Government of Karnataka QUESTION BANK SECOND PUC ACCOUNTANCY (NEW SYLLABUS) Book 1:Not-For-Profit Organisation and Partnership Accounts Book 2: Company Accounts and Analysis of Financial Statements 2019-20 onwards DEPARTMENT OF PRE-UNIVERSITY EDUCATION 18" Cross, Sampige Road, Malleshwaram, Bengaluru — 560 012DISCLAIMER. The Question Bank is prepared for the benefit of students and teachers. The committee worked for the preparation of Question Bank made all efforts to make comprehensive and foolproof. However, if any mistakes, errors found, please mail at [email protected], [email protected]. There is no guarantee that questions from this question bank only appear in the examination conducted by the department. COPYRIGHTS The copyrights of the Question Bank lies with the Director, Department of Pre-University Education, Bangalore. The Question Bank is prepared for academic purpose only. No part of the question bank is allowed to use for commercial gains. (ii)Question Bank Preparation Committee Chairperson ujeri, DDPU, Chikodi Education District, Chikodi Co-ordinator Shri Rajashekhar.V, Pi I, Govt PU College, D.G. Halli, Bengaluru Members Shri Nagaraj V Kagalkar, Principal, Govt PU College, TK Road, Bhadravathi, Shivamogga ‘Shri K A Uppar, Principal, Govt PU College, Lachyan, Taluk: Indi, Dist: Vijapura Shri Prabhakar Reddy L, Principal, Govt PU College, Amrutari,Kunigal Taluka, Tumakur District. Shri Krishnamurthy G, Principal, Govt PU College, Gubbi, Tumkur Dist Shri B R Goddale, Principal, S.R.A PU College, Banahatti Shri S.B.Satalgaon, Selection Grade Lecturer, KLE, SCP PU College, Mahalingapur, Bagalkot Dist. Shri M.S. Halabhavi, Selection Grade Lecturer, S.F.S Composite PLU. College, Sureban, Taluk: Ramadurga, Dist. Belagavi Shri G.C.Gopalareddy, Selection Grade Lecturer, Murali PU College, Nelamangala, Bengaluru Rural Dist. Shri K.N.Manjunath Bhat, Selection Grade Lecturer, MES SSM PU College, Chikkamagaluru, Shri C.H.Goudar, Selection Grade Lecturer, M H Menasagi PU College, Kerur, Bagalkot Dist Shri L.G.Kumbar, Senior Lecturer, Govt PU College, for Boys, Vijayapur Shri V.L.Kamakar, Lecturer, Govt PU College, Nesargi. Bailhongal Taluk, Belagavi Dist. Shri Mallikarjuna K A, Senior Lecturer, Govt PU College, Dandinadibba, Madhugiri Tal, Tumkuru Di ‘Shri Basappa Nagoli, Senior Lecturer, SMNM Govt PU College for girls, Gangavathi, Koppal Dist Shri U.S.Shinde, Lecturer, RD PU College, Chikodi, Belagavi Dist ‘Shri Mahabaleshwar Tanga, Senior Lecturer, Vijaya PU College, Jayanagar, 4" Block,Bengaluru Dr. S.Shivaraj, Senior Lectur Govt PU College, Javalagera, indhanur, Raichur Dist Shri Prakash S, Senior Lecturer Empress Girls Govt PU College, Tumkur. Shri H G Dambalkar, Rtd. Principal GA PU College, Athani, Belgavi Dist (iii)INDEX PAGE PARTICULARS NOS. Course Structure, Q.P. Design & Pattern, Blue print, List of POQs, (i-(xvi) General and Specific instructions Book 1 |1 | Accounting for Not-for-Profit Organisations 1-19 2 | Accounting for Partnership- 20-27 Basic Concepts 3 | Reconstitution of Partnership Firm-Admission of a 28-46 Partner 4 |Reconstitution of Partnership Firm-Retirement/Death | 47-65 of a Partner 5 | Dissolution of Partnership Firm 66-82 Book 2 |1 | Accounting for Share Capital 83-89 2 |Issue and Redemption of Debentures 90-100 3 |Financial Statements of a Company 101-108 4 | analysis of Financial Statements 109-116 5 | Accounting Ratios 117-134 6 |Cash Flow Statements 135-140 Model MQP 1 141-148 Question | | mop 2 149-155 Papers MQP 3 156-162 (iv)CLASS - SECOND PUC COURSE STRUCTURE ; 