Questions for Chapter-Reconstitution of a Partnership Firm – Admission of a Partner

MCQ-Based Questions for CUET Accountancy chapter-Reconstitution of a Partnership Firm – Admission of a Partner

This page is prepared by HT experts and consists of MCQ-Based Questions for CUET Accountancy chapter-Reconstitution of a Partnership Firm – Admission of a Partner with a detailed explanation of all the questions asked from Reconstitution of a Partnership Firm – Admission of a Partner. To find the solution to the MCQ asked just click on the answer tab. Check out all chapters of CUET Accountancy. 

Practice Questions for CUET Accountancy chapter-Reconstitution of a Partnership Firm – Admission of a Partner SET-1

Accounts - MCQ on Reconstitution of a Partnership Firm – Admission of a Partner

Class XII

Q.1. A and B are partners with capitals of Rs. 10,000 and Rs. 20,000 respectively. They share profits equally. They admitted C as their third partner with one-fourth profits of the firm on the payment of Rs. 12,000. The amount of hidden goodwill is

a. Rs.6,000

b. Rs.10,000

c. Rs.8,000

d. Rs.12,000

Answer:

( a )

Explanation: Total capital as per C = 12,000 x 4 = Rs. 48,000

Actual total capital = 10,000 + 20,000 + 12,000 = Rs. 42,000

Q. 2.Some times there are unrecorded liabilities in the books of accounts. They will be recorded at the time of admission of a new partner in

a. credit side of revaluation account.

b. debit side of revaluation account.

c. old partners’ capital accounts.

d. all partners’ capital accounts.

Answer:

(b)

Explanation: The unrecorded liabilities are shown on the debit side of revaluation account and will also be shown in the new balance sheet.

Q.3. The ratio, in which the profit or loss on revaluation is shared among old partners, is called

a. old profit sharing.

b. new profit sharing.

c. capital ratio.

d. gaining ratio.

Answer:

( a )

Explanation: Profit or loss on revaluation is shared among old partners in old ratio.

Q.4. New balance sheet is prepared after the admission of a partner; the assets and liabilities are shown at

a. original value.

b. revalued figures.

c. realisable value.

d. current cost.

Answer:

b

Explanation: Assets and liabilities are written at revalued figures.

Q.5. 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.sacrificing partner’s capital account

Answer:

(c)

Explanation: At the time of admission of a new partner, general reserve appearing in the old balance sheet is transferred to old partner’s capital account in old ratio.

Q.6. A and B share profits and losses in the ratio of 3:1. C is admitted into the partnership with 1/4^th share. The sacrificing ratio of A and B is

a. equal

b. 3:1

c. 2:1

d. 3:2

Answer:

b

Explanation: In this case, sacrificing ratio and old ratio will be the same as no further information is available regarding new ratio.

Q.7. Undistributed profit appearing in the balance sheet of the old firm at the time of admission of a partner is transferred to

a. old partners in old profit sharing ratio.

b. old partners in new profit sharing ratio.

c. all the partners in the new profit sharing ratio.

d. old partners in sacrificing ratio.

Answer:

(a)

Explanation: Undistributed profit appearing in the balance sheet of the old firm at the time of admission of a partner is transferred to the old partners in old profit sharing ratio.

Q.8. If, new partner is unable to bring his share of goodwill, then the account to be debited, is

a. old partners’ capital.

b. new partner’s capital.

c.premium account.

d. goodwill account.

Answer:

b

Explanation: On the admission of a new partner, if he is unable to bring his share of goodwill, then new partner’s capital account will be debited.

Q.9. A and B are partners sharing profits and losses equally. C is admitted for 1/3^rd share of profits. The new profit sharing ratio is

a. 3:2:1

b.1:1:3

c. 1:1:1

d. 1:2:3

Answer:

(c)

Explanation: The new profit sharing ration among the partners will be equal.

Q.10. On the admission of a new partner, decrease in the value of a liability, is

a. debited to revaluation account.

b. credited to revaluation account.

c. credited to capital accounts.

d. debited to capital accounts.

