BRIGHT STAR ACADEMY

ACCOUNTANCY
MODEL PAPER 4- MID TERM EXAMINATION- SEPTEMBER-2023
Multiple choice Questions: (Q.1 -5)
1. Goodwill Account generally shows: (1)
(a) Debit balance (b) Credit balance (c) Debit and Credit both (d) None of the above

2. On 1st June, 2022, a partner introduced in the firm additional Capital of Rs.50,000. In the absence of
partnership deed, on 31st March, 2023, what will be the interest on capital? (1)
(a) Rs.2,500 (b) Rs.5000 (c) Rs.3000 (d) None of the above

3. A and B were Partners in a firm sharing profit and loss equally. With effect from 1st April, 2022, they
agreed to share profits in the ratio of 4:3. Due to change in profit sharing ratio A’s gain or Sacrifice will
be: (1)
(a) Gain 1/14 (b) Sacrifice 1/14 (c) Sacrifice 3/7 (d) Gain 4/7

4. P and S are partners sharing profits and losses in the ratio 3:2. R is admitted with 1/5th share and he
brings in Rs. 84,000 as his share of goodwill which is credited to the Capital account of P and S
respectively with Rs.63,000 and Rs. 21,000. New profit sharing ratio will be: (1)
(a) 3:1:5 (b) 9:7:4 (c) 3;2:5 (d) 7:9:4

5. A,B and C were partners sharing profits and losses in the ratio 5:2:1. B retired and the new profit
sharing ratio will be 3:2. What is the gaining ratio? (1)

(a) 11:4 (b) 3:2 (c) 2:3 (d) (1):11

Fill in the blanks: (Q.6-10)

6. _____ is the Rule mentioned the maximum number of members in a Partnership Firm.
(1)

7. Interest on partners drawings credited to ____________a/c (1)

8. A partner withdraws from firm Rs.7000 at the end of each month@ 6% p.a. The total interest on
drawings will be ___________ (1)

9. Profit on Realization account will be transferred to ____________ (1)

10. The journal entry for goodwill treatment in death is___________ (1)

Match the following (Q.11- 15)

Interest on Capital debited to Current A/c (1)

11
12 Interest on Loan credited to Dissolution of a firm (1)

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 Loan account (1)
13 Salary of a partner credited (under fixed
capital method) to

Interest on loan in the absence of Profit and Loss Appropriation account (1)
14 Partnership
deed

15 Realization account 6% p.a (1)

State the following statements are true or false

16. Workmen compensation A/c to the extent of Claim credited to Realization a/c (1)

17. In the absence of Partnership deed, Interest on Capital is allowed @ 6% p.a (1)

18. If there is any existing goodwill in Dissolution, it will be debited to Partners Capital a/c (1)

19. Revaluation account is personal account in nature (1)

20. When the date of drawings are given, the interest on drawings will be calculated
On an average basis of six months. (1)

21. A, B and C are partners sharing profits in the ratio 3:2:1. After closing the accounts for the year 2022, it was
discovered that interest on capital @ 10% p.a. and interest on drawing @ 10% p.a. were omitted.

Their fixed capitals were Rs.60,000 which was divided in the ratio 3:2:1. Each partner has drawn Rs.1,000
per month:
(i) A- in the beginning of every month.
(ii) B- in the middle of every month.
(iii) C- at the end of every month.

Pass a single adjusting entry at the beginning of the year, so that accounts of the previous year can be
rectified. (3)

22. Jagdish, Ashish and Deepak are partners sharing profits in the ratio 3:2:1. The firm has been in existence
for many years. Now the partners decide to share profits in the ratio 2:2:1. They have also decided that the
change shall be carried out with Retrospective effect from 2010. The profits and losses during the last few
years have been 2009: Rs.16,000; 2010: Rs.12,000; 2011: Rs.14,000; 2012: Rs.19,000; 2013: (loss)
Rs.15,000. Show the adjustment of the profit for the last 4 years by means of a single adjustment entry.(3)

23. X,Y and Z are partners. They have omitted interest on capital @10% p.a for two years ended 31st
March.2021 and 2022. Their fixed capitals on which interest was calculated were X Rs.60,000, Y
Rs.48,000 and Z Rs.42,000. Their profit sharing ratio were 2021-1:2:2 and 2022- 5:3:2. Give the necessary
adjusting entry. (3)

24. Gold and silver are partners in a firm sharing profits in the ratio of 4:1. They admit Copper as a new partner
on April 1,2018 for 1/3rd share in profit. It was agreed that Gold, Silver and Copper would share profits

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 equally in future. Copper brought Rs.15,000 as goodwill (premium) for his 1/3rd share in profits . Record
the necessary journal entries in the books of the firm. (3)

