# MCQ Questions Chapter 3 Reconstitution of a Partnership Firm – Admission of a Partner Class 12 Accountancy

Please refer to MCQ Questions Chapter 3 Reconstitution of a Partnership Firm – Admission of a Partner Class 12 Accountancy with answers provided below. These multiple-choice questions have been developed based on the latest NCERT book for class 12 Accountancy issued for the current academic year. We have provided MCQ Questions for Class 12 Accountancy for all chapters on our website. Students should learn the objective based questions for Chapter 3 Reconstitution of a Partnership Firm – Admission of a Partner in Class 12 Accountancy provided below to get more marks in exams.

## Chapter 3 Reconstitution of a Partnership Firm – Admission of a Partner MCQ Questions

Please refer to the following Chapter 3 Reconstitution of a Partnership Firm – Admission of a Partner MCQ Questions Class 12 Accountancy with solutions for all important topics in the chapter.

MCQ Questions Answers for Chapter 3 Reconstitution of a Partnership Firm – Admission of a Partner Class 12 Accountancy

Question. Calculate the value of goodwill at 3 years’ purchase when: Capital employed Rs. 2,50,000;  Average profit Rs. 30,000 and normal rate of return is I0%.
(a) Rs. 3000
(b) Rs. 25,000
(c) Rs. 30,000
(d) Rs. 5,000

Question. Goodwill of the firm on the basis of 2 years’ purchase of average profit of the last 3 years is Rs. 25,000. Find average profit.
(a) Rs. 50,000
(b) Rs. 25,000
(c) Rs. 10,000
(d) Rs. 2500

D

Question. 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

D

Question. The excess amount which the firm can get on selling its assets over and above the saleable value of its assets is called :
(a)Surplus
(b) Super profits
(c) Reserve
(d) Goodwill

D

Question. A and B are partners in a firm having a capital of ₹ 54,000 and ₹ 36,000 respectively. They admitted C for 1/3rd share in the profits C brought proportionate amount of capital. The Capital brought in by C would be:
(a) ₹ 90,000
(b) ₹ 45,000
(c) ₹ 5,400
(d) ₹ 36,00l

B

Question. Sun and Star were partners in a firm sharing profit in the ratio of 2 : 1. Moon as admitted as a new partner in the firm. New profit sharing ratio was 3 : 3 : 2. Moon brought the following assets towards his share of Goodwill and Capital:
Machinery : 2,00,000
Furniture : 1,20,000
Stock : 80,000
Cash : 50,000
If his capital is considered as Rs. 3,80,000 the Goodwill of the firm will be:
(a) 70,0000
(b) 2,80,000
(c) 4,50,000
(d) 1,40,000

A

Question. For which of the following situations, the old profit-sharing ratio of partners is used at the time of admission of a new partner?
(a) When new partner brings only a part of his share of goodwill.
(b) When new partner is not able to bring his share of goodwill.
(c) When, at the time of admission, goodwill already appears in the balance sheet.
(d) When new partner

C

Question. Arun and Vijay are partners in a firm sharing profits and losses in the ratio of 5:1.Balance Sheet (Extract)If value of machinery in the balance sheet is undervalued by 20%, then at what value will machinery be shown in new balance sheet:
(a) 44,000
(b) 48,000
(c) 32,000
(d) 50,000

D

Question. Amit and Beena were partners in a firm sharing profits and losses in the ratio of 3 : 1. Chaman was admitted as a new partner for 1/6 th share in the profits. Chaman acquired 2/5 th of his share from Amit. How much share did Chaman acquire from Beena ?
(a) 1/10
(b) 2/10
(c) 3/5
(d) None of the above

C

Question. Analyses the transaction and identify the effect on the revaluation account. Two month’s salaries @ Rs. 6000 per month was outstanding.
(a) Revaluation account is debited by Rs. 12000
(b) Revaluation account is credited by Rs. 12000
(c) Revaluation account is debited by Rs.6000
(d) Revaluation account is credited by Rs. 6000

