All Chapter MCQ Accountancy Class 12

CHAPTER 2 –ACCOUNTING FOR PARTNERSHIP:
FUNDAMENTALS
I.MULTIPLE CHOICE QUESTIONS
Sr.No Question:
1. For which one of the following, the balance in the Securities premium Reserve
Account cannot be used?
(A)To write off the preliminary expenses of the company

(B) To pay a premium on the redemption of preference shares of the company.
(C) To pay interest on the debentures of the company
(D)To pay for buyback of its own shares.
2. Capital employed in a business is Rs. 2,00,000. Normal Rate of Return on capital
employed is 15%. During the year, the firm earned a profit of Rs. 48,000. Calculate
goodwill on the basis of 3 years’ purchase of Supper Profit.
(A) Rs. 54,000
(B) Rs. 60,000
(C) Rs. 50,000
(D) None of these
3. Galib&Jakib are partners in a firm. Galib is to get commission of 10% of net profit
before charging any commission. Jakib is to get a commission of 10% on net profit
after charging all commissions. Net Profit for the year ended 31st March, 2021 was
Rs 55,000. What will be amount of Profit to be distributed to each?
(A) Rs. 5,500 to Galib& Rs. 4,500 to Jakib.
(B) Rs. 27,500 each.
(C) Rs. 22,500 each.
(D) None of the above
4. If the guarantee is given to the partner by some partners, deficiency on such will
be borne by
(A) Partnership firm.
(D) All of the other partners.
KVS ZIET BHUBANESWAR 12/10/2021 1

(C) Partners who had given the guarantee.
5. If the Partners are maintaining the capital account on Fixed basis, partner’s capital
account will have:
(A) Credit balance.
(B) Debit balance.
(C) Credit or Debit balance.
(D) May have Nil balance
6. If the partnership deed is silent interest on drawings will be charged @

(A) 6% P.a
(B) 6% P.m
(C) Any other Rate.
(D) Will not be charged
7. Which is not the clause of the Partnership Deed?

(A) Business can be carried on by all or any of the partner’s acting for all.
(B) Commencement of business.
(C) Rights & Duties of Partner.
8. The Net profits of Kamini were Rs. 20,000. Gulafsa the manager was to be given
the commission of Rs 6,000; the distribution of profits will be done as:
(A) Rs. 10,000 to each.
(B) Rs. 7,000 to each.
(C) Rs. 13,000 to each.
9. Shalu, Shan& Julie are partners sharing profits in the ratio of 6 : 4 : 1. Julie is
guaranteed a minimum profit of Rs. 20,000. The firm incurred a loss of Rs.
2,20,000 for the year ended 31st March, 2021. What amount of deficiency will be
borne by Shaluand Shan.
(A) Rs. 10,000 each.

(B) Rs. 20,000 each.
(C) Rs. 24,000 by Shalu& Rs. 16,000 by Shan.
(D) Rs. 12,000 by Shalu& Rs. 8,000 by Shan.
10. Om& Prakash were partner’s without any deed where Prakash invested the total
capital and Om had the complete hold on the business as Prakash was the sleeping
partner, but as Prakash invested complete capital demanded to share the profits in
the Ratio of 5 : 1 and Om object’s to this.
(A) Om’s objection is correct.
(B) Prakash’s demand is correct.

(C) Both are wrong.
(D) As investment is of Prakash he should be given interest on capital.
11. Following are essential elements of a partnership firm except:

(A) At least two persons.
(B) There is an agreement between all partners.
(C) Equal share of profits and losses.
(D) Partnership agreement is for some business.
12. Which of the following items is not dealt through Profit and Loss Appropriation
Account?
(A)Interest on Partner’s Loan

(B) Partner’s Salary
(C) Interest on Partner’s Capital
(D)Partner’s Commission
13. A partner withdrew Rs. 4,000 per month from 1st July, 2016, on beginning of every
month. Accounts are closed at 31st March, 2017. Calculate interest on drawings
while rate of interest is 10% per annum.
(A) Rs. 1,600
(B) Rs. 1,800
(C) Rs. 1,500

(D) Rs. 2,200
14. A, B and C sharing profits in the ratio of 2: 2: 1 have fixed capitals of Rs. 3,00,000,
Rs. 2,00,000 and Rs. 1,00,000 respectively. After closing the accounts for the year
ending 31st March 2019 it was discovered that interest on capitals was provided @
12% instead of 10% p.a. In the adjusting entry:
(A) Cr. A Rs. 1,200; Dr. B Rs. 800 and Dr. C Rs. 400
(B) Dr. A Rs. 1,200; Cr. B Rs. 800 and Cr. C Rs. 400
(C) Cr. A Rs. 800; Cr. B Rs. 400 and Dr. C Rs. 1,200
(D) Dr. A Rs. 800; Dr. B Rs. 400 and Cr. C Rs. 1,200
15. A partner withdraws Rs.8,000 each on 1st April and 1st Oct. Interest on his
drawings @ 6% p.a. on 31st March will be:
(A) Rs. 480
(B) Rs.720
(C) Rs. 240
(D) Rs. 960
16 [ A&E] If Goodwill is Rs. 1,20,000, Average Profit is Rs. 60,000 Normal. Rate of
Return is10% on Capital Employed Rs. 4,80,000. Calculate capitalized value of
the firm:-
a. Rs. 6,00,000
b. Rs. 5,00,000
c. Rs. 4,00,000
d. Rs. 7,00,000
17 [ A ] A business has earned Super profit of Rs. 1,00,000during the last few years
and Normal rate of returns in 10% Calculate goodwill
a. Rs. 10,00,000
b. Rs. 54,000
C. 20,000
d. 36,000
18 (U)Rani and Shyam is partner in a firm. They are entitled to interest on their
capital but the net profit was not sufficient for paying his interest, then the net
profit will be disturbed among partner in

a. 1:2
b. profit sharing ratio
c. capital ratio
d. equally
19 [ U ] Which one of the following items is recorded in the Profit and Loss
appropriation account
a. Interest on loan
b. Partner Salary
c. Rent paid to Partner
d. Managers commission
20 [ R ] Salary to a partner under fixed capital account is credited to
Partner’s Capital A/c
a.
Partner’s current A/c
b.
Profit & Loss A/c
c.
Partner’s Loan A/c
d.
21 In the absence of partnership deed partner share profit and loss in
a. Ratio of Capital Employed
b. Equal ratio
c. 2:1
d. 1:2
22 (A&E) A, B, and C are partner’s sharing profits in the ratio of 5:3:2According to
the partnership agreement C is to get a minimum amount of Rs. 10,000 as his
share of profits every year. The net profit for the year ended 31st March, 2019
amounted to Rs. 40,000. How much amount contributed by A?
a. Rs. 1.350
b. Rs . 1,250
c. Rs. 750
d. Rs. 1,225
23 [ R ] The relation of the partner with the firm is that of
a. An owner
b. An agent and A Principal
c. An agent
d. Manager
24 [ R ] If the partner carries on the business that is similar to firm competition with
the firm and profit earned from it, the profit
a. Shall be retained by the partner
b. Shall be paid to firm
c. Can be retained or gained to the firm
d. Both (A) and (B).

25 [U ] Closing entry for interest on loan allowed to partners
a. Interest on partner’s loan …Dr.
To Profit and Loss A/c
b. Interest on loan …Dr.
To Profit and Loss Appropriation A/c
c. Profit and Loss Appropriation A/c …Dr.
To interest on partner’s loan A/c
d. Profit and Loss Appropriation A/c …Dr.
To interest on loan A/c
26 Features of a partnership firm are :
(A) Two or more persons are carrying common business under an agreement.
(B) They are sharing profits and losses in the fixed ratio.
(C) Business is carried by all or any of them acting tor all as an agent.
(D) All of the above.
27 Which of the following statement is true?

(A) a minor cannot be admitted as a partner
(B) a minor can be admitted as a partner, only into the benefits of the partnership
(C) a minor can be admitted as a partner but his rights and liabilities are same of
adult partner
(D) none of the above
28 The relation of partner with the firm is that of:

(A) An Owner
(B) An Agent
(C) An Owner and an Agent
(D) Manager
29 What should be the minimum number of persons to form a Partnership :

(A) 2
(B) 7
(C) 10
(D) 20
30 Number of partners in a partnership firm may be :

(A) Maximum Two
(B) Maximum Ten
(C) Maximum One Hundred
(D) Maximum Fifty

31 Liability of partner is :
(A) Limited
(B) Unlimited
(C) Determined by Court

(D) Determined by Partnership Act
32 In the absence of Partnership Deed, the interest is allowed on partner’s capital:

(A) @ 5% p.a.
(B) @ 6% p.a.
(C) @ 12% p.a.
(D) No interest is allowed
33 In the absence of a partnership deed, the allowable rate of interest on partner’s
loan account will be :
(A) 6% Simple Interest
(B) 6% p.a. Simple Interest
(C) 12% Simple Interest
(D) 12% Compounded Annually
34 A and B are partners in partnership firm without any agreement. A has given a
loan of ₹50,000 to the firm. At the end of year loss was incurred in the business.
Following interest may be paid to A by the firm :
(A) @5% Per Annum
(B) @ 6% Per Annum
(C) @ 6% Per Month
(D) As there is a loss in the business, interest can’t be paid
35 A and B are partners in a partnership firm without any agreement. A has
withdrawn Rs.50,000 out of his Capital as drawings. Interest on drawings may be
charged from A by the firm :
(A) @ 5% Per Annum
(B) @ 6% Per Annum
(C) @ 6% Per Month
(D) No interest can be charged
36 Capital employed by a partnership firm is Rs10,00,000. Its average profit is Rs
1,20,000. The normal rate of return in similar type of business is 10%. What is the
amount of super profits?
(a) Rs 12,000
(b) Rs 20,000
(c) Rs 1,00,000
(d) Rs 1,12,000
Ans:- Rs 20,000
37 Naman Enterprises earn a profit of Rs. 90,000 with a capital of Rs. 4,00,000. The
normal rate of return in the business is 15%. Use Capitalization of super profit

method to value the goodwill.
(a) Rs.1,50,000
(b) Rs. 2,00,000
(c) Rs.2,25,000
(d) Rs.2,50,000
Ans:- (b) Rs. 2,00,000
38 Super Profit means

(a) Excess of average profit over normal profit
(b) Average profit
(c) None of these
(d) Normal profit
Ans:- (a) Excess of average profit over normal profit
39 X and Y shared profits and losses in the ratio of 3:2 with effect from 1st April,
2019; they decided to share profits equally. Goodwill of the firm was valued at
Rs.60,000. The adjustment entry for Goodwill will be:
(a) Dr. Y’s Capital A/c and Cr. X’s Capital A/c with Rs.6,000.
(b) Dr. X’s Capital A/c and Cr. Y’s Capital A/c with Rs.6,000.
(c) Dr. X’s Capital A/c and Cr. Y’s Capital A/c with Rs.600.
(d) Dr. Y’s Capital A/c and Cr. X’s Capital A/c with Rs.600.
Ans:- a) Dr. Y’s Capital A/c and Cr. X’s Capital A/c with Rs.6,000
40 What are super profits

(a) Actual profit – Normal Profit
(b) Normal Profit - Actual profit
(c) Actual profit + Normal Profit
(d) )None of the above
(e) Ans:- (a) Actual profit – Normal Profit
41 Capital employed in the firm is Rs. 15,00,000 and normal rate of return in similar
businesses is 10%. What is the amount of Actual Average Profit?
(a) Rs. 2,50,000
(b) Rs. 1,20,000
(c) Rs. 2,17,000
(d) None of the above
Ans:- (c) Rs. 2,17,000
42 Following are the factors affecting goodwill except:

(a) Efficiency of Management

(b) Location of the Customers
(c) Technical Knowledge
(d) Nature of business
Ans:- (c) Technical Knowledge.
43 X,Y and Z are partners in a firm. At the time of division of profit for the year there
was dispute between the partners. Profit before interest on partner’s capital was
Rs. 6,00,000 and Z demanded minimum profit of Rs. 5,00,000 as his financial
position was not good. However, there was no written agreement on this point.
How will the profit be distributed?
(a) Other partners will pay Z the minimum profit and will share the loss equally
(b) Other partners will pay Z the minimum profit and will share the loss in capital
ratio.
(c) X and Y will take Rs. 50,000 each and Z will take Rs. 5,00,000.
(d) Rs. 2,00,000 to each of the partners.
Ans:- (d) Rs. 2,00,000 to each of the partners.
44 Which of the following is not a method of valuing goodwill?

a. Discounted Cash Flow Method
b. Average Profit Method
c. Super Profit Method
d. Capitalisation Method
Ans:- (a) Discounted Cash Flow Method
45 A, B and C are partners sharing profits in the ratio of capitals (old 5:3:2 and new
2:3:5). Their capital after adjustment in the new capital ratio is Rs 20,000, Rs
30000, Rs 50000. Who will bring the amount of actual cash for adjustment?
(a) None of these
(b) C
(c) B
(d) A
Ans:- (b) C
46 In absence of partnership deed, partners are entitled to:
a) Salary b) Commission c) Interest on capital d) None of the above

47 If drawings are made at the beginning of each month , then interest is
calculated for:
a) 6 months b) 5.5 months c) 6.5 months d) 12 months

48 In the absence of partnership deed, interest on loan of a partner is allowed:
a) At 8% p.a b) At 6% p.a c) No interest is allowed
d) At 12% p.a
49 Which of the following is not an appropriation of profits?

a) Interest on capital b) Interest on loan c) Commission of partner d) None
of the above
50 Interest on partners loan is treated as:
a) Charge against profit b) Appropriation out of profits
c) Either (a) or (b) d) None of the above
51 Which of the following can be claimed by a partner even in case of no partnership

deed?
a) Profit in equal ratio b) Commission c) Salary
d)Interest on loan
52 In case of fixed capital, interest on drawings:

a) Debited to partners capital account b)Debited to partners current account
c)Either (a) or (b) d) None of the above
53 A firm has earned average profit of Rs 60,000. Rate of return on capital employed
is 12.5% p.a. Total capital employed in the firm is Rs 4, 00,000. Goodwill on the
basis of two years purchase of super profits is:
a) 20,000 b) 15,000 c) 10,000 d) 25,000
54 In order to calculate normal profit for valuation of goodwill:

a)Abnormal losses are added b) Abnormal gain are deducted
c) Both (a) or (b) d) None of the above
55 Interest on capital is allowed on the:

a) Capital at the end of the year b) Opening capital c) Average capital d)
Capital employed

ANSWER KEY
Q.NO. ANSWER
1. C
2. A
3. C
4. C
5. A
6. D
7. A
8. B
9. C
10. A
11. C
12. A
13. C
14. B
15. B
16 A
17 A
18 C
19 A
20 B
21 B
22 A

23 B
24 B
25 C
26 D
27 B
28 C
29 A
30 D
31 B
32 D
33 B
34 B
35 D
36 B
37 B
38 A
39 A
40 A
41 C
42 C
43 D
44 A
45 B
46 d)None of the above

47 c)6.5 months
48 b) At 6% p.a
49 b) Interest on loan
50 a)Charge against profit
51 a)Profit in equal ratio
52 b)Debited to partners current account
53 a) 20,000
54 c) Both (a) or (b)
55 b) Opening capital
PREPARED BY THE PGTs ( COMMERCE ) OF BHUBANESWAR, GUWAHATI,

KOLKATA, RANCHI, SILCHAR AND TINSUKIA REGIONS.

CHAPTER 3:- CHANGE IN PROFIT SHARING RATIO AMONG
EXISTING PARTNERS
MULTIPLE CHOICE QUESTIONS:-

Q.NO. QUESTIONS
1 The ratio in which a partner receives a rise in his share of profits is known as:
A. New Ratio
B. Sacrificing Ratio
C. Capital Ratio
D. Gaining Ratio
2 Sacrificing ratio is the difference between :
A. New ratio and old ratio
B. Old ratio and new ratio
C. New ratio and gaining ratio
D. Old ratio and gaining ratio
3 In case of change in profit-sharing ratio, the accumulated profits are distributed to
the partners in
A. new ratio
B. old ratio
C. sacrificing ratio
D. equal ratio
4 Ajay,Bijay and Sujay are partners sharing profits and losses in the ratio of
5:3:2.They decide to share the future profits in the ratio of 3:2:1. Workmen
compensation reserve appearing in the balance sheet on the date if no information is
available for the same will be:
A. Distributed among the partners in old profit sharing ratio
B Distributed among the partners in new profit sharing ratio
C. Distributed among the partners in capital ratio
D.Carried forward to new balance sheet without any adjustment
5 Alok and Bhupesh are partners in a firm sharing profits in the ratio of 3 : 2. They
decided to share future profits equally. Calculate Alok’s gain or sacrifice
A. 2/10 (sacrifice)
B. 5/10 (gain)
C.1/10 (Gain)
D.1/10 (sacrifice)
6 A, B and Care partner sharing profits in the ratio of 2 : 4 : 6. On 1-4-2022
theydecided to share the profits equally. On the date there was a credit balance of
Rs.1,20,000 in their Profit and Loss Account and a balance of Rs.1,80,000 in
GeneralReserve Account. Instead of closing the General Reserve Account and Profit
andLoss Account, it is decided to record an adjustment entry for the same. In
thenecessary adjustment entry to give effect to the above arrangement:
ZIET BHUBANESWAR 12/10/2021 Page 1

A. Dr. A by Rs. 50,000; Cr. B by Rs. 50,000
B. Cr. A by Rs. 50,000; Dr. B by Rs. 50,000
C. Dr. A by Rs. 50,000; Cr. C by Rs. 50,000
D.Cr. A by Rs. 50,000; Dr. C by Rs. 50,000
7 Which section of Indian Partnership Act, 1932 defines partnership as "Partnership is
the relation between persons who have agreed to share the profits of a business
carried by all or any of them acting for all."
A. Section 4
B. Section 2
C. Section 40
D. Section 42
8 Feature of a partnership firm:

A. Two or more persons are carrying common business under an agreement.
B. They are sharing profits and losses in the fixed ratio.
C. Business is carried by all or any of them acting for all as an agent.
D. All of these
9 Which one from the below is not a right of a partner?

A. Right to inspect the books of accounts
B. Right to take part in the management of the firm
C. Right to share the profit/losses with other partners in agreed ratio
D. Right to receive salary at the end of every year
10 P, Q, and R are partners in 6 : 4 : 2. R is guaranteed that his share of profit will not
be less than rs.70,000. Any deficiency will be borne by P and Q in the ratio of 4 : 2.
Firm’s profit was rs.2,40,000. Share of P will be :
A. Rs.1,00,000
B. Rs.1,10,000
C. Rs.1,20,000
D. Rs.1,02,000
11 Any change in the relationship of existing partners, resulting in the end of existing
agreement and formation of new agreement is termed as
(A) Revaluation of partnership
(B)Realisation of partnership
(C) Reconstitution of partnership firm
(D) Reconstitution of partnership
12 Which of the following is not transferred to partners’ capital accoumt?

