1. Rain and Mohan are partners in a firm. They want to admit one more partner in the firm.

Besides a
minor and insolvent (declared by court) name a person who cannot be admitted as partner.

2. Does partnership firm has a separate legal entity? Give reason for your answer. Ans. A partnership firm
does not have a separate legal entity, separate from its partners because M the eyes of law, partnership
firm and partners are same as liabilities of firm can be met out of the private assets of the partners.

3. What is the maximum number of partners that a firm can have? Where is it so provided? Ans. A firm
can have maximum 50 partners. It is provided in Section 464 of the Companies A. 2013 read with Rule 10
of the Companies (Mi.u-ellaneous) Rules, 2014

. 4. Would a 'charitable hospital' run by 5 members be deemed to be a partnership firm? Give reason in
support of your answer. Ans. 'Charitable hospital' run by 5 members cannot be deemed a partnership
firm because the essential element of partnership, i.e., carrying on business with the objective of earring
profit, is non-existent.

5. Is a sleeping partner liable for the acts of other partners? Ms. Y., a sleeping partner is liable for the
acts of other partners because of mutual agency relationship.

6. X and Y are partners in a firm but they do not have a Partnership Deed. X desires that Y should not
participate in the conduct of firm's business but Y does not agree to this. Who is correct in this case?
Give reasons in support of your answer. ins. Y is correct, because eve, partner is entitled to participate in
the conduct of a firm's business.

7. Distinguish between Partner's Capital Account and Partner's Current Account. ,ns. Partner's Capital
Account shows the transactions relating to introduction or withdrawal of capital whereas Partner's
Current Account shows the transactions other than transactions relating to capital like Interest on
Capital, Drawings, Salary, Commission, Sham of Profit/Loss

. 8. Distinguish between 'Fixed Capital Account' and 'Fluctuating Capital Account' on the basis of negative
balance. as. Fixed Capital Account cannot have negative (Debit) balance whereas fluctuating Capital
Account can have negative (Debit) balance.

An Aid to Accountancy-03SL XII TQ.2

9. t Interest on X's drawings tie I0%, if he withdrew Z 60,000 during the year Ans. Inte•st on Drawings - Z
60,000 x 10/100 = 6,000. Note: Interest has been calculated for 12 months since question specifies
merely a rate of 10% and net 10% pa.

10. Slate giving reason whether Interest on Loan given by a partner to the firm is paid if Own. is loss. Ans.
Yes, because interest on partner's loan is a charge against the profits of the firm. Thus, it is payable even
if the firm incurs a loss.

11. A partner has given a loan oft 50,000 to the firm on 1st July, 2016. The Partnership Deed is silent as
to the Interest on Partner's Loan. State giving reason how much amount of Interest on Partner's !man
will be allowed on 31st March, 2017. Ans. Interest on Partner's Loan = Z 50,000 x 6/100 x 9/12 = 2,250.
Reason: When the Partnership Deed is silent, as per Indian Partnership Act, 1932, Interest on Partner's
Loan is to be allowed 6% p.a.

12. Jaspal and Rosy were partners with capital contributions of 10,00,000 and 5,00,000 respectively.
They do not have a Partnership Deed. Jaspal wants that profits of the firm should be shared in their
capital ratio. Rosy convinced Jaspal that profits should be shared equally. Explain how Rosy would have
convinced Jaspal for sharing the profits equally. Ans. Rosy would have convinced Jaspal by giving the
arguement that if Partnership Deed does not exist, provisions of the Indian Partnership Act, 1932 would
apply which provide that profit would be shared equally in the absence of Partnership Deed.

13. Why is Profit and Loss Appropriation Account prepared? Ans. Profit and Loss Appropriation Account
is prepared to show the appropriation of net profit as per the Partnership Deed. Appropriation may be
towards Reserve, remuneration to partners, interest on capital etc. Where Partnership Deed does not
exist, it is appropriated as per the provisions of Indian Partnership Act, 1932.

14. What is meant by unlimited liability of a partner? Ans. Unlimited liability of a partner means that
debts of the firm can be met from the private property of partners in case of firm not being able to meet
its liabilities.

15. Distinguish between Charge against Profit and Appropriation of Profit on the basis of recording. Ans.
Charge against profit is debited to Profit and Loss Account while Appropriation of Profit is debited to
Profit and Loss Appropriation Account.

16. Flow is Interest on Drawings calculated when date of drawings is not given and rate of interest is
given as p.a.? Ans. Interest on Total Drawings is calculated for the average period, i.e., 6 months.

17. Give one difference between Drawings against Profit and Drawings against Capital. Ans. Drawings
against Profit is not considered for calculating interest on capital while Drawings against Capital is
considered for calculating interest on capital.