A

Question. X and Y share profits in the ratio of 3:2. Z was admitted as a partner who sets 1/5 share. New profit-sharing ratio, if Z acquires 3/20 from X and 1/20 from Y would be
(a) 9 : 7 : 4
(b) 8 : 8 : 4
(c) 6 : 10 : 4
(d) 10 : 6 : 4

A

Question. A and B share profits and losses in the ratio of 3 : 1, C is admitted into partnership for 1/4 share. The sacrificing ratio of A and B is:
(a) equal
(b) 3 : 1
(c) 2 : 1
(d) 3 : 2.

B

Question. Sacrificing ratio is used to distribute………….in case admission of partner.
(a) Reserves
(b) Goodwill
(c) revaluation profit
(d) Balance in profit and loss account

B

Question. Can employee provident fund be distributed among old partner in their old ratio at the time of admission of partner.
(a) It can be distributed
(b) It can’t be distributed
(c) Can be distributed if tax is paid
(d) None of the above

B

Question. A, B and C are partner’s in a firm. If D is admitted as a new partner:
(a) old firm is dissolved
(b) old firm and old partnership is dissolved
(c) old partnership is reconstituted
(d) None of the above.

C

Question. On the admission of a new partner increase in the value of assets is debited to
(a) Profit and Loss Adjustment account
(b) Assets account
(c) Old partner’s capital account
(d) None of the above

Question. A and B are in partnership sharing profits in the ratio of 3:2. they take C as a new Partner. Goodwill of the firm is valued at Rs3,00,000 and C brings Rs30,000 as his Share of goodwill In cash which is entirely credited to the Capital Account of (a) New Profit sharing ratio will be:
(a)3:2:1
(b)6:3:1
(c)5:4:1
(d)4:5:1

C

Question. A and B are partners in a firm. They admit C with 1/5th share in the profits of the firm. C brings Rs.4,00,000 as his share of capital. Find the value of C’s share of Goodwill on the basis of his capital ,given that the combined capital of A and B after all Adjustments is Rs.10,00,000.
(a) Rs.6,00,000
(b) Rs.1,20,000
(c) Rs.1,50,000
(d) Rs.2,80,000

B

Question. When the new partner brings cash for goodwill , the amount is credited to
(a) Revaluation Account
(b) Cash Account
(d) Realisation Account

C

Question. Why new partner needs to bring goodwill?
(a) To compensate the sacrificing partners
(b) For Revaluation Account
(c) For Revaluation of Assets
(d) For all of the above

A

Question. Assertion ((a) : Purchased Goodwill is that Goodwill for which the firm has paid consideration in cash or kind and purchased Goodwill only is recorded in the books of accounts.
Reason (R) : Value of Goodwill is a subjective assessment but it is ascertained when both purchaser and seller agree to its valuation.
Choose the correct option from the following:
(a) Assertion and Reason both are correct and Reason is the correct.
(b) Assertion and Reason both are correct but Reason is not correct explanation of assertion.
(c) Only Assertion is correct.
(d) Reason is correct but Assertion is not correct.

A

Question. X,Y and Z are in partnership sharing profits and losses in the ratio of 5:4:1. Two New partners A and B are admitted. Profits are to shared in the ratio of 3:4:2:2:1 respectively. A is to pay Rs.30,000 for his share of goodwill but E is unable to pay for goodwill. Calculate the the gain of Z.
(a) 12,000
(b) 15,000
(c) 16,000
(d) 20,000

A

Question. Under the Capitalisation , 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.

C

Question. 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 partners.

A

Question. Assertion ((a) : Purchased Goodwill is that Goodwill for which the firm has paid consideration in cash or kind and purchased Goodwill only is recorded in the books of accounts.
Reason (R) : Value of Goodwill is a subjective assessment but it is ascertained when both purchaser and seller agree to its valuation.
Choose the correct option from the following:
(a) Assertion and Reason both are correct and Reason is the correct.
(b) Assertion and Reason both are correct but Reason is not correct explanation of assertion.
(c) Only Assertion is correct.
(d) Reason is correct but Assertion is not correct.

