Previous Questions and Answers Plus Two Accountancy

XII ACCOUNTANCY
PREVIOUS YEARS QUESTION AND ANSWER

Chapter 2
Chapter 2 Accounting for Partnership : Basic Concepts
1 MARK QUESTIONS
1.Identify the name of account which is prepared to show, how the profits are distributed among partners.
(a) Income & Expenditure A/c. (b) Profit & Loss A/c.
(c) Profit & Loss Appropriation A/c. (d) None of these 1(March 2019)
Ans.(c) Profit & Loss Appropriation A/c.
2.When partnership agreement is silent, which of the following partner is entitle to get interest on capital ?
(a) Active Partner (b) Partner who contributed largest amount of capital
(c) Guaranteed partner (d) None 1 (June 2017)AFS
Ans.(d) None
3.When Partnership Deed is silent about salary, which one of the following partner will get salary ?
(a) Sleeping Partner (b) Active Partner
(c) Guaranteed Partner (d) None 1 (March 2017)AFS
Ans.(d) None
4.Write journal entry to charge interest on capital to partner ‘A’, partner’s capital being fluctuating.
1 (June 2017)AFS
Ans.Int.on capital Dr
A’s Capital a/c
5.Under fixed capital method interest on drawing should be shown in

(a) Current A/c (b) Capital A/c
(c) Revaluation A/c (d) Realisation A/c 1 (March 2018)AFS
Ans.(a) Current A/c
6.If partners are entitled to interest on capital as per agreement, such interest is payable
(a) only out of bank balance (b) only out of capital
(c) only out of profits (d) only out of sales 1 (June 2016)CA
Ans.only out of profits
7.What is the journal entry to be passed for transferring partners salary to partner’s capital account
1 (March 2016)CA
Ans.Partners Salary a/c Dr
To Partners Capital a/c
8.Under fixed capital method, the interest on drawings is :

(a) credited to capital account (b) debited to capital account
(c) credited to current account (d) debited to current account 1 (July 2019) CA
Ans.(d) debited to current account
9.Firoz and Shahin are partners in a firm. The firm did not have any partnership deed.
Specify how the following situations are treated
(a) Sharing of profit and losses.
(b) Interest on advance given by Firoz to the firm 1 (March 2017)CA
Ans.a) Profit and losses shared equally b) 6% interest is given to Firoz’s loan
1 2022-23
2021-22
10.Partners capital account and current account are not maintained separately under .....................
method of maintaining captal account. 1 (March 2017)CA
Ans.Fluctating capital method
11.Under fixed capital method, interest on drawings is debited..............a/c 1 (March 2016)CA

Ans.Partner’s Current A/C
12.The written agreement of partnership is called .......................

(a) Articles of Association (b) Memorandum of Association
(c) Partnership Deed (d) None of these
1 (March 2021) CA
Ans.b) Partnership Deed
13.Under fixed capital method of maintaining capital accounts, yearly adjustment are transferred to
partner’s ..............................................
(a) Capital Account (b) Current Account
(c) Loan Account (d) Cash Account
1 (March 2022) CA
Ans.(b) Current account
14.Arun and Babu are partners in a frim sharing profit and losses in the ratio of 3 : 2. They admitted
Chandu as a partner for 1/6 share with a guaranteed minimum profit of Rs 15,000. The Net profit of
the firm for the year ending 31st March, 2021 was Rs 60,000. Chandu’s share of profit will be :
(a) Rs 10,000 (b) Rs 15,000
(c) Rs 20,000 (d) Rs 30,000
1 (March 2022) CA
Ans.(b) Rs 15,000
15.Partnership is the result of .....................................

(a) Law (b) Registration
(c) Agreement (d) None of these
1 (March 2022) AFS
Ans.(c) Agreement
16.Partners are entitled to get ................................................. in the absence of an agreement.

(a) Salary (b) Share of Profit in capital ratio
(c) Interest on Partners loan @ 6% p.a. (d) Commission
1 (July 2022) CA
Ans.(c) Interest on Partners loan @ 6% p.a
17.Under fixed capital method, the accounts maintained for each partner.
A. Partner’s Capital A/c
B. Partner’s Current A/c
(a) A only (b) B only
(c) A and B (d) A or B
1 (July 2022) AFS
Ans.(c) A and B
2022-23 2
2 MARK QUESTIONS
1.Jayan and Sohan are partners in a firm. Jayan’s capital in the firm showed Rs 2,00,000 on April-1-
2015. He introduced an additional capital of Rs 50,000 on July-l-2015.
Calculate the interest on capital of Jayan if the rate of interest is 8%.
Assume the booksof accounts are closed on 3 lsl March every year.
2 (March 2018)AFS
Ans Interest on Capital = 200000*8/100 16000
= 50000*8/100*9/12 3000
2.List out any four items to be credited to a Partners Current Account, when capitals are fixed.
2 (March 2018)CA
Ans. (i) Commission (iv) P/L App. a/c
(ii) Salary (v) General Reserve
(iii) Interest on capital (vi) P/L credit balance
3.Mohan is a partner in a firm. On 1st April, 2017 his capital account showed a balance of Rs.5,00,000.
He had withdrawn Rs 50,000 from his capital on Ist July, 2017. Calculate the amount of interest on capital
@ 6% p.a. for the year ending 31st March, 2018. 2 (July 2019) CA
Ans. Interest on opening Capital = 5,00,000 x 6/100 x 3/12 = 7500

Interest on capital after withdrawal = 4,50,000 x 6/100 x 9/12 = 20250
27750
4.Chaithanya and Sandra are partners in a firm, sharing profits and losses equally. During the financial
year 2017-18, Sandra withdraw Rs 20,000 quarterly on the beginning of each quarter. Find out the interest on
drawings @ 8% p.a. 2(March 2019)CA
Ans.80000 x 8/100 x 7.5/12 = Rs.4,000
5.How will you treat the following items in partnership accounts in the absence of partnership deed ?
(a) Profit Sharing Ratio
(b) Interest on Drawings
2 (March 2021) CA
Ans.In the absence of partnership deed:
1.Profit Sharing - Equally
2. Interest on Drawings – Not charging
6.Briefly explain any two circumstances which need for valuation of goodwill in a Partnership firm
2 (March 2020) CA
Ans. a)Change in Profit sharing ratio b)Admission of a partner
c) Retirement of a partner d)Death of a partner
7.Mr. Rajeev, a partner in a firm withdrew ` 2,000 each every month from the firm. Calculate the
amount of interest on drawings @ 8% per annum, assuming that he withdraws the amount :
(a) at the beginning of each month.
(b) at the end of each month.
2 (March 2022) CA
Ans.(a) Interest on drawings = 24,000*8/100*6.5/12
= 1040
(b) Interest on drawings = 24,000*8/100*6/12
= 880
3 2022-23
2021-22
3 MARK QUESTIONS
1.Light and Shade share profits and losses in the ratio of 3 : 2. They admit Bright agreeing to give 1/6
share in future profits. Light personally guaranteed that Bright’s share of profits, after charging
interest on capital @. 10% p.a. would not be less than Rs 60,000 in any year. The capital contributed
by Light. Shade and Bright are Rs 5,00,000; Rs 4,00,000 and Rs 3,00,000 respectively. The profit for
the year amounted to Rs 3,00,000 before charging interest on capital. Show the profit and loss
appropriation account. The new profit sharing ratio is 3 : 2 : 1.
3 (June 2017)AFS
Profit and loss Appropriation A/C
Ans.
Int.on Capital Net profit 300000
Light 50000
Shade 40000
Bright 30000 120000
Capital a/c
Light 90000
less.to bright 30000 60,000
Shade 60000
Bright 30000
Add.from Light 30000 60000
300000 300000
2.Anwar a partntr in Akbar Travels withdraw money during the year ending 31st March 2016 from
his capital account for his personal use. Calculate interest on drawings on the following situations if
rate of interest is 9% p.a.
(a) If he withdrew Rs 2,500 per month at the beginning of the month.
(b) If the amount withdrawn were on 1-6-2015, Rs 7,500, on 31-8-15 Rs 3,000 and 30-9-15 Rs 6,500
3 (March 2017)CA
Ans.a) Interest on drawings=30000*(6.5/12)*(9/100)=1462 (2500*12=30000)
b) 1012.5
3.Simi, Mini and Suni are partners in a firm sharing P & L in the ratio 2:2:1. Suni was guaranteed a
minimum amount of Rs 20,000 as share of profit every year. Any deficiency shall be met by Simi
and Mini. The profit for the year were Rs 60,000 prepare P & L Appropriation A/c.
3 (March 2018)AFS
Ans
Profit & Loss Appropriation A/c
Particulars Amount Particulars Amount
Partners Ca pital 60000 Net Profit 60000
A/c
Simi 20000
Mini 20000
Suni 20000
60000 60000
4.What is a Partnership Deed ? Give any four items to be included in it.

3 (March 2016)CA
Ans.a. Written Agreement among the partners
b. Any four relevant contents of partnership deed such as -
1.Profit sharing ratio. 2.Partners salary
3.Capital contribution 4.Address of the firm etc
2022-23 4
5.Shameer withdrew the following amounts from his firm for personal use during the year ended 31st
March 2021. Calculate interest on drawings at 6% p.a.
Date Amount (Rs)
May 1,2020 15,000
July 31,2020 20,000
Oct. 1,2020 18,000
Jan 1,2021 22,000
3 (March 2022) AFS

Ans.
Date Amount Period Product
May 1 15,000 11 1,65,000
July 31 20,000 8 1,60,000
Oct.l 18,000 6 1,08,000
Janu 1 22,000 3 66,000
4,99,000
Interest on Drawing = 4,99,000x6/100x1/12

= 2495
6.Akhil, a partner in a firm withdrew the following amounts during the year ended March 31, 2021
for his personal use.
Date of Withdrawal Amount
April 30,2020 7,000
Sept. 30,2020 4,000
Dec. 1,2020 5,000
Calculate the amount of interest on drawings to be charged from Akhil, if the rate of interest
is at 8% p.a.
3 (July 2022) CA
Ans.
Date Amount Period Product
April 30,2020 7,000 11 77,000
Sep. 30, 2020 4,000 6 24,000
Dec.1,2020 5,000 4 20,000
16,000 1,21,000
Interest on drawings = Sum of products x Rate of interest x 1/12