18. Amit and Anita are partners. Their Capital Accounts were credited with Z 1,25,000 each being their
shares of profit after interest on drawings of 15,000 and salary of 30,000 each. What was the net profit
of the firm for the year? Ans. Net Profit for the year was 2,95,000 (ix., 1,25,0(X)+ 1,25,000_ 1 000 + t
30,000 + 30,0(X)).

19. Anil, Sunil and Ramesh are partners sharing profits equally They decided that interest on partner's
loan to the firm should be allowed 01,8% p.a. But after one year, Ramesh wants that no such interest
should be provided. Can he do so? Ans. No, he cannot do so unless all the partners agree to the change
in agreement (Partnership Deed).

20. X and Y are partners in a firm without a Partnership Deed. 25,000. Y wants that interest (e) 6% p.a.
should be charged on X' not agree to this. State giving reason who is correct in this case. X is correct.
Reason: In the absence of Partnership Deed, interest is not of a partner.
 21.State giving reason to which account interest on partner's loan is credited if partners' capitals are
fluctuating. Interest on Partner's Loan is credited to Partner's Loan Account since it is a gain to a partner
as a lender and not as a partner.

22.State giving reason to which account rent paid to a partner for using his premises for business is
debited and credited if partners' capitals are fixed. Rent paid to a partner is debited to Profit and Loss
Account since it is a charge against profit and credited to Rent Payable Account because a credit is given
for use of partner's private asset.

X made drawings of s drawings but X does charged on drawings

23. Give one difference between Profit and Loss Account and Profit and Loss Appropriation Account. Ans.
Profit and Loss Account is prepared to determine Net Profit whereas Profit and Loss Appropriation
Account is prepared to show appropriation of Net Profit.

24. List any two items appearing on the credit side of Profit and Loss Appropriation Account. Ans. (i) Net
Profit for the year; (ii) interest on Drawings.

25. X, Y and Z entered into a partnership on 1st October, 2016 to share profits in the ratio of 3 :2 :1. X,
however, personally guaranteed that Z's share of profit after charging interest on capital 5% p.a. would
not be less than 90,000 p.a. The Capital contributed by X—f 9,00,000; Y—? 6,00,000 and 3,00,000. The
profit for the period ended 31st March, 2017 was t 3,60,000. Calculate deficiency to be charged to X.
Ans. Profit after charging interest on capital = 3,60,000 - 1S,00.000 x 5/100 x 6(12) = 3,13,000. Z's actual
share of profit = 3,15,000 x 1/6 = 52,500. Is Guaranteed profit for half year = 90,000 x 1/2 = 45,000, since
actual share of profit (Z 52,300) exceeds the minimum guaranteed profit, no deficiency is to be charged
to X. Note: The partnership was entered into on 1st October, 2016. Therefore, guaranteed profit will be
taken for 6 months.

26. X, Y and Z entered into a partnership on 1st October, 2016 to share profits in the ratio of 3 : 2 : I. X,
however, personally guaranteed that Is share of profit would not be less than 90,000 p.a. The loss for the
period ended 31st March, 2017 was 3,60.000. Calculate deficiency to be charged to X.

An Aid to Accountancy— CBSE kit

7's share of loss - 3,60,000 x 1/6 - Z 611,000 ailteed amount of profit for half year= 90,000 x 1/2 = t
45,000 Deficiency to he charged to X= Z's Guaranteed Profit + Z's5hare of Lo %, 45,000 60,000 =
1,05,000. Note: The partnership was entered into on 1st October, 2016. Therefore, guaranteed profit win
be taken for o months.

27. s.iChin and Kapil are Iwo Partners sharing profits in the ratio of 3: 2. They admit Virat into the firm as
a partner from 1st April, 2016. Sachin gives 1/3rd of his share while Kapil gives I :It) (tow Ilk share to
Virat. Calculate Sacrificing Ratio and New Profit-sharing Ratio. Sachin's sacrifice a 1/3 x 3/5 = 1/5
sacrifiCe a 1/10 San-thong, Ratio of sachin and Kapil = 1/5 : 1/10 = 2 : 1 New share of old partner = Old
share - Share sacrificed Sachin's new share = 3/5 - 1/5 = 2/5 or 4/10 Kapil's new share = 2/5 - 1/10 = 3/10
Virat's share = 1/5 1/10 = 3/10 New Profit-sharing Ratio = 4/10 : 3/10 : 3/10 = 4 : 3 : 3.
 28. W hat is meant by Goodwill? Ans. Goodwill is the value of advantage that a business has because of
the factors which help in increasing its profits.

29. What is meant by 'Super Profit'? Ans. Super Profit is the excess of average profit over the normal
profit.

30. List any one difference between Average Profit and Super Profit. Arts. Average l'rofit is the average of
the profits of past few years whereas Super Profit is the excess at Average Profit over Normal Profit.

31. What is meant by number of years' purchase? Ans. Number of years purchase means the years for
which the purchaser of Goodwill expects that the profits are likely to be earned in future.