(A) Retained earnings
(B) General Reserve
(C) Employees Provident Fund
(D) Contingency Reserve
13 State the ratio in which the partners share all the accumulated profits, reserves,
losses at the time of change in profit sharing ratio.
(A) Old profit sharing ratio
(B) New profit sharing ratio
(C)Sacricing ratio
(D) Gaining ratio
14 Which of the following statement is correct for Revaluation account?
(A) Increase in the value of an asset is credited to Revaluation account
(B) Increase in the amount of a liability is debited to Revaluation account
(C) Decrease in the value of an asset is credited to Revaluation account
(D) Decrease in the amount of a liability is credited to Revaluation account
15 Sacrificing ratio is calculated as
(A) New ratio – Old ratio
(B) Old ratio – Gaining ratio
(C) Gaining ratio – Old ratio
(D) Old ratio – New ratio
16 Ankita and Neha are sharing profits in the ratio of 2:1. Now they have decided that
new profit sharing ratio will be equal. What will be the Gain/Sacrifice ratio?
(A) Ankita gain 1/6 and Neha sacrifice 1/6
(B) Ankita sacrifice 1/6and Neha gain 1/6
(C) Ankita gain 4/5 and Neha sacrifice 4/5
(D)Ankita sacrifice 2/3 and Neha gain 1/6
17 Sanjeev and Shalu were partners sharing profits in the ratio of 3:2. From 1stApril
2020, they decided to change it to 3:1. For this purpose the goodwill was valued at
₹ 1,20,000. Journal entry for the above transaction will be

(A) Sanjeev capital A/c debit ₹20,000 and Shalu capital A/c credit ₹20,000
(B)Shalu capital A/c debit ₹20,000 and Sanjeev capital A/c credit ₹20,000
(C) Sanjeev capital A/c debit ₹18,000 and Shalu capital A/c credit ₹18,000
(D)Shalu capital A/c debit ₹18,000 and Sanjeev capital A/c credit ₹18,000
18 Sun, Moon and Star are partners sharing profits in the ratio of 5:3:2. With effect
from 1st July 2020, they agreed to share future profits 2:3:5. They decided to
record the following with affecting the values.
Profit & Loss A/c (Cr.) - ₹24,000
Advertisement Suspense A/c - ₹12,000
What is the impact of the above adjustments on Moon?
(A) No effect on Moon
(B) Moon debit by ₹ 3,600
(C) Moon credit by ₹ 3,600
(D) Moon debit by ₹ 12,000
19 Amar, Akbar and Anthony are partners in the ratio of 2:2:1. On 31stMarch, 2021
they decided to share equally in future.
Balance Sheet (Extract)
As on 31st March, 2021
Liabilities ₹ Assets ₹
Investment Fluctuation 12,000 Investments 1,00,000
Reserve
Market value of Investments is ₹93,000. What amount will be debited/credited to
partner’s capital account?
(A) Investment Fluctuation Reserve credited as ₹2,000: ₹2,000:₹1,000
(B) Investment Fluctuation Reserve debited as ₹2,000: ₹2,000:₹1,000
(C) It will not be debited to capitals
(D) It will not be credited to capitals
20 P, Q and R were partners in the ratio of 3:2:1. As on 1st July 2020, they decided to
alter their ratio. For this purpose P decided to give ¼ of his share to Q, and Q

decided to give ½ of his share to P and R equally. What will be the Sacrifice/Gain
of P?
(A) 3/24 Sacrifice
(B) 1/24 Sacrifice
(C) 2/24 Gain
(D) 1/24 Gain
21 Which of the following does not result into reconstitution of a firm?
(A) Dissolution of partnership firm
(B) Dissolution of partnership
(C) Change in profit sharing ratio of existing partners
(D) Death of a partner
22 Any change in the relationship of existing partners which results in an end of the
existing agreement and enforces making of new· agreement is called:
(A)Revaluation of partnership
(B)Reconstitution of partnership
(C)Realisation of partnership
(D)Dissolution of firm
23 A and B are partners in a firm sharing profits in the ratio of 3 : 2. They decided to
share future profits equally. Calculate A’s gain or sacrifice
(a) 2/10 (sacrifice)
(b) 5/10 (gain)
(c) 1/10 (Gain)
(d) 1/10 (sacrifice)
24 Increase and decrease in the value of assets and liabilities are recorded through:
(a) Partners' Capital Accounts
(b) Revaluation Account
(c) Profit and Loss Appropriation Ne
(d) Profit and loss account
25 Pawan and Gouravwere partners in a firm sharing profits in the ratio of 2 : 1. With
effect from 1st January, 2021, they decided to share profits and losses equally.
Individual partner’s gain or sacrifice due to change in the ratio will be:
a. Gain by Pawan 1/6, sacrifice by Gaurav 1/6
b. Sacrifice by Pawan 1/6, gain by Gaurav 1/6
c. Gain by Pawan 1/2, sacrifice by Gaurav 1/2
d. Sacrifice by Pawan 1/2, gain by Gaurav 1/2
26 In case of change in profit-sharing ratio, the gaining partner must compensate the
sacrificing partners by paying the proportional amount of
(a)capital
(b)cash
(c)goodwill
(d) profits
27 R, S and T sharing profits and losses in the ratio of 1:2:3, decided to share future
profit and losses equally. They also decided to adjust the following accumulated
profits, losses and reserves without affecting their book figures, by passing a single
adjustment entry:
General Reserve 40000
Profit and Loss A/c 30000
Deferred revenue expenditure 10000
The necessary .adjustment entry will be:
A. Dr. R and Cr. T by 10,000
B. Dr. T and Cr. R by 10,000
C. Dr. S and Cr. R by 10,000
D. Dr.R and Cr. S by 10,000
28 P , Q and R are partners in a firm sharing profits in the ratio of 5:4:1. They decided
to share future profits equally. The goodwill was valued at Rs. 60,000. The
adjusting journal entry will be:
A. R's Capital A/c Dr. 14,000
To P's Capital A/c 10,000
To Q's Capital A/e 4,000
B. R's Capital A/c Dr. 20,000
To Q's Capital A/C 10,000
C. P's Capital A/e Dr. 10,000
Q's Capital A/c D r. 4,000
To R's Capital A/c 14,000
D. Goodwill A/C Dr. 60,000
To Q's Capital A/c 20,000
To R's Capital A/c 20.000
29 X,Y and Z are partners sharing profits and losses in the ratio of 5:3:2.They decide
to share the future profits in the ratio of 3:2:1. Workmen compensation reserve
appearing in the balance sheet on the date if no information is available for the
same will be:
a) Distributed among the partners in capital ratio
b) Distributed among the partners in new profit sharing ratio
c) Distributed among the partners in old profit sharing ratio
d)Carried forward to new balance sheet without any adjustment
30 A,B and C were partners in a firm sharing profits in the ratio of 3:4:1 .They decided
to share profits equally w.e.f from 1 .4.2019. On that date the profit and loss
account showed the credit balance of 96,000.instead of closing the profit and loss
account ,it was decided to record an adjustment entry reflecting the change in

profit sharing ratio .In the journal entry:
a) Dr. A by 4,000; Dr. B by 16,000; Cr C by 20,000
b) Cr. A by 4,000; Cr. B by 16,000; Dr C by 20,000
c) Cr. A by 16,000; Cr. B by 4,000; Dr C by 20,000
d) Dr. A by 16,000; Dr. B by 4,000; Cr C by 20,000
31 X, Y and Z are in a partnership firm sharing profits in the ratio 4 : 3 : 1. The
partners agreed to share future profits in the ratio 5 : 4 : 3. Each partners’s gain or
sacrifice due to change in ratio will be:
(a) X’s Sacrifice 2/24; Y’s Sacrifice 1/24; Z’s Gain 3/24
(b) X’s Gain 2/24; Y’s Gain 1/24; Z’s Sacrifice 3/24
(c) X’s Sacrifice 1/24; Y’s Sacrifice 2/24; Z’s Gain 3/24
(d) X’s Sacrifice 2/24; Y’s Gain 3/24; Z’s Sacrifice 1/24
32 Komal and Sunita are partners with capitals of Rs.3,00,000 and Rs.2,00,000
respectively. Normal rate of return is 15% and goodwill calculated at 2 years
purchase of Super profits is valued at Rs.1,00,000. What were the average profits
of the firm?
(a) Rs.80,000
(b) Rs.1,25,000
(c) Rs.2,75,000
(d) Rs.95,000
ANSWER KEY
Q.NO. ANSWERS
1 D
2 B
3 D
4 A
5 D
6 C
7 A
8 B
9 D
10 A
11 (D) Reconstitution of partnership
12 (C) Employees Provident Fund
13 (A) Old profit sharing ratio
14 (C) Decrease in the value of an asset is credited to Revaluation account
15 (D) Old ratio – New ratio
16 (B) Ankita sacrifice 1/6and Neha gain 1/6
17 (D) Shalu capital A/c debit ₹18,000 and Sanjeev capital A/c credit ₹18,000
18 (A) No effect on Moon
19 (A) Investment Fluctuation Reserve credited as ₹2,000: ₹2,000:₹1,000
20 (B) 1/24 Sacrifice
21 A
22 B
23 D
24 B
25 B
26 C
27 A
28 A
29 C
30 B
31 A
32 B


Accountancy
Chapter 4: Admission of a Partner
MULTIPLE CHOICE QUESTIONS
Sl. Question:
No
01 A and B share profits and losses equally. They have ₹20,000 each as capital. They
admit C as equal partner and goodwill was valued at ₹30,000. Cis to bring in
₹30,000as his capital and necessary cash towards his share of goodwill. Goodwill
Account will not remain open in books. If profit on revaluation is ₹13,000,find the
closing balance of the capital accounts.
(A) ₹31,500;₹31,500; ₹30,000
(B) ₹31,500; ₹31,500; ₹20,000
(C) ₹26,500; ₹26,500; ₹30,000
(D) ₹20,000;₹20,000; ₹30,000
02 If, at the time of admission, the revaluation A/c shows a profit, it should be
credited to :
(A) Old partners capital accounts in the old profit sharing ratio.
(B) All partners capital accounts in the new profit sharing ratio.
(C) Old partners capital accounts in the new profit sharing ratio.
(D) Old partners capital accounts in the sacrificing ratio.
03 In case of admission of a partner, the entry for unrecorded investments will be:
(A) Debit Partners Capital A/cs and Credit Investments A/c
(B) Debit Revaluation A/c and Credit Investment A/c
(C) Debit Investment A/c and Credit Revaluation A/c
04 A and B are partners of a partnership firm sharing profits in the ratio of 3 : 2
respectively. C was admitted for 1/5th share of profit. Machinery would be
appreciated by 10% (book value ₹80,000) and building wouldbe depreciated by
20% (₹2,00,000). Unrecorded debtorsof ₹1,250would be brought into books now
and a creditor amounting to ₹2,750 died and need not pay anything on this
account. What will be profit/loss on revaluation?
(A) Loss ₹28.000
(B) Loss ₹40,000
(C) Profits ₹28,000
(D) Profits ₹40,000
05 If at the time of admission if there is some unrecorded liability, it will be
to Account
A. Debited, Revaluation
B. Credited, Revaluation
C. Debited, Goodwill
D. Credited, Partners’ Capital
KVS ZIET BHUBANESWAER 12/10/2021 Page 1

06 Revaluation Account or Profit and Loss Adjustment A/c is a
(A) Real Account
(B) Personal Account
(C) Nominal Account
(D) Asset Account
07 A and B are partners sharing profits in the ratio of 2 : 3. Their Balance Sheet
shows Machinery at ₹2,00,000;Stock at ₹80,000and Debtors at ₹1,60,000. C is
admitted and new profit sharing ratio is agreed at 6 : 9 : 5. Machinery is revalued
at ₹1,40,000 and a provision is made for doubtful debts @5%. A’s share in loss on
revaluation amount to ₹20,000. Revalued value of Stock will be :
(A) ₹62,000
(B) ₹1,00,000
(C) ₹60,000
(D) ₹98,000
08 If at the time of admission, some profit and loss account balance appears in the
books, it
will be transferred to:
(A) Profit & Loss Adjustment Account
(B) All partners‘ Capital Accounts
(C) Old partners‘ Capital Accounts
(D) Revaluation Account
09 At the time of admission of a partner, what will be the effect of the following
information? Balance in Workmen compensation reserve ₹40,000. Claim for
workmen compensation ₹45,000.
(A) ₹45,000 Debited to the Partner’s capital Accounts.
(B) ₹40,000Debited to Revaluation Account.
(C) ₹5,000Debited to Revaluation Account.
(D) ₹5,000 Creditedto Revaluation Account.
10 Angle and Circle ware partners in a firm. Their Balance Sheet showed Furniture at
₹2,00,000; Stockat ₹1,40,000;Debtors at ₹1,62,000 andCreditors at ₹60,000.
Square was admitted and new profit-sharing ratio was agreed at 2:3:5. Stock was
revalued at ₹1,00,000, Creditors of₹15,000are not likely to be claimed, Debtors
for ₹2,000have become irrecoverable and Provision for doubtful debts to be
provided @ 10%. Angle’s share in loss on revaluation amounted to ₹30,000.
Revalued value of Furniture will be:
(A) ₹2,17,000
(B) ₹1,03,000
(C) ₹3,03,000
(D) ₹1,83,000

11. Why does incoming partner brings goodwill on his admission
a. To acquire right to share future profits.
b. To compensate old partners for their sacrifice.
c. To compensate old partners for their past efforts.
d. All of the above
12. On admission of a new partner, Work men compensation fund appearing in the
balance sheet is 15,000 and workmen claims a compensation of Rs 20,000. Pass
the journal entry for the treatment of workmen compensation fund.
a. Debit workmen compensation account Rs 5,000 and credit old partner’s
capital account Rs 5,000(old profit sharing ratio)
b. Debit workmen compensation account Rs 5,000 and credit Revaluation
account Rs 5,000
c. Debit Revaluation account Rs 5,000 and credit Workmen compensation
account Rs 5,000
d. None of these
The balance in the investment fluctuation fund after meeting the fall in the book
value of investment at the time of admission will be transferred to :
13.
a. Capital accounts of old partners
b. Revaluation account
c. General reserve
d. Capital accounts of all partners
Anand and Bobby are partners sharing profit in the ratio of 1:1. They admit Chiku
for 1/5th share who contributed Rs 25,000 for his share of goodwill. The total value
14. of the goodwill of the firm will be:
a. 25,000
b. 50,000
c. 1,00,000
d. 1,25,000
15.
Revaluation account is a :
a. Nominal account
b. Personal account
c. Real account
d. None of above.

16. A and B are partners sharing profits in the ratio 4:3. They admitted C as a new
partner who get 1/7th share of profit, entirely from A. The new profit sharing ratio
will be :
a. 3:3:1
b. 4:3:1
c. 3:3:2
d. 4:3:2
17. A and B are partners sharing profit or loss in the ratio 4:1. A surrendered 1/5th
from his share and B surrendered 1/5th of his share in favour of new partner C.
What will be the C’s share?
a. 2/5
b. 6/25
c. 3/25
d. None of these
18. At the time of admission of partner profit or loss on revaluation of assets and
liabilities is share by the partners in

a. New profit sharing ratio
b. Old profit sharing ratio
c. Sacrificing ratio
d. None of these
19. According to AS 26, which goodwill is recorded in the books:
a. Purchased goodwill
b. Self generated goodwill
c. Both (a) and (b)
d. None of the above.

20. Section of the Indian Partnership Act provides that a new partner shall
not be inducted into a firm without the consent of all existing partners.
a. 31
b. 32
c. 33
d. 30
21 Sacrificing ratio is calculated because

(A) Profit shown in Revaluation A/c can be credited to sacrificing partner.
(B) Goodwill brought in by the incoming partner can be credited to the new
partner
(C) Goodwill brought in by the incoming partner can be credited to the
sacrificing partner (s)
(D) Both A and C
22 At the time of admission of partner, new profit sharing ratio is concerned with
partner(s),while sacrificing ratio is concerned with
partner(s).
(A) New,old
(B) New ,all
(C) Old, new
(D) All, old
23 Mohan and Sohan are partners sharing profits in the ratio 3:2. They admit Tarun as
a new partner. After his admission the profit sharing ratio becomes 5:5:3. On the
date of Tarun’s admission the goodwill of the firm is valued at ₹ 13,00,000. The
amount of goodwill to be brought in by Tarun will be
(A) ₹5,00,000
(B) ₹ 10,00,000
(C) ₹ 3,00,000
(D) ₹ 13,00,000

24 When the incoming partner acquires his share from existing partners in their profit
sharing ratio, the steps for calculation of new profit sharing ratio are given as
(i) Calculate old partners’ new share as part of combined share
(ii) Convert the new shares of all partners and find out the new profit
sharing ratio.
(iii) Calculate combined share of old partners in the new firm by deducting
new partners share from (i)
Arrange the steps in the correct order
(A)(i),(ii),(iii)
(B) (iii),(i),(ii)
(C) (ii),(iii),(i)
(D)(iii),(ii),(i)
25 Zakir and Yasin are partners with profit sharing ratio as 2:3.They admitted Qasim
who brought ₹ 80,000 as goodwill which was credited to Zakir and Yasin’s
capitalaccount as ₹ 60,000 and ₹ 20,000 respectively.Goodwill of the firm is ₹
4,00,000, calculate new profit sharing ratio
(A) 2:3:5
(B) 5:11:4
(C) 5:12:3
(D) Can’t be determined
26 When goodwill is paid privately by a new partner (at the time of admission),new
partners’ account is credited
(A) True
(B) Partially true
(C) False
(D) Can’t say
27 P and Q are in partnership sharing profits and losses in the ratio 3:2. They admit R
into partnership with 1/5th share which he acquires equally from P and
Q.Accountant has calculated the new profit sharing ratio as5:3:2. Is accountant
correct?
(A) True
(B) Partially true
(C) False
(D) Can’t say

28 A and B are partners in a firm . They admit C as a partner with 1/5 th share in the
profits of the firm. C brings ₹ 4,00,000 as his share of capital. Calculate the value
of C’s share of goodwill on the basis of his capital, given that the combined capital
of A and B after all adjustments is ₹ 10,00,000
(A) ₹ 1,20,000
(B) ₹ 6,00,000
(C) ₹14,00,000
(D) ₹20,00,000
29 A and B are partners in the ratio of 3:1.C was admitted for 1/5 th share and he
could not bring his share of goodwill. Goodwill of the firm is valued at ₹
1,00,000.Journalise
(A) Premium for Goodwill A/c Dr 1,00,000
To A’s Capital A/c 75,000
To B’s Capital A/c 25,000
(B) C’s Capital A/c Dr 1,00,000
(C) C’s Capital A/c Dr 20,000
(D) C’s Capital A/c Dr 20,000
30 Match the columns for the situations at the time of admissions of new partner(s):
Column I Column II
i. Incoming partner a No Entry
brings his share of
goodwill

ii. Incoming partner b Premium for Goodwill A/c Dr.
Incoming Partner’s Capital A/c Dr.
does not bring his
To Sacrificing Partners Capital A/c
share of goodwill
iii. Incoming partner c Premium for Goodwill A/c Dr.
pays his share of
goodwill privately
iv. Incoming partner d Incoming Partner’s Capital A/c Dr.
brings only a part of
his share of goodwill
(A) i- b, ii-c, iii-a, iv-d
(B) i- c, ii-d, iii-a, iv-b
(C) i- d, ii-c, iii-a, iv-b
(D) i- d, ii-c, iii-b, iv-a
31 Revaluation Account is a
(A) Real Account
(B) Nominal Account
(C) Personal Account
(D) Both A and B
32 In case of admission of a partner, the entry for unrecorded investments will be
(A) Debit Revaluation Account and Credit Investment Account
(B) Debit Partner’s Capital Account and Credit Investment Account
(C) Debit Investment Account and Credit Revaluation Account
(D) Debit Revaluation Account and Credit Partner/s Capital Account
33 How are Accumulated losses treated at the time of Admission of a partner?
(A) Debited to Partners Capital Account
(B) Credited to Partner’s Capital Account
(C) Credited to Revaluation Account
(D) Debited to Revaluation Account
34 Profit or loss on Revaluation of Assets and Liabilities is shared among:
(A) Old Partners In sacrificing Ratio
(B) Old partners in gaining Ratio
(C) Old Partners In old Ratio
(D) All partners In new Ratio
35 At the time of Admission of a partner, decrease in the value of a liability is
(A) Credited to Revaluation Account
(B) Debited to Revaluation Account
( C) Credited to Partner’s Capital Account
(C) Debited to Partner’s Capital Account

36 Why are assets and Liabilities revalued at the time of admission of a partner?
(A) To bring the value of assets and liabilities to their current value.
(B) So that the incoming partner is not put to an advantage or disadvantage
because of the change in values of assets and liabilities .
(C) Both A and B
37 Anamika and Sagarika were partner’s in a firm sharing profits and losses in the
ratio of 3:2. Bagmita was admitted with 1/6th share in the profits of the firm. At the
time of admission, workmen compensation Reserve appeared in the Balance Sheet
of the firm at Rs.32000. The claim on account of workmen compensation was
determined at Rs.40000. Excess of claim over the reserve will be
(A) Credited to Revaluation Account
(B) Debited to Revaluation Account
(C) Credited to Old Partner’s Capital Account
(D) Debited to All Partner’s Capital Account
38 A and B are partners sharing profits and losses in the ratio of 1:1. Their balance
sheet shows a machinery at Rs. 200000; stock at Rs. 80000 and Debtors at Rs.
100000. C is admitted and a new profit sharing Ratio is agreed at 5:3:2. Machinery
is revalued at Rs. 120000 and a provision is made for doubtful debts @10%. A’s
share in loss on revaluation amount to Rs.25000. Revalued value of stock will be:
(A) Rs.100000
(B) Rs.120000
(C) Rs.130000
(D) Rs.140000
39 L and M are partners sharing profits in ratio of 3 : 2 respectively. N was admitted
for 1/5th share of profit. Machinery would be appreciated by 10% (Book value
Rs.80,000) and Building would be depreciated by 20% (Rs.2,00,000). Unrecorded
debtors of Rs.1250 would be brought into books new and a creditor amounting to
Rs. 2750 died and need not pay anything on this account. What will be profit/loss
on revaluation?
(A) Loss Rs.28,000
(B) Profit Rs.28,000
(C) Loss Rs.40,000
(D) Profit Rs.40,000
40 Kushal and Kaushik are sharing profit and loss in the ratio of 2:1. Their balance in
the capital accounts is Rs.200000 and Rs.100000 respectively. They admit
Khonjon into the partnership for 1/4th share in the profit for which he brings
Rs.30000 as his share of Goodwill. The adjusted capital of Kushal and Khonjon
will be:
(A) Rs.20000 and Rs.10000 respectively.