25. On 1st April 2022 an existing Firm had assets of Rs.1,50,000 including cash of Rs.10,000. Its Creditors
amounted to Rs.20,000 on that date. The firm had a Reserve fund of Rs.10,000 while partners’ Capital
account showed a balance of Rs.1,20,000. If the normal rate of return is 20%, and the goodwill of the firm is
valued at Rs. 1,92,000 at four years purchase of super profit, calculate average profit. (3)

26. The following were the profits of a firm for the last three years.

Year ending

March 31 Profits (Rs)

2019 4,00,000 (Including an abnormal gain of Rs.50,000)

2020 5,00,000 (after charging an abnormal loss of Rs.1,00,000)
2021 4,50,000 (excluding Rs.50,000 payable on the insurance of Plant and Machinery)
Calculate the value of firm’s goodwill on the basis of two years purchase of the average profits for the last
three years. (3)

27. Soumya and Bimal are partners in a firm Sharing profits and losses in the ratio of 3:2. The balance in their
capital and current accounts as on April 01, 2016 were as under:
Soumya Bimal

(Rs..) (Rs..)

Capital Accounts 3,00,000 2,00,000

Current Accounts (Cr.) 1,00,000 80,000

The partnership deed provides that Soumya is to be paid salary @ Rs. 500 per month where as Bimal is to
get a commission of Rs. 40,000 for the year. Interest on capital and interest on Current account should be
provided at 6% p.a. The drawings of Soumya and Bimal for the year were Rs. 30,000 and Rs. 10,000
respectively. The net profit of the firm before making these adjustment was Rs. 2,49,000. Interest on
Soumya’s drawings was Rs. 750 and Bimal’s drawings, Rs. 250. Prepare Profit and Loss Appropriation
Account. (4)

28. Three chartered Accountants X,Y and Z form a partnership, sharing profits and losses in the ratio 3:2:1
subject to the following conditions:

(i) Z’s share of profit is guaranteed to be not less than Rs.30,000.

(ii) Y gives a guarantee to the effect that the gross fee earned by him for the firm shall not be less than
the average gross fee earned by him during the preceding five years when he was carrying on the
profession alone. (The average of which works out at Rs.50,000).
The profits for the first year ended 31st March 2023 of the partnership are Rs.1,50,000. The gross fee earned
by Y for the firm are Rs.32,000. Prepare Profit and loss appropriation account. (4)

29. 28. X , Y and Z are partners sharing profits as 20%,30% and 50%. X decided to retire with the consent
of other partners and sold his share to Y. Goodwill was valued at two and a half years purchase of the average

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 profits of last three years. Profits of these three years were Rs. 50,000, Rs.70,000 and Rs. 60,000. Reserve
fund stood in the balance sheet at Rs. 30,000 at the time of his retirement. You are required to record
necessary journal entries to record above adjustments on X’s retirement. Also prepare his capital account to
find out the amount due to him when his capital balance in the balance sheet was Rs. 1,00,000 before any
above adjustment. (4)

30. R,S and T were partners sharing profits and losses in the ratio of 5:3:2 respectively. On 31 st Dec.2018, their
B/S stood as under.
Liabilities Rs. Assets Rs.
Creditors 27500 Goodwill 12500
Reserve Fund 15000 Buildings 50000
Capitals: R 75000 Patents 15000
S 62500 Machinery 75000
T 37500 Stock 25000
Debtors 20000
Cash at bank 20000
217500 217500
T died on 1st May, 2019. It was agreed that:-
(a) Goodwill be valued at 2-1/2 years purchase of the average profits of the last four years, which
were -2015 Rs.32,500; 2016 Rs.30,000; 2017 Rs.40,000 and 2018 Rs.37,500.
(b) Machinery be valued at Rs.70,000, Patents at Rs.20,000, Building at Rs.62,500.
(c) For the purpose of calculating T’s share in the profits of 2019, previous year profits should
be considered.
(d) A sum of Rs.10, 500 is to be paid immediately to the executors of T and the balance to be
paid in 2 equal yearly installments together with interest 10%p.a.
Prepare T’s Capital account and T’s Executors account till it is finally paid.
(6)

31. A ,B and C are partners sharing profits and losses in the ratio of 3:3:2. Their balance sheet as on 31 st March
2022 was as follows :

Liabilities Rs. Assets Rs.

