Question 1 (June 2017)

P, Q and R sharing profits and losses equally, had been trading for many years. R decided to retire on
31.3.2017 on which date Balance Sheet of the firm is as follows.

₹ ₹

Capital accounts: P 1,20,000 Cash 36,000

Q 85,000 Debtors 74,000

R 75,000 Stock 60,000

Creditors 85,000 Plant and Machinery 1,20,000

Land and Building 75,000

3,65,000 3,65,000

Value of goodwill was agreed as ₹93,000. Land and building increased in value, it being agreed at
₹1,05,600, plant and machinery was revalued at ₹1,00,500 and it was agreed to provide 6% in respect
of debtors. Prepare revaluation account, capital accounts and balance sheet.

Question 2 (December 2017)

Snehal, Suchita and Sindhu were partners sharing profits and losses in the ratio of 3 : 2 : 1. The firm
was dissolved on 31.03.2015. After transfer of assets and liabilities to Realisation A/c, the following
transactions took place.

Give journal entries in the books on dissolution of the firm.

(i) Suchita's Loan to the firm ₹ 30,000 was settled at ₹ 28,500.

(ii) A creditor for ₹ 50,000, took over Machinery of Book value ₹ 40,000 at ₹ 35,000. The
balance was settled in Cash.

(iii) Workmen Compensation Reserve - ₹ 40,000. A liability equal to 60% of the Reserve was
settled.

(iv) Sindhu was to receive 5% of the value of assets realised as remuneration for completing the
dissolution work and was to bear realization expenses. Realisation expenses were ₹ 5,500
that was paid by Sindhu. Assets realised ₹ 60,000.

(v) The Balance Sheet disclosed a footnote, contingent liability for ₹ 5,000 in respect of a bill
discounted. The bill was received from Megha. On the date of dissolution Megha was declared
insolvent and was not able to pay the amount due. The bill had to be met by the firm.

Loss on realization amounted to ₹ 24,000.

 Question 3 (June 2018)

A and B were partners of a firm sharing profits and losses in the ratio 2:1. The Balance Sheet of the
firm as at 31st March, 2017 was as under:

Liabilities Amount (₹) Assets Amount (₹)

Capital Accounts: Plant and Machinery 5,00,000

A 8,00,000 Building 9,00,000

B 4,00,000 Sundry Debtors 2,50,000

Reserves 5,25,000 Stock 3,00,000

Sundry Creditors 2,75,000 Cash 1,50,000

Bills Payable 1,00,000

21,00,000 21,00,000

They agreed to admit P and Q into the partnership on the following terms:
(i) The firm's goodwill to be valued at 2 years' purchase of the weighted average of the profits' of
the last 3 years. The relevant figures are:
Year ended 31.03.2014 - Profit ₹ 37,000
Year ended 31.03.2015 - Profit ₹ 40,000
Year ended 31.03.2016 - Profit ₹ 45,000
(ii) The value of the stock and Plant & Machinery were to be reduced by 10%.
(iii) The building was to be valued at ₹ 10,11,000.
(iv) There was an unrecorded liability of ₹ 10,000.
(v) A, B, P & Q agreed to share profits and losses in the ratio 3 : 2 : 1 : 1 .
(vi) The value of reserve, the values of liabilities and the values of assets other than cash were not
to be altered.
(vii) P and Q were to bring capitals equal to their shares of Profit considering B's capital as base
after all adjustments.
You are required to prepare:
1. Memorandum Revaluation Account,
2. Partner's Capital Accounts and
3. The Balance Sheet of the newly constructed firm.
 Question 4 (December 2018)

A, B and C are partners in a firm sharing profits and losses as 3 : 2 : 1. Their Balance Sheet as on
31st March, 2018 was as follows: (Amount in lakhs)
Liabilities Amount (Rs.) Assets Amount (Rs.)

Partners' Capital A/c: Land and Building 210

A 145 Plant and Machinery 255
B 110 Stock 125
C 75 Debtors 95
General Reserve 165 Bills Receivable 25
Partners' Loan: Cash in Hand 3
A 30 Cash at Bank 37
B 20
Sundry Creditors 205
750 750
B died on 1st August, 2018. His account is to be settled under the following terms:
1. Goodwill will be valued at 3 years purchase of last four accounting years average profit. Profits
were : 2014-15 Rs. 135 Lakh, 2015-16 Rs. 145 Lakh, 2016-17 Rs. 131 Lakh and 2017-
18 Rs. 165 Lakh.
2. Land and Building will be valued at Rs. 250 Lakh and Plant and Machinery will be valued at Rs.
240 Lakh.
3. For the purpose of calculating B's share in the profits of 01.04.2018 to 31.07.2018, the profits
for the year 2017-18 will be taken as base.
4. Interest on Partners' Loan will be calculated @ 6% per annum.
5. A sum of Rs.50 Lakh to be paid immediately to B's Executor and the balance to be paid on 1st
December, 2018 together with interest @ 10% per annum.
You are required to pass necessary journal entries to record the above transactions and amount payable
to B' s Executor's Account.