(B) Rs.220000 and Rs.110000 respectively.
(C) Rs.210000 and Rs.120000 respectively.
(D) Rs.10000 and Rs.20000 respectively.
41. Sun and Star were partners in a firm sharing profits in the ratio of 2:1. Moon was
admitted as a new partner in the firm. New profit-sharing ratio was 3:3:2. Moon
brought the following assets towards his share of goodwill and his capital:
Machinery Rs.2,00,000
Furniture 1,20,000
Stock 80,000
Cash 50,000
If his capital is considered as Rs.3,80,0000, the goodwill of the firm will be:
(A) Rs.70,000
(B) Rs.2,80,000
(C) Rs.4,50,000
(D) Rs.1,40,000
42. Goodwill existing in the books is written off at the time of admission of a partner,
it is transferred to partners’ capital accounts in their:
(A) Old profit-sharing ratio
(B) New profit-sharing ratio
(C) Sacrificing ratio
(D) Gaining Ratio
43. When the new partner brings cash for goodwill, the amount is credited to:
(A) Revaluation A/c
(B) Cash A/c
(C) Premium for goodwill A/c
(D) Realisation A/c
44. When a new partner does not bring his share of goodwill in cash, the amount is
debited to:
(A) Cash A/c
(B) Premium A/c
(C) Current A/c of the new partner
(D) Capital A/c of the old partner

45. Sacrificing ratio is used to distribute.................... in case of admission of a partner.
(A) Reserves
(B) Goodwill
(C) Revaluation profit
(D Balance in profit and loss A/c
46. X and Y are partners in a firm with capital of Rs.1,80,000 and Rs.2,00,000. Z was
admitted for 1/3rd share in profit and brings Rs.3,40,000 as capital. Calculate the
amount of goodwill.
(A) Rs.2,40,000
(B) Rs.1,00,000
(C)Rs.1,50,000
(D)Rs.3,00,000
47. A and B are partners sharing profits and losses in the ratio of 5:3.On admission, C
brings Rs.70,000 as cash and Rs.43,000 against goodwill. New profit ratio between
A,B and C is 7:5:4.The sacrificing ratio of A and C is :
(A) 3:1
(B) 1:3
(C) 4:5
(D) 5:9
48. A and B are sharing profits and losses in the ratio of 3:2. They admit C as a partner
and give him 2/10th share in the profits. The new profit sharing ratio will be:
(A) 12:8:5
(B) 3:2:2
(C) 3:2:5
(D) 2:1:2
49. X and Y are partners sharing profits in the ratio of 3:1.They admit Z as a partner
who pays Rs.4,000 as goodwill, the new profit sharing ratio being 2:1:1 among
X,Y and Z.The amount of goodwill will be credited to:
(A) X and Y as Rs.3,000 and Rs.1,000
(B) Rs. 2,000
(C) Only Y
(D) Only X

50. A and B are partners sharing profits in the ratio of 2:3,they admit C as a partner for
1/4th share, the sacrificing ratio of A and B will be:
(A) 2:3
(B) 1:1
(C) 3:2
(D) 2:1
51 Unrecorded assets will be.............................. in Revaluation A/c?

(a). Credited
(b). debited
(c). Not shown
(d). Shown
52 Unrecorded liabilities will be ..............................in Revaluation A/c?

(a). Credited
(b). debited
(c). Not shown
(d). Shown
53 An increase in the value of assets will be recorded in ......................... Side of
Revaluation a/c?
(a). Debit
(b). credit
(c). either debit or credit
(d). both debit and credit
54 A decrease in the value of assets will be recorded in .........................Side of
Revaluation a/c?
(a). Debit
(b). credit
55 A decrease in the value of liabilities will be recorded in ......................... Side of
Revaluation a/c?
(a). Debit
(b). credit

56 An increase in the value of liabilities will be recorded in......................... Side of
Revaluation a/c?
(a). Debit
(b). credit
57 Revaluation Account or Profit & Loss Adjustment Account is a:
(a) Personal Account
(b) Real Account
(c) Nominal Account
(d) None of these
58 A and B are partners of a partnership firm sharing profits in the ratio of 3 : 2
respectively. C was admitted for 1/5th share of profit. Machinery would be
appreciated by 10% (book value ₹80,000) and building would be depreciated by
20% (₹2,00,000). Unrecorded debtors of ₹1,250 would be brought into books
now and a creditor amounting to ₹2,750 died and need not pay anything on this
account.What will be profit/loss on revaluation?
(A) Loss ₹28,000
(B) Loss ₹40,000
(C) Profits ₹28,000
(D) Profits ₹40,000
59 A and B are partners sharing profits in the ratio of 2 : 3. Their Balance Sheet shows
Machinery at ₹2,00,000; Stock at ₹80,000 and Debtors at ₹1,60,000. C is admitted
and new profit sharing ratio is agreed at 6 : 9 : 5. Machinery is revalued at
₹1,40,000and a provision is made for doubtful debts @5%. A’s share in loss on
revaluation amount to ₹20,000. Revalued value of Stock will be :
(A) ₹62,000
(B)
₹1,00,000(C)
₹60,000
(D) ₹98,000

60 At the time of admission of a partner, what will be the effect of the following
information? Balance in Workmen compensation reserve ₹40,000. Claim
forworkmen compensation ₹45,000.
(A) ₹45,000 Debited to the Partner’s capitalAccounts.
(B) ₹40,000Debited to Revaluation Account.
(D) ₹5,000 Creditedto Revaluation Account.
61. The balance in the investment fluctuation reserve, after meeting the loss on
revaluation of investments, at the tine of admission of a partner will be transferred
to:
(a) Old partner’s capital A/c
(b) Revaluation A/c
(c) General reserve
(d) Capital reserve
62. When the balance sheet is prepared after the new partnership agreement, the assets
and liabilities are recorded at:
(a) Current cost
(b) Realising value
(c) Historical cost
(d) Revalued figures
63. If at the time of admission, there is some unrecorded liability, it will be:
(a) Credited to Partner’s Capital A/c
(b) Debited to Profit and Loss A/c
(c) Debited to revaluation A/c
(d) Credited to revaluation A/c
64. When the incoming partner brings in his share of premium for goodwill in cash, it is
adjusted by crediting to:
(a) Incoming partner’s capital A/c
(b) Premium for goodwill A/c
(c) Sacrificing partner’s capital A/c
(d) None of these

65. A and S are partners sharing profits in the ratio of 3:2. They admit B for 1/4 th share
who contributed Rs.30,000 for his share of goodwill. The total value of goodwill of
the firm will be:
(a) Rs.1,50,000
(b) Rs.1,20,000
(c) Rs.1,00,000
(d) Rs.1,60,000
66. R and S share profits in the ratio of 2:1. P is admitted with 1/4th share in profits. P
acquires 3/4th of his shares from R and 1/4th of his share from S. The new profit
sharing ratio will be:
(a) 2:1:1
(b) 3:1:1
(c) 23:13:12
(d) 13:23:12
67. Arun and Bhaskar are patners sharing profits and losses in the ratio of 3:2. Arun’s
capital is Rs.1,20,000 and Bhaskar’s capital is Rs.60,000. They admit Chandan for
1/5th share of profits. Chandan should bring as his capital:
(a) Rs.36,000
(b) Rs.48,000
(c) Rs.58,000
(d) Rs.45,000
68. W, X and Y are partners sharing profits in 3:2:1. They agreed to admit Z into the
firm. W, X and Y agreed to give 1/3rd, 1/6th, 1/9th share of their profit. The share of
profit of Z will be:
(a) 1/11
(b) 13/48
(c) 11/35
(d) 13/54

69. Ajay, Bhanu and Charu are partners sharing profits in the ratio of 4:3:2. Diya is
admitted for 2/9th share of profit. He brings Rs.30,000 as capital. New profit sharing
ratio is 3:2:2:2. Goodwill amount will be credited in the capital account of:
(a) Ajay only
(b) Ajay, Bhanu and Charu (equally)
(c) Ajay and Bhanu (equally)
(d) Ajay and Charu (equally)
70. A and B are partners sharing profits in the ratio of 3:2. On admission of C for 1/5th
share, Land is appreciated by 10% (Book value Rs.80,000), Building is decreased
by 20% (Rs.2,00,000), Unrecorded debtors of Rs.1,250 are bought in the books and
creditors of Rs.2,750 need not be paid. The profit/loss on revaluation will be:
(a) Loss Rs.28,000
(b) Loss Rs.40,000
(c) Profit Rs.28,000
(d) Profit Rs.40,000
71 A and B are partners sharing profit ratio of 3 : 2. They admit C as a partner by

giving him 1/3 share in future profits. The new ratio will be:
a) 12 : 8 : 5
b) 8 : 12 : 5
c) 5 : 5 : 12
d) 6 : 4 : 5
72 A and B are partners in a firm having capital balances of ₹ 54,000 and ₹

36,000respectively. They admit C in partnership for 1/3rd share and C is to
bring
proportionate amount of capital. The capital amount of C would be :
a) ₹ 90,000
b) ₹ 45,000
c) ₹ 5,400
d) ₹ 36,000

73 A and B are in partnership sharing profits in the ratio of 3 : 2. They take C as a new
partner. Goodwill of the firm is valued at
₹ 3,00,000 and C brings ₹ 30,000 as his share of goodwill in cash which is
entirelycredited to the Capital Account of A. New profit sharing ratio will be:
a) 3 : 2 : 1
b) 6 : 3 : 1
c) 5 : 4 : 1
d) 4 : 5 : 1
X and Y are partners sharing profit in the ratio of 3 : 2. Z was admitted with ¼
74
share in profits which he acquires equally from X and Y. The new ratio will be:
a) 9 : 6 : 5
b) 19 : 11 : 10
c) 3 : 3 : 2
d) 3 : 2 : 4
X and y are partners in a firm with capital of ₹1,80,000and

75
₹ 2,00,000. Z wasadmitted for 1/3rd share in profits and brings
₹ 3,40,000 as capital, calculate the amount ofgoodwill
:a) ₹ 2,40,000
b) ₹ 1,00,000
c) ₹ 1,50,000
d) ₹ 3,00,000
76 When new partner does not bring his share of goodwill in cash, goodwill is treated
by :
a) Credited the old partners in the sacrificing ratio and debiting the
new partner for his share of goodwill.
b) Crediting the old partners in old profit sharing ratio and debiting
the new partner for his share of goodwill.
c) Debiting the old partners in sacrificing ratio and crediting the
new partner for his share of goodwill
d) None of the above.

77 A and B share profits in the ratio of 3 : 2. They agreed to admit C on the condition
that A will sacrifice 3/25th of his share of profit in favour of C and B will sacrifice
1/25th of his profits in favour of C . The new profit sharing ratio will be:
a) 12 : 9 : 4
b) 3 : 2 : 4
c) 66 : 48 : 11
d) 48 : 66 : 11
78 Vinay and Naman are partners sharing profit in the ratio of 4 : 1. Their capitals were
₹90,000 and ₹ 70,000 respectively. They admitted Prateek for 1/3 share in the
profits. Prateek brought
₹ 1,00,000 as his capital. What will be the value offirm’s goodwill?
a) ₹ 4000
b) ₹ 50000
c) ₹ 40000
d) ₹ 30000
79 Xero and Yasi were partners sharing profits in the ratio 3 : 2. They admitted Zero as
new partner for 1/5th share in the future profits of the firm which he got equally
from Xero and Yasi. What will be the new profit sharing ratio among Xero, Yasi
and Zero?
a) 3:5:1
b) 1:1:1
c) 3:5:2
d) 5:3:2
80 Hari and Leela are partners in a firm sharing profits and losses in the ratio of 2 : 3
Yash was admitted as a new partner for 1/5th share in the profit of the firm. Yash
acquires his share from Leela. The new profit sharing ratio of Hari, Leela and Yash
will be:
a) 2 : 3 : 5
b) 2 : 2 : 1
c) 5 : 3 : 2
d) 3 : 5 : 1

81 Ashok and Sudha were partners in a firm sharing profits and losses in the ratio of 3
: 1. They admitted Bani as a new partner. Ashok sacrificed 1/4th of his share and
Sudha sacrificed 1/4th of her share in favour of Bani. Bani’s share in the profits of
the firm will be :
a) 5 / 8
b) 1 / 8
c) 1 / 4
d) 7 / 16
82 Swati and Aman were partners in a firm. Their fixed capitals were
₹ 9,00,000 and ₹ 3,00,000 respectively. They shared profits in the ratio of their
capitals. Divya was admitted as a new partner for 1/4th share in the profits of the
firm. Divya brought ₹ 60,000 as her share of goodwill premium and ₹ 6,00,000
asher capital. The amount of goodwill premium credited to Swati’s account will
be:a) ₹ 60,000
b) ₹ 30,000
c) ₹ 45,000
d) ₹ 15,000
83 If at the time of admission there is some unrecorded liability, it will be:
a) Debited to revaluation account
b) Credited to revaluation account
c) Debited to goodwill account
d) Credited to partner’s Capital accounts
84 When a new partner does not bring his share of goodwill in cash, the amount isdebited
to:
a) Cash A/c
b) Premium A/c
c) Current A/c of the new partner
d) Capital A/c of the old partner
85 If the incoming partner brings the amount of goodwill in cash and also a balance
exists in goodwill account, then this goodwill account is written off among the old
partners in :
a) The new profit sharing ratio
b) The old profit sharing ratio
s c) The sacrificing ratio
d) The gaining ratio

KEY/ANSWER SHEET
Multiple Choice question
01 A
02 B
03 C
04 A
05 A
06 C
07 D
08 C
09 C
10 D
11 D
12 C
13 A
14 D
15 A
16 A
17 B
18 B
19 A
20 A
21. (C) Goodwill brought in by the incoming partner can be credited to the
sacrificing partner (s)
22. (D) All, old
23. (C) ₹ 3,00,000
24. (B) (iii),(i),(ii)
25. (B) 5:11:4
26. (C) False
27. (A) True
28. (C) ₹ 14,00,000
29. (D)C’s Capital A/c Dr 20,000
30. (B)i- c, ii-d, iii-a, iv-b
31. A
32 C

33 A
34 C
35 B
36 C
37 C
38 B
39 A
40 B
41 (B)
42 (A)
43 (C)
44 (C)
45 (B)
46 (D)
47 (A)
48 (A)
49 (D)
50 (D)
51 (a). Credited
52 (b). debited
53 (b). credit
54 (a). Debit
55 (b). credit
56 (a). Debit
57 (c) Nominal Account
58 (A) Loss ₹28,000
59 (D) ₹98,000
60 (C) ₹5,000Debited to Revaluation Account.
61 (a) Old partner’s capital A/c

62 (d) Revalued figures
63 (c) Debited to revaluation A/c
64 (c) Sacrificing partner’s capital A/c

65 (b) Rs.1,20,000
66 (c) 23:13:12
67 (d) Rs.45,000
68 (d) 13/54
69 (b) Ajay, Bhanu and Charu (equally)
70 (a) Loss Rs.28,000
71 D
72 B
73 C
74 B
75 D
76 C
77 A
78 C
79 D
80 B
81 C
82 C
83 A
84 C
85 B
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Accountancy
Chapter 5 - Retirement & Death of a Partner
Sl.No Question:
Q1. If Goodwill is appearing in the balance sheet it will be Credited to :
(A) Gaining partner
(B) Retiring partners
(C) All partners
(D) Remaining Partners’
Q.2 In which ratio Retiring partner is compensated by the continuing partner for his
share of goodwill, in which ratio?
(A) Gaining ratio
(B) Sacrificing ratio
(C) Old ratio
(D) New ratio
Q.3 If three partners A, B, C are sharing profit as 5:3:2, then on the death of a partner A,
how much B and C will pay to A executor on account of goodwill. Goodwill is to
be calculated on the basic of 2 years purchase of last 3 years average profit, profits
for the last 3 years are Rs. 3,28,000 Rs. 3,46,000 and Rs. 4,00,000.
(A) Rs. 3,16,000 and Rs. 1,42,000
(B) Rs. 2,44,000 and Rs. 2,16,000
(C) Rs. 4,29,600 and Rs. 2,86,400
(D) Rs. 2,16,000and Rs. 1,44,000
A, B and C are partners in a firm sharing profit and losses in 3:4:2 B retire from the
Q.4 firm. The profit on revaluation on that date was Rs. 72,000, New ratio between A
and C is 5:3 Profit on revaluation will be distributed as:
(A) A Rs. 32,000 B Rs. 24,000 C Rs. 16,000
(B) ARs. 24,000 B Rs. 32,000 C Rs. 16,000
(C) A Rs. 45,000 C Rs. 27,000
(D)47,250 C Rs. 24,750
Q.5 Retiring or outgoing partner
(A) Is liable for firm liabilities
(B) Not liable for any liabilities of the firm
(C) Is liable for obligation incurred before his retirement
(D) Is liable for obligation incurred before and after his retirement
Q.6 P, Q and R sharing profit and losses in the ratio of 8:5:3. Q retire from the firm
takes 3/16 from P and R takes 5/16 from P. New profit sharing ratio between Q and
R will be
(A)1:1
(B)10:6
(C)9:7
(D)5:3
KVS ZIET BHUBANESWAR 12/10/2021 Page 1

Retiring or outgoing partner
Q.7 (A) Is liable for firm liabilities
(B) Not liable for any liabilities of the firm
(C) Is liable for obligation incurred before his retirement
(D) Is liable for obligation incurred before and after his retirement
Q.8 A ,B and C sharing profits in the ratio 4:3:2. A retires B and C decided to share
profit in the future in the ratio of 5:3.what will be the gaining ratio:
(A)21:11
(B)11:21
(C)11:13
(D)13:11
Q.9 A,B and C are sharing profits in the ratio of 3:2:1. B retires and on the day of B’s
retirement Goodwill s valued at Rs 60,000.A and C decided to share future profit
in the ratio of 3:2.Journal Entry will be
(A) A’s Capital A/c Dr. 18000
C’s Capital A/c Dr. 42000
To B’s Capital A/C 60,000
(B) A’s Capital A/c Dr. 6000
(C) A’s Capital A/c Dr. 36000
(D) A’s Capital A/c Dr. 12000
Q.10 At what rate is interest payable on the amount remaining unpaid to the executer of
deceased partner, In the absence of any agreement among partners, when he opts
for interest and not share of profit:
(A) 6%
(B) 12%
(C) 7.5%
(D) 8%
11. What treatment is made of accumulated profits and losses on the retirement of a
partner?
A) Credited to all partner’s capital account in old ratio.
B) Debited to all partner’s capital account in old ratio.
C) Credited to remaining partner’s capital account in new ratio.
D) Credited to remaining partner’s capital account in gaining ratio.

