STUDY POINT-Test Paper 01

Admission of a Partner

1. Kamal and Rahul are partner’s in a firm sharing profits and losses in the ratio of 7:3.
They admit Kaushal as a partner for 1/5th share. Kaushal acquires his share from
Kamal and Rahul in the ratio of 3:2. The goodwill of the firm has been valued at
Rs.25000. Kaushal paid Rs.10000 privately to X and Y as his share of goodwill. What
should be the journal entry
a. No entry will be passed
b.
Rahul A/c Dr.
Kamal A/c Dr.
To Kaushal A/c
c.
Kamal A/c Dr.
Cash A/c Dr.
To Goodwill A/c
d.
Rahul A/c Dr.
LoanA/c Dr.
To Cash A/c
2. Being Chander brought rs 20000 for his share of goodwill. Which account should be
debited?
a. Goodwill A/c
b. Cash/Bank A/c
c. Profit and Loss A/c
d. Partner’s capital account
3. If goodwill already existing in the --------, it should be written off by debiting old
partners in their old profit sharing ratio
a. Trading account
b. Balance sheet
c. Trial Balance
d. Profit and loss account

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 4. In case of undistributed accumulated losses whose account should be debited
a. New partner’s A/c
b. Old partner’s Capital A/c
c. Gaining Partner’s A/c
d. Goodwill A/c
5. What treatment should be given to Employee’s Provident Fund appearing in the
liabilities side of the Balance Sheet in case of admission of a partner
a. Not to be distributed
b. Should be distributed in equal ratio
c. Should be distributed as a part of reserve
d. Both treatment can be done

6. A and B were partners in a firm sharing profits and losses in the ratio of 5 : 3. They
admitted C as a new partner. The new profit sharing ratio between A, B and C was 3: 2
: 3. A surrendered th of his share in favour of C. Calculate B’s sacrifice.

7. Accounting Standard-26 requires that goodwill is to be recorded in the books of

accounts only when money or money’s worth has been paid for it. How will you deal
with the issue, if the new partner is unable to bring in his share of goodwill ?

8. Amit and Viney are partners in a firm sharing profits and losses in 3:1 ratio. On
1.1.2017 they admitted Ranjan as a partner. On Ranjan’s admission the profit and loss
account of Amit and Viney showed a debit balance of Rs 40,000. Record necessary
journal entry for the treatment of the same.

9. (All partners sacrifice) : A and B partners sharing profits and losses in the ratio of 3:2.
They admit C into partnership for 1/4 share in profits. C’s brings Rs. 3,00,000 as capital
and Rs. 1,00,000 as goodwill. New profit sharing ratio of the partners shall be 3:3:2.
Pass necessary Journal entries.

10. At the time of admission of a new partner, new profit-sharing ratio is ascertained. The
new of incoming partner acquires the share from old partners and as a result profit
share of old partners is reduced. What is it known as and why is it important to
ascertain it?

11. A and B who shared profits in the proportion of 5 : 3 had capitals of Rs 70,000 and Rs

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 40,000 respectively. They agree to admit C into partnership for th share in future
profits. C brings Rs 30,000 as capital and is unable to bring Rs 1,600 as his share of
goodwill in cash. Give journal entries.

12. Asha and Aditi are partners in a firm sharing profits and losses in the ratio of 3 :
2They admit Raghav as a partner for th share in the profits of the firm Raghav
brings Rs.6,00,000 as his capital and his share of goodwill in cash. Goodwill of the firm
is to be valued at two year's purchase of average profits of the last four years.
The profits of the firm during the last four years are given below:

Year Profit (Rs.)

2013 - 14 3,50,000

2014 - 15 4,75,000

2015 - 16 6,70,000

2016 - 17 7,45,000

The following additional information is given.

i. To occur management cost an annual charge or Rs. 56,250 should be made for the
purpose of valuation of goodwill.
ii. The closing stock for the year ended 31st March 2017 was overvalued by Rs. 15,000
Pass necessary journal entries on Raghav's admission showing the working notes
clearly.

13. X and Y are partners in a firm sharing profits in the ratio of 4 : 3. On 1st April, 2012,
they admitted Z as a new partner. Z brought in Rs 1,00,000 for his capital and Rs
21,000 for 1/3 rd share of goodwill premium. On Z’s admission goodwill appeared in
the books of the firm at Rs 28,000. Record the necessary journal entries on Z's
admission

14. A, B and C were partners in a firm sharing profits in the ratio of 3:2:1. On 31st March,
2019 their balance sheet was as follows

Balance Sheet
as at 31st March, 2015

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 Liabilities Amit (Rs) Assets Amt (Rs)

Creditors 84,000 Bank 17,000

General Reserve 21,000 Debtors 23,000

Capital A/cs Stock 1,10,000

A 60,000 Investments 30,000

B 40,000 Furniture and Fittings 10,000

C 20,000 1,20,000 Machinery 35,000

2,25,000 2,25,000

On the above date, D was admitted as a new partner and it was decided that

i. The new profit sharing ratio between A, B, C and D will be 2: 2: 1: 1.

ii. Goodwill of the firm was valued at Rs 90,000 and D brought his share of goodwill
premium in cash.
iii. The market value of investments was Rs 24,000.
iv. Machinery will be reduced to Rs 29,000.
v. A creditor of Rs 3,000 was not likely to claim the amount and hence to be written-
off.
vi. D will bring proportionate capital so as to give him l/6th share in the profits of the
firm.
Prepare revaluation account, partners’ capital accounts and the balance sheet of
the reconstituted firm.

15. On 31st March, 2010 the balance sheet of W and R who shared profits in 3: 2 ratio was
as follows

Balance Sheet
as at 31st March, 2010

Amt Amt
Liabilities Assets
(Rs) (Rs)

Creditors 20,000 Cash '5,000

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 Profit and Loss
15,000 Sundry Debtors 20,000
A/c

(-) Provision for Doubtful

Capital A/cs (700) 19,300
Debts

W 40,000 Stock 25,000

R 30,000 70,000 Plant and Machinery 35,000

Patents 20,700

1,05,000 1,05,000

On this date, B was admitted as a partner on the following conditions

i. B will get 4/15th share of profits.

ii. B had to bring Rs 30,000 as his capital to which amount other partners’ capital
shall have to be adjusted.
iii. He would pay cash for his share of goodwill which would be based on 2.5 years’
purchase of average profits of past 4 years.
iv. The assets would be revalued as under Sundry debtors at book value less 5%
provision for bad debts, stock at ? 20,000, plant and machinery at Rs 40,000.
v. The profits of the firm for the year’s ending on 31st March, 2007, 2008 and 2009
were Rs 20,000, Rs 14,000 and Rs 17,000 respectively.
Prepare revaluation account, partners’ capital account and balance sheet of the
new firm.