A

Question. X,Y and Z are in partnership sharing profits and losses in the ratio of 5:4:1. Two New partners A and B are admitted. Profits are to shared in the ratio of 3:4:2:2:1 respectively. A is to pay Rs.30,000 for his share of goodwill but E is unable to pay for goodwill. Calculate the the gain of Z.
(a) 12,000
(b) 15,000
(c) 16,000
(d) 20,000

A

Question. Average profits of a firm during the last few years are Rs. 70,000 and normal rate of return in a similar business is 10%. If the goodwill of the firm is Rs.1,00,000 at 4 years’ purchase of super profit, find the capital employed by the firm.
(a) 5,00,000
(b) 4,00,000
(c) 4,50,000
(d) 6,00,000

C

Question. At the time of admission of a new partner, general reserve appearing in the old balance sheet is transferred to:
(a) all partner’s capital account
(b) new partner’s capital account
(c) old partner’s capital account
(d) none of the above

C

Question. Asha and Nisha are partner’s sharing profit in the ratio of 2:1. Asha’s son Ashish was admitted for 1/4 share of which 1/8 was gifted by Asha to her son. The remaining was contributed by Nish(a)Goodwill of the firm in valued at Rs. 40,000. How much of the goodwill will be credited to the old partner’s capital account.
(a) Rs. 2,500 each
(b) Rs. 5,000 each
(c) Rs. 20,000 each
(d) None of the above

C

Question. A and B are partners sharing profit in the ratio of 3 : 2. They admit C as a partner by giving him 1/3 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

D

Question. A and B are partners in a business sharing profits and losses in the ratio of 7 : 3 respectively. They admit C as a new partner. A sacrificed 1/7th share of his profit and B sacrificed 1/3rd of his share in favour of (c) The new profit sharing ratio of A, B and C will be
(a) 3 : 1 : 1
(b) 2 : 1 : 1
(c) 2 : 2 : 1
(d) None of the above

C

Question. When a new partner does not bring his share of goodwill in cash, the amount is debited to :
(a) Cash A/c
(c) Current A/c of the new partner
(d) Capital A/cs of the old partners

C

Question. At the time of admission of a partner, undistributed profits appearing in the balance sheet of the old firm is transferred to the capital account of:
(a) old partners in old profit sharing ratio
(b) old partners in new profit sharing ratio
(c) all the partner in the new profit sharing ratio.

A

Question. A, B and C are partners sharing profits in the ratio of 3:2:1. They agree to admit D into the firm. A, B and C agreed to give1/3rd,1/6th,1/9th share of their profit. The share of Profit of D will be:
(a)1/10
(b)11/54
(c)12/54
(d)13/54

D

Question. If at the time of admission, some profit and loss account balance appears in the books, it will be transferred to:
(a) Profit & Loss Adjustment Account
(b) All partners’ Capital Accounts
(c) Old partners’ Capital Accounts
(d) Revaluation Account

C

Question. A and B are partners sharing profits and losses in the ratio of 7 : 5. 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) 13 : 7 : 4
(b) 7 : 13 : 4
(c) 7 : 5 : 6
(d) 5 : 7 : 6

A

Question. X and Y are partners in a firm with capital of ₹1,80,000 and ₹2,00,000. Z was admitted for 1/3rd share in profits and brings ₹3,40,000 as capital, calculate the amount of goodwill:
(a) ₹2,40,000
(b) ₹1,00,000
(c) ₹1,50,000
(d) ₹3,00,000

C

Question. Assertion (A): Profit or loss on revaluation account is not transferred to incoming partners’capital AccountReason ( R ) : Profit or loss on revaluation at the time of admission of a Partner belongs to Pre-Admission period hence belong to old partners: 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 false, but Reason (R) is true
(d) Assertion (A) is true, but Reason (R) is false