Question 5 (June 2019)

A, B and C were partners in a firm sharing profits & losses in the ratio of 3 : 1 : 1 agreed upon
dissolution of there partnership. They each decide to take over certain assets and liabilities and continue
business separately.
Balance Sheet
as on date of dissolution
Liabilities Amount Assets Amount
(₹) (₹)
Creditors 6,000 Cash at Bank 3,200
Loan 1,500 Sundry Assets 17,000
Capitals: Debtors 24,200
A 27,500 Less: Bad Debts Provision 1,200 23,000
B 10,000 Stock 7,800
C 7,000 44,500 Furniture 1,000
52,000 52,000
It is agreed as follows:
(i) Goodwill is to be ignored.
(ii) A is to take over all the Fixtures at ₹ 800; Debtors amounting to ₹ 20,000 at ₹ 17,200. The
creditors of ₹ 6,000 to be assumed by A at that figure.
(iii) B is to take over all the stocks at ₹ 7,000 and certain of the sundry assets at ₹ 7,200 (being
book value less 10%).
(iv) C takes over the remaining sundry assets at 90% of book values less ₹ 100 allowances and
assumes responsibility for the discharge of the loan, together with accruing interest of ₹ 30
which has not been recorded in the books of the firm.
(v) The expenses of dissolution were ₹ 270. The remaining debtors were sold to a debt collecting
agency for 50% of book values.
Prepare Realisation Account, partners' Capital Accounts and Bank Account.

Question 6 (December 2019)

The Balance Sheet of X and Y who shares profits and losses in the ratio of 3 : 2, at 31st March, 2019
was as follows:
Liabilities ₹ Assets ₹

Creditors 36,000 Cash at Bank 20,000

Workmen's Compensation Fund 24,000 Debtors 1,30,000
Employees' Provident Fund 20,000 Less: Provision 10,000 1,20,000
General Reserve 40,000 Stock 60,000
X's Capital 1,68,000 Investments 1,00,000
Y's Capital 1,12,000 Patents 20,000
Goodwill 80,000
4,00,000 4,00,000
They decided to admit Z on that date for 1/4th share on the following terms:
(a) New Profit sharing ratio will be 6 : 9 : 5. Z is to bring in capital equal to 1/4th of the total
capital of the new firm.
(b) Goodwill of the firm is to be valued at 4 years' purchase of the average super profits of the last
three years. Average profits of the last three years are ₹ 70,000, while the normal profits that
can be earned with the capital employed are ₹ 30,000. No Goodwill is to appear in the books.
Z brings in ₹ 24,000 cash out of his share of Goodwill.
(c) Patents to be written down to ₹ 3,000 and Stock is undervalued by ₹ 2,000. 20% of General
Reserve to be transferred to Provision for Doubtful Debts. ₹ 9,000 included in Sundry Creditors
be written back as no longer payable.
 (d) Out of the amount of insurance which was debited entirely to P&L A/ c, ₹ 10,000 be carried
forward as an Unexpired Insurance. Unaccounted Accrued Income of ₹ 2,000 to be provided
for. A debtor whose dues of ₹ 10,000 were written off as Bad Debts paid 80% in full settlement.
A claim of ₹ 6,000 on account of workmen's compensation to be provided for.
(e) The market value of investments was ₹ 90,000. Half of the investments were to be taken over
by old partners in their old profit-sharing ratio.
Prepare Revaluation Account, Capital Accounts of the Partners and the Balance Sheet of new firm.

Question 7 (December 2021)

The partners of a firm distributed the profits for the year ended 31/3/2021. Rs.90,000 in the ratio
of 3:2:1 without providing for the following adjustments.
(i) A and B were entitled to a salary of Rs.1500 each per annum.
(ii) B was entitled to a Commission of Rs.4500.
(iii) B & C had guaranteed a minimum profit of rupees 35,000 p.a. to A.
(iv) Profits were to be shared in the ratio of 3:3:2
Pass the necessary journal entries for the above adjustments in the Books of the Firm.