2018-19 SUBJECT : ACCOUNTANCY DURATION: 3 HRS. 15MINS. MAX. MARKS:100 CHAPTER (CHAPTER HEAD PERIODS ALLOTTED (Including POQ) MARKS. ALLOTTED Bridge Course 05. Book -1: Not -for -Profit Organisation and Partnership Accounts 1 Accounting for Not-For- Profit 12+02 15 Organisation 2 Accounting For Partnership: Basic 10+04 09 Concepts 3 Reconstitution of a Partnership Firm: 12+01 15 Admission of a Partner 4 Reconstitution of a Partnership Firm: 14+02 13 Retirement / Death of a Partner 5 Dissolution of Partnership Firm 08 14 Book -2: Company Accounts and Analysis of Financial Statements 1 Accounting for Share Capital 10+01 15 2 Issue and Redemption of Debentures 14 19 3 Financial Statements of a Company 08+02| 09 4 |Analysis of Financial Statements 10+02| 15 5 Accounting Ratios 14 19 6 Cash Flow Statement 08+01 09 Total (Excluding POQ Marks) 152 Practical Oriented Questions Marks + 15 Grand Total (Including POQ) 05 +120+15 =140] 167 (wv)TEXTBOOKWISE AND SECTIONWISE NO. OF QUESTIONS ALLOTMENT OF MARKS No. of Questions Part | Questions| Marks for Total | pook-1| Book-2 Total each question | Marks Questions A 10 01 10 04 06 10 B 08 02 16 03 05 08 c 07 06 42 04 03 07 D 07 12 84 03 04 07 E 03 05 15 02/01 01/02 03 Total 35 - 167 | 16/15 | 19/20 35 TEXTBOOKWISE SPLIT-UP OF QUESTIONS AND MARKS ALLOTMENT Sec-A | Sec-B | Sec-C | Sec-D | Sec-E Weightage of| Textbook 1 Mark|2 Marks|6 Marks|12 Marks|5 Marks| Marks Ques. | Ques. | Ques. | Ques. | Ques. 1 04 03 04 03 | 02/01 | 70+10/05 (1 to 5 Chapters) 2 06 05 03 04 | 01/02 | 8245/10 (1 to 6 Chapters) Total Ques. & Marks | 10 08 07 07 03 |152+15=167 TEXTBOOKWISE POQS. Textbook | No. of POQs 1 07 2 08, Total 15 (vi)SUGGESTED QUESTION PAPER DESIGN / WEIGHTAGE TO KUAS INSTRUCTIONAL OBJECTIVES : 2018 - 19 SUBJECT: ACCOUNTANCY (CODE - 30) Class: I] PUC Duration: 3 Hours And 15 Minutes — Max. Mark: Sl. | Typology of |Sec-A| Sec-B | Sec-C | Sec-D | Sec-E | % age of | Total No. | questions and |(1 Mark|(2 Marks] (6 Marks| (12 Marks|(5 Marks| weightage | Marks weightage | ques.) | ques.) | ques.) | ques.) | POQs) 1 |Knowledge 03 02 o1 o1 - 15 25 2 |Understanding} 05 04 02 ol o1 25 42 3 Application o1 o1 02 04 o1 40 68 4 |Skill 01 o1 02 ol o1 20 32 Total Questions 10 08 o7 o7 03 - - (35 Questions} Total Marks 10 16 42 84 15 100 167 SUGGESTED QUESTION PAPER PATTERN: 2018 - 19 SUBJECT: ACCOUNTANCY (CODE - 30) Class: 1 PUC Duration: 3 Hours and 15 Minutes Max.Marks: 100 Sections Nature of Questions / Questions/| Questions | Marks | Marks Problems Problems | tobe | for each | for each given | answered | question | section A | Very short answer type 10 os 01 08, B___|Short Answer Type os 05 02 10 C | Small Problems 07 04 06 24 D___|Big Problems 07 04 12 48 E |POQs 03 02 os, 10 Total 35 23 - 100vs10a 991A JUOMIOIA WO pays 2g PINOYs WORJSoNb syrUM g UOYy ‘Uo]SSTUIpE UO PoysE s} WORSINb syzEUT ZT JI :O10N ST +8 ab oT ot Zot | OT ‘SwFEUT OS{MUOTIOOS PUL syFEUT'smoy [e301 | a = = = oT oT Ta WonDeS UT yee SHIRA S70 SUONSANO €) OOd - = = = - : SO 9sin0D o8pug 4 Z 3 or est ozt (004 ¥ e8mo05 o3prrg Surpnyoxe (11 + 1 378d) TOL pus = 1 1 = 1 6r +1 soney SupUNOD.y| Ss T T T PaOnan 10. Donation for specific purpose are always Il. Multiple Choice Questions. 1. Not-For-Profit Organisations are formed for: (a) Profit (b) Service (©) Profit & Service (d) None of these 2. Most of Not-For-Profit Organisation transactions are: (a) Cash (b) Credit (c) Cash & Credit (d) Barter 3. Receipts and Payments Account include items of: (a) Capital Nature (b) Revenue Nature (c) Both (a) & (b) (d) (d) None of these 4. Income and Expenditure Account include the amounts of: (a) Current year (b) Previous year (c) Next year (d) Both current year and previous year 8. Capital Fund does not include: (a) Entrance fees (b) Legacies (6) (Building fund (d) Life Membership Fees10. 