Answer:

b

Explanation: Revaluation account is a nominal account therefore any decrease in the value of liability is credited to it.

Q.11. If, there is a decrease in the provision for doubtful debts, then it will be

a. debited to revaluation account.

b. credited to revaluation account.

c. debited or credited depending on its nature.

d. not affecting revaluation account.

Answer:

b

Explanation: The reduction in provision for doubtful debts is a profit so it is shown on the credit side of revaluation account.

Q. 12. A, B and C share profits in the ratio of 5:4:3. D is admitted for 1/4^th share. The sacrificing ratio is

a. 1:1:1

b. 5:4:3

c. 10:8:4

d. 5:4:4.

Answer:

(b)

Explanation: In this case, old ratio itself will be the sacrificing ratio.

Q.13. At the time of admission of new partner, the goodwill is distributed in

a. old ratio.

b. new ratio.

c. sacrificing ratio

d. gaining ratio

Answer:

(c)

Explanation: Goodwill brought in by new partner will be distributed among old partners in their sacrificing ratio.

Q.14. A and B are partners sharing profits and losses equally. C is admitted for 1/3^rd share. The new ratio will be

a. 2:2:1.

b. 1:1:3.

c. 2:2:3.

d. 1:1:1.

Answer:

(d)

Explanation: Old share of A and B is 1:1. The new ratio will be 1:1:1.

Q.15. A and B are partners in a firm. On the admission of a new partner C, they increased the value of creditors from Rs 5,000 to Rs 7,000. The amount to be debited to the revaluation account.

a. Rs 2,000.

b. Rs 7,000.

c. Rs 5,000.

d. Rs 12,000.

Answer:

( a )

Explanation: Increased amount of liability will be shown in the revaluation account.

Q.16. A and B are equal partners with capitals of Rs. 25,000 each after all adjustments. C is admitted for 1/3^rd share and is supposed to contribute the proportionate capital. The capital to be brought in by C is

a. Rs. 25,000.

b. Rs. 50,000.

c. Rs. 8,333.

d. Rs. 16,667.

Answer:

( a )

Explanation: The new ratio will be equal and C’s contribution will be Rs. 25,000.

Q.17. If, the partners of a firm decide to change their profit sharing ratio, the gaining partner must compensate the sacrificing partner by paying the proportionate amount, of

a. premium for goodwill.

b. capital for adjustment.

c. capital.

d. book value of assets.

Answer:

( a )

Explanation: Goodwill is paid, when some partners sacrifices for the others.

Q.18. 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. current value.

Answer:

b

Explanation: Revaluation of assets is required, because value of some assets changes with the time.

Q.19. A new partner is admitted to a partnership firm. Nothing is mentioned that who will contribute the share of profit to a new partner in the future profit. In this case, it is implied that old partners contribute

a. equally.

b. in proportion of their capital.

c. in their old profit sharing ratio.

d. in gaining ratio.

Answer:

c

Explanation: If, nothing is mentioned, then it is assumed to be in old ratio.

Q.20. On the admission of a new partner, increase in the value of an asset, is

a. debited to revaluation account.

b. credited to revaluation account.

c. credited to partners’ capitals.

d. debited to partners’ capitals.

Answer:

b

Explanation: Increase in the value of asset is credited to the revaluation account.

Q.21. At the time of admission of a partner the item, which has to be revalued compulsorily, is

a. stock.

b. fixed assets.

c. investment.

d. goodwill.

Answer:

d

Explanation: Goodwill is compulsory to revalue at the time of admission of a partner, as new partner is suppose to bring his share of goodwill.

Q.22. X and Y are partners sharing profits in the ratio of 3:1. They admit Z as a partner who pays Rs. 4,000 as goodwill. The new profit sharing ratio among X, Y and Z is 2:1:1 respectively. The amount of goodwill will be credited to

a. X and Y (Rs. 3,000 and Rs. 1,000 respectively).

b. X only.

c. Y only.

d. X and Y equally.

Answer:

b

Explanation: The amount of goodwill will be credited to X only as Y has not sacrificed his share.