A

Question. At the time of admission of a partner, who decides the share of profit of the new partner out of the firm’s profit ?
(a) Old partner
(b) New Partner
(c) Sacrificing partner
(d) None of the above

A

Question. In the absence of an express agreement as to who will contribute to new partners’ share of profit, it is implied that the old partners will contribute:
(a) Equally
(b) In the ratio of their capitals
(c) In their old profit-sharing ratio
(d) In the gaining ratio

C

Question. Sacrificing ratio is used to distribute in case of admission of a partner :
(a) Reserves
(b) Goodwill
(c) Revaluation Profit
(d) Balance in Profit and Loss Account

C

Question. A, B, C and D are partners. A and B share 2/3rd of profits equally and C and D share remaining profits in the ratio of 3 : 2. Find the profit sharing ratio of A, B, C and (d)
(a) 5 : 5 : 3 : 2
(b) 7 : 7 : 6 : 4
(c) 2.5 : 2.5 : 8 : 6
(d) 3 : 9 : 8 : 3

A

Question. Vinay and Naman are partners sharing profit in the ratio of 4:1. Their capitals were Rs 90,000 and Rs. 70,000 respectively. They admitted Prateek for 1/3 share in the profits. Prateek brought ` 1,00,000 as his capital. The value of firm’s goodwill will be:
(a) 40,000
(b) 60,000
(c) 1,00,000
(d) 2,60,000

A

Question. The ratio in which the partners share the gain or loss on revaluation of assets and liabilities is
(a) Sacrificing Ration
(b) Old Profit Sharing Ratio
(c) New Profit Sharing Ratio
(d) Gaining Ratio

B

Question. What will be the new profit-sharing ratio of Ryan, Williams, Sania and Ejaz?
(a) 1:1:1:1
(b) 5:5:8:8
(c) 5:5:4:4
(d) None of the above

C

Question. What is the amount of capital brought in by the new partner Ejaz?
(a) Rs.50,00,000
(b) Rs.80,00,000
(c) Rs.40,00,000
(d) Rs.30,00,000

D

Question. What is the value of the goodwill of the firm?
(a) Rs.1,35,00,000
(b) Rs.30,00,000
(c) Rs.1,50,00,000
(d)Cannot be determined from the given data

A

Question.The ratio in which a partner receives a rise in his share of profits is known as:
(a) New Ratio
(b) Sacrificing Ratio
(c) Capital Ratio
(d) Gaining Ratio

D

Question. In which of the following case, revaluation accou nt 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

B

Question. Any change in the relationship of existing partners which results in an end of the existing agreement and enforces making of new· agreement is called:
(a) Revaluation of partnership
(b) Reconstitution of partnership
(c) Realisation of partnership
(d) None of the above

D

Question. In which of the following cases, revaluation account is credited?
(a) Decrease in value of liability
(b) Increase in value of liability
(c) Decrease in value of asset
(d) No change in value of liability

Question. Partner’s capital account is credited when there is
(a) Profit on revaluation
(b) transfer of general reserve
(c) transfer of accumulated profits
(d) All of the e abov

B

Question.Sacrificing ratio is the difference between :
(a) New ratio and old ratio
(b) Old ratio and new ratio
(c) New ratio and gaining ratio
(d) Old ratio and gaining ratio

B

Question.The ratio in which a partner surrenders his share in favour of a partner is known as:
(a) New profit-sharing ratio
(b) Sacrificing Ratio
(c) Gaining Ratio
(d) Capital Ratio

B

Question. X,Y and Z are partners sharing profits and losses in the ratio of 5:3:2.They decide to share the future profits in the ratio of 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 among the partners in old profit sharing ratio
(b) Distributed among the partners in new profit sharing ratio
(c) Distributed among the partners in capital ratio
(d) Carried forward to new balance sheet without any adjustment