32. What is meant by Purchased Goodwill? MIS. Purchased Goodwill means goodwill for which
consideration in money or money's worth has been paid.

33. What is meant by Self-generated Goodwill? Ans. Self-generated Goodwill that has been generated by
the business itself because of which it is able to earn higher profit.

34. What is meant by Hidden Goodwill? Ans. Hidden Goodwill means goodwill that is inferred on the
basis of net worth (Capital) of the firm.

35. What is the reason that self-generated goodwill is not recorded in the books of account? accounted
in the books

eration is not paid for

typ 3 An Ar

A.

joology of Questions Jai 70.5

36. Give an example of purchased Ans. Purchase of bosittess where consideration payable is nu pre than
the value of net assris, i.e.. assets liabilities

37. Can a firm incurring losses for the post many years still have goodwill? Ans. Yes, it the lion has
favourably contracts, locational advantage or has wide customer base.

38. Naomila is admitted into partnership for I/6th tthare. She brings? 50,0(10 as premium for goodwill in
adchtiAm to capital of t 'i,ixt,iton What is the value of goodwill of the firm? Ans, Value of Firm's Goodwill
t 1,00,000.

39. Capital employed of the min t s,nn,nnli and normal rate of return in 9%. Average profit for the last 5
years is t 60,0011. WI 1.11 is the value of goodwill at 5 of super profit? years' purchase Ans. Normal
Profit 2 5,00,000 x 9% 45,000; Average Profit - t 60,0(X); Super l'rofit - t 60,000 - t 45,000 - 2 15,000;
Value of Goodwill - t 15,000 x 5- t 75,0(1

40. Atul and Batik are partners in a firm. They admit Charu into partnership for equal share. Chart, was to
bring Z2,00,000 as her capital along with her share of premium for goodwill which was to be calculated
at three years' purchase of past five years' average pr Profits for the past five years were as follows: Year-
I -2 2,00,000; Year-II -Z 2,50,000; Year-Ill -t 3,00,000; Year-IV -2 3,50,000; Year-V-t 3,75,000. The firm was
regularly insuring their assets. However, in Year V the assets were not insured due to oversight. Had it
insured the assets, insurance premium would have been ? 25,000. Calculate the amount of goodwill that
should be brought by Charu. Ans. Value of Goodwill = Average Profit x Number of Years' Purchase =Z
2,90,000 x 3 = 8,70,000 ? 8,70,000 Charti's Share of Goodwill = 3 2,90,000. Z 2,00,000+ 2 2,50,000 + Z
3,00,000 + 2 3,50,000 + t 3,75,000-2 25,000' Note: Average Profit - 5 2,90,000. *Insurance premium
towards insuring assets is a regular/recurring expense, hence it is deducted from the profit of year V.

41. Jagmohan and Ramesh were partners with capital contributions of 10,00,000 and 5,00,000
respectively. They do not have a Partnership Deed. Jagmohan wants that the firm should allow interest
on capital (4, 6% p.a. on excess capital contributed by him. Ramesh convinced Jagmohan that interest
cannot be allowed on capital to which Jagmohan agreed after discussion. What argument must have
been put forward by Ramesh that convinced Jagmohan? Ans. Ramesh would have given the argument
that in the absence of Partnership Deed the provisions of the Indian Partnership Act, 1932 will have to he
followed, which provide that interest on capital is not payable, when Partnership Deed does not exist or
the Partnership Deed is silent on payment of interest on capital.

42. Manpreet and 3 : [hey decided tl laspreet were panne tat from 1st April. 2017 they will share profits
and rs sharing profits and losses 11, th,. , tithitiv (list- Nil I gratis,' c. 9 WWI r at.in

On Jaspreet was of the that date, the Bilidflet* SWIM of the twin had balance 01 t 1,110.000
( "991,-.1911, i9:911.1t Manp opinion that it should be credited to their Capitol ACC011ni, old p-
nr,,ktar_slhvaarsii-n )1.11W,op;nitsathat it shit-mkt-1hr t redited to their Capital Accounts, titv, in esisivt
b ratio. aspreet agreed to he views of Manpreet. Explain what argumvnt must have been put forward by
Manpreet to which laspreet agreed. raltiolt preet would have given the argument that I. amend Reserve
was C•9111:91';9111.1itirtiz SO. .1 MI: Ans. Ntan Profits when the profit-sharing ratio was 3 : 2.
Therefore, it should be shared profit-sharing ratio, ix., 3 : 2. the RI 1,30