12. What journal entry will be recorded for writing off the goodwill already existing in
Balance sheet at the time of retirement of a partner?
A) Retiring Partner’s Capital, A/c Dr.
To Goodwill A/c
B) All Partner’s Capital A/c’s Dr. (in old ratio)
To Goodwill A/c
C) Remaining Partner’s Capital A/c’s Dr. (in gaining ratio)
To Goodwill A/c
D) Remaining Partner’s Capital A/c’s Dr. (in new ratio)
To Goodwill A/c
13. What journal entry will be recorded for deceased Partner’s share in profit from the
closure of last balance sheet till date of his death?
A) Profit and Loss A/c Dr.
To Deceased Partner’s Capital A/c
B) Deceased Partner’s Capital A/c Dr.
To Profit and Loss A/c
C) Deceased Partner’s Capital A/c Dr.
To Profit and Loss Suspense A/c
D) Profit and Loss Suspense A/c Dr.
To Deceased Partner’s Capital A/c
14. On the death of a partner, the amount due to him will be credited to:
A) All partner’s capital accounts.
B) Remaining partner’s capital accounts.
C) His executor’s account.
D) Government’s revenue account.
15. P, Q and R have been sharing profits and losses in the ratio of 5:3:2. Q retires.
Share of Q is taken by P and R in the ratio of 2:1. New profit-sharing ratio will
be:
A) 6:4
B) 7:3
C) 7:2
D) 6:3

16 A, B and C were partners in a firm sharing profit and losses in the ratio of
2:2:1. The capital balance are Rs. 50,000 for A, Rs. 70,000 for B, Rs. 35,000
for C. B decided to retire from the firm and balance in reserve on the date was
Rs. 25000. If goodwill of the firm was valued at Rs. 30,000 and profit on
revaluation was Rs. 7,500, then, what amount will be payable to B?
a) Rs. 70,820
b) Rs. 76,000
c) Rs. 75,000
d) Rs. 95,000
17 A, B and C are partners with profit sharing ratio 4:3:2. B retires and goodwill
was valued Rs. 1,08,000. If A and C share profits in 5:3, find out the goodwill
shared by A and C in favour of B.
a) Rs. 22,500 and Rs. 13,500
b) Rs. 16,500 and Rs. 19,500
c) Rs. 67,500 and Rs. 40,500
d) Rs. 19,500 and Rs. 16,500
18 X, Y and Z are partners in the ratio of 2:3:5. Goodwill is already appearing in their
books at a value of Rs. 60,000. X retires and Y and Z decided to share future
profits equally. Journal entry will be:
A) Y’s capital A/c Dr. 12,000 and X’s capital A/c Cr. 12,000
B) Y’s capital A/c Dr. 60,000 and X’s capital A/c Cr. 60,000
C) X’s capital A/c Dr. 2,400, Y’s capital A/c Dr. 3,600, Z’s capital A/c Dr. 6,000
and Goodwill A/c Cr. 12,000
D) X’s capital A/c Dr. 12,000, Y’s capital A/c Dr. 18,000, Z’s capital A/c 30,000
and Goodwill A/c Cr. 60,000
19 A, B and C were partners sharing profit and losses in the ratio of 2:2:1. Books
are closed on 31st March every year. C dies on 5th November,2018. Under the
partnership deed, the executors of the deceased partner are entitled to his share
of profit to the date of death, calculate on the basis of last year’s profit. Profit
for the year ended 31st March ,2018 was Rs. 2,40,000. C’s share of profit will
be:
a) Rs. 28,000
b) Rs. 32,000
c) Rs. 28,800
d) Rs. 48,000
20 At what rate is interest payable on the amount remaining unpaid to the executor
of deceased partner, in absence of any agreement among partners, when he opts
for interest and not share of profit:
12% p.a.
8% p.a.
6% p.a.
7.5% p.a.

21 Gaining Ratio’ mean:
A) Old Ratio – New Ratio
B) New Ratio – Old Ratio
C) Old Ratio – Sacrifice Ratio
D) New Ratio – Sacrifice Ratio
22 On retirement of a partner, goodwill will be credited to the capital account

of:
A) Retiring partner
B) Remaining Partners
C) All partners
D) None of the above
23 P, Q and R have been sharing profits in the ratio of 8:3:5. P Retires. Q

takes 3/16th share from P and R takes 5/16th share from P. New profit-
sharing ratio will be:
A) 1:1 B) 10:6
C) 9:7 D) 5:3
24 P, Q and R share profits in the ratio of 5:4:3. R retires and the new ratio is
5:3. If R is given Rs 6,000 as goodwill, Journal entry will be:
A) P’s capital A/C Dr 1,000
Q’s capital A/C Dr 5,000
To R’s capital A/c 6,000
B) P’s capital A/C Dr 5,000

C) P’s capital A/C Dr 3,750

D) P’s capital A/C Dr 3,333

25 A, B & C were partners in a firm sharing profits and losses in the ratio of
5:3:2. C retired & his capital balance after adjustments regarding reserves,
accumulated profits/losses & his share of gain on revaluation was 2,50,000.
C was paid 3,22,000 including his share of goodwill. The amount credited
to C’s Capital A/C, on his retirement, for goodwill will be:
A) Rs 72,000 B) Rs 7,200
C) Rs 14,000 C) Rs 3,22,000

KEY/ANSWER SHEET
MultpleChice question
Q.1 (C) All partners
Q.2 a) Gaining ratio
Q.3 Rs. 4,29,600 and Rs. 2,86,400
Q.4 Rs. 24,000 B Rs. 32,000 C Rs. 16,000
Q.5 Is liable for obligation incurred before his retirement
Q.6 1:1
Q.7 Is liable for obligation incurred before his retirement
Q.8 (A)21:11
Q.9 (B) A’s Capital A/c Dr. 6000

Q.10 (A) 6%
Q.11 A
Q.12 B
Q.13 D
Q.14 C
Q.15 B
Q.16 D
Q.17 D
Q.18 D
Q.19 C
Q.20 C
Q.21 B
Q.22 A
Q.23 A
Q.24 B
Q.25 A
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RANCHI, SILCHAR AND TINSUKIA REGIONS.

e average profit
Reduce average profit for the period up to thedate of death

CHAPTER-6
DISSOLUTION OF PARTNERSHIP FIRM

S.N Question
o.
1 On dissolution of a firm, out of the proceeds received from the sale of assets
.................will be paid first of all
(A) Partner's Capital
(B) Partner's Loan to Firm
(C) Partner's additional capital
(D) Outside Creditors
2 Court can make an order to dissolve the firm when:
(A) Some partner has become fully mad
(B) Partnership deed is fully followed
(C) Continued future profits are expected
(D) Firm is running legal business
3 On taking responsibility of payment of a liability of Rs.30,000 by a partner, the
account Credited will be:
(A) Realisation Account
(B) Cash Account
(C) Capital Account of the Partner
(D) Liability Account
4 There was an Unrecorded asset of Rs.3,000 which was taken over by a partner by at
2,500. Partner's Capital Account will be debited by………………..
(A) Rs.2,000
(B) Rs.2,500
(C) Rs.500
(D) Rs.3,500
5 If total assets are Rs.2,00,000; total liabilities are Rs.40,000; amount realised on sale
of assets is Rs.1,75,000 and realisation expenses are Rs.2,000, the profit or loss on
realisation will be:
(A) Profit Rs.12,000

(B) Loss Rs.68,000
(C) Loss Rs.27,000
(D) Loss Rs.25,000
6 In the Balance Sheet Total Debtors appear at Rs.50,000 and Provision for Doubtful
Debts appear at Rs.1,500. How much amount will be realised from Debtors, if bad
debts amount to Rs.10,000 and remaining debtors are realised at a discount of 5%.
(A) Rs.38,000
(B) Rs.36,500
(C) Rs.36,575
(D) Rs.39,500
7 P, a partner, is to bear all expenses of realisation for which he is to be paid Rs.3,000.
P had to pay realisation expenses of Rs.3,500. How much amount will be debited to
Realisation Account?
(A) Rs.500
(B) Rs.3,500
(C) Rs. 4,500
(D) Rs.3,000
8 Investments valued Rs. 5,00,000 were not shown in the books. One of the creditors
took over these investments in full satisfaction of his debt of Rs. 5,20,000. How
much amount will be deducted from creditors?
(A) Rs. 20,000
(B) Rs. 5,20,000
(C) Rs. 4,20,000
(D) Rs. 5,00,000
9 On dissolution of a firm, a partner took-over the investments of Rs. 15,000 at Rs.
20,000. By how much amount the Realisation Account will be credited?
(A) Rs. 24,000
(B) Rs. 20,000
(C) Nil
(D) Rs. 15,000
10 If creditors are Rs. 25,000, capital is Rs. 1,50,000 and cash balance is Rs. 40,000,
what will be the amount of sundry assets?
(A) Rs. 1,75,000

(B) Rs. 1,65,000
(C) Rs. 1,35,000
(D) Rs. 1,40,000
11 In case of dissolution A one of the partner was paid only RS5000 for his loan to the
firm which amounted to Rs5500. Rs 500 will be recorded in which account and on
which side:
A. Realisation account credit side correct
B. Realisation account debit side
C. loan account debit side
D. All the above
12 Settlement of accounts in case of dissolution of partnership is dealt with which

section of partnership act 1932?
A. Section 45
B. section 46
C. section 47
D. section 48
13 New ratio is not to be calculated on:

A. Admission of a partner
B. retirement of a partner
C. death of a partner
D. dissolution of a partnership
14 At the time of dissolution of partnership an unrecorded asset taken by X a partner is

debited to:
A. X capital account
B. realisation account
C. cash account
D. none of the above
15 When realisation expenses are to be borne by a partner, actual realisation expense is

credited to:
A. Partners capital a/c
B. Cash a/c
C. Realisation a/c
D. None of the above
16 Partners are liable to settle the account of accounts payable even from their
sources, if they are solvent.
A. Personal
B. Capital only
C. Bank loan

17 On firm’s dissolution, which one of the following account should be prepared at the
last?
(A) Realisation Account
(B) Partner’s Capital Accounts
(C) Cash/Bank Account
(D) Partner’s Loan Account
18 At the time of dissolution total assets are worth Rs3,00,000 and external liabilities are
worth Rs1,20,000. If assets realised 120% and realisation expenses paid were
Rs4,000, then profit/loss on realisation will be:
A. Profit Rs60,000
B. Loss Rs60,000
C. Loss Rs56,000
D. Profit Rs56,000
19 On dissolution of a firm, a partner’s capital account has a credit balance of ₹42,000.

His share of profit in realisation account is ?9,000. He has paid firm’s realisation
expenses ₹3,000. He will finally get a payment of:
(A) ₹39,000
(B) ₹42,000
(C) ₹54,000
(D) ₹48,000:
20 On dissolution, goodwill account is transferred to):

(A) In the Capital Accounts of Partners
(B) On the credit of Cash Account
(C) On the Debit of Realisation Account
(D) On the Credit of Realisation Account
21 As per section 44, under what circumstances a partnership firm may be dissolved?
1. When a partner has become of unsound mind.
2. When the court is satisfied that the firm cannot be carried on except at a loss.
(A) Only 1
(B) Only 2
(C) Neither 1 nor 2
(D) Both 1 and 2
22 Out of the following which will be settled at first, at the time of dissolution of firm?
(A) Loans advanced by partners
(B) Outside debts of the firm
(C) Balance of partners’ capital account
23 One of the creditors of ₹ 25,000 took away some part of the stock worth ₹12,000 and
cash ₹10,000 in full settlement of his claim. What will be the journal entry for the
above?
(A) Debit creditor’s account and credit realisation account by ₹ 10,000.
(B) Debit realisation account and credit bank account by ₹ 10,000.
(C) No entry is required
(D) Debit realisation account and credit creditors account by ₹10,000.

24 At the time of dissolution of firm, debtors appear on the asset side amounted to
`60,000. One of the debtors of ₹ 25,000 become bad and could realise only 40%.
Balance of the debtors realised at 80%.
State the amount credited to realisation account on account of amount realised from
debtors.
(A) ₹43,000
(B) ₹17,000
(C) ₹22,000
(D) ₹38,000
25 If dissolution expenses paid by a partner and he had to bear the expenses, how it will
be recorded?
(A) Debit realisation account and credit bank account
(B) Debit realisation account and credit partners’ capital account
(C) Debit partners’ capital account and credit bank account
(D) Not recorded
26 Which of the following will not be recorded in realisation account?

(A) Sale of unrecorded asset
(B) Payment of outsider’s loan
(C) Payment of partners’ loan
(D) Payment of dissolution expenses by a partner on behalf of firm
27 At the time of dissolution of a firm, debtors of ₹30,000 realised at 70% and others
assets worth ₹1,20,000 realised at a loss of 20%.
Creditors having book value of `40,000 were paid in full.
What is the amount of gain or loss on realisation?
(A) Gain ₹33,000
(B) Loss ₹33,000
(C) Gain ₹21,000
(D) Loss ₹21,000
28 On dissolution, Goodwill account is transferred to....

(A) In the capital accounts of the partner
(B) On the credit of cash account
(C) On the debit of realisation account
(D) On the credit of realisation account
29 On dissolution of a firm, realisation account is debited with.....

(A) Any asset taken over by one of the partners
(B) All outside liabilities of the firm
(C) Cash received on sale of assets
(D) All assets to be realised
30 At the time of dissolution of a firm, at which stage the balance of partners’ capital is
paid?
(A) After making payment to third party loan
(B) Before making payment of partners in respect of their loans

(C) After making the payment to third party for their loans as well as partners
loan

ANSWER KEY
Multple Choice question
Q.No.1 (D) Outside Creditors
Q.No.2 (A) Some partner has become fully mad
Q.No.3 (C) Capital Account of the Partner
Q.No.4 (B) Rs.2,500
Q.No.5 (C) Loss Rs.27,000
Q.No.6 (A) Rs.38,000
Q.No.7 D) Rs.3,000
Q.No.8 B) Rs. 5,20,000
Q.No.9 (B) Rs. 20,000
Q.No.10 (C) Rs. 1,35,000
Q.No.11 A
Q.No.12 D
Q.No.13 D
Q.No.14 A
Q.No.15 D
Q.No.16 A
Q.No.17 C
Q.No.18 D
Q.No.19 C
Q.No.20 C
Q.No.21 (D) Both 1 and 2
Q.No.22 (B) Outside debts of the firm
Q.No.23 (B) Debit realisation account and credit bank account by ₹10,000.
Q.No.24 (D) `38,000
Q.No.25 (D) Not recorded
Q.No.26 (C) Payment of partners’ loan
Q.No.27 (B) Loss `33,000
Q.No.28 (C) On the debit of realisation account
Q.No.29 (D) On the debit of realisation account
Q.No.30 (C) After making the payment to third party for their loans as well as partners
loan


Chapter 7 : ACCOUNTING FOR SHARE CAPITAL
1. Shares issued by company to its employees or directors at a discount are called (i)
_________. When such shares are issued, the amount of discount on issue or shares is in
the nature of (ii) ________ for the company.
A. (i) Sweat equity shares (ii) Capital loss
B. (i) Private placement of shares (ii) Revenue loss
C. (i) Issue of shares at discount (ii) Capital loss
D. (i) None of the above
2. Which of the following capital is not shown in the company’s Balance Sheet?
A. Authorised Capital
B. Issued Capital
C. Subscribed Capital
D. Reserve Capital
3. The fact of _________ is not recorded in the books.
A. Over subscription
B. Under subscription
C. Forfeiture of shares
D. Reissue of forfeited shares
4. Share Application and Share Allotment A/c is:
A. Personal A/c
B. Real A/c
C. Nominal A/c
5. As per the provisions of Companies Act, 2013 the amount received as premium on
securities cannot be utilized for:
A. Issuing fully paid bonus shares to the members
B. Purchase of fixed assets
C. Writing off preliminary expenses
D. Buy back of its own shares
6. When the shares offered for public subscriptions are subscribed fully by the public,
which of the following would be the same?
A. Authorised capital and issued capital
B. Issued capital and subscribed capital
C. Subscribed capital and called up capital
D. Called up capital and reserve capital
7. Money received in advance from shareholders before it is actually called-up by the
directors is:
A. Debited to calls in arrear account
B. Credited to calls in advance account
C. Debited to calls in advance account
D. Credited to calls in arrear account
8. Uncalled capital is that portion of the _________ which has not yet been called up; and
the portion of such uncalled capital to be called only in the event of winding up of the
company is called _______.

A. Subscribed capital; Reserve capital
B. Issued capital; Reserve capital
C. Authorised capital; Capital Reserve
9. X ltd. Purchased business from Y Ltd. by paying ₹15 lakh for the assets worth ₹18 lakh
and liabilities of ₹4 lakh. Then _______ will be debited by ₹1 lakh.
A. Capital Reserve A/c
B. Asset A/c
C. Goodwill A/c
D. Vendor’s A/c
10. Bansal Heavy Machine Ltd. purchased assets worth ₹4,00,000 at ₹3,20,000 from Handa
Traders Ltd. and took creditor’s of ₹70,000 for a purchase consideration of ₹3,00,000.
Payment was by NEFT for ₹50,000 and remaining amount by issue of equity shares of
₹100 each fully paid at an issue price of ₹125. How many equity shares will be issued to
Handa Traders Ltd.?
A. 3000
B. 2500
C. 2000
D. 3200
11.Shares can be forfeited:
a. For nonpayment of call money
b. For failure to attend meetings
c. For failure to repay the loan to the bank
d. For which shares are pledged as a security
12.When shares are forfeited, the account which is debited is:

a. General Reserve A/c
b. Share Capital A/c
c. Share forfeiture A/c
d. Capital Reserve A/c
13. A forfeited share can:

a. Not be re-issued at discount
b. Re-issued at a maximum discount of 10%
c. Be re-issued at a maximum discount equal to the amount forfeited
d. Re-issued at a maximum discount of 25%
14. 2,000 shares of Rs 10 on which Rs 7 have been called-up and Rs 5 has been paid
for forfeited .Out of these 1,500 share are re-issued for Rs 9 fully paid. What is the
amount to be debited to share forfeiture A/c at the time of reissue of forfeited share?
a. Rs 13,550
b. Rs 1,500
c. Rs 15,000
d. Rs 14,000
15. A company forfeited 1,000 share of Rs 10 each, Rs 7 being called up for the
nonpayment of Rs 2 on first call. All these shares were reissued at Rs 5 per share.
What will be the amount transferred to Capital Reserve A/c?

a. Rs 2,000
b. Rs 3,000
c. Rs 4,000
d. Rs 5,000
16.A company forfeited 100 share of Rs 10 each issued at par for the nonpayment of
first and final call of Rs 2.50 each. The share forfeiture account will be
.…………by………………...
a. Credited; Rs 500
b. Debited; Rs 500
c. Credited; Rs 750
d. Debited; Rs 750
17.On forfeiture of shares, share forfeiture account is credited with……………………

a. The amount not received on forfeited share including premium
b. The amount not received on forfeited share excluding premium
c. The amount already received on forfeited share including premium
d. The amount already received on forfeited share excluding premium
18.Beta Ltd. Issued 10,000 shares of Rs10 each at 20% premium which was over
subscribed to the extent of 5,000 share. All money to be paid on application only and
shares were allotted on pro-rata basis. The company will refund……………….
Rs 60,000
Rs 50,000
Rs 40,000
Rs 30,000
19.L Ltd. forfeited Mr. M’s share who has applied for 600 shares and was allotted 400
shares failed to pay allotment money of Rs 4 per share including premium of Rs 2 on
which he had paid application money of Rs 2 only. The journal entry for forfeitures of
shares by opening calls in arrears account will be:
a)Share Capital A/c Dr. 1,600
To Calls in Arrears A/c 800
To share forfeiture A/c 800
b) Share Capital A/c Dr. 1,600
Securities premium A/c Dr. 800
To Calls in Arrears A/c 1,200
To share forfeiture A/c 1,200
c)Share Capital A/c Dr. 1,600
d)Share Capital A/c Dr. 2,000


Answer: b) Share Capital A/c Dr. 1,600

To share forfeiture A/c 1,200
20. The directors of Poly Plastic Ltd. resolved that 200 shares of Rs 100 each be
forfeited for non payment of the second and final call of Rs 30 per share. Out of these
150 shares were reissued at Rs 60 per share to Mohit.
How much amount will be transferred to Capital Reserve A/c?
a. Rs 3,500
b. Rs 4,500
c. Rs 6,000
d. Rs 14,000
21. As per SEBI guidelines, minimum subscription shall be fixed at-

A. 50% of the subscribed capital
B. 90% of the issued amount
C. 90% of Authorized capital
D. 80% of the issued amount
22.Which capital of company is mentioned in the Memorandum of Association?
A. Authorized capital
B. Issued capital
C. Subscribed capital
23, Y Ltd. invited applications for 20,000 shares of Rs. 10 each payable at Rs. 3 on
application, Rs. 5 on allotment and balance on first and final call. Applications were
received for 11,000 shares. Amount to be transferred to capital account is-
A. Rs. 1,10,000
B. Rs. 2,00,000
C. Rs.90,000
D. Nil
24. P Ltd. purchased the business of Q Ltd. for Rs. 5,50,000 payable in fully paid up
shares of Rs. 10 each at a premium of 10%. Number of shares to be issued by P Ltd.
will be-
A. 55,000
B. 5,50,000
C. 50,000
D. 27,500
25. A company issued 10,000 equity shares of Rs. 10 each payable as Rs. 3 on
application, Rs. 3 on allotment ,Rs. 2 on first call and the balance on second and final
call.All calls were made and received except the final call on 500 shares. Subscribed
but not fully paid up capital will be-

A. Rs. 20,000
B. Rs. 4,000
C. Rs. 5,000
D. Rs. 80,000
26. A company is registered with 80,000 equity shares of Rs. 10 each. Out of which it
has offered to the general public 70,000 shares @ Rs. 10 each. Shares which are not
issued by the company are called-
A. Reserve Capital
B. Issued capital
C. Unissued Capital
D. Called up Capital
27. When a company gives an option to its employees to subscribe the shares at a price
that islower than the market price, it is called-
A. Right issue
B. Private placement of shares
C. Bonus shares
D. Employees Stock Option Plan (ESOP)
28. Premium on the issue of shares should be shown-
A. On the Equity and Liabilities side of the Balance Sheet
B. On the Assets side of the Balance Sheet
C. In the Statement of Profit and Loss
29. Which of the following is not a part of subscribrd capital?
A. Preference shares of convertible nature
B. Equity shares issued to vendor
C. Bonus shares
D. Forfeited shares
30. If vendors are issued fully paid up shares of Rs. 1,00,000 in consideration of net
assets of Rs. 1,20,000, the balance of Rs. 20,000 will be credited to-
A. Goodwill Account
B. Statement of profit and Loss
C. Security Premium Reserve Account
D. Capital reserve Account
31.The profit on reissue of forfeited shares is transferred to :