A

Question. A,B and C were are partners in a firm sharing profits in the ratio of 3:4:1 .They decided to share profits equally w.e.f from 1 .4.2019. 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

B

Question.In case of change in profit-sharing ratio, the accumulated profits are distributed to the partners in
(a) new ratio
(b) old ratio
(c) sacrificing ratio
(d) equal ratio

B

Question. R; S and T sharing profits and losses in the ratio of 1:2:3, decided to share future profit and losses equally. They also decided to adjust the following accumulated profits, losses and reserves without affecing their book figures, by passing a single adjustment entry:
General Reserve 40000
Profit and Loss A/c 30000
Share .Issue expenses 10000
The necessary .adjustment entry will be:
(a) Dr. R and Cr. T by < I 0,000
(b) Dr. T and Cr. R by < 10,000
(c) Dr. S and Cr. R by < 10,000
(d) Dr.R and Cr. S by < 10,000

A

Question. U V and W are partners sharing profits in the ration of 2:3:5. They also decide to record the effect of the following revaluations and reassessments without affecting the book values of assets and liabilities by passing a single adjustment entry:The single adjustment entry will
(a) Dr. W and Cr. U by 10,500
(b) Dr. U and Cr. W by Rs. 10,500
(c) Dr. V and Cr. U by Rs. 10,500
(d) Dr. W and Cr. V by Rs. 10,500

B

Question.Reserves and accumulated profits are transferred to partners ‘ capital accounts at the time of reconstitution in:
(a) Old profit-sharing ratio
(b) Sacrificing Ratio
(c) Gaining ratio
(d) New profit-sharing ratio

A

Question. Increase and decrease in the value of assets and liabilities are recorded through:
(a) Partners’ Capital Account
(b) Revaluation Account
(c) Profit and Loss Appropriation Ne
(d) Balance Sheet

B

Question. Which of the following is not the reconstitution of partnership?
(b) Dissolution of Partnership
(c) Change in Profit Sharing Ratio
(d) Retirement of a partner

B

Question. A and B are partners in a firm sharing profits in the ratio of 3 : 2. They decided to share future profits equally. Calculate A’s gain or sacrifice
(a) 2/10 (sacrifice)
(b) 5/10 (gain)
(c) 1/10 (Gain)
(d) 1/10 (sacrifice)

D

Question. In case of change in profit-sharing ratio, the gaining partner must compensate the sacrificing partners by paying the proportional amount of
(a) capital
(b) cash
(c) goodwill
(d) none of the above

C

Question. 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

A

Question. “At the time of admission, old partnership comes to an end”. Is the statement true or false?

True

Question. Which of the following is not true with respect to Admission of a partner?
(a) A new partner can be admitted if it is agreed in the partnership deed.
(b) If all the partners agree, a new partner can be admitted.
(c) A new partner has to bring relatively higher capital as compared to the existing partners
(d) A new partner gets right in the assets of the firm

C

Question.11 As per ———, only purchased goodwill can be shown in the Balance Sheet.
(a) AS 37
(b) AS 26
(c) Section 37
(d) AS 37

B

(a) Credited to sacrificing partners
(b) Credited to all partners in the new profit sharing ratio
(c) Credited to old partners in the old profit sharing ratio
(d) Credited to only gaining partners

A

Question. A, and B are partners sharing profits in the ratio of 2:3. Their balance sheet shows machinery at ₹2,00,000; stock ₹80,000, and debtors at ₹1,60,000. C is admitted and the new profit sharing ratio is 6:9:5. Machinery is revalued at ₹1,40,000 and a provision is made for doubtful debts @5%. A’s share in loss on revaluation amount to ₹20,000. Revalued value of stock will be:
(a) ₹62,000
(b) ₹1,00,000
(c) ₹60,000
(d) ₹98,000

C

Question. 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

C

Question. If at the time of admission if there is some unrecorded liability, it will be ————- to — ———— Account
(a) Debited, Revaluation
(b) Credited, Revaluation
(c) Debited, Goodwill
(d) Credited, Partners’ Capital