=1,21,000 x 8 % x 1/12
= 806.66 or 807
7.What do you mean by goodwill ? List out any 2 factors affecting goodwill
3 (March 2021) CA
Ans.Goodwill the value of reputation of a firm in respect of the profits expected in future over and
above the normal profits earned by other similar firms belonging to the same industry.
Factors affecting the value of goodwill
1) Favorable Location 2) Nature of business 3) Efficiency of management
4) Market situation 5) Special advantages 6) Time Factor
5 2022-23
2021-22
8.Jeeja and Rekha are partners in a firm. Their capital balances as on 01-04-2020 were Jeeja Rs
1,50,000 and Rekha Rs 2,00,000. On 1-10-2020 Jeeja introduced additional capital of Rs 50,000.
Calculate the interest on capital @ 10% per annum assuming that they closes their books of account
on 31st March every year.
3 (March 2022) CA
Ans.(a) Interest on capital to Jeeja
1,50,000*10/100=15,000
50,000*10/100*6/12=2,500
=17,500
(b) Interest on capital to Rekha
2,00,000*10/100=20,000
9.Santhosh and Suresh are partners in a firm. Their capital accounts showed a balance of Rs 50,000
and Rs 40,000 as on 01/04/2020. Santhosh introduced an additional capital of Rs 10,000 on 01/07/
2020 and Suresh Rs 5,000 on 01/01/2021. Calculate partners interest on capital @ 6% p.a. for the
year ended 31/03/2021.
3 (July 2022) CA
Ans.Santhosh’s interest on capital = 50,000 x 6% = 3000
= 10,000 x 6% x 9/12 = 450
=3,450
Suresh’s interest on capital =40,000x6% = 2,400.
=5,000 x 6 % x 3 /12 = 75
=2475
4 MARK QUESTIONS
1..Prasanth and Janish are partners. They do not have any partnership agreement. What should be
done in the following cases ?
(i) Prasanth spends twice the time that Janish devotes to business. Prasanth claims that he
should get a salary of Rs 3,000 per month for his extra time spent.
(ii) Prasanth wants to introduce his son Shenoi as a partner. Janish objects to it.
4 (June 2016)CA
Ans. 1) No salary will be paid to Prasanth
2) Shenoi will not be admitted as a partner
2.Complete the following table with regard to the provisions applicable in the absence of partnership
deed on the basis of the hint given :
4 (March 2022) CA
Hint: Interest on capital No.
(a) Sharing of Profits and Losses
(b) Interest on drawings
(c) Interest on loan from a partner
(d) Remuneration to partner
Ans.(a) Sharing P/L - Equally
(b) Interest on drawings - No
(c) Interest on loan from a partner - 6%
(d) Remuneration to partner-No
2022-23 6
3.Write any 4 differences between fixed capital and fluctuating capital methods.
4 (March 2021) CA
Ans.
FIXED CAPTIAL METHOD FLUCTUATING CAPITAL METHOD
1. Two accounts are maintained, ie, Capital a/c 1. Only one account ie, Capital a/c is
and Current a/c prepared.
2.Usually, the amount of Capital remains 2. The amount of capital is fluctuating
the same year after year.
3. Adjustments like interest on capital, drawings, 3. Adjustments are made in the
interest on drawings, etc. are made in the current Capital a/c itself.
a/c
4. Both the Current a/c and the Capital a/c are 4. Only the Capital a/c appears in the Balance
appeared in the Balance Sheet Sheet.
5. It should be specifically mentioned in the deed. 5. It is not necessary.
4.Reena and Rehna are partners in a firm sharing profits and losses in the ratio of 3 : 2 with capitals
of Rs 5,00,000 and Rs 4,00,000 respectively. The profit of the firm for the year ended March 31,
2021 was Rs 1,00,000. Interest on capital is to be allowed at 5% p.a. Reena is to be paid a salary of
Rs 2,500 per month. Prepare the Profit and Loss Appropriation Account to show the distribution of
profit among the partners.
4 (July 2022) CA
Ans.
Profit and Loss Appropriation Account
Salary-Reena 30,000 Net profit 1,00,000
Interest on cap:
Reena:25,000 45,000
Rehna:20,000 25,000
Share of profits
transferred to capital
accounts
Reena: 15,000
Rehna: 10,000
1,00,000 1,00,000
5.Anusha, partner in a firm, who withdraws Rs 2,000 each in every month from partnership business.
Interest on drawings @ 10% p.a. Calculate interest on drawings for the year 2021, assuming that
money is withdrawn :
(i) in the beginning of every month
(ii) in the middle of every month
Ans.. (1) = 24,000 * 10/100 *6.5/12

=1300
(2) = 24,000 * 10/100 *6/12
=1,200
7 2022-23
2021-22
5 MARK QUESTIONS
1.Girecsh and Ramees are equal partners in a firm and their capitals as on 01-04-2016 were Rs
80,000 and Rs 60,000 respectively. As per the partnership deed Gireesh is entitled to monthly salary
of Rs 3,000. Ramees gets a commission of 10% on the Net Profits of the business, before charging
such commission. They are also eligible for interest on capital @ 8% p.a. Interest on drawings is
charged as 6% p.a. Gireesh withdrew Rs 2,000 at the beginning of every month for his personal
purposes. Total drawings of Ramees during 2016-17 was Rs 20,000.
Prepare the Profit and Loss Appropriation Account, to show the distribution of profits among
partners. The net profits of the business for the year ended 31-03-2017 was Rs 1,24,000 (before
adjusting above items).
5 (March 2018)CA
Ans.
Profit & Loss Appropriation a/c

Salary - Gireesh 36000 Profit & Loss a/c 124000
Commission - Ramees 12400 Int. On drawings
Int. On capital Gireesh 780
Gireesh 6400 Ramees 600
Ramees 4800
Partners capital a/c 65780
Gireesh 32890 125380 125380
Ramees 32890
Int.On drawings:
Gireesh = 24000 x 6/100 x 6.5/12 = 780
Ramees = 20000 x 6/100 x 6/12 = 600
2.Priya is a partner in a firm, her capital at the end of the financial year 2016-17 was Rs 2,00,000.
During the year she had withdrawn Rs 30,000. Her share of profit before charging interest on capital
for the year was Rs 8,000. Calculate interest on capital @ 10% p.a. 5(March 2019)CA
Ans.
CI. Capital balance 200000
Add: Drawings 30000
230000
Less: Share of profit 8000
OP.Capital balance 222000
Interest on capital = 2.22,000 x 10/100 = ' Rs.22,200
PREPARED BY: SIRAJUDHEEN M, HSST
2022-23 8
XII ACCOUNTANCY
Chapter 2
Chapter 3 Admission of a partner
1 MARK QUESTIONS
1.The ratio in which the old partners agree to sacrifice their share of profit in favour of incoming
partner is
(a) New ratio
(b) Old ratio
(c) Sacrificing ratio
(d) Gaining ratio
1 (March 2018) CA
Ans.(c) Sacrificing ratio
2.Excess of old share over the new share of old partners while admitting a new partner is..............
a)Gaining
b) Profit
c) Sacrificing
d) Loss
1 (March 2013) CA
Ans.c) Sacrificing
3.Find the odd one

a) Super profit
b) Capitalization Method
c) Average Profit
d) Weighted Capitalization
1 (March 2014 ) CA
Ans.d) Weighted Capitalization
4.On admission of a partner, the Debit Balance of Profit and in the Balance Sheet of the firm,
denotes
(a) Accumulated Profit
(b) Accumulated Loss
(c) Revaluation Loss
(d) General Reserve
1 (March 2018) CA
Ans.(b) Accumulated Loss
5.Complete the following Journal Entry :

.........................A/c. Dr.
To Cash A/c.
(The amount of goodwill brought in by the new partner withdrawn by the existing partners.)
1 (March 2019) CA
Ans.Old Partners / Existing Partners Capital A/c
To Cash
9 2022-23
2021-22
6.If an incoming partner brings the premium of goodwill in cash, it will be shared by the old partners
in:
(a) new profit sharing ratio (b) old profit sharing ratio
(c) capital ratio (d) sacrificing ratio
1 (July 2019) CA
Ans.(d) sacrificing ratio
7.Reconstitution of a partnership happens at the time of ..................................

(a) Admission of a partner (b) Retirement of a partner
(c) Death of a partner (d) All of these
1 (March 2021) CA
Ans.(d) All of these
8.On retirement of a partner, the amount of General Reserve is transferred to all partner’s capital
account in :
(a) New Profit Sharing Ratio (b) Capital Ratio
(c) Old Profit Sharing Ratio (d) Gaining Ratio
1 (March 2022) CA
Ans.(c) Old Profit Sharing Ratio
9.The proportion in which existing partner surrender their share of profit in favour of newly admitted
partner is called :
(a) Sacrificing ratio (b) Gaining ratio
(c) Old ratio (d) New ratio
1 (March 2022) CA
Ans.(a) Sacrificing ratio
10.The capitalized value of average profit of a business is Rs 5,00,000 and value of net assets of the
business is Rs 4,20,000. The Goodwill of the business under capitalization method will be
(a) Rs 5,00,000 (b) Rs 4,20,000
(c) Rs 80,000 (d) Rs 9,20,000
1 (March 2022) CA
Ans.(c) Rs 80,000
11.Goodwill is a/an ............................

(a) Tangible asset (b) Intangible asset (c) Current asset (d) None of these
1 (March 2022) AFS
Ans.(b) Intangible asset
12.The share of goodwill brought in by the new partner is shared by the old partners in their ..............
(a) Old ratio (b) Sacrificing ratio (c) New ratio (d) Ratio of their capitals
1 (July 2022) CA
Ans.(b) Sacrificing ratio
13.Goodwill existing in the books at the time of admission of a partner is transferred to the capital
accounts of ......................................
1 (July 2022) CA
(a) old partners in sacrificing ratio (b) all partners in new ratio
(c) old partners in old ratio (d) all partners in capital ratio
Ans.(c) old partners in old ratio
2022-23 10
2 MARK QUESTIONS
1. Anu and Beena are partners in a firm sharing profits in 3 : 2 ratio. They admitted Bindu as a new
partner. Anu surrendered 1/3 of her share in favour of Bindu and Beena surrendered 1/4 of her share
in favour of Bindu. Calculate the new Profitsharing ratio.
2 (March 2018) CA
Ans.Anu’s share of sacrifice = 3/5 x 1/3 = 3/15
Anu’s new share = 3/5 - 3/15 = 9/15 - 3/15
= 6/15
Beena’s share of sacrifice = 2/5 x 1/4 = 2/20
Beena’s new share =2/5 - 2/20 = 8/20 - 2/20
= 6/20
Bindu’s share =3/15 + 2/20 = 3/10
Therefore New ratio=6/15: 6/20: 3/10 = 4:3:3
2.Prince and Queen are partners sharing profits in the ratio of 3 : 2. They admit Sun as a new partner
for ¼ share in the profit. The new profit sharing ratio will be 2 : 1 : I. Calculate the sacrificing ratio
of Prince and Queen
2 (March 2017 ) AFS
Ans.Prince’s Sacrifice = 3/5-2/4
=12/20-10/20 = 2/20
Queen’s Sacrifice = 2/5-1/4
=8/20-5/20 = 3/20
Sacrificing ratio = 2/20:3/20 = 2:3
3.R & S are Partners sharing profits in the ratio 5 3. They admit T for l/7th share in the profits.
Calculate sacrificing ratio.
2 (March 2016) CA
Ans.New share of R = 6/7 of 5/8,= 6/7*5/8 = 30/56
R’s Sacrifice = 5/8-30/56 =35/56-30/56 = 5/56
New share of S = 6/7 of 3/8,= 6/7*3/8 = 18/56
S’s Sacrifice = 3/8-18/56 =21/56-18/56 =3/56
Sacrificing ratio = 5/56:3/56 = 5:3
4.Menon and Varma are Partners in the ratio 2:3 They admit Jyothi for 2/5th Share which She
acquired equally from Menon and varma. Calculate New Ratio and sacrificing ratio
2 (March 2013) CA
Ans.Jyothi’s share=2/5
Acquired equally from Menon and varma =1/5+1/5=2/5
New share of Menon = 2/5 - 1/5, = 1/5
Menon’s Sacrifice = 2/5-1/5 =1/5
New share of Varma = 3/5 - 1/5, = 2/5
Menon’s Sacrifice = 3/5-2/5 =1/5
Sacrificing ratio = 1/5:1/5 =1:1
5.Enumerate any two rights acquired by a newly admitted partner of a firm

2 (March 2020) CA, 2 (March 2022) AFS
Ans.1) Right to share the asset of the firm and 2) Right to share the Profit of the firm
11 2022-23
2021-22
3 MARK QUESTIONS
1.Consider the following information and ascertain the value of goodwill by super profit method
a) Total Capital employed 1,00,000
b) Normal rate of return 8%
c) Average Profit for the last 5 Years Rs12000
d) Remuneration to partners Rs 3000
Goodwill estimated at 3 years purchase of super profit
3 (March 2013) CA
Ans.Goodwill=Super profit x No.of purchasing years
Super profit=Average profit-Normal profit
Normal profit = Capital employed x NRR/100 =1,00,000 x 8/100 =8,000
Average profit = 12,000-3000 =9,000
Super profit = 9,000 – 8,000 =1,000
Goodwill = 1,000 x 3 = 3,000
2.A business has earned an average profit of Rs 1,00,000 during the last few years and the normal
rate of return in similar type of business is 10%. Find out the value of goodwill by capitalization
method, given that the value of net assets of the business is Rs 8,20,000.
3 (June 2012) CA
Ans.Average profit = 1,00,000
Capitalised value of average profits = average profit x100/Normal Rate of return
= 1,00,000x100/10 = 10,00,000
Goodwill = Capitalised value - Net assets
= 10,00,000 -8,20,000 =1,80,000
3.Afnas and Sakariya are partners in a firm sharing profits and losses in the ratio of 3 : 2. Ukkash is
admitted as a new partner for 1/4 share in profits. He should brings in Rs 50,000 as capital and his
share of goodwill in cash, Firms goodwill is valued At Rs 80,000 at the time of his admission.
Give necessary Journal Entries, on the assumption that 50% of the premium amount is
withdrawn by the old partners.
3 (March 2018 ) CA
Ans. Date Particulars L.F. Debit Credit
(Rs.) (Rs.)
1 Cash A/c Dr. 70,000

