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Accountancy Test F.M.

1. What is meant by retirement of a partner? 1
2. A, B and C are partners sharing profits in the ratio of 3:2:1. B retires and the newprofit
sharing ratio between A and C is 3:1. State the gaining ratio. 1
3. State the need for treatment of Goodwill on retirement of a partner. 1
4. State the difference between dissolution of partnership and dissolution of partnership firm
on the basis of court intervention. 1
5. On dissolution, how will you deal with partners loan, if it appears on the (a)Assets side of
the balancesheet and (b)Liabilities side of the balance sheet. 1
6. What the journal entry will be made if, a partner X paid the realization expense and the
same expense borne by another partner Y? 1

7. A, B , C and D are partners in a firm sharing profits in the ratio of 3:3:2;2 respectively. D
retires and A, B and C decide to share the future profits in the ratio of 3:2:1. Goodwill of
the firm is valued at Rs. 6,00,000. Goodwill already appears in the books at Rs.
4,50,000.The profits for the first year after D’s retirement amounted to Rs. 12,00,000.
Give the necessary journal entries to record goodwill and to distribute the profits. 3

8. Roopa, Sunder and Shalu are partners sharing profit in the ratio of5 : 3 : 2. Roopa retired,
when their capitals were: Rs.46,000, Rs.42,000 andRs.38,000 respectively after making
all adjustments on retirement. SunderandShalu decided to have a total capital of the firm
at Rs.84,000 in theproportion of 7 : 5. Calculate actual cash to be paid or brought in by
eachpartner and make necessary journal entries 3

9. Arun, Varun and Karan were partners in a firm sharing profits in the ratio of 4:3:3. On
31.3.2014, their Balance Sheet was as follows: 4
Liabilities Amount Assets Amount (Rs.)
Creditors 17,000 Cash 8,000
Bills Payable 12,000 Debtors 13,000
Karan’s Loan 28,000 Bills Receivable 9,000
Capital Accounts : Furniture 27,000
Arun 70,000 Machinery 1,25,000
Varun 68,000 1,38,000 Karan’s Capital 13,000
1,95,000 1,95,000

On 30.9.2014, Karan died. The Partnership Deed provided for the following to the executors
of the deceased partner :
a) His share in the goodwill of the firm calculated on the basis of three years purchase of the
average profits of the last four years. The profits of the last four years were Rs. 1,90,000;
Rs. 1,70,000; Rs. 1,80,000 and Rs. 1,60,000 respectively.
b) His share in the profits of the firm till the date of his death calculated on the basis of the
average profits of the last four years.
c) Interest @ 8% p.a. on the credit balance , if any, in his Capital Account.
d) Interest on his loan @ 12% p.a.
Prepare Karan’s Capital Account to be presented to his executors, assuming that his loan and
interest on loan were transferred to his Capital Account.

10. L and M were partners in a firm sharing profits in the ratio of 2:3. On 28-2-2016 the firm
was dissolved. After transferring assets (other than Cash )and outsiders liabilities to
realization account you are given the following information:- 4
a) A creditor for Rs. 1,40000 accepted building valued at Rs. 1,80,000 and paid to
the firm Rs. 40,000.
b) A second creditor for Rs, 30,000 accepted Machinery valued at Rs. 28,000 in full
settlement of his claim.
c) A third creditor amounting to Rs. 70,000 accepted Rs. 30,000 in cash and
investments of the book value of Rs. 45,000 in full settlement of his claim.
d) Loss on dissolution was Rs. 4000.
Pass journal entries for the above transactions in the books of firm assuming all payments
were made by cheque.

11. Aarti, Bharti and Seema were partners sharing prfoits in the ratio of 3:2:1 and their
Balance sheet as at 31.03.2003 was as follows : 6

Liabilities Amount Assets Amount

(Rs.) (Rs.)
Creditors 14,000 Buildings 21,000
Bills payable 12,000 Cash in Hand 12,000
Contingency Reserve 12,000 Bank 13,700
Capitals: Debtors 12,000
Aarti 20,000 Bills Receivable 4,300
Bharti 12,000 Stock 1,750
Seema 8,000 40,000 Investment 13,250
78,000 78,000
Bharti died on 12th June, 2003 and according to the Partnership Deed, her executors are entitled
to be paid as under:
(i) The capital to her credit at the time of her death and interest thereon @ 10% per
(ii) Her proportionate share of reserve fund.