Q.23. A and B are partners sharing profits in the ratio of 3:2. They admitted C for 1/4^th share. The new profit sharing ratio is

a. 9:6:5

b. 3:2:4

c. 3:2:1

d. 18:12:5

Answer:

( a )

Explanation: When the new partner is admitted for 1/4^th share, the new ratio will be 9:6:5 and the old ratio of partners will remain the same.

Q.24. On the admission of a new partner, decrease 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:

( a )

Explanation: Decrease in the value of assets is debited to the revaluation account, as it is a loss.

Q.25. Sometimes, partners agree that the value of assets and liabilities will not change and continue to appear at old values, the account prepared in such a case is

a. revaluation account.

b. revaluation account is not required.

c. memorandum balance sheet.

d. memorandum revaluation account.

Answer:

(d)

Explanation: Memorandum revaluation account is prepared to show the assets and liabilities at the old value in the balance sheet.

Q.26. Reconstitution of a partnership firm, means

a. any change in the existing agreement of partnership.

b. new partner is admitted.

c. old partner has retired.

d. the partnership firm is no more.

Answer:

( a )

Explanation: Reconstitution of partnership firm, mean any change in the existing agreement of partnership.

Q.27. A sacrificing partner is defined as the one

a. whose share has decreased.

b. who has taken share from other partner.

c. whose share has increased.

d. who has not taken share from other partner.

Answer:

( a )

Explanation: A sacrificing partner is defined as the one, whose share has decreased.

Q.28. If, first part of memorandum revaluation account shows a profit, then the second part will show, a

a. loss.

b. profit.

c. profit or loss, it depends.

d. zero balance.

Answer:

( a )

Explanation: If, the first part of memorandum revaluation account shows a profit, the second part must show, a loss.

Q.29. As per AS-10, the goodwill to be recorded in books of accounts, is

a. premium goodwill.

b. purchased goodwill.

c. privately paid goodwill.

d. unpaid goodwill.

Answer:

b

Explanation: Only purchased goodwill is recorded in the books of accounts.

Q.30. The capital balances of Ram and Mohan are Rs. 50,000 and Rs. 40,000 respectively, after making all the adjustments. If, Sohan the incoming partner, is to bring in 1/3^rd of the total capital of the firm, then his share of capital, is

a. Rs.22,500.

b. Rs.67,500.

c. Rs.45,000.

d. Rs.90,000.

Answer:

c

Explanation: Sohan’s share of capital is = (50,000 + 40,000) x 3/2 x 1/3

=Rs. 45,000

Q.31. A, B and C share profits and losses in the ratio of 1/2, 1/3 and 1/6 respectively. D, a new partner, is given 1/8^th share. Calculate the new profit sharing ratio.

a. 2:3:6:8

b. 8:6:3:2

c. 21:14:6:7

d. 21:14:7:6

Answer:

(d)

Explanation:

Share of remaining partners = 1-1/8 = 7/8

New share

A = 7/8 x 1/2

B = 7/8 x 1/3

C = 7/8 x 1/6

D = 1/8

Q.32. When, the new partner brings his share of premium for goodwill in cash, it is adjusted by crediting to

a. revaluation account.

b. his capital account.

c. premium account.

d. sacrificing partner’s capital account.

Answer:

(c)

Explanation: Premium account is used for distributing the goodwill among the sacrificing partners.

Q.33. Chandran is admitted to a firm for 1/4^th share in the profits. If, for this, he brings in Rs. 10,000 towards premium for goodwill, then it will be taken by the old partners, in

a. the old profit sharing ratio.

b. the new profit sharing ratio.

c. sacrificing ratio.

d. capital ratio.

Answer:

c

Explanation: Premium for goodwill is divided in the sacrificing ratio among the old partners.

Q.34. Revaluation account is a

a. real account.

b. personal account.

c. nominal account.

d. goodwill account.

Answer:

c

Explanation: Revaluation account is a nominal account.