(a) General Reserve
(b) Capital Redemption Reserve
(c) Capital Reserve
(d) Revenue Reserve
31. If a share of Rs.100 on which Rs.60 has been paid, is forfeited, it can be re-
issued at the minimum price of:
(a) Rs.60
(b) Rs.100
(c) Rs.40

(d) Rs.140
33,.Maximum limit of premium on reissue of forfeited shares is :
(a) 32%
(b) 20%
(c) No limit
(d) 100%
34. Shares can be forfeited for :
(a) For non – payment of call money
(b) For failure to attend meetings
(c) For failure to repay the loan to the bank
(d) For which shares are pledged as a security to
35. X Ltd. had allotted 10,000 shares to the applicants of 14,000 shares on pro-
rata basis, application money on another 6000 shares was refunded. The amount
payable on the application was Rs.2. Sita applied for 420 shares. The number of
shares allotted to him will be:
(a) 60 shares
(b) 340 shares
(c) 320 shares
(d) 300 shares
36. A company issued 4,000 equity shares of rupees 10 each at par payable as
under:
On application Rs.3 , on allotment Rs.2; on first call Rs.4 and on final call Rs.
1 per share. Applicants were received for 16,000 shares. Application for 6,000
shares were rejected and pro-rata allotment was made to the applicants for
10,000 shares. How much amount will be received in cash on first call, when
excess application money is adjusted towards amount due on allotments and calls
:
(a) Rs.6.000
(b) nil
(c) Rs.16,000
(d) Rs.10,000
37. A Forfeited Share can :
(a) not be re-issued at discount
(b) re-issued at a maximum discount of 10%
(c) be re-issued at a maximum discount equal to the amount forfeited
(d) None of the above.
38. Balance in Forfeited Shares Account is shown in the balance sheet under the
head of :
(a) Reserves and Surplus
(b) Long-term Borrowings
(c) Share Capital
(d) Other Current Liabilities
39. A company forfeited 3,000 shares of Rs.10 each (which were issued at par)
held by Kishore for non-payment of allotment money of Rs.5 per share. The
called up value per share was Rs.8.On forfeiture, the amount debited to share
capital:
(a) Rs.30,000

(b) Rs.24,000
(c) Rs.15,000
(d) Rs.6,000
40. Z limited issued shares of Rs.100 each at a premium of 10%. Mr. Q purchased
500 shares and paid Rs.20 on application but did not pay the allotment money of
Rs.30. If the company forfeited his 30% shares, the forfeiture account will be
credited by :
(a) Rs.4500
(b) Rs.3500
(c) Rs.1650
(d) Rs.3000
41. The difference between subscribed capital and called up capital is called :
(a) Calls-in-arear
(b) Calls-in-advance
(c) Uncalled capital
(d) None of these
42. Company can utilise securities premium for :

(a) Writing off loss incurred on revaluation of asset
(b) Issuing fully paid bonus shares
(c) Paying divided
(d) Writing off trading loss
43. When a company issues shares at a premium, amount of premium may be received
by the company :
(a) Along with application money
(b) Along with application money
(c) Along with calls
(d) Along with any of the above
44. Securities Premium can not be applied :

(a) For paying dividend to members
(b) For issuing bonus shares to members
(c) For writing off preliminary expenses of company
(d) For writing off discount on issue of debentures
45. If a share of ₹ 10 on which ₹ 8 has been called and ₹ 6 is paid is forfeited, the
Share Capital Account should be debited with :
(a) ₹ 8
(b) ₹ 10
(c) ₹ 6
(d) ₹ 2
46. If the loss on reissue of shares is less than the amount forfeited, the ‘surplus’ or
profit is transferred to :
(a) Capital Reserve
(b) Revenue Reserve

(c) Profit & Loss A/c
(d) None of these
47. Amount of calls in Arrear is :

(a) Added to capital
(b) Deducted from share capital
(c) Shown on the assets side
(d) Shown an the equity and liability side
48. Balance of Forfeited Shares Account after reissue of forfeited shares is transferred
to :
(a) Profit & Loss A/c
(b) Capital Reserve Account
(c) General Reserve Account
(d) None of these
49. Premium on issue of shares is shown on which side of the Balance sheet.
(a) Assets
(b) Liabilities
(c) Both
(d) None of these
50. The portion of the authorized capital which can be called-up only on the liquidation
of the company is called:
(a) Issued Capital
(b) Called-up Capital
(c) Uncalled Capital
(d) Reserve Capital
51. A company issued 10,000 shares of Rs.10 each at par for which
Application were received for 50,000 shares. Amount called up:-
On application Rs.4 each, on allotment Rs.3 and final call
remaining Amount Shares were allotted on pro-rata basis Excess
money will be refunded. After utilization for allotment and final
call. The Bank A/c will be credited with Rs. _______.
A. Rs. 4,00,000
B. Rs. 1,00,000
C. Rs. 3,00,000
D. Rs. 5,00,000

52. When the shares are reissued at a price more that face value it is
known as _______.
A. Forfeiture
B. Discount
C. Premium
D. Reserve Capital
53. Excess balance amount at Share forfeiture account will be
transferred to ______ account.
A. Forfeiture
B. Capital Reserve
C. Premium
D. General Reserve
54. Amount of discount given at the time of reissue of shares should not be
more than..
A. Shares Capital
B. Face value of share
C. Share Forfeiture Amount
D. Calls-In-Areas Amount
55. A company Forfeited 2,000 shares of Rs 10 each issued at 20 %
Premium to be paid at the time of allotment on which Rs 8 is called up.
Company not received Rs 4 on Allotment including premium and Rs 2 in
First call. What will be the amount Debited to share capital account:
A. Rs. 20,000
B. Rs. 16,000

C. Rs. 24,000
D. Rs. 18,000
56.A forfeited share can:
a. Not be reissued at a discount.
b. Reissued at a maximum discount 10%
c. Be reissued at a maximum discount equal to the amount forfeited.
d. None of the above
57. Shelly Ltd. forfeited 6,000 equity shares of ` 10 each, ` 10 called-up, for
the non-payment of final call of ` 1 per share. Half of the forfeited shares were
reissued at ` 12 per share as fully
paid up. On reissue of the forfeited shares, the following amount will be
transferred to Capital Reserve A/c:
(a) ` 54,000
(b) ` 27,000
(c) ` 15,000
(d) ` 36,000

58. What will be the correct sequence of events?
Forfeiture of shares.
i.Default on Calls.
ii.Re-issue of shares.
(iv) Amount transferred to capital reserve.
Options:
(A) (i), (iv), (ii), (iii)

(B) (ii), (iv), (i), (iii)
(C) (ii), (i), (iii), (iv)
(D) (iii), (iv), (i) (ii)
59. Apaar Ltd forfeited 4,000 shares of ₹20 each, fully called up, on which only
application money of ₹6 has been paid. Out of these 2,000 shares were
reissued and ₹8,000 has been transferred to capital reserve. Calculate the
rate at which these shares were reissued.
(A) ₹20 Per share
(B) ₹18 Per share
(C) ₹22 Per share
(D) ₹8 Per share
60. 52. Star ltd. Issued 10,000 equity shares of Rs. 100 each at a premium of
20%. Mamta who had been allotted 2,000 shares did not pay the first and final
call of Rs.5 per share. On forfeiture of Mamta’s shares, amount debited to
Securities Premium Reserve Account will be:
a) Rs.5,000
b)Rs.10,000
c)Rs.15,000
d) Nil
61. (A) Part of authorised capital to be called at the beginning

(B) Portion of uncalled capital to be called only at liquidation
(c) Over subscribed capital
(D) Under subscribed capital

62.When full amount is due on any call but it is not received, then the short fall
is debited to :
(a) Calls-in-advance
(b) Calls-in-arrear
(c) Share Capital
(d) Suspense Account
63. The difference between subscribed capital and called up capital is called :
(a) Calls-in-arear
(b) Calls-in-advance
(c) Uncalled capital
(d) None of these
64. Which statement is issued before the issue of shares ?
(a) Prospectus
(b) Articles of Association
(c) Memorandum of Association
(d) All of these
65. Company can utilise securities premium for :
(a) Writing off loss incurred on revaluation of asset
(b) Issuing fully paid bonus shares
(c) Paying dividend
(d) Writing off trading loss

ANSWER KEY
ANSWER KEY
i. MULTIPLE CHOICE QUESTIONS
1. A
2. D
3. A
4. A
5. B
6. B
7. B
8. A
9. C
10. C
.11 (B) 90% of the issued amount
12 (A) Authorized capital
13. (D) Nil
14. (C) 50,000
15 (B) Rs. 4,000
16 (C) Unissued Capital
17 (D) Employees Stock Option plan (ESOP)
18 (A) On the Equity and Liabilities side of the Balance Sheet
19 (D) Forfeited shares
20 (C) Security premium Reserve Account
21 C
22 C
23 C
24 A
25 D
26 A
27 C
28 C
29 B
30 D
31. C
32 B
33 D
34 A
35 A
36 A

37 B
38 B
39 B
40 D
41 B
42 B
43 C
44 D
45 B
46 B
47 D
48 A
49 A
50 A
51 B
52 C
53 B
54 B
55 B
56 C
57 B
58 C
59 B
60 D
61 B
62 D
63 C
64 B
65 B


Chapter 8 - Issue of Debenture
Sl.No Question:
1 Debentures that do not carry any charge or security on assets of the company are
known as:
a. secured debentures
b. unsecured debentures
c. convertible debentures
d. registered debentures
2 A company can issue debentures

a. for cash
b.as a collateral security
c. for consideration other than cash
d.All of these.
3 Which of the following is not a feature of debenture?
a. Rate of interest on the debenture is specified
b. Mode and period of repayment of principal and interest is fixed
c. Interest on debenture is an appropriation of profit
d. Debenture is generally secured by way of charge on the assets of the
company
4 Excess value of net assets over purchase consideration at the time of

Purchase of business is credited to:
a. General reserve
b. Capital reserve
c. Vendor's account
d. Goodwill account
5 Aim ltd wants to issue 10,000, 8% debentures of Rs 100 each at a discount. The
Companies Act 2013, has specified the maximum amount of discount that can be
allowed on issue of debenture is ---------
a. 80,000 b.10,000 c.25000 d. maximum discount not specified
6 Securities Premium Reserve ------------4,00,000
Preliminary expenses ----------- 50,000
Debenture issue expenses--------- 40,000
Loss due to fire -----------------------------30,000
Bad debt ------------------------------------10,000
If Securities Premium Reserve is utilized as per Section 52(2) of the Companies Act
2013. Balance of Securities Premium Reserve will be------
a. 3,10,000 b. 3,00,000 c.2,70,000 d.3,50,000
7 If M ltd purchased machinery worth Rs 6,00,000 from N and agreed to issue 6,500,
10% debentures of Rs 100 each to vendor. The difference in the amount will be
adjusted in which account
a. Vendor b. Goodwill c. Capital Reserve d sundry assets
8 Z ltd issued 10,000, 9% Debentures of Rs 100 each at a premium of 10% payable
along with application. Subscription was received for 9,000 debentures and all the
applicants were allotted the debentures. Pass the journal entry to record the
application money received
a. Bank a/c Dr 10,00,000 and debenture application Cr 10,00,000
b. Bank a/c Dr 10,00,000 and debenture application and allotment Cr 10,00,000

c. Bank a/c Dr 9,90,000 and debenture application and allotment Cr 9,90,000
d. Bank a/c Dr 9,90,000 and debenture application Cr 9,90,000
9 Raj ltd purchased assets of Rs 9,90,000 from Y ltd. Payment was made by issuing
8% debentures of Rs 100 at a discount of 10%. Discount on issue of debenture A/c
will be debited with—
a. Rs1,10,000 b. Rs 90,000 c. Rs 99,000 d. Rs10,000
10 X ltd issued 20,000, 8%Debentures of Rs 100 each at a discount of 10%. It has
balance in Securities Premium Reserve of Rs 1,40,000 and Capital Reserve of
Rs90,000. While passing journal entry to write off Discount on Issue of Debentures,
Capital Reserve will be debited with how much amount.
a. 90,000 b 60,000 c.70,000 d.80,000
11 For writing off discount on issue of debentures, ………… is debited and ………
account is credited, if security premium reserve doesn’t exist.
(A) Statement of P/L a/c and Discount on issue of debentures
(B) Discount on issue of debentures and Statement of P/L a/c
(C) Statement of P/L a/c and Debenture suspense account
(D) None
12 Interest payable on debentures is calculated at the:
(A) Issue price of debentures
(B) Nominal value of debentures
(C) Redemption value of debentures
(D) None
13 ABC Ltd has Rs 100,000, 8% debentures outstanding. Interest is paid semi-annually
on 30 September and 31 march every year. Tax deducted at source is 10%. The
th st
amount of interest paid to the debenture-holders on 31 march, 2020 will

st
be………………..
(A) 3400
(B) 3500
(C) 3600
(D) None
14 On 1.4.2019, a company issues Rs 15,00,000, 9% debentures at a discount of 10%
redeemable by annual drawings of Rs 300,000 at the end of each year. On 31 march,
st
2020, security premium reserve exists at Rs 60,000.The amount by which statement

of p/l a/c will be debited is…………
(A) 80000
(B) 85000
(C) 88000
(D) 90000
15 A company issued 5000, 12% debentures of Rs 100 each at 10% discount,
redeemable at 10% premium. Interest on debentures are payable half-yearly on which
TDS is 10%. What will be the amount of tax deduction of a year?
(A) 3000
(B) 4000
(C) 5000
(D) 6000
16 X Ltd purchased assets worth Rs 28,80,000. It issued debentures of Rs 100 each at a
discount of 4% in full satisfaction of the purchase consideration. The number of
debentures issued to vendor is:
(A) 30000

(B) 28800
(C) 32000
(D) 3000
17 Excess value of net assets over purchase consideration at the time of purchase of
business is credited to:
(A) General reserve account
(B) Capital reserve account
(C) Vendors’ account
(D) Goodwill account
18 Omega Ltd purchased a business. The purchase price was paid by 20,000, 6%
debentures of Rs 100 each issued at a premium of 10%. The purchase consideration
was
(A) 20,00,000
(B) 22,00,000
(C) 24,00,000
(D) None
19 When debentures issued as collateral security is recorded in the books of accounts,
………….account is debited.
(A) Goodwill
(B) Capital reserve
(C) Debenture redemption
(D) Debenture suspense
20 When 10,000 debentures of Rs 100 each are issued as collateral security against a
bank loan of Rs 8,00,000, the debenture suspense is debited by an amount of…….
(A) 10,00,000
(B) 800,000
(C) 200,000
(D) None
21. Debenture holders are:

a. Owners of the company b. Debtors of the company
c. Creditors of the company d. promotors of the company
22. Debenture represents the:

a. Long term borrowing of the company
b. The investment of equity- shareholders
c. Directors’ shares in a company
d. Shorts-term borrowing of a company
23. Zero coupon bonds are issued:

a. At zero interest rate
b. With specified rate of interest
c. Without specified rate of interest
d. None of these
24. A debenture holder is entitled to;

a.fixed dividend b. share in profit

c.voting rights in the company d. interest at the fixed rate
25. Interest on debentures issued as a collateral security is paid on:

a. nominal value of debentures b.no interest is paid
c.face value f debentures d. paid up value of debentures
26. When debentures of rs.1,00,000, are issued as collateral security against a loan of
rs.1,50,000, the entry for issue of debentures will be:
a. Credit debentures rs.1,50,000 and debit bank a/c rs1,50,000
b. Debit debenture suspense a/c rs1,00,000 and credit bank a/c rs.1,00,000
c. Debit debenture suspense a/c rs.100,000 and credit debenture a/c rs1,00,000
d. Debit cash a/c rs1,50,000 and credit bank a/c r1,50,000
27. ‘A’ ltd. Purchased the assets from ‘B’ ltd. Fr rs.8,10,000. ‘A’ ltd. Issued 10% debentures
of rs 100 each at 20% discount against the payment. The number of debenturereceived by
‘B’ ltd. Will be:
a.4,500 b.9,000
c.45,000 d.none of these
28.. If vendors are issued debenture of rs 4,40,000 in consideration of assets rs5,00,000 and
liabilities of rs1,00,000, the balance of rs 40,000 will be debitedto:
a.general reserve b. capital reserve account
c .goodwill account d.statement of profit & loss
29. .Issued 4,000, 12% debentures of rs100 each at a discount of 4%, redeemable at a
premium of 10%. In such a case:
a. Loss on issue will be debited by rs24,000
b. Loss on issue will be debited by rs56,000
c. Loss on issue will be debited by rs40,000
d. Premium on redemption will be credited by rs24,000
30. A ltd. Issued 1,000,10% debentures of rs 100 each at a premium of rs 5%. What will be
the total amount of interest for one year:
a. Rs10,500 b.Rs10,000
c. Rs5,250 d. Rs.5,000
Sl.No Question
31 Where is ‘Premium on Redemption of debenture’ shown in the balance sheet
A. Under the sub head ‘Long term Borrowing’.
B. Under the sub head 'Long term provision’.
C. Under the sub head ‘Other Long-term liabilities.