A

Question. Heena and Sudha share Profit & Loss equally. Their capitals were Rs.1,20,000 and Rs. 80,000 respectively. There was also a balance of Rs. 60,000 in General reserve and revaluation gain amounted to Rs. 15,000. They admit friend Teena with 1/5 share. Teena brings Rs.90,000 as capital. Calculate the amount of goodwill of the firm.
(a) Rs.85,000
(b) Rs.1,00,000
(c) Rs.20,000
(d) None of the above

A

Question. At the time of admission of a new partner, the balance of Workmen Compensation 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

A

Question. 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

A

Question. Himanshu and Naman share profits & losses equally. Their capitals were Rs.1,20,000 and Rs. 80,000 respectively. There was also a balance of Rs. 60,000 in General reserve and revaluation gain amounted to Rs. 15,000. They admit friend Ashish with 1/5 share. Ashish brings Rs.90,000 as capital. Calculate the amount of goodwill of the firm.
(a) Rs.1,00,000
(b) Rs. 85,000
(c) Rs.20,000
(d) None of the above

B

Question. 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

C

Question. 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) Rs.3,400
(d) None of the above

C

Question. Revaluation Account is a ———— Account.
(a) Real
(b) Nominal
(c) Personald)
(d) Liability

B

Question. Yash and Manan are partners sharing profits in the ratio of2:1. They admit Kushagra into partnership for 25% share of profit. Kushagra acquired the share from old partners in the ratio of 3:2. The new profit sharing ratio will be:
(a) 14:31:15
(b) 3:2:1
(c) 31:14:15
(d) 2:3:1

C

Question. Which statement is true with respect to AS-26?
(a) Purchased goodwill can be shown in the Balance Sheet
(b) Revalued goodwill can be shown in the Balance Sheet
(c) Both purchased goodwill and revalued can be shown in the Balance Sheet
(d) None of the above

A

Question. Match the following with respect to journal entries for treatment of goodwill.
i. Incoming partner brings his share of
goodwill
A No Entry
ii. Incoming partner does not bring his share
of goodwill
B Premium for Goodwill A/c Dr.
Incoming Partner’s Capital A/c Dr.
To Sacrificing Partners Capital A/c
iii. Incoming partner pays his share of
goodwill privately
C Premium for Goodwill A/c Dr.
To Sacrificing Partners Capital A/c
iv. Incoming partner brings only a part of his
share of goodwill
D Incoming Partner’s Capital A/c Dr.
To Sacrificing Partners Capital A/c
(a) i- B, ii-C, iii-A, iv-D
(b) i- C, ii-D, iii-A, iv-B
(c) i- D, ii-C, iii-A, iv-B
(d) i- D, ii-C, iii-B, iv-A

B

Question. Goodwill i s _____
(a) tangible asset
(b) intangible asset
(c) fictitious asset
(d) both (b) & (c)

B

Question.Under which method of valuation of goodwill, normal rate of return is not considered?
(a) Loss on sale of fixed assets
(b) Loss due to fire, earthquake etc
(c) Undervaluation of closing stock
(d) All of the above

C

Question.Weighted average profit method of calculating goodwill is used when:
(a) Profits are not equal
(b) Profits show a trend
(c) Profits are fluctuating
(d)None of the above

B

Question. What are super profits
(a) Actual profit – Normal Profit
(b) Normal Profit – Actual profit
(c) Actual profit + Normal Profit
(d)None of the above

A

Question. 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
(d) None of the above

B

Question. 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

C

Question. The goodwill of the firm is not affected by:
(a) Location of the firm
(b) reputation of the firm
(c)Better customer services
(d)None of the above

B

Question. Capital invested in a firm is 5,00,000.Normal rate of return is 10% .Average profit 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) Rs.72,000
(b) Rs. 40,000
(c) Rs. 2,40,000
(d) 1,80,000