11. Legacies are treated as: (a) Revenue Receipt (b) Capital Receipt (c) Revenue Expenditure (d) Capital Expenditure Purchase of a computer by a college is treated as: (a) Capital Receipt (b) Capital Expenditure (c) Revenue Receipt (d) Revenue Expenditure In the absence of any specific instruction, where do you show the Entrance Fee? (a) Debit side of Income and Expenditure account (b) Credit side of Income and Expenditure account (c) Liability side of the Balance sheet (d) Added to Capital Fund on the liabilities side of B/S Special Funds are shown in: (a) Income Side (b) Expenditure Side (c) Liability Side (d) Asset Side Life Membership fees are treated as: (a) Capital Receipts (b) Capital Expenditure (c) Revenue Receipts (d) Revenue Expenditure Loss on sale of fixed asset is treated as: (a) Capital Receipts (b) Revenue Receipts (c) Capital Expenditure (d) Revenue Expenditure Ill. True or False types Questions: 1. 2. 3. a x 10. Receipt and Payment Account isa summary ofall capital receipts and payments. If the sports fund is maintained, sports expenses will be shown on the debit side of Income and Expenditure Account. ‘The balancing figure on credit side of Income and Expenditure Account denotes excess of expenses over incomes. Scholarships granted to students out of funds provided by Government will be debited to Income and Expenditure Account. Donations for specific purposes are always capitalized. Opening Balance Sheet is prepared when the Opening Balance of capital fund is not given. Surplus of Income and Expenditure Account is added to Capital Fund. Income and Expenditure Account is equivalent to Profit and Loss Account of a trading concern. Receipts and Payments Account does not differentiate between capital and revenue receipts. Capital and Revenue items are recorded in Receipt and Payment Account.IV. Very Short Answer Questions: 1. 2. 3. 14, 15. 16. 17. 18. 19. Give an example for Not- For- Profit Organisation. What is the Motive of Not- For- Profit Organisation? Where do you show Opening Bank overdraft in Receipt and Payment Account? Name any one final account of a Not- For- Profit Organisation. State any one major source of income of Not- For- Profit Organisation. State any one books of account maintained by a Not- For- Profit Organisation. State any one feature of Receipts and Payments Account. How do you treat the prizes paid, when the prize fund is not maintained? What is Capital Fund? Give an example for specific donation. How do you treat the tournament expenses, when the Tournament Fund is maintained? How do you treat the Life Membership Fees? Section B: Two Marks Questions What are Not-For-Profit Organisations? Give any two examples of Not-For-Profit Organisation State any two features of Not-For-Profit Organisation Name any two books of accounts maintained by Not-For-Profit Organisation . Give the meaning of Receipts and Payments Account State any two features of Receipt and Payment Account. What do you mean by Income and Expenditure Account? State any two features of Income and Expenditure Account. Give any two examples for revenue expenditure. Give any two examples for capital expenditure. . Give any two examples for revenue receipt. Give any two examples for capital receipt. State two differences between Receipts and Payments Account