32 Taza Ltd. Issued 20,000,8% Debentures of ₹100 each issued at 5% discount,
redeemable at par. The 8% Debenture account is:
A. Debited with ₹20,00,000
B. Credited With ₹20,00,000
C. Debited with ₹19,00,000
D. Credited with ₹1,00,000
33 Alfa Ltd. Obtained loan of ₹1,00,000 from HDFC bank and issued 1200,10% Debentures of
₹100 each as collateral security. The amount shown in balance sheet under long term
borrowings:
A. 1,00,000
B. 1,20,000
C. 20,000
D. 1,32,000
34 X Ltd. Issued ₹10,00,000 debentures at a discount of 6% on 1 April 2017 repayable at par
st
the end of five years. The entry for writing off discount on issue of debenture:
A. Discount on issue of debenture A/c Dr.
To Debenture A/c
B. Debenture A/c Dr.
To Discount on issue of debenture A/c
C. Statement of profit and loss A/c Dr.
To on Discount issue of debenture A/c
D. Discount issue of debenture A/c Dr.
To Statement of profit and loss A/c
35 Loss on issue of debentures can be written off from:
A. Securities Premium Reserve
B. Statement of profit and loss
C. Both (A) and (B)
36 Panna Ltd. Issued 2,000, 10% debentures of ₹ 100 each at a premium of 20%. What will be
the total amount of interest for one year?
A. ₹20,000
B. ₹10,000
C. ₹15,000
D. 10,500
37 Z Ltd. Issued 10,000 9% debentures of ₹100 each at a discount of 5%redeemable at the end
of three year at premium of 5%. For what amount ‘Loss on issue of Debenture account’ will
be debited.
A. 50,000
B. 90,000
C. 1,00,000
D. 1,50,000
38 Mhajan Ltd. Issued 3,000, 15% debentures of ₹100 each at a discount of 5%, redeemable at
a premium of 10% after 5 years. Which of following statement is correct:
A. Loss on issue of debentures will be deibited by ₹45,000
B. Loss on issue of debentures will be credited by ₹40,000
C. Premium on redemption of debenture will be debited by ₹45,000
D. Premium on redemption of debenture will be credited by ₹40,000
39 ChamanVerma adopts the policy of Risk aversion while purchasing securities from the

market. Which option ChamanVerma will select from the following:
i.1,500, 10% debentures of ₹100each.
ii.2,000 equity shares expected to yield dividend of ₹50,000 per year
a. Option (i) as by purchasing 1,500, 10% debentures of ₹ 100 each
b. Option (ii) as by purchasing equity shares
c. Either (i) or (ii)
d. None of the above
40 Daman Ltd. Made the following issues of debentures:
i.For cash at 95%, 500 debentures of ₹100 each
ii.To a creditor who supplied machinery costing 16,000, 170 debentures of ₹100 each
iii.To a bank for loan of for ₹ 80,000 as a collateral security
In which of the above issues Debenture suspense account will be opened
a. In Option (i)
b. In Option (ii)
c. In option (iii)
d. All
Debenture holders are the:
41.
(a) Customers of the Company
(b) Owners of the Company
(c) Creditors of the Company
(d) None of these
42. In case of issue of debentures as a collateral security for loan from the bank which
account will be debited:
(a) Bank Account

(b) Bank Loan Account
(c) Debentures Account
(d) Debentures Suspense Account
43. In the Balance Sheet of a Company, Debentures are shown under the head :
(a) Unsecured Loans

(b) Long-term Loans
(c) Current Liabilities
(d) Reserve and Surplus
44. Discount on issue of Debentures is in the nature of:
(a) Revenue Loss

(b) Capital Loss
(c) Deferred Revenue Expenditure
(d) None of there

45. If debentures of ₹ 4,50,000 are issued for the consideration of net assets of ₹
5,00,000 balance ₹ 50,000 will be credited to:
(a) Profit & Loss A/c

(b) Goodwill A/c
(c) General Reserve A/c
(d) Capital Reserve A/c
46. F Ltd. purchased machinery for a book value of ₹ 4,00,000. The consideration was
paid by issue of 10% Debentures of ₹ 100 each at a discount of 20%. The
Debenture Account will be credited by :
(a) ₹ 4,00,000
(b) ₹ 5,00,000
(c) ₹ 3,20,000
(d) ₹ 4,80,000
47. Debenture premium can be used to
(a) Write off the discount on issue of shares or debentures

(b) Write off the premium on redemption of shares or debentures
(c) Write off capital loss
(d) All of the above
48. A company issued ₹ 1,00,000 12% debentures of ₹ 100 each. The amount of
interest on debentures will be:
a) ₹ 12,000
(b) ₹ 1,20,000
(c) ₹ 12,00,000
(d) None of these
49. When debentures are issued at a discount and are redeemable at a premium, which
of the following accounts is debited at the time of issue ?
(a) Debentures A/c

(b) Premium on Redemption of Debentures A/c
(c) Loss on Issue of Debentures A/c
(d) Profit & Loss A/c
50 Deep Ltd. issue 10,00,000, 7 % debentures of 100 Rs. each at a discount of 4%,
redeemable after 5 years at a premium of 6%. Loss issue of debentures is :
(a) ₹ 10,00,000
(b) ₹ 6,00,000
(c) ₹ 16,00,000
(d) ₹ 4,00,000
51 Debenture holders are :

A. Owners of the company
B. Customers of the company
C. Creditors of the company

52 Debentures issued as collateral security will be debited to:
A. Bank account
B. Debenture suspense account
C. Debentures account
D. Debenture holder account
53 Profit on cancellation of own debentures is transferred to:

A. Profit and loss account
B. Profit and loss appropriation account
C. General reserve account
D. Capital reserve account
54 If debenture of ₹100000 were issued for discount of ₹ 10000, which are

redeemable after 4 years. Then amount of discount to be written off from P&L
Account each year is:
A. ₹ 3000
B. ₹ 4000
C. ₹ 2500
D. ₹ 5000
55 Debentures can be redeemed out of:

A. Profit
B. Capital
C. Provision
D. All of these
56 Premium on redemption of debentures is a .......

A. Personal account
B. Real account
C. Nominal account
D. Suspense account
57 If debentures purchased in open market are not immediately cancelled , they are
treated as ................
A. Current asset
B. Current liability
C. Investment
D. Capital
58 Debentures cannot be redeemed at:

A. Par
B. Premium
C. Discount
D. More than 10% premium
59 Loss on issue of debenture account is shown:

A. On asset side of balance sheet
B. On liability side of balance sheet
C. On credit side of P &L account
D. None of these

60 Debentures represent the:
A. Long term loan of a company
B. The investment of equity shareholders
C. Directors shares in a company
61. Debentures represent the :
(A) Long-term Borrowings of a Company
(B) The Investment of Equity-Shareholders
(C) Directors’ shares in a company
(D) Short-term Borrowings of a Company
62. Zero Coupon Bonds are issued :

(A) At Zero Interest Rate
(B) With Specified Rate of Interest
(C) Without Specified Rate of Interest
(D) None of These
63. When a company is liquidated, the debenture holders have a prior right
for :
A) principal amount
B) interest
C) both (a)and (b)
D) none of these
64. ‘A’ Limited purchased the assets from ‘B’ Limited for Rs.5,40,000. ‘A’
Limited issued 10% debentures of Rs.100 each at 20% premium against
the payment. The number of debentures received by ‘B’ Limited will be :
(A) 4,500
(B) 5,400
(C) 45,000
(D) 6,000
65. Which of the following is not a characteristic of Bearer Debentures?
(A) They are treated as negotiable instruments.
(B) Their transfer requires a deed of transfer.
(C) They are transferable by mere delivery.
(D) The interest on it is paid to the holder irrespective of identity
66. When 100 debentures are issued at 5% discount@ 100 each redeemable
at a premium of 8%.How much amount will be credited as premium on
redemption of debentures account
(A)Rs.5,000
(B)Rs.4,000
(C) RS.8,000
(D) Rs.6,000
67. When debentures of Rs.1,00,000 are issued as Collateral Security
against a loan of Rs.1,50,000, the entry for issue of debentures will be :
(A) Credit Debentures Rs.1,50,000 and debit bank A/c Rs.1,50,000
(B) Debit Debenture Suspense A/c Rs.1,00,000 and Credit Bank A/c
Rs.1,00,000
(C) Debit Debenture Suspense A/c Rs.1,00,000 and Credit Debentures
A/c Rs.1,00,000.
(D) Debit Cash A/c Rs.1,50,000 and Credit Bank A/c Rs.1,50,000
68. X Ltd. purchased a building for Rs.60,00,000 payable as 20% in Cash
and balance by allotment of 8% debentures of Rs.500 each at a premium

of 20%. Number of debentures issued will be :
(A) 9,600
(B) 8,000
(C) 12,000
(D) 10,000
69. Issued 4,000, 12% debentures of Rs.100 each at a premium of 4%,
redeemable at a premium of 10%. In such case :
(A) Loss on Issue will be debited by Rs.24,000
(B) Loss on Issue will be debited by Rs.56,000
(C) Loss on Issue will be debited by Rs.40,000
(D) Premium on Redemption will be credited by Rs.24,000
70. Interest payable on debentures is :
(A) an appropriation of profits of the company
(B) a charge against profits of the company
(C) transferred to sinking fund investment account
(D) transferred to general reserve
71 10% debenture issued at Rs105 is repayable at Rs115, the face value of
debenture being Rs100. Calculate the amount of loss on redemption of
debentures:
(a) 10 (b) 5 (c) 15 (d) 25
72 Collateral security means ___________security:
(a) primary (b) secondary
(c) additional (d) both b & c
73 10% debenture issued at Rs. 95 is repayable at Rs. 115, the face value of
debenture being Rs100. In this case, debentures are issued at __________ and
redeemable at_______________
(a) discount, discount (b) premium, premium
(c) discount, premium (d) its cost price
74 When the number of debentures applied is less than number of debentures
offered to public the issue is said to be:
(a) oversubscribed (b) under subscribe
(c) Fully subscribed (d) none of the above
75 A company can issue debentures
(a) for cash (b) as a collateral security
(c) for consideration other than cash (d) any of the above
76 Manoj Ltd took over the assets of Rs7,60,000 and liabilities of Rs80,000 of Saroj
Ltd. for purchase consideration of Rs6,30,000 payable by the issue of 12%
debentures of Rs100 each at a discount of 10%. The number of debentures to be
issued is:
(a) 6300 (b) 6500
(c) 7000 (d) 7500
77 Which of the following is not a method of redemption of debentures:
(a) Lump-sum Method (b) Installment Method
(c) Conversion method (d) Collateral Method
78 Debenture redemption reserve is created
(a) before redemption starts
(b) at the closure of previous accounting year
(c) before 30 April of the current year
th
(d) all the above

79 H Limited has outstanding 10,000, 8% debentures of Rs 100 each that are

redeemable at a premium of Rs 10 each. Out of these 6000 debentures are to be
redeemed on 31 December 2018. Denture redemption investment should be
st
(a) 75,000 (b) 85,000

(c) 90,000 (d) 95,000
80 Nav Lakshmi Ltd invited applications for issuing 3,000, 12% Debentures of Rs.
100 each at a premium of Rs. 50 per Debenture. The full amount was payable on
application.
Applications were received for 4000 debentures. How much amount will be
transferred to 12% Debentures account.
(a)Rs. 3,00,000/= (b) Rs. 4,00,000
(c)Rs. 4,50,000= (d)Rs. 6,00,000
81.When debentures are issued at par and redeemable and premium the loss on
such an issue is debited to:
a. profit and loss account
b. debenture application and allotment account
c. loss on issue of debentures account
d. discount on issue of debentures account.
82.Excess value of net assets over purchase consideration at the time of purchase
of business is credited to:
a. General reserve
b. Capital reserve
c. Vendor's account
d. Goodwill account.
83. ABC took over the assets of Rs7,60,000 and liabilities of Rs 80,000 of Y limited
for purchase consideration of Rs5,85,000 payable by the issue of 12% debentures of
Rs100 each at a discount of 10%. The number of debentures to be issued is:
a. 6600
b. 6500
c. 4500
d. 5400
84. XYZ limited issued 4000,12% debentures of Rs100 each at a premium of 5%
.the total amount of interest for one year will be:
a. 48,000
b. 58,000
c. 50,000
d. 50,400.
85. ABC limited issues 10,000 9% debentures of 100 each at a premium of 5%

payable at a premium of 10%, the loss on issue of debentures account will be
debited to by:
a. Rs10,00,000
b. Rs1,00,000
c. Rs10,50,000
d. Rs1,05,000

86. Debentures that do not carry any charge or security on assets of the company
are known as:
a. secured debentures
b. unsecured debentures
c. convertible debentures
d. registered debentures.
87. Debenture is:

a. written instrument acknowledging a debt written by its holder.
b. An oral acknowledgement of debt by a company
c. A written instrument acknowledging a debt written by its company
d. None of these.
88. Debentures issued as collateral security will be______ to debenture suspense

account:
a. debited
b. credited
c. sometimes debited and sometimes credited
d. none of these.
89. Debenture interest:

a. is payable only in case of profits
b. accumulates in case of losses are inadequate profits
c. is payable irrespective of profit or loss
d. none of the above.
90. Collateral security means ___________security:

a. primary
b. secondary
c. government
d. valuable.
91. Debenture holders are the :

(a) Customers of the Company
(b) Owners of the Company
(c) Creditors of the Company
(d) None of these
92. Debentures which are transferred by mere delivery are called:

(a) Registered Debentures
(b) First Debentures
(c) Bearer Debentures
(d) None of these
93. In the Balance Sheet of a Company, Debentures are shown under the head :
(a) Unsecured Loans
(b) Long-term Borrowings
(c) Current Liabilities
(d) Reserve and Surplus

94. Discount on issue of Debentures is in the nature of:
(a) Revenue Loss
(b) Capital Loss
(c) Deferred Revenue Expenditure
(d) None of there
95. Debentures carries interest at: .

(a) 12% p.a.
(b) Fixed Rate
(c) 20% p.a.
(d) 6% p.a.

ANSWER KEY
Compiled (MCQ) KEY/ANSWER SHEET
Multiple Choice question
1 b
2 d
3 c
4 b
5 d
6 a
7 b
8 c
9 a
10. b
11 (A) Statement of P/L a/c and Discount on issue of debentures
12 (B) Nominal value of debentures
13 (C) 3600
14 (D) 90000
15 (D) 6000
16 (A) 30000
17 (B) Capital reserve account
18 (B) 22,00,000
19 (D) Debenture suspense
20 (A) 10,00,000
21 c
22 a
23 c
24 d
25 b
26 c
27 b
28 c
29 c
30 b
31 Under the sub head ‘Other Long-term liabilities
32 Credited With ₹20,00,000
33 1,00,000
34 Discount on issue of debenture A/c Dr.
To Debenture A/c
35 Both (A) and (B)
36 A. ₹20,000

37 1,00,000
38 Loss on issue of debentures will be debited by ₹45,000
39 Option (i) as by purchasing 1,500, 10% debentures of ₹ 100 each
40 In option (iii)
41 A
42 D
43 B
44 B
45 D
46 B
47 D
48 A
49 C
50 A
51 C
52 B
53 D
54 C
55 D
56 C
57 C
58 C
59 A
60 A
61. (A) Long-term Borrowings of a Company
62. (c) Without Specified Rate of Interest
63 (C) both (a)and (b)
64. (A) 4,500
65. (B) Their transfer requires a deed of transfer.
66. ( C) Rs.8,000
67. (C) Debit Debenture Suspense A/c ₹1,00,000 and Credit
Debentures A/c ₹1,00,000.
68. (B) 8,000
69. (C) Loss on Issue will be debited by ₹40,000
70. (B) a charge against profits of the company
71 (c) 15
72 (d) both b & c
73 (c) discount, premium
74 (b) under subscribe
75 (d) any of the above
76 (c) 7000
77 (d) Collateral Method
78 (c) before 30 April of the current year
th
79 (c) 90,000
80 (a)Rs. 3,00,000/=

81 C
82 B
83 B
84 A
85 B
86 B
87 C
88 A
89 C
90 B
91 C
92 C
PREPARED BY THE PGTs ( COMMERCE ) OF BHUBANESWAR, GUWAHATI, KOLKATA,

RANCHI, SILCHAR AND TINSUKIA REGIONS.

PART – B (FINANCIAL STATEMENT ANALYSIS)
NAME OF THE CHAPTER: - ANALYSIS OF FINANCIAL STATEMENT
Q1 Identify, which amongst the following statements is wrongly stated in respect of objectives of
comparative balance sheet:
A、To measure the short term and long-term solvency of the firm.
B、To analyze changes in various items in absolute and percentage terms
C、To gauge the financial position and soundness of business.
D、To measure the performance of the business during the current year.
Q2 Comparative balance sheet shows the effect of business operations on which of the following:
A、Only on assets
B、Only on liabilities
C、Both on assets and liabilities
D、Not only on assets and liabilities but also on capital.
Q3 Find out which of the following is right formula for finding out percentage change at the time of
preparation of comparative financial statements.
A、Absolute change/Current year figure
B、Absolute change/Current year figure x100
C、Absolute change/Previous year figure
D、Absolute change/Previous year figureX100
Q4 If share capital is ₹-30,000 during the previous year and Absolute change is ₹-6000, then,
percentage change in share capital is equal to:
A) 20%.
B) 25%
C) 30%.
D) 35%
Q5 If profit after tax is ₹-2,70,000 and Tax rate is -25%, then profit before tax is equal to:
A、₹-3,60,000
B、₹-3,00,000
C、₹-3,37,500
D、₹-4,00,000
Q6 In a common Size statement of profit and loss, which figure is assumed to be equal to 100%
A、Revenue from operations
B、Total revenue from operations
C、Total expenses
D、Net profit after tax
Q7 In the preparation of common size balance sheet, which figure assumed to be equal to 100%
A、Shareholders’ funds
B、Total of Non-current assets
C、Total of equity and liabilities or Total of assets
D、Capital employed
Q8 Which of the following cannot be identified from the comparative statement of profit and loss?
A、Rate of decrease or increase in revenue from operations
B、Rate of decrease or increase in trade receivables
C、Rate of decrease or increase in incomes and expenses
D、Rate of decrease or increase in net profit
Q9 If amount of shareholder funds ₹-3,00,000, Non-current liabilities ₹-1,20,000 and current
liabilities ₹ 80,000, what will be its percentage of shareholders’ funds to Total of Equity and
liabilities.
A) 50%.
B) 60%.
C) 40%.
D) 70%
Q10 If purchase of stock-in-trade ₹-2,00,000: Change in inventories of stock-in- trade₹-50,000 and
other expenses-20% of cost of revenue from operations
What will be the total expenses:
A) ₹-50,000.
B) ₹-40,000.
C) ₹-80,000.
D) 35,000
Q11 While preparing the balance sheet of a company, securities premium reserve is shown under:
(a) Non-Current liabilities
(b) Share capital
(c) Long term borrowings
(d) Reserves and surplus
Q12 Call in advance appears in a Company’s Balance sheet under:
(a) Current liabilities
(b) Share Capital
(c) Long term Borrowings
(d) Reserves and Surplus
Q13 Analysis of financial statement is significant for:
(a) Creditors
(b)Management
(c) Employees
(d) all of the above
Q14 Schedule III has prescribed format for presentation of balance sheet.
(a) Horizontal
(b) Vertical
(c) Either (a) or (b)
(d) Neither (a) nor (b
Q15 Interest accrued on investments is shown in company’s Balance Sheet under the main head.
(a) Non-current investments
(b) Current assets
(c) Other current assets
(d) Other Non-Current assets
Q16 This of the following items is shown under the head ‘current assets’ while preparing company’s
Balance Sheet??
(a) Investment in property
(b) Patents
(c) Inventories
(d) Vehicles
Q17 Under the sub head of short – term provision which one is shown from the following :
(a) Interest accrued and due on borrowing
(b) Proposed dividend
( c ) unpaid dividend
( d ) calls in advance
Q18 11%Debentures redeemable within 12 months of the date of balance sheet will be shown under:
(a) Short term borrowings
(b) Short terms provisions
(c) Other current liability
(d) Trade payables
Q19 Share Capital of a company consists of 90,000 shares of RS. 10 each, RS. 7 called up. All the
shareholders have duly paid the called up amount. Share capital will be shown as:
(a)Subscribed and fully paid
(b) Subscribed but not yet fully paid
(c) Either (a) or (b)
(d) Neither(a) nor (b)
Q20 Which of the following is a not limitation of analysis of financial statement?
(a)Window dressing
(b)Subjectivity
(c)Intra-firm comparison
(d) Only quantitative analysis
Q21 Under this tool of financial statement analysis ,100% is taken as a base and all other related items
are expressed as a percentage of base. The tool is-
(A) Comparative statement
(B) Common Size Statement
(C) Cash flow statement
(D) Ratio analysis
Q22 Which of the following is an objective of comparative statements?
(A) Data presentation becomes simple and comparable
(B) Indicates trend
(C) Indicates strength and weaknesses
(D) All of the above
Q23 Which item is assumed to be 100 on the asset side in case of Common size Balance Sheet?
(A)Fixed Assets
(B)Non current investments
(C)Inventories
(D) Total of assets
Q24 Which item is assumed to be 100 in case of Common size Statement of Profit and Loss?
(A)Revenue from operations
(B)Total Revenue
(C)Total Expenses
(D)None of the above
Q25 Which technique of financial analysis shows a comparative study of items or components of
financial statements for two or more years?
(A) Common size statement
(B) Ratio analysis
(C) Comparative statement
(D) Trend analysis
Q26 Which of the following is a tool of financial statement analysis?
(A)Comparative statements
(B)Common-size statements
(C)Cash flow statements
(D)All of these
Q27 In a company, cost of materials consumed is Rs 1,00,000 and revenue from operations is Rs
2,00,000. What will be its percentage to revenue from operations?
(A) 57%
(B) 50%
(C) 65%
\(D) 44%
Q28 Comparison of a firm’s financial statements of two or more years is known as------------
(A)Inter-firm comparison
(B)Intra-firm comparison
(C)Standard comparison
(D)Pattern comparison
Q29 The name Vertical analysis is given to –
(A)Common size statement
(B)Comparative statement
(C)Ratio analysis
Q30 Horizontal analysis stands for-
(A)Comparative statements
(B) Common size statement
(C)Ratio analysis
(D)Cash flow statement
Q31 Analysis of Financial Statement is significant
(A)For creditors
(B)For Managers
(C)For employees
(D)All the above
Q32 Which of the following is shown as Current Liabilities?
(A) Inventories
(B)Trade receivable
(C)Unclaimed Dividend
(D)Prepaid Insurance
Q33 Mining right is a example of
(A)Tangible fixed assets
(B)Intangible fixed assets
(C)Asset under development
(D)Capital work in progress
Q34 In Asha Ltd., There is a Claim for Workmen compensation Rs.45,000 and will be settled within
12 months. In companies balance sheet Claim for Workmen compensation will be shown under
(A)Non-current liabilities
(B)Current liabilities
(C)Non-current Assets
(D) Current Assets
Q35 When bad position of the business is tried to be depicted as good it is known as
(A)Personal bias
(B)Window dressing
(C)Pricelevel changes
(D) None of these
Q36 Which Analysis is based on one year’s data?
(A)Horizontal Analysis
(B)Vertical Analysis
(C)Cash Flow Statement
(D)Dividend Analysis
Q37 Which of these is not the limitation of financial statements of a company?
(A)Ignore qualitative aspects
(B) Providing information about the profitability of the business
(C)Personal bias
(D) Ignores price level change
Q38 Financial Analysis becomes useless because it
(A)Measures the profitability
(B)Measures the solvency
(C)Lacks qualitative analysis
(D)Makes a comparative study
Q39 Under which of the following is head/sub-head is ‘Calls in Arrears’ presented in the Balance
Sheet of a Company?
(A)Reserves and Surplus
(B)Other Long-term Liabilities
(C)Share Capital
(D) Other Current Liabilities
Q40 Out of the following items, identify which is shown as part of Revenue from operations in a
factory:
(A)Interest income
(B)Rent from subletting
(C)Sale of scrap
(D) Sale of old newspaper
Q41 All of them are long term borrowings except :-
A.) Cash credits.
B.) Public deposits
C.) Debentures
D.) Both A & C
Q42 Which of the following is not a long-term borrowing of a company?
A.) 10% Debentures.
B.) Term loans.
C.) Loans repayable on demand from banks
D.) Long-term finance lease obligations.
Q43 How the following liabilities are to be shown on the liability side of the balance sheet in the order
of permanence?
1. Current liabilities and provisions
2. Secured loans
3. Share capital
4. Unsecured loans
5. Reserves and surplus
A.) 3, 5, 2 , 4 , 1
B.) 3 , 2 , 1 , 4 , 5
C.) 1 , 4 , 2 , 5 , 3
D.) 5, 4, 3, 2, 1
Q44 Which of the following item to be included in Reserve & Surplus?
A.) Capital Redemption Reserves
B.) General Reserve
C.) Securities Premium
D.) All of the above
Q45 Fictitious assets are shown on the asset side of the balance sheet of a company under the
heading:-
A.) Fixed Assets
B.) Current Assets
C.) Miscellaneous Expenditure
D.) None of these.
Q46 Which of the following Sub-head does not come under the “Non-Current Assets” as per the
Company Act, 2013?
A.) Fixed Assets
B.) Current Assets
C.) Non-Current Investment
D.) Long-terms Loans & Advances
Q47 Which of the following head come under the ‘Expenses’ in the Statement of Profit & Loss?
A. Cost of Materials Consumed
B. Purchases of Stock-in-Trade
C. Finance Cost
D. All of these
Q48 Calculate ‘Revenue from Operation’ for a non-financial company from the following
information:- Sales ₹ 1,30,000/-, Sales Return ₹ 30,000/-, Sale of Scrap ₹ 50,000/-, Dividend
Earned ₹ 65,000/-.
A.) ₹2,15,000/-
B.) ₹1,50,000/-
C.) ₹1,65,000/-
D.) None of these
Q49 If the Accounting income is more than the Taxable income, then it result is……………..
A.) Deferred Tax Liability
B.) Deferred Tax Assets
C.) Both (A) and (B)
D.) None of these
Q50 The provisions against which liability will arise within 12 months of the date of Balance Sheet,
then that provision is classified as:
a.) Long-term Provision
b.) Short-term Provision
c.) Both (A) and (B)
d.) None of these
Q51 While preparing Common Size Income statement each item is expressed as a % of (a)
Revenue from operations
(b) Total revenue
(c)Other income
(d) Profit before tax
Q52 The main objective of common size statement is:
(a) to present changes in various items