Question 8 (December 2021)

X&Y are partners. They decided to dissolve their firm. Pass necessary entries assuming that various
assets and external liabilities have been transferred to the Realisation account.
i) X’s loan(partner) was appearing on the liability side of the balance sheet at rupees 30,000.
He accepted an unrecorded asset of rupees 50,000 in full settlement of his account.
ii) Runa, a creditor, to whom rupees 30,000 were due to be paid, accepted an unrecorded
computer of rupees 20,000 at a discount of 10%, and the balance was paid to him in cash.
iii) Suman, an unrecorded creditor of rupees 45,000, accepted an unrecorded motorcar of
rupees 30,000 at 35,000, and the balance was paid to him in cash.
iv) There was a contingent liability in respect of bills discounted but not matured rupees 30,000.
v) Furniture of rupees 15,000 and goodwill of rupees 20,000 were appearing in the balance
sheet but no other information was provided regarding these two items.

Question 9 (December 2022)

P, Q, R and S are sharing profits and losses in the ratio 3:3:2:1. Frauds committed by R during the
year were found out and it was decided to dissolve the partnership on 31 st march, 2019 when their
balance sheet was a under:
Liabilities Amount Assets Amount
Capitals Building 190000
P 150000 Stock 130000
Q 150000 Investments 50000
R - Debtors 70000
S 60000 Cash 30000
 General reserve 40000 R 40000
Trade creditors 80000
Bills payable 30000
5,10,000 5,10,000
Following information is given to you:
(i) A cheque for 7000 received from debtors was not recorded in the books and was misappropriated
by R.
(ii) Investments costing 8000 were sold by R at 11000 and the funds transferred to his personal
account. This sale was omitted from the firm’s books.
(iii) A creditor agreed to take over investments of the book value of 9000 at 13000. The rest of the
creditors were paid off at a discount of 5%.
(iv) The other assets realized as follows:
Building 110% of book value
Stock 120000
Investments The rest of investments were sold at a profit of 7000
Debtors The rest of the debtors were realized at a discount of 10%
(v) The bills payable were settled at a discount of 500
(vi) The expenses of dissolution amounted to 8000
(vii) It was found that realization from R’s private assets wound only be 7000
Prepare realization account, cash account and partner’s capital accounts. All workings should part of
your answer.

Question 10 (June 2023 syllabus 2016)

X, Y, and Z are partners sharing profit and losses in the ratio of 4:3:1. Their balance sheet as on 31 st
march, 2022 was as under:
Balance sheet
Liabilities Amount Assets Amount
Sundry creditors 7,00,000 Cash in hand 20,000
Bills payable 4,00,000 Cash at bank 8,80,000
General reserve 8,00,000 Stock 7,50,000
Capital accounts Debtors 13,00,000
X 20,00,000 (-) provision 50,000
Y 30,00,000 Joint life policy 15,00,000
Z 20,00,000 Investments 10,00,000
Plant and machinery 12,00,000
Building 23,00,000
89,00,000 89,00,000
On the above date, Y retires from the firm selling his share of profits to X for 3,60,000 and to Z for
4,50,000 in the ratio of 4: 5. Stock is to be appreciated by 20% and building by 10%. Joint Life Policy
is surrendered at 7,00,000 to Insurance Company. Provision for doubtful debts is increased to 10%.
Investments are sold for 23,00,000. The Capital of the newly constituted firm is fixed at 60,00,000
to be divided among X and Z in the profit-sharing ratio and adjustments to be made in cash. Y is paid
the amount due. Prepare Revaluation Account, Cash Account, Partners Capital Account and the Balance
Sheet of the new firm.