A

Question. Capital invested in a firm is 5,00,000.Normal rate of return is 10% .Average profit 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) Rs.72,000
(b) Rs. 40,000
(c) Rs. 2,40,000
(d) 1,80,000

A

Question.Value of reputation of the Firm is:
(a) Royalty
(b) Assets
(c) Goodwill
(d) Patents

C

Question.An increase in the value of a liability will be recorded on ………………. side of Revaluation Account.
(a) Debit
(b) Either Debit or Credit
(c) Credit
(d) Debit and Credit both

A

Question. Weighted average method of calculating goodwill is used when:
(a) Profits are not equal
(b) Profits show a trend
(c) Profits are fluctuating
(d) None of the above

B

Question. Correct ormula for calculating of Goodwill is:
(a) Goodwill =Average Profit × 100/ Normal Rate of Return
(b) Goodwill = Capital Employed × 100/ Normal Rate of Return
(c) Goodwill =Super Profit × 100/ Normal Rate of Return
(d) Goodwill = Normal Profit × 100 Normal Rate of Return

C

Question. ……………….. Profit is excess of actual profits over normal profits
(a) Net
(b) Average
(c) Super
(d) Appropriated

C

Question.Tangible Assets of the firm are `14,00,000 and Outside Liabilities are `4,00,000. Profit of the firm is `1,50,000and normal rate of return is 10%. The amount of Capital employed will be
(a) `10,00,000
(b) `1,00,000
(c) `50,000
(d) `20,000

A

Question. Amount of old goodwill already appearing in the books will be written off:
(a) in old ratio
(b) in new ratio
(c) in sacrificing ratio
(d) in gaining ratio

A

Question. Jeetu and Vijay are partners in a firm sharing profits and losses in the ratio of 6 : 5.
If value of M. cycle in the balance sheet is undervalued by 20%, then at what value will the M. cycle be shown in the New balance sheet 1
(a) `48,000
(b) `50,000
(c) `53,000
(d) `65,000

B

Question. 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

B

Question. The goodwill of a firm is `54,000 valued at 4 years’ purchase of super profits. The capital employed of thefirm is `2,00,000 and normal rate of return is 10%. The average profit of the firm is:
(a) `27,500
(b) `23,600
(c) `33,500
(d) `21,500

C

Question. Following are the factors affecting goodwill except:
(b) Location of the customers
(c) Technical Know-how
(d) Efficiency of Management

B

Question. Accounting Standard ………….. requires goodwill should be recorded in the books of accounts only whensome money or money’s worth is paid for it.
(a) 26
(b) 23
(c) 27
(d) 10

A

Question. The entry to be passed for adjustment of Goodwill when there is a change in profit and loss sharing ratioof partners without opening Goodwill Account is
(a) Sacrificing Partners’ Capital A/cs Dr.
To Gaining Partners’ Capital A/cs
(b) Gaining Partners’ Capital A/cs Dr.
To Sacrificing Partners’ Capital A/cs
(c) Gaining Partners’ Current A/cs Dr.
To Sacrificing Partners’ Current A/cs
(d) Either (b) or (c)

B

Question. Goodwill is to be calculated at one and half year’ purchase of average profit of last 5 years. The firm earnedprofits during 3 years as `20,000, `18,000 and `9,000 and suffered losses of `2,000 and `5,000 in last 2 years.
The amount of goodwill will be:
(a) `12,000
(b) `10,000
(c) `15,000
(d) None of these

A

Question. Revaluation of assets on the reconstitution of partnership is necessary because their present value may bedifferent from their ………………. .
(a) Market Value
(b) Net Value
(c) Place Value
(d) Book Value

D

Question. Reassessment of liabilities means:
(a) Only increase in the values of liabilities
(b) Change in the values of liabilities
(c) Change in the values of assets
(d) Only decrease in the values of liabilities

B

Question.The purpose of revaluation account is to ascertain the
(a) Reassessment
(b) None
(c) Both A and B
(d) Revaluation Profit/Loss