(b) to provide common ways for comparison
(c) to establish relationship between various items
(d) all of these
Q53 which tool of financial analysis shows a comparative study of items of financial statements for
two or more years?
(a) common size statement

(b) comparative statement
(c) ratio analysis
(d) trend analysis
Q54 In the common size statement of profit and loss:
(a) figure of net revenue from operations is assumed to be equal to 100

(b) figure of gross profit is assumed to be equal to hundred
(c) figure of net profit is assumed to be equal to hundred
(d) figure of total income it is assumed to be equal to hundred
Q55 Which of the following is not a tool of financial analysis?
(a) comparative income statement

(b) comparative position statement
(c) statement of profit and loss
(d) cash flow statement
Q56 Common size statement are prepared:
(a) in the form of ratios

(b) in the form of percentages
(c) in the form of (a) and (b) both
(d) none of the above
Q57 A company’s working capitalis Rs.10 Lakh (Negative balance) in the year 2018. It became Rs.15
Lakh (positive balance) in the year 2019. What is the percentage of change?
(A)150%
(B)100%
(C)250%
(D)50%
Q58 Total Assets of a firm are rupees 20 lakh and its fixed assets are rupees 8 lakh. what will be the
percentage of fixed assets on total assets?
(a) 60%
(b) 40%
(c) 29%
(d) 71%
Q59 comparative statement of profit and loss provides information about:
(a) rate of increase or decrease in the revenue from operations

(b) rate of increase or decrease in the cost of revenue from operations
(c) rate of increase or decrease in the net profit
(d) all of the above
Q60 if net revenue from operations of a firm are rupees 120000 cost of revenue from operations is
rupees 66000 and operating expenses are rupees 21600 what will be the percentage of operating
income on net revenue from operations?
(a) 55%
(b) 45%
(c) 73%
(d) 27%
Q61 The most commonly used tools for financial analysis are:
(A) Comparative Statements
(B) Common Size Statements
(C) Accounting Ratios
Q62 Which one of the following is not a method/tool of analysis of financial statements?
(A) Accounting Ratios
(B) Break Even Point
(C) Statements of Receipts and Payments
(D) Fund Flow Statement
Q63 Which of the following is the objective of comparative statements?

(A) To make the data simpler and understandable
(B) To indicate the trend
(C) To help in forecasting
Q64 Comparative Balance Sheet :

(A) Provides a summarized view of the operations of the firm
(B) Presents the financial position of the firm
(C) Presents the change in various items of balance sheet
Q65 Comparative Statement of Profit and Loss provides information about:

(A) Rate of increase or decrease in revenue from operations
(B) Rate of increase or decrease in cost of revenue from operations
(C) Rate of increase or decrease in net profit
Q.66 1. Which analysis depicts the relationship between two figures:

(A) Ratio Analysis
(B) Trend Analysis
(C) Cumulative figures and averages
(D) Dividend Analysis
Q67 Fixed Assets of a company increased from Rs.3,00,000 to Rs.4,00,000. What is the percentage of
change?
(A) 25%
(B) 33.3%
(C) 20%
(D) 40%
Q68 If net revenue from operations of a firm are Rs.1,20,000; cost of revenue from operations is
Rs.66,000 and operating expenses are Rs.21,600, what will be the percentage of operating
income on net revenue from operations ?
(A) 55%
(B) 45%
(C) 73%
(D) 27%
Q69 If total assets of a firm are Rs.8,20,000 and its fixed assets are Rs5,90,400, what will be the
percentage of current assets on total assets?
(A) 42%
(B) 58%
(C) 28%
(D) 72%
Q70 In the Balance Sheet of a Common size Statement:

(A) Figure of current liabilities is assumed to be 100
(B) Figure of fixed assets is assumed to be 100
(C) Figure of total assets is assumed to be 100
(D) Figure of share capital is assumed to be 100
ANSWER KEYS
ANSWER ANSWER ANSWER ANSWER

Q.NO KEYS Q.NO KEYS Q.NO KEYS Q.NO KEYS
1 D 11 D 21 B 31 D
2 D 12 C 22 D 32 C
3 D 13 D 23 D 33 B
4 A 14 B 24 A 34 B
5 A 15 B 25 C 35 B
6 A 16 C 26 D 36 B
7 C 17 B 27 B 37 B
8 B 18 C 28 B 38 C
9 B 19 B 29 A 39 C
10 A 20 C 30 A 40 C
ANSWER ANSWER
Q.NO KEYS Q.NO KEYS Q.NO ANSWER KEYS
41 A 51 A 61 D
42 C 52 D 62 C
43 A 53 B 63 D
44 D 54 A 64 C
45 C 55 C 65 D
46 B 56 B 66 A
47 D 57 C 67 B
48 B 58 B 68 D
49 A 59 D 69 C
50 B 60 D 70 D
NAME OF THE CHAPTER :- RATIO ANALYSIS
Q1 Working Capital is the:

(A) Cash and Bank Balance (B) Capital borrowed from the Banks
(C) Difference between Current Assets and Current Liabilities
(D) Difference between Current Assets and Fixed Assets
Q2 Current assets include only those assets which are expected to be realised within
………………………
(A) 3 months (B) 6 months
(C) 1 year (D) 2 years
Q3 . On the basis of following data, the proprietary ratio of the company will be:
Equity share capital Rs.10,00,000 ; Debentures Rs. 5,00,000; Statement of profit & loss Debit
Balance Rs. 1,00,000; Current Liabilities Rs. 6,00,000, Current Assets 8,00,000.
(A) 70% (B) 50% (C) 45% (D) 75%
Q4 . The two basic measures of liquidity are:

(a) inventory turnover and current ratio
(b) current ratio and liquid ratio
(c) gross profit margin and operating ratio
(d) current ratio and average collection period
Q5 A company’s liquid assets are 6,00,000, inventory is 1,50,000 and its current liabilities are
4,00,000. Subsequently, it purchased goods for Rs. 1,00,000 on credit. Quick ratio will be
(a) 1.5:1 (b) 1.2:1 (c) 1.4:1 (d) 1.7:1
Q6 Revenue from Operations Rs.2,00,000; Inventory Turnover ratio 5; Gross Profit 25%.
Find out the value of Closing Inventory, if Closing Inventory is Rs.8,000 more than the
Opening Inventory.
(A) Rs.38,000 (B) Rs.22,000 (C) Rs.34,000 (D) Rs.26,000
Ans-(C) Rs.34,000
Q7 Current Ratio is 1.5:1. Working Capital is 30,000. What will be the amount of current
liabilities?
(a) 20,000 (b) 60.000 (c ) 1,65,000 (d) 1,20,000
Q8 From the following information, the quick ratio will be:

Bank Overdraft 40000, Trade Payable 10,000, Current Assets: 70,000, Inventories 10,000
Prepaid Expenses 5,000, Advance Tax 5,000.
(a) 1:1.2 (b) 1:1 (c) 5:7 (d) 1.25:1
Q9 The Debt Equity ratio of a company is 1: 2. Purchase of a fixed asset for Rs. 5,00,000
on long term deferred payment basis. Debt Equity Ratio will:
(a) Increase (b) Decrease
(c ) Remain constant (d) Not change
Q10 Quick Assets = ?

(a) Current Assets – Prepaid Expenses
(b) Current Assets – Inventory – Prepaid Expenses
(c) Current Assets + Inventory – Prepaid Expenses
(d) Current Assets – Inventory + Prepaid Expenses
Q11 Capital Employed can be calculated by:
(A) Debt + Equity
(B)Non current assets + Working capital
(C) Total Assets – Current Liabilities
(D) Any of the above
Q12 Which of the following will reduce Debt-Equity ratio?

(A) Payment of Bills payable on maturity
(B) Conversion of debentures into equity shares
(C) Declaration of final dividend
(D) Issue of bonus shares
Q13 Net Profit can be greater than Operating Profit when:

(a) Cost of Revenue from Operations is more than Operating Expenses
(b) Operating Expenses are more than Non-operating Expenses
(c) Non-operating Expenses are more than Non-operating Income
(D)Non-operating Expenses are less than Non-operating Income
Q14 If Share Capital Rs.8,00,000, Reserves and Surplus Rs.3,00,000, Non-current Assets Rs.40,00,000,
Current Assets Rs.4,00,000, then proprietary ratio will be:
(a) 12%
(b) 25%
(c) 8.33%
Q15 Higher the ratio, the more favorable it is, does not stand true for:
(a) Gross profit ratio
(b) Net profit ratio
(c) Operating ratio
(d) Operating profit ratio
Q16 A company's revenue from operations is Rs.10,00,000, cost of revenue from operations is Rs
7,00,000, closing inventories Rs 50,000 and indirect expenses are Rs 1,00,000. Its gross profit ratio
is:
(a) 40%
(B) 15%
(C) 20%
(D) 30%
Q17 From the following information, Calculate Return on Investment:
Net Profit after Interest and Tax Rs. 4,50,000,
10% Debentures 15,00,000
Tax @ 10% Capital employed Rs.26,00,000
(A) 17.31%
(B) 25%
(C) 15.85%
(D) 10.98%
Q18 Interest coverage ratio is given by:

(A) Net Profit/Interest on long-term borrowing
(B) Long-term borrowings/Interest on long term borrowings
(C) Profit before interest and tax/Interest on long-term borrowings
(D) Profit before Tax/Interest on long-term borrowings
Q19 Which ratios are complimentary to each other:

(A) Gross profit ratio and Net profit ratio
(B) Operating profit ratio and Net profit ratio
(C) Operating ratio and Net profit ratio
(D) Operating ratio and Operating profit ratio
Q20 If revenue from operation is Rs. 6,00,000 and Gross profit is 25% of cost of revenue from
operation. Gross profit will be:
(A) Rs. 1,50,000
(B) Rs. 1,20,000
(C) Rs. 4,50,000
Q21 The ideal Current ratio is:
(A) 1:2
(B) 2:1
(C) 1:1
(D) 40%
Q22 If the total assets are Rs. 13,20,000, Non- Current assets Rs. 6,00,000 and capital employed is Rs.
12,00,000, which of the following correctly represents the current ratio for the venture?
(A) 2:1
(B) 4:1
(C) 6:1
(D) 7:1
Q23 Which of the following is not a type of Activity Ratio:
(A) Inventory Turnover Ratio
(B) Trade Receivable Turnover Ratio
(C) Working Capital Turnover Ratio
(D) Debt to Equity Ratio
Q24 ………………. Ratios are a measure of the speed with which various accounts are converted into
sales or cash.
(A) Activity Ratio
(B) Liquidity Ratio
(C) Profitability Ratio
(D) Solvency Ratio
Q25 Opening Inventory of a firm is Rs. 80,000. Cost of revenue from operation is Rs. 6,00,000.
Inventory Turnover Ratio is 5 times. Its closing inventory will be:
(A) Rs. 1,60,000
(B) Rs. 1,20,000
(C) Rs. 80,000
(D) Rs. 2,00,000
Q26 A transaction involving a decrease in both Current Ratio and Quick Ratio is:
(A) Sale of Non-Current Assets for Cash
(B) Sale of Stock-in-Trade at Loss
(C) Cash payment of a current liability
(D) Purchase of stock-in-trade on credit
Q27 Total purchase Rs. 1,70,000, cash purchase Rs. 16,000, Purchase return Rs. 8,000, creditors at the
end of the year Rs. 32,000, creditors in the beginning Rs. 24,000. What will be the creditors
turnover ratio?
(A) 5.12 times
(B) 5.16 times
(C) 5.21 times
(D) 5.25 times
Q28 Assuming that the current ratio is 2:1, purchase of goods on credit would:
(A) Increase Current Ratio
(B) Decrease Current Ratio
(C) No effect on Current Ratio
(D) Either increase or decrease Current Ratio
Q29 A company has Liquid Assets Rs. 75,000; Inventories Rs. 15,000; Prepaid Expenses Rs. 10,000
and Working Capital of Rs. 60,000. Its Liquid Ratio will be:
(A) 2.5:1
(B) 1.87:1
(C)2:1
(D) 1:1
Q30 Liquid Ratio is also known as:
(A) Quick Ratio
(B) Acid Test Ratio
(C) Working Capital Ratio
(D) Both (A) and (B)
Q31 Current Ratio=
(a) Current Assets / Current Liabilities
(b) Quick Assets / Current liabilities
(c) Fixed Assets / Current liabilities
Q32 100 - Operating Profit Ratio is equal to

(a) Operating Ratio
(b) Operating Net profit Ratio
(c) Gross Profit Ratio
(d) Current ratio
Q33 Debt to Equity ratio=

(a) Debt / Equity
(b) Debt / Shareholders Fund
(c) Both (a) and (b)
(d) None of these
Q34 Which of the following statements are true about ratio analysis?
(a) Ratio Analysis is useful in financial analysis.
(b) Ratio Analysis is helpful in communication and coordination.
(c) Ratio Analysis is not helpful in identifying weak spots of the business.
(d) Ratio Analysis is helpful in financial planning and forecasting.
(A) A,B and D
(B) A,C and D
(C) A,B and C
(D) A,B,C,D
Q35 Operating ratio is:
(A) Cost of revenue from operations + Selling Expenses/Net revenue from operations
(B) Cost of production + Operating Expenses/Net revenue from operations
(C) Cost of revenue from operations + Operating Expenses/Net Revenue from Operations
(D) Cost of Production/Net revenue from operations.
Q36 Revenue from operations, i.e. sales ` 6,00,000, Gross Profit 25% on cost. Gross profit ratio will be:
(A) 25%
(B) 20%
(C) 22%
(D) 18%
Q37 Which of the following transactions will increase the Debt of Equity ratio, which is 1 : 2?
(a) Issue of shares for cash
(b) Redemption of Preference shares
(c) Redemption of Debentures
(d) Conversion of Debentures into Shares
Q38 Profit for the objective of calculating a ratio may be taken as
(a) Profit before tax but after interest
(b) Profit before interest and tax
(c) Profit after interest and tax
Q39 Which of the following are limitations of ratio analysis?

(a) Ratio Analysis is historical analysis
(b) Ratio analysis ignores qualitative factors.
(c) Ratio Analysis ignores quantitative analysis.
(d) Ratio Analysis may result in false results if variations in price levels are not considered.
(A) A,C and D
(B) A,B and D
(C) A,B and C
(D) A,B,C,D
Q40 The ………………………….. indicates the percentage of each sales rupee remaining after the
firm has paid for its goods.
(a) Net profit margin
(b) Operating profit margin
(c) Gross profit margin
(d) Earnings available to equity shareholders
Q41 Debt Equity Ratio express the relationship between Long Term debt and_________
(A) Short term debt
(B) Total assets
(C) Equity Shareholders’ Fund
(D) Shareholders’ Fund
Q42 This ratio measures the extent to which long-term borrowings are covered by assets which
indicates the margin of safety available to providers of long-term borrowings.
(A) Current ratio
(B)Debt-Equity ratio
(C) Total assets to Debt ratio
(D) Proprietary ratio
Q43 This ratio is generally treated an indicator of sound financial position where the assets are largely
backed by Shareholders’ fund. Name the ratio.
(A) Debt Equity ratio.
(B) Current Ratio
(C) Acid test ratio
(D) Proprietary ratio
Q44 It is usually an accepted fact that the lower this ratio the better will be margin of operating profit on
Revenue from operation.
(A) Operating profit ratio
(B) Gross profit Ratio.
(C) Net Profit ratio
(D) Operating Ratio
Q45 Employees benefits Expenses, Depreciation on Fixed assets, Office & administrative expenses,
Selling & distribution Expenses, Discount, bad debt, interest on short term loans etc are termed
as______ expenses
(A) Operating expenses.
(B) Non-operating expenses
(C) Capital Expenses
(D) Other Expenses
Q46 If the Debt-Equity ratio of Kanak Ltd is 1:2.Now the company is decided to purchase Machinery
on long term deferred payment basis. How the ratio will be affected?
(A)Increase
(B)Decrease
(C) Not Changed
(D) Any of the above depending on amount
Q47 Proprietary ratio of Diganta Ltd is 0.6:1 .Now the company wants to increase it by the following
measures-
i) Issue of New Equity Shares in cash

ii) Sale of Fixed assets at profit
iii) Redemption of Debenture and paid immediately.
iv) Issue of debenture against purchase of Machinery.
Which are the correct measures?
(A) i+ii+ii+iv
(B) i+ii+iii
(C)ii+iii+iv
(D) i+iii+iv
Q48 The gross Profit ratio of Gizma Ltd is 20%.Now the company wants to decrease it by the following
measures:
i) Purchase of goods in cash.

ii) Goods given as free samples.
iii) Goods sold at a profit(CP- ₹3,40,000 ; SP-₹ 4,00,000)
iv) Goods stolen by the staff
(A)i+ii+ii+iv
(B) i+ii+iii
(C) iii only
(D) i+iii+iv
Q49 Revenue from Operations ₹6, 00,000; Gross Profit 20%; Office Expenses ₹30,000; Selling
Expenses ?₹48,000. Calculate operating ratio (A) 80%
(B) 85%
(C) 96.33%
(D) 93%
Q50 Cash Revenue from Operations ₹4, 00,000 Credit Revenue, from Operations ₹21,00,000; Revenue
from Operations Return ₹1,00,000; Cost of revenue from operations ₹19,20,000. G.P. ratio will be
(A) 4%
(B) 23.2%
(C) 80%
(D) 20%
Q51 Operating Ratio is:

(a) Profitability Ratio
(b) Activity Ratio
(c) Solvency Ratio
(d) None of these
Q52 Proprietary Ratio indicates the relationship between proprietor’s funds and….
(a) Reserve
(b) Share Capital
(c) Total Assets
(d) Debentures
Q53 Which one of the following ratios is most important in determining the long-term solvency of a
company?
(a) Profitability Ratio
(b) Debt-Equity Ratio
(c) Stock Turnover Ratio
(d) Current Ratio
Q54 Total Assets ₹ 8,10,000
Total Liabilities ₹ 2,60,000
Current Liabilities ₹ 40,000
Debt-equity ratio is:
(a) 0.05 : 1
(b) 0.4 : 1
(c) 2.5 : 1
(d) 4 : 1
Q55 Equity share capital ₹ 15,00,000
Reserve and Surplus ₹ 7,50,000
Total Assets ₹ 45,00,000
Proprietary Ratio ?
(a) 50%
(b) 33.3%
(c) 200%
(d) 60%
Q56 The ideal liquid ratio is :
(a) 2 : 1
(b) 1 : 1
(c) 5 : 1
(d) 4 : 1
Q57 Debtors Turnover Ratio :
(a) Average Trade Receivable
Net Credit Sales
(b) Average Stock
Net Sales
(c)Net Credit Sales
Average Trade Receivable
(d)Cash Sales
Net Debtors
Q58 When Cash is 7 10,000 Stock is 7 25,000, B/R is 7 5,000 and Debtors 90000 Creditors is 8,00,000
and Bank Overdraft is 4,00,000 then current ratio is :
(a) 2 : 1
(b) 4 : 3
(c) 3 : 4
(d) 1 : 2
Q59 The term ‘Current Liabilities’ does not include: .
(a) Sundry Creditors
(b) Debentures
(c) Bills Payable
(d) Outstanding Expenses
Q60 When opening stock is ₹ 50,000 and closing stock ₹ 60,000. Net Sales is ₹ 3,00,000 and Gross
Profit ₹ 80,000 then stock turnover ratio is:
(a) 2 times
(b) 3 times
(c) 4 times
(d) 5 times
Q61 Which of the following accounting ratios is shown in pure form?
A. Current Ratio
B. Net Profit Ratio
C. Debtors Turnover Ratio
D. Inventory Turnover Ratio
Q62 1. Which of the following accounting ratios is expressed in terms of percentage?
A. Debt Equity Ratio
B. Liquidity Ratio
C. Operating Ratio
D. Debtor Turnover Ratio
Q63 While calculating Debt Equity Ratio which of the following item will not be included in debt?
A. Debentures to be redeemed within 24 months
B. Debentures to be redeemed within 28 months
C. Debentures to be redeemed within 12 months
D. Both a and b
Q64 Which of the following accounting ratios is used for knowing the long-term financial position of
a business?
A. Debtor turnover ratio
B. Proprietary Ratio
C. Fixed Assets Turnover Ratio
D. Return on Investment
Q65 Which of the following item is taken as numerator in calculation of Operating Raito?
A. Net Profit
B. Operating Profit
C. Operating Cost
D. Either b or c
Q66 In which of the following accounting ratios, Cost of Goods Sold/Cost of Revenue from
Operation is taken as numerator?
A. Return on Investment
B. Gross Profit Ratio
C. Trade Receivable Turnover Ratio
D. Inventory Turnover Ratio
Q67 Which of the following is correct about liquid assets?