To Ukkash’s Capital A/c 20,000
To Anfas Capital A/c 12,000
To Sakariya’s Capital A/c 8,000
2 Anfas Capital A/c Dr. 6,000
Sakariya’s Capital A/c Dr. 4,000
To Cash A/c 10,000
(Cash withdrawn by old Partners)
4.Anil and Sunil are partners in a firm sharing profit and losses in the ratio of 3: 2. Kapil is admitted
for 1/6 th share of profits, he is to bring in Rs 40,000 as capital and Rs 8000 as his share of goodwill.
Give necessary journal entries in the following cases :
1.When the amount goodwill is retained in the business.
2.When 50% of the amount of goodwill withdrawn by the partners.
3(March 2018) AFS
2022-23 12
Ans. 1.When the amount of goodwill is retained in the business.
Date Particulars LR Debit Credit

(Rs.) (Rs.)
1 CashA/c Dr. 48,000

To Anil's Capital A/c 4,800
To Sunil's Capital A/c 3,200
To Kapil's Capital A/c 40,000
2.When 50% of the amount of goodwill withdrawn by the partners

2 Anil's Capital A/c Dr. 2,400
Sunil's Capital A/c Dr. 1,600
To Cash A/c 4,000
(Cash withdrawn by Sunil and Dalip
equal to their share of goodwill)
5.Tony and Sony are partners in a firm sharing profits and losses in the ratio of 3 : 2. They admitted
Moni into Partnership for 1/4 share. Moni brings Rs 50,000 as his capital and Rs 10,000 for his share
of goodwill. At the time of admission goodwill appears in the Balance Sheet at Rs 5,000. New profit
sharing ratio of the partners shall be 2 : 1 : 1.Pass necessary journal entries.
3 (March 2015) AFS
Ans.
Date Particulars . Debit Credit
(Rs.) (Rs.)
Cash A/c Dr. 50,000

To Moni’s Capital 50,000
(Amount brought by Moni as capital)
Goodwill A/c Dr. 5,000

To Tony’s Capital A/c 3,000
To Sony’s Capital A/c 2,000
(Goodwill brought down to its
agreed vlaue)
6.Balu and Binu are partners in a firm sharing profits in 5:3 ratio. They admit Babu as a new partner
and the new profit sharing ratio was agreed at 4:2:1. Calculate the sacrificing ratio.
3(July 2022) CA
Ans.Sacrificing ratio = Old ratio -New ratio
Balu’s sacrifies =5/8 -4/7
Binu’s sacrifies =3/8-2/7
Sacrificing Ratio = 3:5.
7.Rana brothers earn an average profits of ` 60,000 with a capital of ` 4,00,000. The normal rate of
return in the business is 10%. Calculate the value of goodwill under capitalization of super profit
method.
3(March 2022) AFS
Ans.Normal Profit 4,00,000x10/100 = 40,000
Super profit 60,000- 40,000 = 20,000
Goodwill 20,000/10x100 = 2,00,000
13 2022-23
2021-22
4/5 MARK QUESTIONS
1.Amala and Nandana are partners in a firm sharing profits and losses in the ratio of 3 : 2. They
decided to admit Hajara as a new partner for 1/5th share in profits, which she acquired equally from
Amala and Nandana.
Calculate the new ratio after admission.
4 (March 2021) CA
Ans.Old Ratio of Amala and Nandana= 3:2 4
Hajira’s share = 1/5 (acquired equally(1/10 each) from old partners
So, Amala’s New share = 3/5 – 1/10 (6/10-1/10) = 5/10
Nandana’s new share = 2/5 – 1/10 (4/10- 1/10) = 3/10
Hajira’s share = 1/5 or 2/10
New ratio of Amala, Nandana and Hajira = 5:3:2
2.Abhinav and Adarsh are partners in a firm sharing profits and losses in the ratio of 5 : 3. Ananya is
admitted in the firm for 1/5th share of profits. She has to bring in Rs 20,000 as capital and Rs 4,000
as her share of goodwill.
Give the necessary journal entries if the amount of goodwill is retained in the business.
4 (March 2021) CA
Ans. (i) Cash A/c Dr. 24,000
To Ananya’s Capital A/c 20,000
To To Abhinav’s Capital A/c 2,500
To Adarsh’s Capital A/c 1,500
(Goodwill transferred to old partners in the ratio of 5:3)
3.What are the different modes of reconstitution of a partnership firm ? Briefly explain.
5 (March 2021) CA
Ans..Modes of Reconstitution of a Partnership Firm:
1.Change in the profit sharing ratio among the existing partners
Sometimes partners of an existing firm may decide to change their existing profit sharing
ratio.The change in profit sharing ratio may lead to increase or decrease partner’s share in the firm. In
other words, certain partner may gain others will lose.
2. Admission of a new partner
Inclusion of a person as a partner to an existing partnership firm is called admission of a
partner.When a firm requires additional capital or managerial help or both for the expansion of its
business, a firm can admit a person as a partner to an existing firm.
3.Retirement of a partner
Retirement means withdrawal of a partner from an existing business. Retirement may be due
to his bad health, old age or change in business interests.
4.Death of a partner
Death of a partner will also result in the change of relationship between surviving partners.
Their profit sharing ratio will change and it leads to reconstitution.
5.Amalgamation of two firms
Sometimes two firms amalgamate in order to avoid competition and reduce administrative
cost.This arrangement brings new relationship among partners of two firms. A new agreement is
signed.New profit sharing arrangements takes place. Here also reconstitution occurred.
4.Jithu and Muthu are partners in a firm sharing profits and loss in the ratio of 3:2. They admit Rithu
into partnership and the new profit sharing ratio will be 2:1:1. Rithu brings in Rs 60,000 for capital
and required amount of premium in cash. The goodwill of the firm is valued at Rs 80,000. Jithu and
Muthu withdraw their share of goodwill. Give necessary journal entries. 4 (March 2022) AFS
2022-23 14
Ans.1. Sacrificing Ratio = 2:3
2. Bank A/c Dr. 80,000
To Rithu’s Capital 60,000
To Premium(Goodwill) 20,000
3.Premium(Goodwill) Dr. 20,000
To Jithu’s Capital 8,000
To Muthu’s Capital 12,000
OR
Bank A/c Dr. 20,000
To Jithu’s Capital 8,000
To Muthu’s Capital 12,000
4.Jithu’s Capital A/c Dr. 8,000
Muthu’s Capital A/c Dr. 12,000
To bank 20,000
5.Anju and Manju are partners in a firm sharing profits and losses in the ratio of 3:2. Sanju is admitted
as to partnership. The new profit sharing ratio will be 2:1:2. Sanju brings in Rs 20,000 as his capital, but
not in a position to bring any amount for his share of goodwill. Goodwill of the firm was valued at Rs
60,000. Give necessary journal entries, if there is no goodwill appearing in the books of the firm.
4(March 2022)AFS
Ans.For Calculating Sacrificing Ratio as 1:1
For writing entry
Bank A/c Dr. 20,000
To Sanju’s Capital 20,000
Sanju’s Capital A/c Dr. 24,000
Anju’s Capital 12,000
Manju’s Capital 12,000
6.A firm’s profits for the last four year were Rs 30,000, Rs 40,000, Rs 50,000 and Rs 60,000. Calculate the
value of firm’s goodwill on the basis of two years’ purchase of the average profits for the last four years.
4(March 2022) CA
Ans.Goodwill= Average profit * Purchasing years
Average pforit =30,000+40,000+50,000+60,000
4
=45,000
Goodwill=45,000*2=90,000
7.Lalu and Balu were partners in a firm sharing profits and losses in the ratio of 3:1. They admitted
Jisha as a new partner for 1/5 share. Jisha brings Rs 1,00,000 as capital and Rs 20,000 as her share of
goodwill. On the date of Jisha’s admission the balance sheet of the firm showed a balance of Rs 10,000
in Reserve Fund. Record necessary journal entries for the treatment of these items on Jisha’s admission.
4(July 2022) CA
Ans.Cash / Bank account. Dr.1,20,000
To Jisha’s Capital 1,00,000
ToG/W 20,000
G/W Dr. 20,000
To Lalu’s Capital 15,000
To Balu’s Capital 5,000
Reserve Fund Dr 10,000
To Lalu’s Capital 7,500
To Balu.s Capital 2,500
15 2022-23
2021-22
8 MARK QUESTIONS
1.Sreshta and Esha are partners sharing profit and losses in the ratio of 3:2 respectively. Their Bal-
ance Sheet as on March 31,2017 was under
Liabilities Amount Assets Amount
Creditors 28,000 Cash in Hand 3,000
23,000
Capitals : Cash at Bank
Sreshta 70,000 Debtors 19,000
Esha 70,000 1,40,000 Building 65,000
Furniture 15,000
Machinery 13,000
Stock 30,000
1,68,000 1,68,000
On that date they admit Nayomi into the partnership for ¼ share in future profit on the
following terms :
(i) Furniture and stock are to be depreciated by 10%.
(ii) Building is appreciated by Rs 20,000.
(iii) 5% provision is to be created on Debtors for doubtful debts.
(iv) Nayomi have to bring in Rs 50,000 as her capital and Rs 30,000 as goodwill.
Suppose you were an Accountant in this firm, how will you prepare Journal entries
and ledger account and balance sheet ?
8 (March 2017) CA
Ans. Revaluation Account
Furniture 1,500 Building 20,000

Stock 30,000
Provision 950
Capitals :
Sreshta 8,730
Esha 5,820 14,550
20,000 20,000
Partner’s Capital Accounts Cr.

Particulars Sreshta Esha Nayomi Particulars Sreshta Esha Nayomi
(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
Balance 96,730 87,820 50,000 Balance b/d 70,000 70,000
c/d Cash 50,000
Goodwill 18,000 12,000
Revaluation 8,730 5,820
(Profit)
96,730 87,820 50,000 96,730 87,820 50,000
2022-23 16
Balance sheet
Creditors 28,000 Cash in hand 3,000

Cash at Bank 1,03,000
Capitals : Debtors 19,000
Sreshta 96,730 Less : provision 950 18,050
Esha 87,820 Building 65,000

Nayomi 50,000 Add: Appreciation 20,000 85,000
Furniture 15,000
Less: Depreciation 1,500 13,500
2,34,550
Machinery 13,000
Stock 30,000
Less : Depreciation 3,000 27,000
2,62,550 2,62,550
2.J and K are partners in a firm, sharing profit and losses in the ratio of 3:2.Balance Sheet of J & K as
on 1April , 2010
Liabilities Amount Asset Amount
Sundry Creditors I5000 Cash in hand 3,000
Capitals of : Stock 12,000
J 25,000 Plant & Machinery 45,000
K 20,000 45,000
60,000 60,000
L is admitted on the following terms :
(1) L will bring Rs I5,000 as capital and Rs 5,000 as premium for goodwill for 1/6 share.
(2) The value of stock is reduced by 10% and plant and machinery increased by 5%.
(3) Investment worth Rs 1,500 (not mentioned in the Balance Sheet) is to be taken into account.
Prepare revaluation account and capital account of partners.
6 (March 2017) CA
Ans. Revaluation Account

Stock 1,200 Plant and Machinery 2,250
Capitals : Investment 1,500
J 1530
K 1020 2,550
3,750 3,750
Partner’s Capital Accounts Cr.