43' Abhay and Anirudh were partners sharing profits and losses in the rant, tif when 2 : I. They decided
that front 1st April, 2017 they will share profits and losses equalh, liability towards Leave Encashment oft
15,000 existed. Abhay was of the opinion that it Ans. On that date, Revaluation Account was prepared, It
was noticed that an unreveirdra Date Pal should be debited to the Revaluation Account. Anirudh was of
the opinion that it should We not he brought into books but should be accounted when it is paid. Abhay
explained to Anirudh the need for it being accounted now and what effect it will have when it is
accounted at the time of payment. Anirudh agreed to his view point. Explain what argument must have
been put forward by Abhay to which Anirudh agreed. Ans. Abhay would have given the argument that
the liability was that of the old firm and therefore, should be debited to Revaluation Account and shared
in their old profit-sharing ratio. If it was accounted at the time of payment, it would result in Accrual
Concept 51. X al being not followed and also partners will share the loss in their new profit-sharing ratio:
bele;

44. Does the change in profit-sharing ratio result into dissolution of the partnership firm? Ans. Give
reason in support of your answer. Ans. No, change in profit-sharing ratio does not result into dissolution
of partnership firm. It results in change in partnership meaning it is Reconstitution of the firm.

45. In the absence of Partnership Deed, can a partner be admitted into partnership with the consent of
majority partners? Ans. No, a partner cannot be admitted unless all the partners agree.

46. State the other right acquired by a new partner besides the right to share the future profits of the
firm. Ans. Right to share the assets of the firm.

47. State the other right acquired by a new partner besides the right to share the assets of the firm. Ans.
Right to share future profits of the firm.

48. Why are reserves, accumulated profits and losses distributed at the time of change in profit-sharing
ratio? Ans. It is necessary to distribute reserves, accumulated profits and losses at the time of change in
profit-sharing ratio because they are the part of undistributed profits or losses that the firm earned or
incurred in the period prior to the change in profit-sharing ratio.

49. Rahul and Rajat were partners in a firm sharing profits and losses in the ratio of 3:2. On 1st April,
2017, they admitted Ramita into partnership for 114th share in the profit. On that date, Balance Sheet of
the firm showed t 50.000 as Workmen Compensation Reserve against which there was no liability.
Ramita expressed her opinion that it should ly

I-le• 52. X vvb Ans. 1-h 53. W Ans. G T A 54. X a

TQ.7

credited to all the Partners' Capital Accounts in their profit-sharing ratio. Rahul and Rajat explained that
the amount of reserve should he credited only to their Capital Accounts. Explain the reason given by
them to which Ramita agreed. They must have given the argument that Workmen Compensation
Reserve came into existence out of profits when Rahul and Rajat were partners. Therefore, this reserve
should be credited only to their Capital Accounts in their old profit-sharing ratio.

50. A, 13 and C are partners sharing profit~ in the ratio of 5 : 3 : 2, decide to share future profits in the
ratio of 2 : 3 : 5. Give Journal entry to distribute 'Workmen Compensation Reserve' of 1,50,001)
appearing in the books of account at the time of change in profit-sharing ratio, when there is a claim of
1,00,000 against it.

Ans.

JOURNAL
Date Paniculars Li. Dr. Crl O. m Workmen Compensation Reserve A/c _Dr. 1.50.000 To Workmen
Compensation Claim A/c 1 00,000 , To As Capital A/c 25.000 To BsCapital Aft 15,000 To Cs Capital A/c
10,000 (Being the claim on account of Workmen Compensation created and surplus WCR transferred to
partners in their old profit-sharing ratio)

51. X and Y admitted Z into the partnership, their profit-sharing ratio being 5 : 4 : 3. If, before the
admission, profit-sharing ratio of X and Y was equal, find the Sacrificing Ratio. Ans. Sacrifice = Old Share -
New Share X's Sacrifice = 1/2 - 5/12 = 1/12 Y's Sacrifice = 1/2 - 4/12 = 2/12 Hence, Sacrificing Ratio of X
and Y = 1 : 2.

52. X and Y are partners sharing profits in the ratio of 5 : 4. They admit Z for 1/10th share which he
acquires equally from both. Find the New Profit-sharing Ratio. Ans. X's New Share = 5/9 - 1/20 = 91/180
Y's New Share = 4/9 - 1/20 = 71/180 Z's Share = 1/10 or 18/180. Hence, New Profit-sharing Ratio =
91/180: 71/180: 18/180 = 91 : 71 : 18.

53. Why is General Reserve existing at the time of admission of a partner credited to the Old Partners
Capital Accounts in their old profit-sharing ratio? Ans. General Reserve existing in the books of account at
the time of admission of a partner was set aside out of the profits earned in the period before the
admission of a new partner. Thus, i,t belongs to the old partners and is transferred to the old Partners'
Capital Accounts in their old profit-sharing ratio.

54. X and Y are in partnership with 1,50,000 and Z 1,00,000 as their respective capitals. They admitted Z
as a partner for 1/6 share in profits. You are required to calculate the amount of Z's share in the capital
of the firm if he is asked to bring in capital in proportion to his share of profit.

T(2.8

Ans.

