
Q.47. Funds generally provided by the partnership to pay to the representative of a deceased partner is
a. sinking fund.
b. joint life policy.
c. reserve fund.
d. separate bank account.
Answer:
b
Explanation: The insurance company provides cash to be payable to the deceased partner.