Particulars J K L Particulars J K L
(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
Balance 29,530 23,020 15,000 Balance b/d 25,000 20,000
c/d Bank 15,000
Goodwill 3,000 2,000
Revaluation 1,530 1,020
(Profit)
29,530 23,020 15,000 29,530 23,020 15,000
17 2022-23
2021-22
3.Anju and Manju were in partnership, who were sharing profits and losses equally. Their Balance
Sheet as on 31-03-2012 was as follows:

Capital A/c's Cash 3,000
Anju 30,000 Debtors 20,000
Manju 20,000 Stock 40,000
Creditors 30,000 Furniture 5,000
Bills Payable 3,000 Plant & Machinery 15,000
83,000 83,000
Sanju is admitted as a partner on 31-03-2012 on the following terms.

1. Sanju will bring in Rs 40,000 as his capital
2. Plant & Machinery will be increased by Rs 5,000
3. Furniture should be appreciated by 20%
4. Stock should be reduced by Rs 3,000
5. Creditors be reduced by Rs 1,000.Prepare Revaluation Account and CapitalAccounts.
(May 2013) CA
Ans.
Revaluation Account
Stock 3,000 Plant &Machinery 5,000
Partners' Capital Furniture 1,000
Anju 2,000 Creditors 1,000
Manju 2,000 4,000
7,000 7,000
Capital Account
Particulars Anju Manju Sanju Particulars Anju Manju Sanju
Balance c/d Opening Balance

30,000 20,000
32,000 22,000 40,000 Cash 40,000
2,000 2,000
Revaluation
32,000 22,000 40,000 32,000 22,000 40,000
4 .State any two circumstances under which goodwill of a partnership firm is valued.
2 (March 2022) CA, 2 (July 2022) CA
Ans.1.Change in the profit sharing ratio among the existing partners
2. Admission of a new partner 3.Retirement of a partner
4.Death of a partner 5.Amalgamation of two firms
6.Dissolution of Partnership (Any two)
2022-23 18
5.Aneesh and Akhil were in partnership,who were sharing profits and losses equally. Their Balance
Sheet as on 31-03-2013 was as follows:
Capital A/cs
Aneesh 60,000 Cash 6,000
Akhil 40,000 Debtors 40,000
Creditors 60,000 Stock 80,000
Bills Payable 6,000 Furniture 10,000
. Plant &
Machinery 30,000
1,66,000 1,66,000
Ajith is admitted as a partner on the date of the Balance Sheet on the following terms:
1. Ajith will bring in Rs 80,000 as his capital
2. Plant & Machinery will be increased by Rs.10,000
3. Furniture should be appreciated by 20%
4. Stock should be reduced by Rs.6,000
5. A provision for bad and doubtful debts is to be created at 5% on debtors.
6. Creditors be reduced by Rs 2,000
Prepare Revaluation Account and Capital Accounts.
8 (March 2014) CA
Ans.
Revaluation Account
Stock 6.000 Plant &

Pro.for bad debt 2.000 Machinery 10.000
Aneesh's capital 3,000 Furniture 2.000

Akhil's capital 3.000 Creditors 2,000
14,000 14,000
Capital Account
Particulars Aneesh Akhil Ajith Particulars Aneesh Akhil Ajith
Balance b/d 60.000 40.000 —
Caah — — 80.000
Balance c/d
63.000 43,000 80.000 Revaluation 3.000 3.000 —
63.000 43.000 80.000 63.000 43.000 80.000
19 2022-23
2021-22
6. The following is the Balance Sheet of X and Y sharing profits and losses in the ratio 3:2 as on 31st
March 2001
Sundry creditors 45,000 Cash 3,000
Outstanding expenses 2,000 Sundry Assets 80,000
Capitals:
X 17,000
Y 19,000 36,000
83,000 83,000
They admit Z into partnership on 1st April 2001 on the following terms:
1. That Z pays Rs, 10,000 as capital and Rs. 5,000 as goodwill for 1/4 share in future profits.
2. Sundry assets be valued at Rs. 72,000
3. That the capital accounts of all partners be readjusted on the basis of their profit sharing
arrangements by bringing in or paying off cash as the case may be.
Prepare ledger accounts and Balance Sheet immediately after Z’s admission
Ans. Dr. Revaluation Account Cr.

Sundry assets 8,000 Loss transferred to Capital 8,000
X 4,800
Y 3,200
8,000 8,000
Capital Account
Particulars X Y Z Particulars X Y z
Revaluation 4,800 3,200 10,000 Bal. b/d 17,000 19.000 10,000

Cash 18,000 5,800 Cash (Goodwill) 3,000 2,000
Bal. c/d 12,000 Cash 2,800
22,800 21,000 10,000 22,800 21,000 10,000
Cash Account
Balance b/d 3,000 Y's capital 5,800
Z's capital 10,000 Balance c/d 15.000
X's capital - goodwill 3,000
Y's capital - goodwill 2,000
X's capital - deficiency brought 2,800
20,800 20,800
2022-23 20
Balance sheet
Sundry creditors 45,000 Cash 15,000
Outstanding expenses 2,000 Sundry assets 72,000

Capitals:
X 18,000
Y 12,000
Z 10,000 40,000
87,000 87,000
Working Notes
Old ratio = 3:2,New ratio = 9:6:5
Z’s Capital for ¼ share = 10,000
Total Capital of the firm = 10,000*4/1 =40,000
X’s Capital = 40,000*9/20 = 18,000
Y’s capital = 40,000*6/20 =12,000
7.Sathy and Varsha are partners in a firm sharing profit and losses in the ratio of 3 : 1.Their Balance
Sheet as on 1st January 2019 was as follows :
Balance Sheet of Sathy and Varsha as on 01-01-2019

Rent Outstanding 3,000 Cash in hand 12,000
Creditors 18,000 Investment 60,000
General Reserve 10,000 Stock 24,000
Capital: Sathy 2,00,000 Debtors 44,000
Varsha 60,000 Bad debts 4,000 40,000
Machinery 30,000
Building 1,25,000
2,91,000 2,91,000
Suma is admitted into the firm with ¼ share in profits on the following terms :
(1) Market value of Investment are to be taken at ` 70,000.
(2) Buildings were found undervalued by Rs 4,000.
(3) Stock is revalued at Rs 26,000.
(4) It was found that creditors included a sum of Rs 3,000 which was not to be paid.
(5) Machinery is to be depreciated by 10%.
Prepare Revaluation Account
5 (March 2020) CA
Ans.
Revaluation Account
Machinery 3,000 Investment 10,000
Capital: Sathy 12,000 Stock 2,000
Varsha 4,000 16,000 Creditors 3,000
Building 4,000
19,000 19,000
21 2022-23
2021-22
8.Given below is the Balance Sheet of Amal and Midhun who share profits and losses in the ratio of
3 : 2.
Balance Sheet as on 01-01-2017
Creditors 50,000 Cash at Bank 5,000

Partners Capital A/c.: 70,000 Sundry Debtors 20,000
Amal 40,000 Stock 20,000
Midhun 30,000 Machinery 50,000
Furniture 25,000
1,20,000 1,20,000
Mr. Faisal is admitted into the partnership on the following terms :

(i) New partner has to bring in 7 25,000 as capital and Rs 10,000 as goodwill for 1/6 share.
(ii) A creditor of Rs 1,000 will not claim his amount.
(iii) Furniture is revalued at Rs 20,000.
(iv) Stock- reduced by Rs2,000.
(v) Depreciation on machinery @ 10% p.a.
Prepare the Revaluation A/c, Partners’ Capital A/c and the Balance Sheet after admission.
8 (March 2019) CA
Ans.
Revaluation a/c
Furniture 5000 Creditors 1000

Stock 2000 Partners Capital a/c 11000
Machinery 5000 Amal 6600
12000 Midhun 4400 12000
Capital Account
Amai Midh Faisal Amal Midh Faisal
Revaluation 6600 4400 Bal b/d 40000 30000
Cash 39400 29600 25000 Cash 6000 4000 25000
46000 34000 25000 Premium
46000 34000 25000 46000 34000 25000
Balance Sheet as on 01/01/2017

Liabilities Assets
Creditors 49000 Cash 40000
Partners Capital a/c 39400 Debtors 20000
Amal 29600 Stock 18000
Midhun 25000 Machinery 45000
Faisal Furniture 20000
143000 143000
2022-23 22
9.Castro and Clinton are partners sharing profit and losses in the ratio of 2 : 1. Their Balance Sheet
was as follows :

Creditors 10,000 Cash in Hand 7,000
Bills payble 7,000
Capitals : Investments 15,000
Castro 40,000 Debtors 26,000
Clinton 30,000 70,000 Building 20,000
Machinery 13,000
Stock 6,000
87,000 87,000
Cathy is admitted as a partner and assets are revalued and liabilities are reassessed as follows:
(i) Create a provision for doubtful debt on debtors at Rs 800.
(ii) Building and investment are appreciated by 10%.
(iii) Machinery is depreciated at 5%.iv) Creditors were overestimated by Rs 500
Before the admission of Cathy, how will you treat revaluation of assets and liabilities and
make necessary journal entries 8 (June 2017) CA
Ans.
Revaluation A/c Dr. 800
To Provision for D.D 800

To MachineryA/c 650
Building A/c Dr. 2,000

Investment A/c 1,500
To Revaluation A/c 3,500
Creditors A/c Dr. 500

To Revaluation A/c 500

To Castro’s Capital A/c 480
To Clinton’s Capital A/c 320
(Profit on revaluation )
Revaluation Account
Provision for D.D 800 Building 2,000

Machinery 650 Creditors 500
Capitals : Investment 1,500
Castro 1700
Clinton 850 2,550
4,000 4,000
23 2022-23
2021-22
10..Devika and Krishna are equal partners in a firm. Their balance sheet as on March 31,2021 is given below
Capital Devika 50,000 Debtors 20,000
Krishna 50,000 Furniture 33,000
Machinery 84,000
Total 1,78,000 Total 1,78,000
They agreed to admit Amala into the firm with 1/4 share in future profits. They decided to
revalue their assets at the time of admission.
(1) Stock is to be revalued at Rs 35,000.
(2) Furniture is to be depreciated by 10%.
(3) Machinery is to be revalued at Rs 1,00,000.
(4) A provision for doubtful debts is to be created on debtors at 5%.
Prepare Revaluation account. 5(March 2022) CA
Ans. Dr. Revaluation Account Cr.
Furniture 3,300 Stock 8,000
Provision for DD 1,000 Machinery 16,000
Capital: 19,700
Devika 9850
Krishna 9850
24,000 24,000
10..Anu and Bindu are partners in a firm sharing profits in the ratio of 2:1. Chandana is admitted into
the firm with 1/4 share of profit.
Balance Sheet as on 31" March 2021
Bills payable 8,000 Cash at hank 20,000
General Reserve 12,000 Sundry debtors 16,000
Bank Overdraft 4,000 Stock 20,000
Capital Furniture 10,000
Anu 1,00,000 Machinery 50,000
Bindu 60,000 1,60,000 Building 80,000
2,00,000 2,00,000
At the time of admission of Chandana, Assets are revalued as :