Let the total share be 1 Z's share 1/6

'1!

An Aid to Accountancy—cast xi;

Remaining share of X and Y = 1 For 5/6 share, combined capital of X and Y ? - 1/6 - 5/6 2,50,000 Total
capital of the new firms 2 2,50,000 A 6/5 - t 3,00,000 Thus, Z's proportionate capital ? 3,00,000 x 1/6 = 2
50,000.

55. X and Y who are in partnership sharing profits and losses in the ratio of 3 : 2 admit z tor 1/5th share
in profits. The capitals of X and Y after adjustments are 2 2,40,000 and 1,60,000 respectively. Z is to bring
25% of the total capital of X and Y. Calculate Z.'s capital. Ans. I's capital = 25/100 x (2 2,40,000 + t
1,60,000) - t 1,00,000.

56. Jagmohan and Jatinder were partners with capital contributions of 2 10,00,000 and 2 5,00,000
respectively. They admit Ramesh into partnership but did not enter into Partnership Deed. At the end of
the accounting period, Ramesh demanded that profit should be shared equally and convinced both
Jagmohan and Jatinder. What argument must have been put forward by Ramesh that convinced
Jagmohan and Jatinder? Ans. Ramesh would have given the argument that in the absence of Partnership
Deed, profit is shared equally by the partners as per the provisions of Indian Partnership Act, 1932.

57. Sunil and Jatinder were partners in a firm sharing profits and losses equally. They admitted Vikas into
partnership for 1/5th share. At the time of admission, an unrecorded asset (Furniture) of 2 15,000 was
found not to have been recorded in the books. Vikas claimed that he should get credit of amount equal
to 1/5th share of the asset. Sunil and Jatinder convinced Vikas that the unrecorded asset should be
shared only between them in their old profit-sharing ratio to which Vikas agreed. What argument must
have been put forward by Sunil and Jatinder that convinced Vikas? Ans. Sunil and Jatinder would have
given the argument that unrecorded asset came into existence when Vikas was not partner. Therefore, it
should be shared by Sunil and Jatinder in their old profit-sharing ratio.

58. State the ratio in which the partners share gain or loss on revaluation of assets and liabilities. Ans.
The partners share the gain or loss on revaluation of assets and liabilities in their old profit-sharing ratio.

59. Goodwill appearing in the books of account is written off to all Partners' Capital Accounts (including
retiring and deceased partner) in their profit-sharing ratio. Is it correct and why? Ans. Yes, existing
goodwill is written off at the time of reconstitution of partnership because it is valued at the time of
reconstitution and adjusted through Partners' Capital Accounts by debiting gaining partner(s) and
crediting sacrificing partner(s) in their sacrificing ratio.

60. Balance in any of the free reserves such as General Reserve and undistributed Profit and Loss
Account is credited to the Capital Accounts of all the partners (including retiring or deceased partner) in
their profit-sharing ratio. Is it correct and why? Ans. Yes, it is correct because General Reserve and
undistributed Profit and Loss Account belong to the period when all the partners (including retiring or
deceased partner) were partners in the firm.

Typology of Questions

61. Give two circumstances in which gaining ratio may be applied. Ans. (a) When there is change in
profit-sharing ratio; (b) When a partner retires/dies.

62. Why gaining ratio is calculated in case of retirement of a partner? Ans. Gaining ratio is calculated to
determine the amount of compensation to be paid by each of the gaining partners to the retiring
partner.

63. Flow can the amount due to the retiring partner be settled? Ans. The amount due is either paid
immediately or is transferred to retiring partner's Loan Account which is paid in instalments with or
without interest as per agreement.

64. Interest on loan by a partner is debited to Profit and Loss Account_ Why? Ans. It is debited to Profit
and Loss Account because it is a charge against profit.
 65. When is Partner's Executors Account prepared? Ans. Partner's Executors' Account is prepared at the
time of death of a partner.

66. If the amount due to retiring partner or legal heirs of deceased partner is not paid immediately, the
firm is liable to pay interest on the balance 6_0 6% p.a. or share in profit proportionate to amount due to
total capital. Is it correct and why? Ans. It is correct. Indian Partnership Act, 1932 provides that if the
retiring partner or legal heirs of deceased partner are not paid the due amount, they can claim either
interest @ 6% p.a. or share in profit earned in proportion of amount due to total capital.

67. What is Dissolution of a Firm? Ans. Dissolution of firm means the dissolution of partnership between
all the partners of the firm along with the termination of firm's business.

68. Distinguish between Dissolution of Partnership and Dissolution of firm on the basis of account to
determine Profit/Loss. Ans. In case of Dissolution of Partnership, Revaluation Account is prepared to
determine the profit or loss on revaluation. In case of Dissolution of firm, Realisation Account is prepared
to determine the profit/loss on realisation.