A. Liquid assets include inventory and prepaid expenses
B. Liquid assets are those assets which can be converted into cash with significant change
in value
C. Liquid assets are those assets which can be converted into cash with insignificant
change in value
D. Liquid assets are those assets which can be converted into other assets
Q68 Which of the following accounting ratios comes under Solvency Ratio?
A. Fixed Assets Turnover Ratio
B. Acid Test Ratio
C. Working Capital Turnover Ratio
D. Total Assets to Debt Ratio
Q69 Which of the following accounting ratio comes under Activity Ratio?
A. Return on Investment
B. Net Profit Ratio
C. Operating Profit Ratio
D. Trade Receivable Turnover Ratio
Q70 Debt collection period is 2 months, Trade Receivable Turnover Ratio will be
A. 2 Times
B. 6 Times
C. 4 Times
D. 3 Times
ANSWER KEYS
MCQ BASED QUESTIONS
Q.NO ANSWER Q.NO ANSWER Q NO ANSWER Q NO ANSWER
1 C 21 B 41 C 61 A
2 C 22 C 42 C 62 B
3 C 23 C 43 D 63 C
4 B 24 A 44 D 64 B
5 B 25 A 45 A 65 C
6 C 26 D 46 A 66 D
7 B 27 C 47 B 67 C
8 B 28 A 48 C 68 D
9 A 29 B 49 D 69 D
10 B 30 D 50 D 70 B
11 D 31 A 51 A
12 B 32 A 52 C
13 D 33 C 53 B
14 B 34 B 54 C
15 C 35 C 55 A
16 D 36 B 56 B
17 B 37 B 57 C
18 C 38 D 58 B
19 D 39 B 59 D
20 B 40 C 60 A
Chapter Name :- CASH FLOW STATEMENT
Q1 Cash from operation is equal to :

(a) Net Profit + Increase in Current Assets
(b) Net Profit + Decrease in Current Liabilities
(c) Operating Profit + Adjustment of Current Assets and Current Liabilities
Q2 Cash Flow Statement is related to:
(a) AS-3
(b) AS-6
(c) AS-9
(d) AS-12
Q3 Net Profit during the year ₹ 1,00,000
Debtors in the beginning the year of ₹ 30,000
Debtors at the end of the year ₹ 36,000
What is the amount of cash from operating activities ?
(a) ₹ 30,000
(b) ₹ 94,000
(c) ₹ 1,06,000
(d) ₹ 1,66,000
Q4 If a machine whose original cost is ₹40,000 having accumulated depreciation ₹12,000, were sold for
₹34,000 then while preparing Cash Flow Statement its effect on cash flow will be :
(A) Cash flow from financing activities ₹34,000
(B) Cash flow from financing activities ₹6,000
(C) Cash flow from investing activities ₹34,000
(D) Cash flow from investing activities ₹6,000
Q5 If 6% Pref. share capital ₹2,00,000 were redeemed at a premium of 5%, while preparing Cash Flow
Statement its effect on cash flow will be :
(A) Cash used from financing activities ₹2,12,000
(B) Cash received from financing activities ₹2,12,000
(C) Cash used (Payment) from financial activities ₹2,10,000
(D) Cash used (Payment) from financial activities ₹2,00,000
Q6 If the amount of goodwill is ₹40,000 at the beginning of a year and ₹48,000 at the end of that year
then while preparing cash flow statement its effect on cash flow will be :
(A) Cash used (Payment) in Investing Activities ₹8,000
(B) Cash received from operating activities ₹8,000
(C) Cash used (Payment) from Operating Activities ₹8,000
(D) Cash used (Payment) from Financial Activities ₹8,000
Q7 Cash deposit with the bank with a maturity date after two months belongs to which of the following
while preparing Cash Flow Statement?
a) Investing Activities
b) Financing Activities
c) Cash and Cash Equivalents
d) Operating Activities
Q8 If net profit is ₹ 35,000 after writing off good will ₹ 6,000 and loss on sale of furniture ₹ 1,000, cash
flow from operating activities will be :
(a) ₹ 35,000
(b) ₹ 42,000
(c) ₹ 29,000
(d) ₹ 28,000
Q9 Which activity comes under ‘Operating Activities’?
(a) Purchase of Land
(b) Issue of Debentures
(c) Proceeds from Issuance of Equity Shares
(d) Cash Sales
Q10 Net Profit during the year ₹ 50,000
Debtors in the beginning the year of ₹ 15,000
Debtors at the end of the year ₹ 18,000
What is the amount of cash from operating activities ?
(a) ₹ 15,000
(b) ₹47,000
(c) ₹ 53,000
(d) ₹ 83,000
Q11 Welspun India Ltd. has given you the following information: Machinery as on April 01, 2016 50,000 ;
Machinery as on March 31, 2017 60,000 ;
Accumulated Depreciation on April 01, 2016 25,000 ;
Accumulated Depreciation on March 31, 2017 15,000 ;
During the year, a Machine costing Rs. 25,000 with Accumulated Depreciation of Rs. 15,000 was sold
for Rs. 13,000.
Calculate cash flow from Investing Activities on the basis of the above information.
(a) 48000
(b) (48,000)
(c) 22,000
(d) (22,000)
Q12 Long-term Loans on 1st April, 2016 Rs. 2,00,000 ;
Long-term Loans on 31st March, 2017 Rs.2,50,000 ;
During the year, the company repaid a loan of Rs. 1,10,000.
Loan obtained during the year......................
(a) 50,000
(b) 1,60,000
(c) (1,60,000)
Q13 An example of cash flow from operating activity is :
(a) Purchase of own debenture
(b) Sale of fixed assets.
(c) Interest paid on term-deposits by a bank
(d)Issue of equity share capital
Q14 If a machine whose original cost is ₹40,000 having accumulated depreciation ₹12,000, were sold for
₹34,000 then while preparing Cash Flow Statement its effect on cash flow will be :
(a) Cash flow from financing activities ₹34,000
(b) Cash flow from financing activities ₹6,000
(c) Cash flow from investing activities ₹34,000
(d) Cash flow from investing activities ₹6,000
Q15 If the amount of goodwill is ₹40,000 at the beginning of a year and ₹48,000 at the end of that year
then while preparing cash flow statement its effect on cash flow will be :
(a) Cash used (Payment) in Investing Activities ₹8,000
(b) Cash received from operating activities ₹8,000
(c) Cash used (Payment) from Operating Activities ₹8,000
(d) Cash used (Payment) from Financial Activities ₹8,000
Q16 How will you deal increase in the balance of ‘Securities Premium Reserve’ while preparing a Cash
Flow Statement?
(a) Cash Flow from Operating Activities
(b) Cash Flow from Investing Activities
(c) Cash Flow from Financing Activities
(d) Cash Equivalent
Q17 How will you treat Bank Overdraft in a Cash Flow Statement?
(a) Cash Flow from Operating Activities ’
(b) Cash Flow from Investing Activities
(c) Cash Flow from Financing Activities
(d) Cash Equivalent
Q18 In case of other enterprises cash flow arising from interest paid should be classified as cash flow from
________ while dividends and interest received should be stated as cash flow from ____.
(a) Operating activities, financing activities
(b) Financing activities, investing activities
(c) Investing activities, operating activities
Q19 6. Which of the following statements are false?
(A) Old Furniture written off doesn’t affect cash flow.
(B) Cash flow statement is a substitute for cash account.
(C) Appropriation of retained earnings is not shown in Cash flow statement.
(D) Net cash flow during a period can never be negative.
(a) A, B, C
(b) B, C, D
(c)C, D, A
(d) All are true
Q20 As per Accounting Standard-3, Cash Flow is classified into

(a) Operating activities and investing activities
(b) Investing activities and financing activities
(c) Operating activities and financing activities
(d) Operating activities, financing activities and investing activities
Q21 Cash deposit with the bank with a maturity date after two months belongs to which of the following
while preparing cash flow statement?
(A) Investing activities
(B) Financing activities
(C) Cash and cash equivalents
(D) Operating activities
Q22 Computer software comes under:
(A) Fixed tangible assets
(B) Fixed intangible assets
(C) Current liabilities
(D) Long term borrowings
Q23 Rent received is classified under:
(A) Operating activities
(B) Investing activities
(C) Financing activities
(D) Cash and cash equivalents
Q24 Dividend paid by a finance company is classified under which of the following, while preparing cash
flow statement?
(A) Operating Activities
(B) Investing activities
(C) Financing activities
(D) Cash and cash equivalents
Find out cash flows from from investing activities:
Q25 A mutual fund company invested Rs. 3000000in share, and Rs. 1500000 in Debentures. It received Rs.
300000 as dividend and interest.
(A) Rs. 4800000 inflow
(B) Rs. 4200000 outflow
(C) Rs. 300000 inflow
(D) Rs. NIL
Q26 9% Debenture issued to vendor for the purchase of a Machinery of Rs. 50000, will result in:
(A) Inflow
(B) Outflow
(C) Both A and B
(D) No flow
Q27 Issue of Debenture Rs. 500000 will be shown under:
(A) Investing activity
(B) Operating activity
(C) Financing activity
(D) Cash and cash equivalent
Q28 Which of the following item is not considered under cash and cash equivalent?
(A) Current investments
(B) Marketable securities
(C) Drafts on hand
(D) Loose tools
Q29 Calculate change in working capital, from the following information:
Increase in Bills payable Rs. 20000, decrease in Creditors Rs. 5000
(A) Rs. 15000 negative
(B) Rs. 15000 positive
(C) Rs. 25000 positive
(D) Rs. 25000 negative
Q30 Where will you show goodwill written off?
(A) Operating activity
(B) Investing activity
(C) Financing activity
(D) Cash and cash equivalent
Q31 Statement of cash flows includes
A) Financing Activities
B) Operating Activities
C) Investing Activities
D) All of the Above
Q32 The statement of cash flow clarifies cash flows according to

A) Operating and Non-operating Flows
B) Inflow and Outflow
C) Investing and Non-operating Flows
D) Operating, Investing, and Financing Activities
Q33 Cash flow example from a financing activity is

A) Payment of Dividends
B) Receipt of Dividend on Investment
C) Cash Received from Customers
D) Purchase of Fixed Asset
Q34 Cash flow example from an investing activity is

A) Issue of Debenture
B) Repayment of Long-term Loan
C) Purchase of Raw Materials for Cash
D) Sale of Investment by Non-Financial Enterprise
Q35 Cash flow example from an operating activity is

A) Purchase of Own Debenture
B) Sale of Fixed Assets
C) Interest Paid on Term-deposits by a Bank
D) Issue of Equity Share Capital
Q36 A company that issues stocks and bonds to raise funds results in
A) Decrease in Cash
B) Increase in Cash
C) Increase in Equity
D) Increase in Liabilities
Q37 Which item comes under financial activities in cash flow?

A) Redemption of Preference Share
B) Issue of Preference Share
C) Interest Paid
D) All the above
Q38 Which of the following is source of cash?
(A) Cash deposited into Bank
(B) Cash withdrawn from Bank
(C) Sale of Goods costing ₹10,000 for ₹8,000
(D) Sale of marketable securities for cash
Q39 . Cash from operating activities consists of:
(A) Operating Profit
(B) Decrease/Increase in Current Assets
(C) Decrease/Increase in Current Assets
(D) All of the Above
Q40 While calculating operating profit before working capital changes, which will be added to net profit:
(A) Preliminary Expenses Written off
(B) Depreciation
(C) Loss on Sale of Asset
(D) All of the Above
Q41 Which of the following is not considered as cash equivalents?
A) Bank Overdraft
B) Commercial Paper
C) Treasury Bills
D) All of these
Q42 Cash Flow Statement is also known as:
A) Statement of Changes in Financial Position on Cash basis
B) Statement accounting for variation in cash
C) Both a and b
Q43 The objectives of Cash Flow Statement are
A) Analysis of cash position
B) Short-term cash planning
C) Evaluation of liquidity
D) Comparison of operating Performance
Q44 Cash Flow Statement is based upon
A) Cash basis of accounting
B) Accrual basis of accounting
C) Credit basis of accounting
Q45 Operating profit of the year is Rs.2,00,000. During the year, there was increase in inventory by Rs.
9,00,000 and decrease in trade receivable of Rs.50,000. What is the amount of cash flow from
operations?
A) Rs. 60,000/-
B) Rs. 1,60,000/-
C) Rs. 2,40,000/-
D) Rs. 3,40,000/-
Q46 Which of the following transitions will result into flow of cash:?
A) Cash withdrawn form bank Rs. 20,000
B) Issued Rs, 20,000, 9% debentures for the vendors of machinery.
C) Received 19,000 from debtors
D) Deposited cheques of Rs. 10,000 into bank
Q47 ABC Ltd had investment of Rs 68,000 as on 31.3.2013 and investment of Rs 56,000 as on 31.3.2019.
During the year ABC Ltd sold 40% of its investments being held in the beginning of period at a profit
of Rs 16,800. Determine cash flow from investing activities.
A) Rs 59,200
B) Rs 28,800
C) Rs 72,800
Q48 In a statement of cash flows, a company investing in short-term financial investments and in fixed
assets results in:
A) increased cash
B) decreased cash
C) increased liabilities
D) increased equity
Q49 Which of the following is considered to be as cash equivalent?
A) Marketable securities
B) Debtors
C) Investment
D) Bill of exchange
Q50 A company who issues bonds or stocks in result raised funds which finally:
A. increases liabilities
B. increases equity
C increases cash
D . decreases cash
Q51 Interest received by other than financial enterprise is shown in Cash Flow Statement under
A. Operating Activities.
B. Investing Activities.
C. Financing Activities.
D. General Activities
Q52 Interest received by financial enterprise is shown in Cash Flow Statement under
Q53 Payment of Income Tax is shown as
Q54 Dividend paid by a financial company is shown as cash outflow under ( APPLICATION)
Q55 Dividend paid by a non-financial company is shown as
D. General Activities.
Q56 Which of the following is shown under Financing Activity?

A. Interest paid.
B. Commission Received.
C. Cash received against sale of goods.
D. Cash paid for purchase of goods
Q57 Which of the following is not included in Cash and Cash Equivalents?
A. Balance with Banks.
B. Debentures purchased maturing after 100 days of purchase.
C. Cheques and Drafts on hand.
D. Cash on Hand.
Q58 Which of the following is not a part of Cash and Cash Equivalents?
A. Inventories.
B. Current Investments.
C. Short-term Deposits.
D. Marketable Securities
Q59 Which of the following is not added as Non-Cash Expense?
A. Goodwill amortized.
B. Depreciation.
C. Interest on debentures paid.
D. All of these
Q60 XY Ltd. Has balance in Provision for Tax Account of Rs 1,00,000 and Rs 1,50,000 as on 31 st March,
2019 and 2020 respectively. It made a provision for tax during the year of Rs 1,30,000. The amount of
tax paid during the year was
A. Rs 1,00,000
B. Rs 1,20,000
C. Rs 80,000
D. Rs 1,50,000
ANSWER KEYS
MCQ ANSWER KEYS

Q
Q.NO ANSWER Q.NO ANSWER NO ANSWER
1 B 21 C 41 A
2 B 22 B 42 C
3 B 23 B 43 D
4 C 24 C 44 A
5 C 25 D 45 B
6 A 26 D 46 C
7 C 27 C 47 B
8 B 28 D 48 B
9 D 29 B 49 A
10 B 30 A 50 C
11 D 31 D 51 B
12 B 32 B 52 A
13 C 33 A 53 A
14 C 34 D 54 C
15 A 35 C 55 C
16 C 36 B 56 A
17 C 37 D 57 B
18 B 38 C 58 A
19 B 39 D 59 C
20 D 40 D 60 C

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CHAPTER 2 –ACCOUNTING FOR PARTNERSHIP:

I.MULTIPLE CHOICE QUESTIONS

(A)To write off the preliminary expenses of the company

KVS ZIET BHUBANESWAR 12/10/2021 1

6. If the partnership deed is silent interest on drawings will be charged @

7. Which is not the clause of the Partnership Deed?

KVS ZIET BHUBANESWAR 12/10/2021 2

(B) Prakash’s demand is correct.

(D) As investment is of Prakash he should be given interest on capital.

11. Following are essential elements of a partnership firm except:

(A)Interest on Partner’s Loan

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(C) Rs. 240

(D) Rs. 960

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b. profit sharing ratio

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27 Which of the following statement is true?

28 The relation of partner with the firm is that of:

29 What should be the minimum number of persons to form a Partnership :

30 Number of partners in a partnership firm may be :

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(C) Determined by Court

32 In the absence of Partnership Deed, the interest is allowed on partner’s capital:

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38 Super Profit means

40 What are super profits

42 Following are the factors affecting goodwill except:

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44 Which of the following is not a method of valuing goodwill?

46 In absence of partnership deed, partners are entitled to:

a) Salary b) Commission c) Interest on capital d) None of the above

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49 Which of the following is not an appropriation of profits?

51 Which of the following can be claimed by a partner even in case of no partnership

52 In case of fixed capital, interest on drawings:

54 In order to calculate normal profit for valuation of goodwill:

55 Interest on capital is allowed on the:

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46 d)None of the above

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50 a)Charge against profit

51 a)Profit in equal ratio

52 b)Debited to partners current account

54 c) Both (a) or (b)

PREPARED BY THE PGTs ( COMMERCE ) OF BHUBANESWAR, GUWAHATI,

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MULTIPLE CHOICE QUESTIONS:-

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8 Feature of a partnership firm:

9 Which one from the below is not a right of a partner?

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PREPARED BY THE PGTs ( COMMERCE ) OF BHUBANESWAR, GUWAHATI,

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KVS ZIET BHUBANESWAER 12/10/2021 Page 1