(a) Stock Rs 18,000, Building Rs 90,000, Furniture Rs 9,200 and Machinery Rs 52,000.
(b) Provision for doubtful debts is to be created at 5% on debtors. 5(March 2022) AFS
Prepare Revaluation A/c.
Revaluation Account
To Stock 2,000 By Building 10,000
To Furniture 800 By Machinery 2,000
To Provision for DD 800
To Anu's Capital 5,600
To Bindu's Capital 2,800
12,000 12,000
2022-23 24
11.Following is the Balance Sheet of Leena and Jyothi who share profits in the ratio of 3:1
as on 31 March, 2021.
Balance Sheet of Leena and Jyothi as on 31/03/2021
Bank overdraft 4,000 Cash in ha nd 20,000
Sundry creditors 10,000 Furniture 25,000
General Reserve 6,000 Sundry debtors 30,000
Capital: Stock 15,000
Leena 1,50,000 Plant and Machinery 40,000
Jyothi 1,30,000 2,80,000 Land & Building 1,70,000
3.00,000 3,00,000
Rajesh is admitted as a partner on the date of the balance sheet as per the following terms :
1. Rajesh will bring in Rs 1,00,000 as his capital for 1/5 share in profits.
2. Plant & Machinery is to be appreciated to Rs 60,000 and the value of buildings is to be reduced by 10%.
3. Stock is revalued at Rs 20,000.
4. Investment worth Rs 2,500 is to be taken into account.
Prepare Revaluation Account.
5(July 2022) CA
Ans.
Revaluation Account
Building 17000 Stock 5,000
Plant & 20.000
Leena’s Capital- 7875 10,500 Machinery
Jyothi’s Capital- 2625 Investment 2,500
27,500 27,500
12.Anu and Binu are partners sharing profit and losses in the ratio of 2:1. Their Balance
Sheet on 31st March, 2021 was as follows :
Balance Sheet of Anu and Binu as at 31sl March, 2021
Creditors 30,000 Cash 2,000
Ami's Capital 45,000 Furniture 30,000
Binu's Capital 30,000 Machinery 40,000
Building 30,000
1,20.000 1,20,000
On 1 April, 2021, Manu was admitted into partnership on the following terms :
a. Manu brings Rs 20,000 as his capital.
b. Manu brings Rs 6,000 as his share of goodwill for 1/6 share in profit.
c. Stock and furniture be reduced by 10%.
d. The value of buildings be appreciated by 20%.
Prepare revaluation account and capital accounts of all partners.
5 (July 2022) AFS
25 2022-23
2021-22
Dr. Revaluation Account Cr.
Stock 1,800 Building 6,000
Furniture 3,000
Capital: 1,200
Anu 800
Binu 400
6,000 6,000
Capital Balance:Anu-59,800 Binu-37,400 Manu-20,000
13.Abhirami and Dayana are partners in a firm sharing profits and losses equally. Their balance sheet
as on 31st Dec. 2018 were as follows :
Balance Sheet as on 31st Dec 2018

Amount Amount
Liabilites Assets

Bills payable 6,000 Debtors 24,000
Capital: Furniture 32,000
Abhirami 38,000 Land & Buildings 28,000
Dayana 40,000 P&LA/c 2,000
96,000 96,000
They decided to admit Manju as a partner on that date for a 1/4 share in profit and the
following were agreed upon :
(i) Manju contributed Rs20,000 as capital and Rs 10,000 as her share of goodwill.
(ii) Furniture is valued at Rs 28,000.
(iii) Land and buildings found appreciated by 10%.
(iv) A provision of 5% on debtors were created for bad debts.
Prepare the Revaluation account and Capital account of the firm after admission.
8 (March 2021) CA
Ans.
Revaluation Account
Furniture 4000 Land & Building 2800
Provision for D/D 1200 Revaluation Loss:
Abhirami"s Capital A/c 1200
Dayana's Capital A/c 1200
5,200 5,200
Dr. Capital Account Cr.

Paticulars Abhirami Dayana Manju Particulars Abhira mi Da yana Manju
To Revaluation A/c 1200 1200 By Bal. B/d 38000 40000

P&LA/c 1000 1000 Ca sh 20000
Balance C/d 40800 42800 20000 Ca sh( G/W) 5000 5000
43000 45000 20000 43000 45000 20000
2022-23 26
XII ACCOUNTANCY
Chapter
Chapter 4 Retirement and Death of a partner
1 MARK QUESTIONS
1.Retirement of partner leads to..................................of the partnership.
(a) dissolution (b) amalgamation
(c) reconstitution (d) merger
1 (March 2018) AFS
Ans.(c) reconstitution
2.Profit or loss on revaluation at the time of retirement must be transferred to the partners
in....................
(a) Capital ratio (b) Old profit sharing ratio
(c) Equally (d) Gaining ratio 1 (June 2016) CA
Ans.(b) Old profit sharing ratio
3.In which ratio the continuing partners compensate the share of goodwill of partner when he retires
(a) Profit Sharing Ratio (b) Sacrificing Ratio
(c) Gaining Ratio (d) Capital Ratio
1 (June 2017) CA
Ans.(c) Gainig ratio
4.The ratio in which the continuing partners share the profit of outgoing partner is called .....................
(a) Old Ratio (b) Gaining Ratio
(c) Sacrificing Ratio (d) New Ratio
1 (March 2021) CA
Ans.(b) Gaining Ratio
5.On retirement of a partner, the amount of General Reserve is transferred to all partner’s capital
account in :
(a) New Profit Sharing Ratio (b) Capital Ratio
(c) Old Profit Sharing Ratio (d) Gaining Ratio
1 (March 2022) CA
Ans.(c) Old Profit Sharing Ratio
6.Anil, Biju and Chithra were partners sharing profit and losses in the ratio of 5 : 4 : 3. Biju retired
from the firm. Gaining ratio of the remaining partners will be :
(a) 5 : 4 (b) 5 : 3
(c) 4 : 3 (d) Equal
1 (March 2022) CA
Ans.(b) 5 : 3
7.A, B and C are partners sharing profits in the ratio of 3:2:1. B retires and new ratio between A and
C is .................................
(a) 3:2 (b) 2:1
(c) 3:1 (d) 1:2
1 (March 2022) AFS
Ans.(c) 3:1
27 2022-23
2021-22
8.If the firm is not in a position to pay the amount due to retiring partner, such amount is transferred
to ....................................
(a) Partner’s Capital A/c (b) Partner’s Loan A/c
(c) Partner’s Drawings A/c (d) None of these
1 (March 2022) AFS
Ans.(b) Partner’s Loan A/c
9.The balance of Revaluation account prepared at the time of retirement of a partner is transferred to
..............................
(a) All partners capital account in old ratio.
(b) Existing partners capital account in new ratio.
(c) Old partners capital account in gaining ratio.
(d) Existing partners capital account in capital ratio.
1 (July 2022) CA
Ans.(a) All partners capital account in old ratio.
10.The ratio in which the continuing partners have acquired the share from the retiring partner is
called ........................................
(a) Sacrifising Ratio (b) Gaining Ratio
(c) Profit Sharing Ratio (d) Capital Ratio
1 (July 2022) AFS
Ans.(b) Gaining Ratio
11.What is gaining ratio ?

1 (June 2017) AFS
Ans.The ratio in which the continuing partners acquire the out going partners share is called a
gaining ratio
12.Abraham,Basheer and Chellappan are partners sharing profits in the ratio of 5 : 3 : 2. Basheer
retires. Find out the gaining ratio of Abraham and Chellappan.
1(June 2017) AFS
Ans.Gaining ratio 5:2
13.Write journal entry for recording unrecorded liability at the time of retirement of a partner.
1(March 2017) CA
Ans.Revaluation a/c Dr.
Unrecorded liability
14.On death of a partner, his legal representatives were settled by paying Rs 1,20,000.As per his
Capital Account, the amount due to him after all adjustments was Rs 1,05,000. Ascertain the de-
ceased partner’s .share of goodwill from the firm. (Hint: Case of hidden goodwill)
1 (March 2018) CA
Ans.Goodwill = 15,000
15.Agnes,Anila and Seena are partners sharing profits in the ratio of 5 : 3 : 2. What will be the new
profit sharing ratio, if Agnes retires from the firm
1 (June 2018) CA
Ans.3:2
2022-23 28
2 MARK QUESTIONS
8.Priya, Priji and Viji are partners, sharing profit and losses in the ratio of 4:3:2. Priji retired and
goodwill is valued Chapter 2
at Rs 63,000. Priya and Viji are decided to share future profits and losses in the
ratio of 5:3. Record necessary journal entry, when goodwill is raised at its full value and written off
immediately.
2 (March 2017) CA
Ans.Goodwill a/c Dr 63,000
Priya’s capital a/c 28,000
Priji’s capital a/c 21,000
Viji’s capital a/c 14,000
Priya’s capital a/c Dr 39,375
Viji’s capital a/c Dr 23,625
Goodwill a/c 63,000
OR
For calculating gaining ratio = 13:11
Priya’s capital a/c Dr 11,375
Viji’s capital a/c Dr 9,625
Priji’s capital 21,000
13.Bhanu,Jinu and Tinu are partners in a firm sharing P & L in the ratio of 4 : 3 : 2 Tinu retires from
the firm. Bhanu and Jinu decided to share profits in the ratio of 2:1.Calculate gaining ratio.
2 (March 2018) AFS
Ans.
Old ratio New ratio
Binu 4/9 2/3
Jinu 3/9 1/3
Gainig ratio
Binu = 2/3-4/9 = 2/9
Jinu = 1/3-3/9 = 0
So Binu only gain
27.Sruthi, Aleena and Febina are partners in the ratjp of 3 : 2 : 1. Sruthi retires and her share is acquired
by the remaining partners in the ratio of 3 : 2. Calculate the new ratio.
2 (March 2019) CA
Ans. Share Acquired by Aleena =3/6 x 3/5 =9/30
Share Acquired by Febina = 3/6 x 2/5 = 6/30
New share ot Aleena =2/6 + 9/30
= 19/30
New share of Febin =1/6 + 6/30
= 11/30
New Ratio = 19:11
24.Tiji, Jiji and Mini arc partners sharing profits in the ratio of 3:2:1. Tiji retires from the firm and
her share is taken up by Jiji and Mini in the ratio of 3:2. Calculate the new profit sharing ratio.
2 (June 2018) CA
Ans..Tiji’s share taken by Jiji = 3/6 X 3/5 = 9/30
Tiji’s share taken by Mini = 3/6 X 2/5 = 6/30
New ratio of Jiji = 2/6 + 9/30 = 10/30 + 9/30 = 19/30
New ratio of Mini = 1/6 + 6/30 = 5/30 + 6/30 = 11/30
New ratio = 19:11
29 2022-23
2021-22
26.Najeeba, Sherin and Nasar are equal partners.Nasar decides to retire. On the date of his retirement
the Balance Sheet of the firm showed a General Reserve of Rs 40,000 and Profit and Loss Account
Rs 20,000 (Dr.)
Show the accounting treatment for the above. 2 (March 2019) CA
Ans. a) General Reserve a/c Dr 40000
To Najeeba Capital a/c 13,333
To Sherin Capital a/c 13,333
To Nasar Capita! a/c 13,334
[GR distributed to partners in equal ratio]
[b) Najeeba Capital a/c Dr 6666
Sherin Capital a/c Dr 6666
Nasar Capital a/c Dr 6667
To Profit and Loss a/c 20000
[Accumulated loss distributed to partners]
3 MARK QUESTIONS
1.Sunil, a partner in a firm retired on 1st April 2020. He is entitled to