69. Why is Realisation Account prepared? Ans. Realisation Account is prepared for closing the books of
account of a dissolved firm and to compute the net effect of realisation of various assets and settlement
of various liabilities.

70. List any Iwo items which are not transferred to Realisation Account. Ans. I. Fictitious Assets, 2. Cash
and Bank Balance.

71. Distinguish between Revaluation Account and Realisation Account on the basis of time. Ans.
Revaluation Account is prepared at the time of reconstitution of partnership (e.g., admission of a new
partner or retirement/death of partner). Realisation Account is prepared at the time of dissolution
offirm.

72. Distinguish between Revaluation Account and Realisation Account on the basis of purpose. Ans.
Revaluation Account is prepared to determine the gain/loss on revaluation while Realisation Account is
prepared to determine the gain/loss on realisation of various assets and payment of various liabilities.

TQ.9

7,0,10 An Ani to Arrountancy—c Hu xi,

73, cilve the twill mew of riNt". per Se" 14111 4ri of Type Ans. .airrzs.sittliut
riliiinigny.1;1(1.:1•:11.1)citi.:.;:tort..11:11,1.1;411:: RI lastly from partners individu Any

74. I ist any luveire111 OSLO IWO, Imdrr whirl rim is coinpulsorily dissolved without order::: their prolli-
sharing rano. (a) 011 bl1,01-1('SS bet OMIllg unl.twt 09 on the insolvency ol all tile partners or of all
partners except one partner.
75. last two circumstance•, under which a firm is dissolved by the court. An of the firm and the Z's
Capital Account has a debit balance of Z5,000. What Oat. Ans. (a) A partner becomes a person of
unsound mind. (b) A partner is found guilty of misconduct.

76. It .1 loan from a partner, of ? 55,000 appears on the liabilities side of the Balance Sheetwill be passed
on payment of such loan at the time of dissolution of firm? JOURNAL

Ans. Date

Particulars i's Loan A/c To i's Capital A/c To Bank A/c (Being debit balance of is Capital Account of 5,000
set off against his Loan Account and the balance paid)

Dr. (?)

OAT)

.Dr.

55,000

5,0® Ai 50,000

77. X and Y are partners in a firm sharing profits equally. Mrs. X has given a loan of ? 20,000 to the firm
and the firm also took a loan of 2 10,000 from Y. The firm was dissolved and its assets were realised for Z
25,000. State the order of payment of Mrs. X's loan and I's loan with reason, if there were no other
creditors of firm. Ans. According to the Section 48 of the Indian Partnership Act, 1932, Mrs. X's loan of Z
20,000 will be paid before payment of Y's loan since Mrs. X's loan is an external liability. Thereafter, Y's
loan will be paid up to the available cash, i.e., Z 5,000 being internal liability.

78. X, Yand Z were partners in a firm. They decided to dissolve the firm. Z demands that his loan of t
50,000 should be paid before payment of creditors of ? 20,000. However, feels that creditors should be
paid before payment of Z's loan. Who is correct? Ans. Y is correct. According to Section 48 of the Indian
Partnership Act, 1932, debts due to third parties are paid before payment of partner's loan.

79. X, Y and Z were partners in a firm sharing profits in the ratio of 3 : 2 : I. They decided to dissolve the
firm. Z demands that his loan of 7 15,000 should be paid before payment of capitals of the partners.
However, X demands that capital should be paid before l''s loan. Who is correct? Ans. 1 is correct.
According to Section 48 of the Indian Partnership Act, 1932, partner's loan is paid before the payment of
partner's capital.

80. is the loan by a partner transferred to Realisation Account at the tulle of Disiolution of a Partnership
Firm? Why? Ant No, it is not transferred to the Realisation Account because it is payable after outside
liabilities are paid but before the payment towards capital.

A
Di

Typology of Questions TQ.11

81. Is the loan by a partner's relative transferred to Realisation Account at the time of Dissolution of a
Partnership Firm? Why? Ans. Yes, loan by partner's relativeis transferred to Realisation Account, it being
an outside liability.

82. X, a partner, is to take over some of assets at Z 1,80,000 (being 10% less than book value). Remaining
assets are sold at 90% of the book value (Book value of Assets given in Balance Sheet just before
dissolution = ?4,25,0011). Pass Journal entry. Ans. JOURNAL Date Paniculars Dr. (t) Cr. al Ks Capital A/c
1,80,000 Bank A/c 2,02,500 To Realisation A/c 3,82.500 (Being the assets of book value of is 2,00,000
taken over by rat 10% less and remaining assets sold at 90% of book value)

83. Creditors agreed to take over debtors in full settlement of their claim (Book value given in Balance
Sheet just before dissolution: Creditors- t 2,50,000; Debtors — ? 2,25,000). Pass Journal entry. Ans. No
entry will be passed.