D

Question. Rakesh and Prakash are partners in a retail business. Balances in Capital and Current Accounts as on 31stMarch, 2021 were:
The firm earned an average profit of `90,000. If the normal rate of return is 10%. Find the value of 45
Goodwill by Capitalisation Method.
(a) `4,20,000
(b) `2,10,000
(c) `1,10,000
(d) `2,20,000

A

Question.The ratio which one or more partners of the firm forego, i.e., sacrifice their share of profits in favour ofone or more partners of the firm is known as:
(a) Sacrificing Ratio
(b) Gaining Ratio
(d) Profit Ratio

A

Question.The circumstances when change in profit sharing ratio is needed:
(b) When existing partner’s decide
(c) When existing partner retires
(d) All of these

D

Question. ……..should compensate …………..in the case of reconstitution of the firm.   ,

Sacrificing partner

Question. Goodwill is not valued during ………….

Dissolution of the firm

Question. An amount previously written off as bad debt is promised to be paid by the debtor. The promised amount will not be credited to _________________ Account.

Debtors

Question.The newly admitted partner brings his / her share of capital for which he will get _______ in firm.

Profit share

Question. When the value of goodwill of the firm is not given but has to be inferred on the basis of the net
worth of the firm ,it is called…………

Hidden goodwill

Question. If Super profit of a firm is 10,000,its value of goodwill will be …1,25,000……….if rate of return is 8%

Question. At the time of admission, if the book value and the market value of investment is same Investment Fluctuation Reserve is transferred to __________ account of the old partners in their ______________ ratio.( )

capitals , old

Question. For the distribution of revaluation profit in case firm is following Fixed Capital Accounts method is transferred to ________ accounts

current

Question. At the time of admission, if claim of Workmen Compensation is more than the Workmen
Compensation Reserve, the amount of Workmen Compensation Reserve and the claim is transferred to ______________________ account.

Provision for workmen compensation liability

Question. The value of goodwill is based on ———- judgment of the valuer .

Subjective

Question. Capitalisation of average profit——– method ,goodwill is the excess of capitalized value of business over actual capital
employed.

Capitalisation of average profit

State true or false

Question. Purchased goodwill may arise on acquisition of an existing business concern..

True

Question. While computing goodwill, abnormal incomes and expenses are not ignored to calculate the value of goodwill.

False

Question. Weighted Average Method is preferred over Average Profit method at the time of falling profits.

False

Question. Efficiency of management is a factor affecting goodwill of a firm. X

True

Question. New partner brings goodwill in the firm to get share in the past profits.

False

Question. Gaining Partner(s) compensate Sacrificing Partner(s) when Profit-sharing Ratio changes.

True

Question. Reserves and accumulated profits are distributed in old Profit-sharingRatio at the time of change in Profit-sharing Ratio.

True

Question. Goodwill appearing in the Balance Sheet means Purchased Goodwill.

True

Question. Goodwill is a fictitious asset

False

Question. Goodwill can be sold in part..

False

Question. “Average profit method” takes into consideration the future maintainable profits.

True

False

Question. Self-Generated goodwill is recorded in the books of accounts as some consideration is paid for it.

False

Question. A partnership is reconstituted due to change in profit sharing ratio

True

Question. A,B and C are sharing profits in the ratio of 3:2:1. They decided to share equally in future .B’s has neither sacrificed nor gained .

True

Question. “As per Section 26 of the Indian Partnership Act, 1932, a person can be admitted as a new partner if it
is agreed in the Partnership Deed”. Is the statement True or False?

False

Question.  “A newly admitted partner cannot pay his share of the goodwill to the sacrificing partners privately”.
Is the statement True or False?

False

Question.  “Unless agreed otherwise, Sacrificing Ratio of the old partners will be the same as their Old Profit
Sharing Ratio”. Is the statement True or False?

True

Question. Goodwill is valued during dissolution of a.