(a) His share of capital ` 75,000.
(b) His share of goodwill is 1/4 share. Goodwill of the firm was valued at ` 60,000.
(c) He withdraw ` 10,000 during the year from the firm.
(d) Interest on capital at 8% p.a.
Prepare Sunil’s Capital A/c.
3 (March) AFS
Ans.
Capital Account
Date Particulars Amoun Date Partculars Amount
2020 2020 By Balance b/d 75,000
April To Drawings 10,000 April By Gaining 15,000
1 To Sunil's 1 Partners Capital A/c
Loan Account 86,000 (Good Will)
By Interest on Capital 6,000
96,000 96,000
2.Ameena, Fidha and Gayathri are partners sharing profits and losses in the ratio of 5 : 3 : 2.
Fidha retires from the firm and her share was acquired by Ameena and Gayathri in the ratio of 2 :1.
Calculate the new ratio.
3 (March 2021) CA
Ans. Old Ratio of Ameena, Fidha and Gayathri = 5:3:2 4
Fidha retires and her share = 3/10
Fidha’s share acquired by Ameena and Gayathri in the ratio of 2:1
Fidha’s share acquired by Ameena = 3/10 X 2/3 =6/30
So Amena’s new share =5/10 + 6/30 (15/30+ 6/30)=21/30
Fidha’s share acquired by Gayathri = 3/10 X 1/3 = 3/30
So Gayathri’s new share = 2/10+3/30(6/30+3/30)=9/30
New ratio of Ameena and Gayathri = 21:9 or
7:3
2022-23 30
3 MARK QUESTIONS
1.A, B and C were in partnership, sharing profits equally. C agreed to retire from the partnership on
30,th June, 2007. His share of profits to the date of retirement has to be calculated on the basis of the
average profits of the preceeding three accounting years. The books showed the profits of the last five
accounting years (ending on 31st March) as follows :
2002- 03 = Rs 12,650
2003- 04 = Rs 15,400
2004- 05 = Rs 9,900
2005- 06 = Rs 8,800
2006- 07 = Rs 11,000
Calculate C’s share of profit. 3 (June 2016) CA
Ans.825
2.Arun. Hari and Java are partners in a firm sharing profits and losses in the ratio of 5:3:2. Jaya
retires from the firm and the continuing partners decided to share future profits in the ratio of 3 : 2
respectively. On her retirement, firm’s goodwill valued at Rs.50,000. Record necessary journal
entries for the treatment of goodwill, without opening the Goodwill Account.
3 (March 2018) CA
Ans. Arun’s Capital a/c Or 5,000
Hari’s Capital a/c Dr 5,000
To Jaya’s Capital a/c 10,000
(Retiring partner’s share of goodwill paid off in the gaining ratio 1:1]
3.Ayisha, Anagha and Anjana are partners in a firm and Anagha decided to retire from the firm. Can
you identify what are the different amounts to be transferred to her account ?
3 (June 2018) AFS
Ans.a) credit balance of her capital A/c and Current A/c
b) Her share of goodwill
c) Her share of accumulated profits
d) Her share in the gain of revaluation of assets and liabilities
e) share of profits up tu the date of retirement
f) Interest on his capiial,Salary,Commission etc (Any three item)
4.A. B. C and D are partners of a firm sharing profits in the ratio of 2 : 1 : 2 : 1. ‘A’ retires. The
goodwill of the firm is valued at ? 48.000. B. C and D decided to share future profits equally. Show
the necessary journal entry for the treatment of goodwill without opening Goodwill Amount.
3(June 2017) AFS
Ans.A’s share of goodwill 16,000
B’s Capital a/c Dr. 8,000
D’s Capital a/c Dr. 8,000
A’s Capital a/c 16,000
Gaining ratio between B&D =1:1
5.What is accumulated profit and accumulated loss ? How these items will be treated at the time of
retirement/death of a partner ? Give journal entries about them.
Ans.Explanation for accumulated profit and loss
If Profit P & L a/c Dr
All partner’s capital
If loss All partners capital a/c Dr.
P&L a/c
31 2022-23
2021-22
6.Adam, Eve and Omar are partners in a firm sharing profits and losses in the ratio 3:2:1. They close
accounts on March 31s1 every year. Omar wishes to retire on September 30lh 2016. As per their
partnership deed, the retiring partner’s share of profit upto the date of retirement should be estimated
on the basis of average profit of last 4 completed years.
The profit of the firm for the last 4 years were Rs 25,000, Rs 30,000, Rs 35,000 and Rs
30,000 respectively. Calculate the share of profit of Omar upto the date of retirement.
3 (June 2017) CA
Ans.Calculation of average profit = 120000/4=30,000
Profit up to the date of retirement = 30,000*6/12 = 15,000
Omar’s share of profit = 15,000 * 1/6 =2500
7.Santha, Gayathri and Nisha are partners sharing profits in the ratio of 4 : 3 : 2. Gayathri retires and
the Goodwill is valued at Rs 36,000 future profit sharing ratio between Santha and Nisha will he
5 : 3. They decided that the Goodwill is not to appear in the firms books at all. Record necessary
Journal Entry.
3 (June 2017) AFS
Ans.Santha Capital a/c Dr. 6500
Nisha Capital a/c Dr. 5500
Gayathri Capital a/c 12000
Gaining ratio 13:11
8.(a) How hidden Goodwill is found out at the fine of retirement / death of a partner ?
Explain with example.
(b) How this Goodwill is accounted in the Capital Accounts of partners ?
3 (June 2017) AFS
Ans.a) Sometimes, a firm may agree to settle the retiring partner by making a lump sum payment.
The amount paid may be more than what is due to him based on his capital account after making all
adjustments. The excess paid shall be treated as his share of goodwill (known as hidden goodwill).
b) Remaining partners Capital a/c Dr
Retiring partner’s capital
9.List out any 6 accounting treatments involved on the retirement or death of a partner.
3 (March 2021) CA
List out the various adjustments required in the accounts of a firm on retirement of a partner.
3 (March 2020) CA
Ans.1. Change in Profit sharing ratio.
2. Calculation of gaining ratio.
3. Adjustment regarding goodwill.
4. Adjustment of reserves and accumulated profits/losses.
5. Revaluation of assets and liabilities.
6. Ascertainment of profit or loss up to the date of retirement
2022-23 32
4 MARK QUESTIONS
1.Neeraj, Nima and Aswin are partners sharing profits in the ratio of 4:3:2. Goodwill is appearing in
the books at a value of Rs 45,000. Nima retires. On retirement, goodwill of the firm is valued at Rs
90,000. Neeraj and Aswin decided to share future profits in the ratio of 3:2 and also not to show
goodwill in the books. Give journal entries
4 (June 2019) CA
Ans.Gaining ratio of Neeraj = 3/5-4/9
= 7/15
Gaining ratio of Aswin =2/5-2/9
=8/45
= 7:8
Neeraj a/c Dr 20,000
Nima a/c Dr 15000
Aswin a/c Dr 10000
Goodwill 45000
Neeraj’s Capital a/c Dr 14000

Aswin’s Capital a/c Dr 16000
Nima’s capital a/c 30000
2.Renjith, Sumesh and Aneesh are partners in a firm. Sumesh retires from the firm. On the date of
retirement of Sumesh, Rs 45,000 become due to him. Renjith and Aneesh promise to pay the amount
in instalments. Prepare Sumesh’s loan account, when they agree to pay three yearly instalments of Rs
15,000 including interest at 12% p.a. on the outstanding balance during the first 3 years and the
balance including interest in fourth year.
4 (March 2017) CA
Ans. Sumeh’s Loan a/c
Bank 15,000 Sumesh’s capital 45,000
Balance c/d 35,400 Interest 5,400
50,400 50,400
Bank 15,000 Balance b/d 35,400
39,648 39,648
27,606 27,606
Interest 1,512
14,119 14,119
OR Sumeh’s Loan a/c
Bank 20,400 Sumesh’s capital 45,000
50,400 50,400
33,600 33,600
Interest 1,800
16,800 16,800
33 2022-23
2021-22
5/8 MARK QUESTIONS
1.John. Thomas and David arc partners in a firm. Thomas decides to retire from the firm. On the date
of retirement Rs 80,000 becomes due to him. John and David promises him to pay the amount in four
equal yearly instalments plus interest @ 12% per annum on the unpaid balance. Prepare Thomas’s
Loan A/c.
5 (June 2018) AFS
Ans. Thomas Loan a/c
Yea r Particulars Amount Year Particulars Amount
1 Ca sh 29600 1 Thomas Capital A/c 80000
Ba lance C/d 60000 Interest 9600
89600 89600
2 Ca sh 27200 2 Balance b/d 60000
Ba lance c/d 40000 Interest 7200
67200 67200
3 Ca sh 24800 Bala nce b/d 40000
Ba lance c/d 20000 Interest 4800
44800 44800
4 Ca sh 22400 4 Bala nce b/d 20000
Interest 2400
22400 22400
2. P, Q and R are partners in a firm. Q retires. On his date of retirement, Rs 60,000 becomes due to
him. P and R promise to pay him in instalments every year at the end of the year. Prepare Q’s Loan
A/c. in the following cases :
(a) When the payment is made four yearly instalments plus interest @ 12% p.a.on the unpaid balance.
(b) When they agree to pay three yearly instalments of Rs 20,000 including interest @ 12% p.a. on the
outstanding balance during the first three years and the balance including interest in the fourth year.
7 (March 2016)
Ans.a)
Q's Loa n a/c
1 Yr To Ca sh [15000+ 72001 22200 1 Yr By Q's Capital a/c 60000
To Ba la nce c/d 45000 By Interest 7200
67200 67200
II Yr To Ca sh (15000+ 5400! 20400 II Yr By Bal b/d 45000
To Ba la nce c/d 30000 Interest 5400
50400 50400
III Yr To Ca sh [15000 + 36001 18600 III Yr By Bal b/d 30000
To Ba la nce c/d 15000 Interest 3600
33600 33600
IV Yr To Ca sh [15000 + 18001 168O0 IV Yr By Bal b/d 15000
Interest 1800
16800 16800
b) Q's Loan a/c

lYr To Cash 20000 1 Yr By Q's Capital a/c 60000
To Balance c/d 47200 By Interest 7200
67200 67200
II Yr To Cash 20000 II Yr By Bal b/d 47200
To Balance c/d 32864 Interest 5664
52864 52864
III Yr To Cash 20000 III Yr By Bal b/d 32864
To Balance c/d 16808 Interest 3944
36808 36808
IV Yr To Cash 18825 IV Yr By Bal b/d 16808
Interest 2017
18825 18825
2022-23 34
3.Following is the Balance Sheet of Lekshmi, Priya and Deepa, who share profits and losses equally
Balance Sheet of Lekshmi, Priya and Deepa as on 31/03/2017

Reserve fund 36,000 Sundry Debtors 26,000
Capital :- Stock 18,000
Lekshmi 29,200 Fixed Assets 65,000
Priya 29,200
Deepa 29,200
1,35,600 1,35,600
Lekshmi died on 31st May 2017. According to the Partnership deed her legal representatives are
entitled to :
(1) Balance in the capital account and undistributed profit/loss.
(2) Share of Goodwill under average profit method.
(3) Share in the profit upto the date of death based on last year Profit.
(4) Interest on capital @ 6% p.a.
The goodwill of the firm under average profit method is Rs 42,000, and profit for the year
2016-17 Rs 21,600. Calculate the amount payable to Lekshmi’s legal representatives.
5 (March 2020) CA
Ans.
Dr .Lekshmi’s Capital Account Cr.
Balance b/d 29,200
Lekshmi’s Executors Loan 56,692 Reserve fund 12,000
Account
Goodwill 14,000
P&L Suspense 1,200
Int.on Capital 292
56,692 56,692
4.X. Y and Z were partners in a business sharing profits and losses in the ratio of 3: 2 :1. ‘X’ died on
October 1.2016. It was agreed between his executors and the remaining partners that :
(a) Goodwill to be valued at 2 years purchase of the average profits of previous ‘5’ years.
(Average profit of past 5 years is worked out as Rs 30,000)
(b) Machinery be depreciated by Rs 12,000 and Buildings be appreciated by Rs 24,000.
(c) Profits for the year 2016-17 be taken as having accrued at the same rate as that of the previous
year. (The profits of 2015-16 was Rs 36,000)
(d) Interest on capital @ 12% p.a. (X’s capital account has a credit balance of Rs 60,000 as on 01-04-2016)
(e) Accumulated profits or losses are to be shared among partners. (Balance Sheet of the firm as on
31-03-2016 shows a credit balance of Rs 24,000 in the Profit and Loss Account)
Workout the amount payable to X’s legal representatives and show them in X’s Capital Account.
5 (March 2018) CA
35 2022-23
2021-22
Ans.
X's Capital Account
Bal b/d 60000

Y's Capital (GW) 20000
X's Executors a/c 120600 Z's Capital (GW) 10000
Revalua tion a/c 6000
P/LSuspense a/c 9000
Int. On Capital 3600
Profit & Loss a/c 12000
120600 120600
a. Goodwill: Average Capital 30,000 x 2 = 60,000