84. 60% of debtors were realised at 90% and remaining debtors were given to a debt collecting agency
for 80% less 10% Commission (Book value given in Balance Sheet just before dissolution: Debtors— ?
1,50,000; Provision for Doubtful Debts — ?1,25,000). Pass Journal entry.

Ans. JOURNAL

Particulars LF. Or. (Z) I Cr.()Z Bank A/c (Note) ...Dr. 1,24,200 To Realisation A/c 1,24,200 \ (Being the
debtors realised in cash) Note: 60% of Debtors realised at 90% (Z 1,50,000 x 60/100 x 90/100) 81,000
40% of Debtors given for 80% less 10% (? 60,000 x 80/100) - 10% of Z 48,000) 43,200 1,24,200

85. Is the loan from a partner has priority as to the repayment over the repayment of any part of the
capital? Anse Yes, as per Section 48 of the Indian Partnership Act, 1932.

86. What is the nature of liability of the partners? Ans. The liability of partners is unlimited (Jointly and
Severally).

87. Sunil, Amit and Anita were partners in a firm sharing profit and losses equally. Anita retired from the
partnership. At the time of retirement, an unrecorded liabilty of Z 50,000 was found in the books. Anita
claimed that she should not be debited for her share of the liability. Is she correct? Ans. No, she is not
correct. The unrecorded liability of Z 50.000**itntefeliod when Anita was also partner. Hence, she should
also bear the loss equal to her share.

012

Very Shun un Annwors (VSA)—COMPANY ACCOUNTS lip• A11010'1.411 Or N11111111.11 I 01,11.11

Allbliri'le I 'itpltali- to 0 ' I ' iiivinuraiiiiiiiti ,,, a , I 'IN' thilni, • Vital. Ill•allt. 'all )1 I .11111.1I ol•i l'•
authorised b , ontany "Hiram,. i 1111' till• Ill./W(11111111 1/111, /WO CA ',hare capital f 0 try. by thp
ic„,, ,,„„ :PM) X11 lio.• ( ompanies Act, 21113i
RH. Aim

Mr, Ans

au alit lo A remottancy Cage An

•such tune to time for heria, .,..(!tcm ofrypanit•, Ad, 2(,n,1

90. [Hine •ihserils• I r. Arms Cupifal" means such part of the capital which is for the time being
subscribed by the members of n company. 'Section 2(86) of the Companies Ad, 20131

91. Define Subscribed and Fully Paid-up shares. Atm. Subscribed and Fully Paid up shares are the shares
on which the company has called-up its entire nominal value and teas also received

92. I ).lin• Subscribed but not Cully Paid-up shares. Ans. Subscribed but not Fully Paid-up shares ciuo
those shares on which the company has either called-up it% entire nominal value but km not received it
or the company has not celled-up its entire nominal value.

93. What is meant by Shares issued for Consideration Other than Cash? ns. Shares issued for
ccmsicleration other than cash are those shares against which the company has not received cash
instead has received assets or services.

94. What is meant by Issue of Shares at Par? Arts. Issue of shares at par means shares issued for
subscription at its nominal (face) value.

95. What is meant by Issue of Shares at Premium? Ans. Issue of shares at premium means shares issued
(or subscription at a price that is higher than its nominal (face) value.

96. Can .1 company issue securities at premium for consideration other than cash? Ant Vt's, a company
can issue securities at premium for cash or for consideration other than cash,

97. At what stage can the amount of securities premium be demanded? Ant The amount of securities
premium can be demanded along with the application money/ allotment money/call money.

98. What is meant by an 'Application for Shares'? Ans. An application for shares is an offer made by an
applicant to purchase shares.

99. How the application money in respect of applications rejected fully is dealt with? Ans. Excess applioil
ion money (received on applications rejected fully) is refunded to the applicants.

100. Can a company issue shares at a discount? If yes, under what circumstances' Ans. A company
cartissueshatellatit &Mit toemployees under Employees' Stock Option Man.

Typology of

101. Name Sheet. Ans- 'Secur sub-h.

102. State. Ans. Secur (it f

103. Why share Ans. Sean Prerr Corn

104. Why shay Ans. Secu to tt shag

105. is it Ans. No, inst

106. Z L vat in I

Ans.

Date

107. R.

Ant Date

4y

mpology of Questions

TQl3

101. Name the head under which the 'Securities Premium Reserve' is shown in the Balance Sheet. Ans.
'Securities Premium Reserve' is shown under the head 'Shareholders' Funds' and sub-head 'Reserves and
Surplus' in the Balance Sheet.

102. State any two purposes for which Securities Premium Reserve can be utilised. Ans. Securities
Premium Reserve can be utilised: (0 for issue of fully paid bonus shares; and (ii) for writing off
preliminary expenses. in Why is Securities Premium Reserve Account not debited if premium is received
and shares are forfeited? Ans. Securities Premium Reserve Account is not debited because the amount
of Securities Premium Reserve can be used only for the purposes specified in section 52(2) of the
Companies Act, 2013.