Question 11 (June 2023 syllabus 2022)

X and Y were in partnership in XY & Co. sharing profits in the proportions of 3: 2. On 31st March,
2023, they accepted an offer from P. Ltd. to acquire at that date their fixed assets and stock at an
agreed price of ₹ 7,20,000. Debtors, creditors, and bank overdraft would be collected and discharged
by the partnership firm.
The purchase consideration of ₹ 7,20,000 consisted of cash 3,60,000, Debentures in P. Ltd. (at par)
1,80,000 and 12,000 Equity Shares of 10 each in P. Ltd. X will be employed in P. Ltd. but, since Y
was retiring X agreed to allow him ₹ 30,000 in compensation, to be adjusted through their Capital
Accounts. Y was to receive 1,800 shares in P. Ltd. and the balance due to him in cash. The Balance
Sheet of the firm as on 31.03.2023 is in below:
Liabilities Amount Assets Amount
X's Capital Account 1,20,000 Fixed Assets 4,80,000
Loan from X 2,10,000 Stock 45,000
Bank Overdraft 1,50,000 Debtors 75,000
Creditors 1,80,000 Y's Capital Account 60,000
6,60,000 6,60,000
The sale of the assets to P. Ltd. took place as agreed; the Debtor’s realised 60000 and Creditors were
settled for 1,71,000. The firm then ceased business. You are required to pass necessary journal entries
and show:
(i) Realization account
(ii) Bank account
(iii) Partner’s capital accounts

Question 12 (December 2023 syllabus 2016)

A, B and C were equal partners in a firm. From 1st April 2022, they decided to change their profit
sharing ratio to 4: 3:2. It was also decided that A, who was getting remuneration of 10,000 per month
will not get any remuneration henceforth.
They also decided to value the Goodwill of the firm at 150% of the average annual profits of the last
three years, which were as follows:
Year ended:
31st March, 2021 1,70,000
31st March, 2022 1,40,000
31st March, 2023 2,88,000
On a scrutiny of accounts the following errors were discovered:
(1) On 1st October, 2022, 2 Motor bikes costing 50,000 each were purchased and were wrongly
debited to Travelling Expenses. Depreciation on Motor bikes be charged @20% p.a. on written down
value basis.
(2) On 1st January 2021, a fire broke out which resulted into a loss of goods of 2,00,000. A claim of
75% was received from the insurance company.
(3) The closing stock for the year ending on 31st March 2022 was over-valued by ₹ 30,000.
On the basis of above information, answer the following questions:
a) What may be the reason for withdrawing remuneration to A with effect from 1st April, 2022
b) What are the adjusted profits of the firm?
c) What will be the value of firm's goodwill?
d) What Journal entry will be passed for goodwill and why?

Question 13 (December 2023 syllabus 2022)

A and B were carrying on business as equal partners. The firm’s business sheet as on 31 st December,
2022 was as follows
Liabilities Amount Assets Amount
Capital Accounts Fixed assets:
A 138000 Leasehold building 80000
B 152000 Plant and machinery 180000
Bank loan 40000 Furniture 20000
Current liabilities: Current assets:
Sundry creditors 70000 Stock 60000
Bills payable 10000 Book debts 68000
Cash at bank 2000
410000 410000
The business was carried on till 30th June, 2023. The partners withdrew in equal amounts half the
amount of profits made during the period of six months (from January to June, 2023) after charging
depreciation on
Leasehold Building 10% per annum
Plant and Machinery 10% per annum
Furniture 10% per annum
Meanwhile Sundry Creditors were reduced by 15,000. Bills Payable by 2500 and Bank Loan by 20,000.
On 30th June stock was valued at 7,09,000, Book Debts were 75,000 and Cash at Bank was ₹ 2,500.
On 30th June, 2023 the firm sold the business to a limited company for ₹ 4,00,000 payable in Equity
Shares of 10 each.
The partners decided to take shares in the profit sharing ratio, any difference to be settled in cash.
You are required to prepare:
(i) Statement of Net Assets as on 30th June, 2023;
(ii) Statement of Profit earned during the period six months ended on 30.6.2023;
(iii) Realisation Account;
(iv) Capital Accounts of the partners.
 Question 14 (December 2023 syllabus 2022)
A' and 'B' were partners in a firm and their capitals were ₹ 5,00,000 and ₹ 3,00,000 respectively on
1st April, 2022. Profit for the year ending 31st March, 2023 amounted to ₹ 2,10,000. Drawings of
partners were ₹ 1,00,000 and ₹ 60,000 respectively. It was observed that following errors were
committed while distributing the profit:
(i) Manager's commission @ 10% on the profits before charging such commission was omitted.
(ii) Closing Inventory was valued at 70,000 whereas its net realisable value (market value) was 50,000.
(iii) Outstanding salary of employees 40,000 were not recorded.
(iv) 'A' had given a loan of 1,50,000 to the firm on 1st December, 2022, interest was omitted to be
recorded on this loan.
(v) Loan was given to 'B' on 1st July, 2022 amounting to ₹ 1,00,000 bearing interest @8% p.a. Interest
was omitted to be charged by the firm.
(vi) Interest on Capital @ 6% p.a. was not allowed and interest on drawings was not charged @ 10% р.а.
On the basis of above information, answer the following questions:
(i) How much interest should be allowed on A's Loan to the firm? Is it a charge or appropriation of
profit?
(ii) What is the amount of net profit?
(iii) What is the amount of divisible profit?
(iv) What is each partner's share of profit?