(iii) Her share of profits for the intervening period will be based on the sales during that
period, which were calculated as Rs. 1,00,000. The rate of profit during past three
years had been 10% on sales.
(iv) Goodwill according to her share of profit to be calculated by taking twice the amount
of the average profit of the last three years less 20%. The profits of the previous years
were 2001- Rs. 8,200; 2002 – Rs. 9,000; and 2003 – Rs. 9,800.
The investments were sold at par and her executors were paid out.
Pass the necessary journal entries, Bharti’s Capital Account and the account of the executors of
12. Following is the Balance sheet of K and S, who were in the business of manufacturing
toxic chemicals, which were posing a threat to the environment. They shared profits and
losses equally.Following is their Balance Sheet as on 31st March 2013 : 6
Particulars Amt (Rs.) Particulars Amt (Rs.)
Capital Accounts Bank 40,000
K 1,00,000 Debtors 25,000
S 50,000 Stock 35,000
Creditors 30,000 Machinery 60,000
Workmen 15,000 Furniture 40,000
compensation fund
Bank loan 5,000
2,00,000 2,00,000
Due to a mandate from the government, the firm had to be dissolved on the above date:
1) K agreed to take over 50% of the stock at 10% less on its book value, the remaining stock
was sold at a gain of 15%. Furniture and machinery realized for Rs 30,000 and 50,000
2) There was unrecorded Investments which was sold for Rs 25,000.
3)Debtors realized Rs 31,500 (with interest) and Rs 1200 was recovered for bad debts written off
last year.
4) There was an outstanding bill for repairs which had to be paid Rs 2000.

Prepare necessary Ledger accounts to close the books of the firm.

13. Following is the Balance Sheet of Aruna, Karuna and Varuna as on 31st March 2014,
who have agreed to share profits and losses in proportion of their capitals: 8
Liabilities Amount (Rs.) Assets Amount (Rs.)
Aruna’s Capital 2,00,000 Land and Building 2,00,000
Karuna’s Capital 3,00,000 Machinery 3,00,000
Varuna’s Capital 2,00,000 Closing Stock 1,00,000
General Reserve 35,000 Debtors 1,10,000
Workmen’s Less: PDD(10,000) 1,00,000
Compensation Fund 15,000
Sundry Creditors 50,000 Cash at Bank 1,00,000

8,00,000 8,00,000

On March 31st 2014, Aruna desired to retire from the firm and the remaining partners decided to
carry on the business. It was agreed to revalue the assets and re-assess the liabilities on that date,
on the following basis:
(a) Land and Building be appreciated by 30% and Machinery be depreciated by 20%.
(b) There were Bad Debts of Rs.17,000.
(c) The claim on account of workmen compensation fund was estimated at Rs.8,000.
(d) Goodwill of the firm was valued at Rs.1,40,000 and Aruna’s share of goodwill was adjusted
against the capital accounts of the continuing partners Karuna and Varuna who have decided to
share future profits in the ratio of 4:3 respectively.
(e) Capital of the new firm in total will be the same as before the retirement of Aruna and will be
in the new profit sharing ratio of the continuing partners. Amount due to Aruna be settled by
paying Rs.50,000 in cash and balance by transferring to her Loan A/c which will be paid later on.

Prepare Revaluation A/c, Partners Capital A/c and Balance Sheet of new firm.

14. Nutan, Sumit and Shiba are partners in a firm sharing profits in the ratio
5 : 3 : 2. On 31st December 2006 their Balance Sheet was as under: 6Dea
Liabilities RS. Assets Rs.
Creditors 52,000 Building 60,000
Reserve Fund 15,000 Plant 50,000
Capital Stock 27,000
Nutan 60,000 Debtors 25,000
Sumit 45,000 Cash 10,000
Shiba 30,000 1,35,000 Bank 30,000
2,02,000 2,02,000

Nutan died on 1 July 2007. It was agreed between her executor and theremaining partners
1. Goodwill to be valued at 2½ years purchase of the average profits of
the last Four years, which were: 2003 Rs. 25,000; 2004 Rs.20,000;
2005 Rs.40,000 and 2006 Rs.35,000.
2. Building is valued at Rs.70,000; Plant at Rs.46,000 and Stock at
3. Profit for the year 2006 be taken as having accrued at the same rate
as that of the previous year.
4. Interest on capital is provided at 9% p.a.
5. On 1 July 2007 her drawings account showed a balance of Rs.20,000.
6. Rs.25,950 are to be paid immediately to her executor and the balance
is transferred to her Executors Loan Account.
Prepare Nutan’s Capital Account and Nutan’s Executor’s Account as on 1stJuly 2007.