104. Why is Securities Premium Reserve Account debited if premium is not received and shares are
forfeited? Ans. Securities Premium Reserve Account is debited because the amount of premium credited
to the Securities Premium Reserve Account is not received in respect of the forfeited shares. Hence,
provisions of Section 52(2) of the Companies Act, 2013 are not violated.

105. Is it compulsory to demand the amount of Securities Premium in lump sum? Ans. No, the amount
of Securities premium may he demanded either in lump sum or in instalments, e.g., partly with
application money and balance with allotment money.
106. Z Ltd. took over assets of Z 27,00,000 and liabilities of T 2,00,000 of Y Ltd. at an agreed value of t
24,00,000. Pass the necessary Journal entry t. :',H•ord the purchase of business in the books ofZ Ltd.

Ans.

Date I Particulars

JOURNAL OF Z LTD.

Sundry Assets A/c To Sundry Liabilities AR To ',ltd. To Capital Reserve A/c (Balancing Figure) (Being the
purchase of business of Y Ltd.)

Di. M I Cr. (Z) 27,00,000

2.00,000 24,00,000 1.00,000

107. RS Ltd. took over assets of Z 27,00,000 and liabilities of Z 2,00,000 of Y Ltd. at an agreed value of
26,00,000. Give Journal entry in the books of RS Ltd. for purchase of business.

Ans. JOURNAL OF RS LTD. Date Particulars Dr. (T) Cr. ft) Sundry Assets A/c Goodwill A/c (Balancing Figure)
To Sundt+, Liabilities A/c To Y Ltd. (Being the purchase of business of Y LW.) _Dr. —Dr. 27,00,000 1,00,000
2,00,000 26i00.000

111/ Ans. Since ? 6,000 have been received on 100 shares, the maximum amount of discountit which
these shares can be reissued is ? 60 per share. Ans. Gain (Profit) on reissue of forfeited shares is
transferred to Capital Reserve. 114. How is gain (profit) on reissue of forfeited shares dealt? 115. How is
'Calls-in-Arrears' shown in the Balance Sheet? Ans. The amount of Calls-in-Arrrears is shown by way of
deduction from the amount of Subscribed but not fully Paid-up Capital under Subscribed Capital in the
Note to Accounts on Share Capital. 116. Can a company pay dividend on Calls-in-Advance? Ans. No,
dividend is not payable on Calls-in-Advance as it is not part of the Share Capitalel the company. 117.
What is meant by 'Pro rata Allotment of Shares'? Ans. Pro rata allotment of shares means allotment of
shares on proportionate basis. it talcs place only when the issue is oversubscribed.

114.14

108.

Ans. 109. Ans. 110. Ans.

111. Ans.

An Aid to AccounT111111111ancy-ast.vii

Rose Ltd. took Over assets of ? 27,00,000 and liabilities of ? 2 Ot agreed value of ? 24,00,000 payable as
6,00,000 by cheque and b 1 - ),000 of , shares of 100 each at a premium of 20%. Calculate the number of
sharer to Lac "rice by a Number Of shares to be issued = moomoorr 120 = 15,000 shares. i"r„444
Can a company reissue forfeited shares at premium? Yes, a company can reissue forfeited shares at
premium. Can a company reissue forfeited shares at par? Yes, a company can reissue forfeited shares at
par. Can a company reissue forfeited shares at discount? Yes, a company can reissue forfeited shares at
discount. However, the a maim fit discount cannot be more than the amount forfeited on forfeited
shares. 112. What is the maximum permissible discount at which forfeited shares can be rtissued) Ans.
Maximum permissible discount at which forfeited shares can be reissued is the am," that the company
has forfeited.

113. X Ltd. forfeited 100 equity shares of ? 100 each for non-payment of first call of Z 20 per share, The
final call of 20 per share was yet to be made. Calculate the maximum amount of discount at which these
shares can be reissued

roO0lOgy O.

121. Wha Ans. Whe publ 122. Wha Ans. Unc nun 12.3. Das rea Arts. Utu 124. Stal Ans. Tht sub bet 125.
Mil Ans. Un 126. Wt Ans. Th 127. Gt. Arts. Ca 128. Gi Ans. Cz

118. Is it compulsory for a company to make an allotment on pro rata basis in case of oversubscription?
Ans. No. 119, When does the need for a pro rata allotment arise? Ans. The need for a pro rata allotment
arises in case of oversubscription of shares. 120. Give arty two alternatives available to a company for
the allotment of shares in case ei oversubscription. Ans. (0 Rejecting excess applications. (ii) Pro rata
allotment.

129. W Ans. Pr

130. W Ans. Ei at cc

131. Ans. 132. 1, Ans. E. 133. Ans. I 134. 1 Ans.