= 60,000x3/6 = 30,000
b. Revaluation profit = 12,000. X’s Share = 12,000 x 3/6 = 6,000
c. P/L Suspense a/c = 36,000 x 6/12 x 3/6 = 9,000
d. Interest on Capital = 60,000 x 12/100 x 6/12 = 3,600
e. P/L Credit bal = 24,000 x 3/6 = 12,000
5.Akhil, Amal and Anand are partners in a firm Akhil died on 1-1-2010. Rs 1,00,000 become due to
him. Amal and Anand transfer this amount to Akhil’s executors loan a/c and promises to pay four
yearly installments of Rs 25,000 including interest @ 10% p.a. on the outstanding balance during the
first four years and the balance including interest in the fifth year.Prepare Akhil’s executors loan a/c.
5 (March 2018)
Ans. Executors Loan a/c
Cash 25,000 Balance c/d 100,000
1,10,000 1,10,000
Cash 25,000 Balance b/d 85,000
93,500 93,500
75,350 75,350
Balanc c/d 30,385 Interest 5035
55,385 55,385
Cash 33,424 Balance c/d 30,385
Interest 3039
33,424 33,424
2022-23 36
XII ACCOUNTANCY
Chapter
Chapter 5 DISSOLUTION OF PARTNERSHIP FIRM
1 MARK QUESTIONS
1.An unrecorded asset rcalized at the time of dissolution should be credited to account.
(a) cash (b) realisation
(c) capital (d) revaluation
1 (June 2019)
Ans.Realisation Account
2.The business of the firm is terminated when

(a) Dissolution of Partnership (b) Retirement of a partner
(c) Death of a partner (d) Dissolution of firm
1(March 2019)
Ans.(d) Dissolution of firm
3.At the time of dissolution of a firm, which of the following liability will be paid first ?
(a) Outstanding Salary of Partners (b) Partners Loan
(c) Partners Capital (d) Sundry Creditors
1 (March 2020 ) CA
Ans.(d) Sundry creditors
4.Identify the situation where partnership firm is not compulsorily dissolved

(a) When partner gives a notice in writing.
(b) When all partners except one become insolvent.
(c) When a business become illegal.
(d) When all partners except one become insane.
1 (June 2018 ) AFS
Ans.(a) When partner gives a notice in writing.
5.Which among the following account is prepared at the time of dissolution of a partnership firm ?
(a) Profit and Loss Appropriation Account
(b) Profit and Loss Adjustment Account
(c) Revaluation Account
(d) Realisation Account
1 (March 2022) CA,1 (July 2022) CA
Ans.(d) Realisation Account
6.On dissolution of firm, sundry creditors is transferred to ......................

(a) Partner’s Capital A/c (b) Bank A/c
(c) Cash A/c (d) Realisation A/c
1 (March 2022) AFS
(d) Realisation A/c
7.Realisation account of a partnership is prepared at the time of .......................

(a) dissolution of partnership firm (b) admission of a partner
(c) retirement of a partner (d) death of a partner 1(July 2022) AFS
Ans.(a) dissolution of partnership firm
37 2022-23
2021-22
2 MARK QUESTIONS
1.Select the suitable Account from brackets for the following :
(Realisation, Bank, PartnersCapital)
(a) On dissolution of the firm, capital accounts of partners are closed by transferring the capital
balance to..............................Account.
(b) The accumulated loss appearing in the balance sheet is closed by transferring to.............. Account.
2 (March 2022) CA
Ans. (a)Bank (b)PartnersCapital
2.How the private property of a partner is utilised at the time of dissolution of a firm ?
2 (March 2022) CA
Ans.The private property of any partner shall be applied first in payment of his private debts and the
surplus, if any, may be utilised for payment of the firm’s debts, in case the firm’s liabilities exceed
the firm’s assets.
3.Briefly explain the “treatment of losses” in the settlement of accounts on dissolution of a firm.
2(July 2022) CA
(i) first out of profits,
(ii) next out of capital of partners, and
(iii) lastly, if necessary, by the partners individually in their profit sharing ratio. (Any 2)
4.From the following rearrange according to the order in which settlement of accounts of partnership
firm in case of dissolution of partnership.
(a) Settlement of Partners’ capital
(b) Residual profit divided in profit sharing ratio
(c) Settlement of Partners’ loan
(d) Settlement of outside liabilities
2(July 2022) AFS
Ans. d) Settlement of outside liabilities
(c) Settlement of Partners’ loan
(a) Settlement of Partners’ capital
(b) Residual profit divided in profit sharing ratio
5.Write down the journal entries for the following at the time of dissolution of a partnership firm.
(a) For sale of assets (b) For payment of realisation expenses
2 (March 2021)
Ans.a) Sale of Asset:
Cash / Bank Account Dr
To Realisation Account
b) Payment of realisations expenses:
Realisation Account Dr
To Cash / Bank Account
6.Mention two situations in business takes place the‘Compulsory Dissolution’ of a partnership

2 (March 2018 ) CA
Ans.A firm is dissolved compulsorily in the following cases:
1.when all the partners or all but one partner, become insolvent,
2.when the business of the firm becomes illegal; or
3.Unlawful business
2022-23 38
4.Differentiate Dissolution of Partnership from Dissolution of Firm on the basis of following grounds
Chapter 5
Basis Dissolution of Partnership Dissolution of Firm
(1) Termination of Business
(2) Closure of Books of Account
2 (June 2017) CA
Ans.
(1) Termination of Business Business is not terminated Business is terminated
(2) Closure of Books of Account Does not require Books of account are closed
7.Explain the order in which the amounts realised through the sale of assets are to be applied, at the
time of dissolution of a partnership firm. (March 2018) CA
Dissolution of a partnership in what order must the proceeds of the realization of assets be applied
(June 2016 ) CA
Ans. Firstly-Paying outside debt
Secondly-Paying to the partners due to them for advances
Thirdly-Partners Capital
Fourthly-if any balance divide among partners in profit sharing ratio
9.Pass Journal Entries for the treatment of ‘Realisation expenses’ spent by the firm, under the following
situations:
(a) When realization expenses of Rs 6,500 are incurred and paid by the firm.
(b) When realization expenses of Rs 6,500 met by Mr. Luckose. one of the partners on behalf
of the firm.
(March 2018) CA
Ans.a) Realisation A/c ..Dr 6500
ToBank A/c 6500
b) Realisation A/c ..Dr 6500
To Lukose Capital A/c 6500
12.Complete the worksheet based on the hint given below :

Description Journal Entry
Hint Transfer of assets to Realisation A/c. Dr.

Realisation A/c. To Assets A/c.
(individually)
(a) Sale of Asset ?
(b) ? Liabilities A/c. Dr.

To Realisation A/c..
2(March 2019)
Ans. a. Cash a/c Dr
To Realisation a/c
b. Transfer of liabilities to realisation
39 2022-23
2021-22
3 MARK QUESTIONS
1.Ashina, a Commerce student is in a dilemma that she has no clear idea about the differences between
dissolution of partnership and dissolution of firm. Can you help her by giving three points of differences
in this regard ? 3 ( March 2019) CA
Distinguish between ‘Dissolution of a partnership’ and ‘Dissolution of a firm” in accounting point of view.
3 ( June 2018) CA
Bring out any three differences between dissolution of partnership and dissolution of partnership of a firm
3 (June 2018) AFS, 3(March 2020,2022) CA
Ans.
1. Termination of The business is not The business of the firm is
business terminated. closed.
2. Settlement of Assets and liabilities are Assets are sold and
assets and revalued and new balance liabilities are paid-off.
liabilities sheet is drawn.
3. Court’s Court does not intervene A firm can be dissolved by
intervention because partnership is the court’s order.
dissolved by mutual
agreement.
4. Economic Economic relationship Economic relationship
relationship between the partners between the partners
continues though in comes to an end.
a changed form.
5. Closure of books Does not require because The books of account are
the business is not closed.
terminated.
6. Other dissolution It may or may not involve It necessarily involves
dissolution of the firm. dissolution of partnership.
2.Pass necessary journal entries in the following cases at the time of dissolution of a firm.
(a) Rohit, a partner took over stock worth Rs7,500.
(b) Kiran, a partner paid realization expenses amounting to Rs 1,500 on behalf of the firm.
(c) Loss on realization of Rs 6,300 transferred to partner’s capital account.
3 (June 2019)
Ans Rohit’s Capital a/c Dr 7500
Realisation a/c 7500
Realisation a/c Dr 1500
Kiran’s Capital a/c 1500
Realisation a/c Dr 6300
Partner’s capital a/c 6300
3. Complete the journal entries passed at the time of dissolution of a partnership firm.
(a) Partner’s Capital A/c Dr.
To ...................
(Asset taken over by a partner)
(b) .....................A/c Dr.
To Realisation A/c
(Sale of assets)
(c) .....................A/c Dr.
To Bank A/c
(Payment of Realisation expenses)
3 (July 2022) CA
2022-23 40
Ans. a. Realisation Account. b. Bank Account. c. Realisation Account.
4.Find out the amount of profit or loss to be shared among partners on dissolution of a firm, from the
given details:
(a) Firm paid realisation expenses of Rs 2,000.
(b) The book value of assets other than cash and bank balance was Rs 84,000.
(c) External liabilities of Rs 20,000 are settled in full.
(d) Firm realised Rs 78,000 from the sale of assets.
(e) The partners Raju and Babu are equal partners in the firm
3 (June 2018) CA
Ans. Realisation Account
Bank /Cash (Exp) 2000 Liabilities 20000
Assets 84000 Bank/Cash 78000
Bank/Cash 20000 Partner's Capital A/c
Raju 4000
Babu 4000 8000
106000 106000
5.Adithyan and Theertha are partners of Aswani Traders in the ratio of 2 : 3. Their Balance Sheet as
on 31-12-2019 stood as follows :
Capital A/c. Land & Buildings 40,000

Adithyan Rs 50,000 Furniture 20,000
Theertha Rs 30,000 80,000 Stock 40,000
Sundry Creditors 20,000
1,00,000 1,00,000
Prepare the realisation account on the assumption that the firm is dissolved on the above date
by considering the following :
(i) Land & Buildings realised Rs 60,000.
(ii) Furniture sold for Rs 20,000.
(iii) Stock taken over by Adithyan Rs 15,000 4 (March 2021) CA
Realisation A/c
Ans. Particulars Amount Particulars Amount
Land and Building 40,000 Sundry Creditors 20,000
Furniture 20,000 Cash (Land & Buildings) 60,000
Stock 40,000 Cash (Furniture) 20,000
Cash (Creditors) 20,000 Adithyan's Capital A/c 15,000
(Stock)
Partners'Capital A/c
(Realisation Loss)
Adilhyan 2,000
Theertha 3,000 5,000
1,20,000 1,20,000
41 2022-23
2021-22
6/8 MARK QUESTIONS
1.What journal entries would you pass for the following transactions on the dissolution of the firm of
partners X and Y ?
(i) Dissolution expenses Rs 800 were paid by Y
(ii) An unrecorded asset realized Rs 3,000.
(iii) Stock Rs 5,000 already transferred to realization account was taken over by X
(iv) Creditors already transferred to realization account were paid Rs 4,000.
(v) Loss on realization Rs 3,000 was distributed among the partners X and Y in their
profit sharing ratio 3 : 2.
6 (June 2016) CA
Ans. 1.Realisation a/c Dr 800
Y’s Capital 800
2.Cash a/c Dr 3000
Realisation 3000
3.X’s Capital Dr 5000
Realisation 5000
4. .Realisation a/c Dr 4000
Bank 4000
5.X’s Capital a/c Dr 1800
Y’s Capital a/c Dr. 1200
Realisation 3000
2.A, B & C are partners sharing profit and losses in the ratio of 5: 3:2.Their Balance Sheet as on
31st March 2015 was as follows :
Creditors 15,000 Buildings 1,78,000
Bills payable 15,000 Machinery 20,000
Provident Fund 60,000 Stock 65,000
Bank loan 1,00,000 Bills receivables 72,000