Sundry Creditors 24,000 Cash at Bank 37,000
General Reserve 36,000 Sundry Debtors 44,000
Capital Accounts ; Stock 1,20,000
A 2,00,000 Machinery 1,59,000
B 1,50,000 Building 2,00,000
C 1,50,000 5,00,000
5,60,000 5,60,000
Partners decided that with effect from 1st April 2022, they would share profits and losses in the ratio of 4:3:2.
It was agreed that:
(i) Stock be valued at Rs. 1,10,000.
(ii) Machinery is to be depreciated by 10%.
(iii) A provision for doubtful debts is to be made on debtors @5%.
(iv) Building to be appreciated by 20%.
(v) A liability for Rs. 2,500 included in sundry creditors is not likely to arise.
Partners agreed that the revised values of assets and liabilities are to be recorded in the books. Prepare
Revaluation a/c and Capital A/c. (6)

32. The Balance Sheet of X and Y, who are partners sharing profits in the ratio of 3:2, on 31 st December 2018
was as follows:
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 Liabilities Amount Assets Amount
(Rs.) (Rs.)
Creditors 16,200 Cash 2,000
Bills Payable 13,300 Stock 7,700
General Reserves 15,000 Debtors 18,800
Investment Fluctuation Fund 10,000 Plant & Machinery 28,000
Capital Investment 33,000
X 26,800 Goodwill 5,000
Y 23,200 50,000 Profit and Loss A/c 10,000
1,04,500 1,04,500
On the above date Z was admitted as a partner . X surrendered 1/6 of his share and Y surrendered 1/3rd of
th

his share in favour of Z. Goodwill was valued Rs. 60,000 . Z brings only half of his share of goodwill in
cash and Rs. 28,000 as his Capital .

The following revaluations were made:

Stock and Plants & Machinery were worth 10% less than the book value . The market value of investment is
Rs. 30,000 . Make a provision of 5% for bad and doubtful debts on debtors and a discount of 5% on creditors.
There was a Claim on workmen compensation amounted to Rs.5,000.

Capitals of the Partners are to be adjusted on the basis of Z’s capital. Prepare necessary ledger accounts and
the Balance Sheet of the new firm. (6)

33. L, M and N were partners sharing profits as 50%, 30% and 20% respectively. On March 31, 2015, their
Balance Sheet stood as follows:
Balance of L, M and N as at March 31, 2015
Liabilities Amount Assets Amount
(Rs.) (Rs.)
Creditors 21,000 Premises 62,000
Profit and Loss A/c 15,000 Motor Vans 20,000
Workmen Compensation Fund 10,000 Investment 19,000
Plant 12,000
General Reserve 25,000 Stock 15,000
Capitals: Debtors 40,000
L 50,000 Less: provision 3,000 37,000
M 40,000 Cash 16,000
N 20,000 1,10,000
1,81,000 1,81,000
M retires on 1st April 2015 and L and N agreed to continue on the following terms:
(i) Firm’s goodwill was valued at Rs. 51,000 and it was decided to adjust M’s goodwill into
capital accounts of continuing partners
(ii) There is a claim for workmen’s compensation to the extent of Rs. 4,000. Investments are
brought down to Rs. 15,000.
(iii) Provision for bad debts is to be reduced by Rs. 1,000.
(iv) M will be paid Rs. 8,200 in cash and balance will be transferred to his Loan Account which
will be paid in 3 equal installments together with interest @ 10% p.a.
(v) The Capital of the new firm is fixed at Rs.1,00,000 and L’s and N’s capital will be adjusted
in their new profit sharing ratio i.e.3:2 through cash account. Prepare Revaluation a/c, Capital
Account and M’s Loan Account till it is finally paid. (6)

34. X, Y and Z were partners in a firm sharing profits and losses in the ratio of 3:2:1. Following was the
Balance Sheet on the date of dissolution:
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 Rs.. Rs..
Creditors 18,500 Bank balance 1,000
Mrs. X’s Loan 5,000 Debtors 15,000
X’s Loan 8,000 Less: Provision 1,000 14,000
Investment Fluctuation 7,500 Stock 80,000
Fund
Workmen Compensation 15,000 Investments 20,000
Reserve
Capital Accounts: Furniture 40,000
X 75,000 Plant 75,000
Y 66,000 Goodwill 10,000
Z 45,000
2,40,000 2,40,000

Following transactions took place:

(i) Furniture was sold to Mr. Kamat for Rs. 38,000.
(ii) X took over the investments at 25% more than the book value and he agreed to discharge
his wife’s loan
(iii) Y took over debtors amounting to Rs. 5,000 at Rs.4,000. Remaining debtors realized 75% of their
book value.
(iv) Stock sold for Rs. 41,000 and plant sold for Rs. 40,000.
(v) Expenses of realization amounted to Rs.. 1,000 . It was also found that there is a liability for Rs.
8,000 for damages, which also had to be paid. Prepare Realization account and Capital A/c. (6).

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