Question 15
Following differences have arisen among P, Q and R. State who is correct in each case:
(a) P used ₹ 20,000 belonging to the firm and made a profit of ₹ 5,000. Q and R want the amount to
be given to the firm?
(b) Q used ₹ 5,000 belonging to the firm and suffered a loss of ₹ 1000. He wants the firm to bear the
loss.
(c) P and Q want to purchase goods from A Ltd., R does not agree?
(d) Q and R want to admit C as partner, P does not agree?
(e) R had given loan of ₹ 1,00,000 to firm and demands interest @ 10% p.a. P and Q do not want to
pay the interest.

Question 16
Amit, Binita and Charu are three partners. On 1st April, 2020, their Capitals stood as: Amit 1,00,000,
Binita 2,00,000 and Charu 3,00,000. It was decided that:
(a) they would receive interest on Capital @ 5% p.a.,
(b) Amit would get a salary of 10,000 per month,
(c) Binita would receive commission @ 5% of net profit after deduction of commission, and
(d) 10% of the net profit would be transferred to the General Reserve.
Before the above items were taken into account, the profit for the year ended 31st March, 2021 was
5,00,000.
Prepare Profit and Loss Appropriation Account and the Capital Accounts of the partners.

Question 17
Mudit, Sudhir and Uday are partners in a firm sharing profits in the ratio of 3 : 1 : 1. Their fixed
capital balances are 4,00,000, 1,60,000 and 1,20,000 respectively. Net profit for the year ended
31st March, 2018 distributed amongst the partners was 1,00,000, without taking into account the
following adjustments:
(a) Interest on capitals @ 2.5% p.a.;
(b) Salary to Mudit 18,000 p.a. and commission to Uday 12,000.
(c) Mudit was allowed a commission of 6% of divisible profit after charging such commission.
Pass a rectifying Journal entry in the books of the firm. Show workings clearly.

Question 18
Manav and Vinay are partners sharing profts in the ratio of 3:2. They decided to admit Mohit as a
partner from 1st April, 2024 on the following terms
(i) Mohit will be given 2/5th share of the profit.
(ii) Goodwill of the firm will be valued at two years' purchase of three years' normal average profit of
the firm.
Profits of the previous three years ended 31st March, were
2024- Profit 30,000 (after debiting loss of stock by fire `40,000).
2023- Loss 80,000 (includes voluntary retirement compensation paid `1,10,000).
2022- Profit 1,10,000 (including a gain (profit) of 30,000 on the sale of fixed assets).
Calculate the value of goodwill.

Question 19
Bhanu and Pooja are partners sharing profits and losses in the ratio of 3: 2. They admit Kishor into
partnership for 1/4th share in profit. Kishor brings in her share of goodwill in cash. Goodwill for this
purpose is to be calculated at two years' purchase of the average normal profit of past three years.
Profits of the last three years ended 31st March, were:
2021 - Profit 50,000 (including profit on sale of assets 5,000).
2022 - Loss 20,000 (including loss by fire 30,000).
2023 - Profit 70,000 (including insurance claim received 18,000 and interest on investments and
Dividend received 8,000).
Calculate the value of goodwill. Also, calculate goodwill brought in by Kishor.

Question 20
From the following information, calculate value of goodwill of the firm:
(i) At three years' purchase of Average Profit.
(ii) At three years' purchase of Super Profit.
(iii) On the basis of Capitalisation of Super Profit.
(iv) On the basis of Capitalisation of Average profit.
Information:
(a) Average Capital Employed is 6,00,000.
(b) Net Profit/Loss of the firm for the last three years ended are:
31st March, 2021 − 2,00,000, 31st March, 2020 − 1,80,000, and 31st March, 2019 − 1,60,000.
(c) Normal Rate of Return in similar business is 10%.
(d) Remuneration of 1,00,000 to partners is to be taken as charge against profit.
(e) Assets of the firm (excluding goodwill, fictitious assets and non-trade investments) is 7,00,000
whereas Partners' Capital is 6,00,000 and Outside Liabilities 1,00,000.