A’s husband s' loan 65,000 Furniture 65,000
General Reserve 45,000 Cash at Bank 35,000
Capitals:
A 35,000
B 45,000
C 55,000 1,35,000
4,35,000 4,35,000
The firm was dissolved on that date. Prepare realization account with the following information :
(1)Building realized for Rs 1,20,000:
Bills receivables realized for Rs 70,000:
Stock realized for Rs 40,000 and
Machinery sold for Rs 33,000 and
furniture Rs 60,000.
(2) Bank loan was settled for Rs 70,000;
Creditors and bills payable were settled at10% discount.
(3) Realisation expenses Rs 1,500.
4 ( March 2017 ) CA
2022-23 42
Building 178000 Creditors 15000

Machinery 20000 Bills payable 15000
Stock 65000 Bank loan 100000
Bills receivables 72000 P.F 60000
Furniture 65000 A’s husband Loan 65000
Bank (Realisation exp) 1500 Bank: 323000
Bank (Bank loan) 70000 Partners Capital:
Bank (Creditors) 13500 A 22750
Bank (Bills payable) 13500 B 13650
Bank (PF) 60000 C 9100 45500
Bank (A’s husband loan) 65000
623500 623500
3.Prepare a Realisation Account from the following details, on dissolution of a firm :

Liabilities Rs Assets Rs
Reserve Fund 8,000 Cash in hand 12.000
Capitals: Debtors 10,000
Sudha - 20,000 Furniture 20,000
Bindu - 20,000 40,000
70,000 70,000
On the date of the balance sheet, the firm was dissolved and all assets were sold out for Rs 68,000.
Firm incurred Rs 1,000 as the realisation expenses.
(March 2018)CA

Stock 28000 Creditors 22000
Debtors 10000 Cash(Assets) 68000
Furniture 20000
Cash (Realisation exp) 1000
Cash (Creditors) 22000
Partners Capital
Sudha - 4500
Babu -4500 9000
90000 90000
43 2022-23
2021-22
4.From the given Balance Sheet of a partnership firm prepare Realisation Account
Balance Sheet as on 31st March 2017
Creditors 1,52,000 Cash at bank 34,000
Mrs. Prithvi's Loan 20,000 Stock 20,000
Mrs. Nripan's Loan 40,000 Investments 40,000
investment Fluctuation 4,000 Debtors 80,000
Fund Less: Provision for
Reserve Fund 40,000 doubtful debt 8,000 72,000
Capitals:
Prithvi 40,000 80,000 Buildings 1,40,000
Nripan 40,000 Goodwill 30,000
3,36,000
3,36,000
The firm was dissolved on 31st March 2017- The following was agreed by partners :
Prithvi promised to pay Mrs. Prihtvi’s loan and took away Stock for Rs 16000.
Nripan took away half of the investments at 10% less.
Debtors realised for Rs 76,000. Creditors were paid at less of Rs760. Buildings realised for Rs
2,00,000. Goodwill Rs 24,000 and the remaining Investments were sold for Rs 18,000.
An old typewriter not recorded in the book was taken over by Nripan for Rs 1,200.
Realisation expenses amounted to Rs 4,000.
8 (June 2017) CA
Stock 20000 Provision for baddebt 8000
Debtors 80000 Bank 378000
Investment 40000 Creditors 152000
Building 140000 Mr.Pritivi’s Loan 20000
Goodwill 30000 Mrs.Nirpan Loan 40000
Prithivi’s a/c 20000 Investment fluctation 4000
Bank (creditors) 151240 Prithivi’s 16000

Bank(expense) 4000 Nirpan 18000
Bank 40000 Nirpan’s Capital 1200
Capital
Prithivi 55980
Nripan 55980 111960
637200 637200
2022-23 44
5.Rani,Preethi and Meera are partners sharing P & L in the ratio of 2:2:1. Their Balance Sheet as on
March 31, 2017 as follows :
Liability Amount Assets Amount

Sundry Creditors 3,000 Cash in hand 7,000
Reserve fund 3,500 Stock 3,500
Capital Debtors 4,000
Rani 10,000 Furniture 8,000
Preethi 10,000 Plant & Machinery 9,000
Meera 5,000
31,500 31,500
They decided to dissolve the business. The assets are realized as follows :
Plant and Machinery Rs 10,000. Stock Rs 3,500. Debtors Rs 3,750. Furniture Rs 7,500. Realisation
expense Rs 450 is met by Rani. Creditors were paid 5% less. There was an unrecorded assets of Rs
750 which were taken by Preethi at 500. Prepare Realization A/c.
8 (June 2018) AFS
Ans.
Realization A/c
Stock 3500 Sundry Creditors 3000
Debtors 4000 Bank 24750
Furniture 8000 Preethi Capital 500
Plant & Machinery 9000 ( unrecorded
Bank (Creditors) 2850 asset)
Rani's Capital
( Realization 450
expense)
Partners Capital
Rani 180
Preethi 180
Meera 90 450
28250 28250
6.Rineesha and Arya are partners in the ratio of 3 : 2. Their Balance Sheet 31-03-2017 is given below:
Partners' Capital A/c.: Bank A/c. 50,000
Rineesha 22,000 Stock in Hand 10,000
Arya 25,000 47,000 Debtors 20,000
Creditors 60,000 Sundry Assets 53,000
Reserve Fund 26,000
1,33,000 133,000
The firm is dissolved on 31-3-2017. Prepare the Realisation Account by considering the following:
(i) Stock realized Rs 9,000
(ii) Sundry assets sold for Rs 45,000
(iii) Realisation expenses met Rs 2,000
(iv) Creditors paid in full 5(March 2019)
45 2022-23
2021-22
Ans. Realisaion a/c
Stock in hand 10000 Creditors 60000
Debtors 20000 Cash 74000
Sundry Assets 53000 Partners Capital a/c
Cash-Creditors 60000 Rineesha 6600
Arya 4400
Cash - Exp 2000 11000
145000 145000
7.Green and Red sharing profits as 3 : 1 and they agree upon dissolution. The Balance Sheet as on
31-03-2014 is as under:
Loan 12,000 Cash at Bank 25,000
Capitals: Furniture 16,000
Green 1,10,000 Debtors 70,000
Red 68,000 1,78,000 Plant & Machinery 52,000
2,08,000 2,08,000
Green took over plant and machinery at an agreed value of Rs 60,000. Stock and furniture
were sold for Rs 42,000 and Rs 13,900 respectively. Debtors were taken over by Red at Rs 69,000.
Creditors were paid at a discount of Rs 900. Green agreed to pay the loans. Realisation expenses
were Rs 1,600. Prepare necessary Ledger A/cs. 7 (March 2016) CA
Realisation a /c
Slock 45000 Loan 12000
Furniture 16000 Creditors 18000
Debtors 70000 Green's Capital 60000
Plant and Machinery 52000 Cash 55900
Cash 17100 Red's Capital 69000
Green’s Capita l a/c 12000
Cash (Real. Expenses] 1600
Partners Capital a/c 1200
Green ca pital - 900
Red Ca pital - 300
214900 214900
Capital Account
Realisation a/c 60000 69000 Bal b/d 110000 68000
Cash 62900 Realisation a/c 12000
Realisation a/c 900 300
Cash 700
122900 69000 122900 69000
Cash Account
Balance b/d 25000 Green's Capital 62900
Red's Capital 700 Realisation 1600
Realisation 55900 Realisation 17100
81600 81600
2022-23 46
8.Saji,Stephenad Sunil were partners sharing profit and losses in the ratio of 1:2:2,their balance sheet
as on 31st March 2012 was as follows
Liabilities Rs Assets Rs
accounts payable 15000 cash at Bank 16000
bank overdraft 12000 Joint life policy 15000
Stephen’s loan 18000 accounts receivable 18000
Joint life policy reserve 15000 stock in trade 56000
capital office equipment 8,000
Saji 20000 land and buildings 47000
Stephen 40000
Sunil 40000
160000 160000
The partners agreed to dissolve the firm on the following terms

a) Assets realised as land and buildings Rs 120000 stock Rs 40000 accounts receivable Rs. 15000
b) expenses on dissolution RS 3000
c) a creditor accept office equipments for Rs 7000 and the remaining creditors were paid in full by
cheque
d) The Joint life insurance policy was surrendered for Rs 9000
Prepare realisation account , capital accounts and bank account
8 (March 2014 ) CA
Ans. Realisation a/c
JLP 15,000 Account payable 15,000
Account receiva ble 18,000 Bank OD 12,000
Stock 56,000 JlP Resserve 15,000
Office equipment 8,000 Cash 1,75,000
L&B 47,000 Cash 9,000
Cash/Bank 8,000
Cash 12,000
Cash 3,000
Capital a /c 59,000
2,26,000 2,26,000
Capital Account
Saji Stephen Sunil Saji Stephen Sunil
Bal c/d 20,000 40,000 40000
Cash 31,800 63,600 63,600 Realisation a/c 11,300 23,600 23,600
31,800 63,600 63,600 31,800 63,600 63,600
Cash Account
Bala nce b/d 16,000 Stephen’s loan 18,000
Realisation 1,75,000 Realisa tion 8,000
Realisation 9,000 Realisa tion 12,000
Realisa tion 3,000
Partner’s ca pita l
Saji 31,800
Stephen 63,600
Sunil 63,600
2,00,000 2,00,000

47 2022-23
2021-22

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XII ACCOUNTANCY

PREVIOUS YEARS QUESTION AND ANSWER

5.Under fixed capital method interest on drawing should be shown in

8.Under fixed capital method, the interest on drawings is :

11.Under fixed capital method, interest on drawings is debited..............a/c 1 (March 2016)CA

12.The written agreement of partnership is called .......................

15.Partnership is the result of .....................................

16.Partners are entitled to get ................................................. in the absence of an agreement.

Ans. Interest on opening Capital = 5,00,000 x 6/100 x 3/12 = 7500

4.What is a Partnership Deed ? Give any four items to be included in it.

3 (March 2022) AFS

Interest on Drawing = 4,99,000x6/100x1/12

Date of Withdrawal Amount

April 30,2020 7,000

Sept. 30,2020 4,000

Dec. 1,2020 5,000

Interest on drawings = Sum of products x Rate of interest x 1/12

Ans.. (1) = 24,000 * 10/100 *6.5/12

Profit & Loss Appropriation a/c

PREPARED BY: SIRAJUDHEEN M, HSST

3.Find the odd one

5.Complete the following Journal Entry :

7.Reconstitution of a partnership happens at the time of ..................................

11.Goodwill is a/an ............................

5.Enumerate any two rights acquired by a newly admitted partner of a firm

1 Cash A/c Dr. 70,000

Date Particulars LR Debit Credit

1 CashA/c Dr. 48,000

2.When 50% of the amount of goodwill withdrawn by the partners

Cash A/c Dr. 50,000

Goodwill A/c Dr. 5,000

Ans. Revaluation Account

Particulars Amount Particulars Amount

Furniture 1,500 Building 20,000

Partner’s Capital Accounts Cr.

Creditors 28,000 Cash in hand 3,000

Esha 87,820 Building 65,000

Particulars Amount Particulars Amount

Partner’s Capital Accounts Cr.

29,530 23,020 15,000 29,530 23,020 15,000

Liabilities Amount Assets Amount

Sanju is admitted as a partner on 31-03-2012 on the following terms.

Particulars Anju Manju Sanju Particulars Anju Manju Sanju

Balance c/d Opening Balance

Stock 6.000 Plant &

Aneesh's capital 3,000 Furniture 2.000

Balance b/d 60.000 40.000 —

Particulars Amount Particulars Amount

Revaluation 4,800 3,200 10,000 Bal. b/d 17,000 19.000 10,000

22,800 21,000 10,000 22,800 21,000 10,000

Outstanding expenses 2,000 Sundry assets 72,000

Liabilities Amount Assets Amount

Creditors 50,000 Cash at Bank 5,000

Mr. Faisal is admitted into the partnership on the following terms :

Furniture 5000 Creditors 1000

Balance Sheet as on 01/01/2017

Liabilities Amount Assets Amount

Revaluation A/c Dr. 650

Building A/c Dr. 2,000

Creditors A/c Dr. 500