Q.35. The goodwill already appearing in the books 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.36. A and B are partners sharing profits and losses in the ratio of 2:1. They admit C into partnership for 1/4^th share in profits, for which he brings in Rs. 30,000 as his share of capital. The capitals of other partners are adjusted on the basis of new partner’s capital.The adjusted capitals of A and B are

a. Rs.60,000 and Rs.30,000 respectively.

b. Rs.30,000 and Rs.60,000 respectively.

c. Rs.30,000 and Rs.15,000 respectively.

d. Rs.12,000 and Rs.6,000 respectively.

Answer:

( a )

Explanation: 30,000 x 4 = Rs. 1,20,000 will be divided in the new profit sharing ratio.

Q.37. If, memorandum revaluation account is prepared, then the item that will appear at new value, is

a. building.

b. stock.

c. cash.

d. debtors.

Answer:

c

Explanation: Cash does not appear at old value in case of memorandum revaluation account.

Q.38. At the time of admission of a new partner, accumulated profits are divided in

a. old ratio.

b. new ratio.

c. sacrificing ratio.

d. gaining ratio.

Answer:

( a )

Explanation: The accumulated profits are divided among old partners in old ratio.

Q.39. A, B and C are partners sharing profits and losses in the ratio of 3:2:1. D is admitted for 1/3^rd share in the future profits. The sacrificing ratio will be

a. 3:2:1

b. 1:1:1

c. in the ratio of capitals.

d. 3:2

Answer:

( a )

Explanation: Sacrificing ratio itself is the old ratio, when old ratio is given and new partner enters with a particular fraction of share (and no other information regarding profit sharing is given).

Q.40. Goodwill brought in kind implies

a. goodwill is not brought at all.

b. goodwill is paid privately.

c. extra goodwill brought by new partner.

d. goodwill brought in the form of assets.

Answer:

( d )

Explanation: Goodwill brought in kind means goodwill in the form of assets brought in by new partner.

Q.41. Proportionate capital means

a. capital balances of the partners in accordance with the profit sharing ratio.

b. capital has been brought by partners in equal amount.

c. calculation of capital of a new partner on the basis of goodwill.

d. capital for the purpose of a new partner.

Answer:

( a )

Explanation: Proportionate capital implies capital balances of all the partners in accordance with the profit sharing ratio.

Q.42. A and B are partners sharing profits and losses in the ratio of 3:2 (A’s capital Rs. 30,000 and B’s capital Rs. 15,000). They admitted C for 1/5^th share of profits. The capital of C is

a. Rs. 9,000.

b. Rs. 12,000.

c. Rs. 14,500.

d. Rs. 11,250.

Answer:

( d )

Explanation:

Total capital will be = 45,000 x 5/4

C’s share of capital = 45, 000 x 5/4 x 1/5 = 11,250

Q.43. 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: Debit side of revaluation account records decrease in assets and increase in liabilities.

Q.44. 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 debit side of the partner’s capital account

Q.45. P and Q are partners sharing profits in the ratio of 2:1. R is admitted to the partnership with effect from 1^st April on the terms that he will bring Rs. 20,000 as his capital for 1/4^th share and will pay Rs. 9,000 for goodwill, half of, which is to be drawn by P and Q. The cash withdrawn by P and Q is

a. Rs.3,000 and Rs.1,500 respectively.

b. Rs.6,000 and Rs.3,000 respectively.

c. Rs.3,000 and Rs.6,000 respectively.

d. Rs.1,500 and Rs.3,000 respectively.

Answer:

( a )

Explanation: Half goodwill is withdrawn, i.e., Rs. 4,500. It will be divided in the sacrificing ratio, i.e., 2:1.

Q.46. Pawan and Jayshree are partners. Bindu is admitted for 1/4^th share. The sacrificing ratio of Pawan and Jayshree, is

a. 4:1.

b. 1:1.

c. 1:4.

d. 2:1.

Answer:

b

Explanation: The ratio of Pawan and Jayshree is not given. So, their old ratio is taken to be the same. Hence, their sacrificing ratio will also be equal.

Q.47. 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.