and Income and Expenditure Account. What is Capital Fund? What are Legacies? What is Honorarium? Give the meaning of Endowment Fund. How do you treat tournament expenses, when separate tournament fund is not maintained? How do you treat prizes awarded, when Prize Fund is maintained?Section D: 12 Marks Questions I. Preparation of Income and Expenditure Account and Balance Sheet when Opening Balance Sheet is given in the problem 01. Followings are the Balance Sheet and Receipts and Payments Account of Sharada Education Society, Mangaluru. Balance Sheet as on 31-03-2017 Liabilities z Assets z [Capital fund 36,400 |Cash in hand 2,050 Audit fees 2,500 |Maps and charts 1,600 5% Govt. Bonds 31,000 Subscriptions outstanding 1,000 Furniture 3,250 38,900 38,900 Receipts and Payments A/C for the year ending 31-03-2018 Dr. cr. Receipts z Payments z To Balance b/d 2,050 |By Audit fees 2,500 ‘To Subscriptions 20,500 |By Rent 1,800 To Donation 2,500 |By Maps and charts 3,400 To Interest on Govt. 850 |By Stationery and postage 250 Bonds By Salary 8,000 By Functions 1,050 By Balance ¢/d 8,900 25,900 25,900 Adjustments: 1) Audit fees % 2,500 still due 2) Charge % 250 as depreciation on furniture. 3) Half of the donation is to be Considered as revenue. 4) Outstanding Subscriptions %2,000 and subscriptions received in advance %1,500. Prepare: i) Income and Expenditure Account and ii) Balance Sheet as on 31-03-2018. (Answer: I & E A/C Surplus 7 8,950, Total of B/S 7 50,600,)02. Following are the Balance Sheet and Receipt and Payment Account of Gurudeva Education Trust, Tumkur. Balance Sheet as on 31-03-2017 Liabilities z Assets z (Outstanding Office exp 5,000 |Cash in hand 15,000 Bank Loan 35,000 [Furniture 25,000 ‘Capital Fund 1,20,000 |Buildings 70,000 Sports Materials 20,000 Library Books 30,000 1,60,000 1,60,000 Receipts and Payment A/C for the year ended 31-03-2018 Dr. Cr. Receipts z Payments z To Balance b/d 15,000 [By Office Exp. To Subs. 2016-17 5,000 2017-18 17,000 22,000 2017-18 45,000 By Printing & 2018-19 5,000 | 50,000 Postage Exp. 600 To Entrance Fees 8,000 |By Salary 25,000 To Donations 12,000 |By Purchase of To Interest 5,000 | __ books. 10,000 By Bank Loan repaid. 5,000 By Subs. to Newspapers 600 By Balance ¢/d 26,800 90,000 90,000 Adjustments: 1. Subscriptions outstanding %5,000. 2. Salary prepaid 72,500 3. Capitalise 50% of entrance fees and 100% of donations. 4. Depreciate buildings by 10% p.a. Prepare: i) Income and Expenditure Account for the year ending 31-03-2018. ii) Balance Sheet as on 31-03-2018. (Answer: I & E A/C Surplus %11,300, Total of B/S ¢ 1,82,300,) 503. Followings are the Balance Sheet and Receipt & Payment Account of Golden Sports Club, Vijayapura. Balance Sheet as on 31-03-2017 Liabilities z Assets z Outstanding salary 7,000 |Cash in hand 15,500 Pre-received Subscriptions 4,000 |Sports Materials 35,000 Capital Fund 150,500. |Furniture 21,000 Land and Buildings 90,000 1,61,500 1,61,500 Receipts and payment A/c for the year ending 31-03-2018 Dr. cr. Receipts z Payments z 'To Balance b/d 15,500 [By Salary 25,000 To Subscriptions 52,000 |By Sports materials To Entrance Fees 6,000 (1-10-2017) 18,000 To Sale of old newspaper 3,000 |By Investments 15,000 ‘To Sports Fees 9,500 |By Postage 400 By Electricity charges 1,600 By Up-keep of grounds 6,500 By Balance ¢/d 19,500 86,000 86,000 Adjustments: a) Outstanding subscriptions for 2018 21,000 b) Outstanding salary as on 31-03-2018 %5,000 c) Half of the Entrance fees are to be capitalized. d) Depreciate sports materials @ 20% per annum Prepare: i) Income and Expenditure account for the year ending 31-03-2018 and ii) Balance Sheet as on that date (Answer: I & E A/C Surplus % 32,200, Total of B/S 1,90,700)04. Followings are the Balance Sheet and Receipt and Payment Account Durgha Sports Club, Koratagere. Balance Sheet as on 01-01-2017 Liabilities z Assets z Outstanding salary 2,000 |Cash balance 7,300 (Capital fund 32,500 |0/S subscriptions 1,200 Sports Materials 16,000 Furniture 10,000 34,500 34,500 Receipt and Payment A/C for the year ended 31-12-2017 Dr. cr. Receipts z Payments z 'To Balance b/d 7,300 |By Salary 10,000 To Subscriptions 38,000 |By purchase of Sports To Entrance Fees 2,000 | Materials 6,000 To Sale of old newspapers 200 |By Investments 20,000 To Sale of old sports By Fixed Deposits 10,000 materials 1,200 |By Postage 300 To Rent 7,000 |By General expenses 400 By Lighting Charges 1,300 By Balance ¢/d 7,700 55,700 55,700 Adjustment: a. Subscriptions outstanding for the year 2017 is % 3,000. Capitalize entrance fees ones Prepare: . Outstanding lighting charges % 300. (i) Income and Expenditure Account and Subscriptions received in advance for the year 2018 %1,000. Depreciate sports materials by 5,000. (ii) Balance Sheet as on 31-12-2017. Answer: I & E A/C Surplus ¢ 31,900, Total of B/S 767,70005. Followings are the Balance Sheet and Receipt and Payment Account of Malnad Sports Club, Chikkamagaluru. Balance Sheet as on 31-03-2017 Liabilities z Assets z (Outstanding salary 3,200 [Cash at Bank 52,400 Outstanding rent 800 |Outstanding subs. 4,800 Subs. received in Investments 5,200 advance 4,000 |Sports Materials 43,600 Capital Fund 1,30,800_|Furniture 32,800 1,38,800 1,38,800, Receipt and Payment A/C for the year ending 31-03-2018 Dr. cr, Receipts z Payments z To Balance b/d 52,400 [By Rent: 2016-17 800 To subscriptions 2017-18 8,800 2016-17 4,800 |By Salaries: 2016-17 3,200 2017-18 90,200 2017-18 46,400 2018-19 4,200 2018-19 2,400 ‘To Donations 32,400 |By Printing 15,200 To Entrance fees 65,200 |By General Expenses 10,800 To Interest 2,800 |By Furniture 48,000 To Sale of old sports (31-03-2018) materials 2,000 |By Sports Materials 57,600 (01-10-2017) By Balance c/d 60,800 2,54,000 2,54,000 Adjustments: a. Subscriptions outstanding % 5,600. b. Printing unpaid % 1,000. c. Interest accrued @ 800. d. Depreciate furniture by 10% and sports materials by 10%. ©. Capitalize 50% of donations. Prepare: (i) Income and Expenditure account and (ii) Balance Sheet as on 31-03-2018. Answer: I & E A/C Surplus ¢ 92,080, Total of B/S 7 2,44,28006. Followings are the Balance Sheet and Receipt and Payment Account of Raghavendra Education Trust, Ballary. Balance Sheet as on 31-03-2016 Liabilities z Assets z Capital Fund 64,000 [Building 60,000 Subscriptions received Outstanding subs. 400 jin advance 1,200 Outstanding rent 840 Outstanding expenses 2,800 |Cash at Bank 20,000 Loan 10,000 Income & Expenditure A/c 3,240 81,240 81,240 Receipt and Payment A/C for the year ending 31-03-2017 Dr. cr, Receipts z Payments z To Balance b/d 20,000 |By Expenses: 'To Subscriptions 2015-16 2,800 2015-16 400 2016-17 3.600 6,400 2016-17 4,200 By Leasehold land 8,000 2017-18 _ 300 4,900 |By Interest 800 ‘To Entrance fees 1,600 |By Refreshment To Rent 1,400 expenses 4,000 To Income from By Balance c/d 16,700 refreshments 8,000 35,900 35,900 Adjustments: a. Expenses due but not paid % 1000. b. Subscriptions due but not received % 200. . Interest due but not paid 7400 c. d. Half of the entrance fees are to be capitalized. e. Depreciate buildings by 10%. Prepare: (i) Income and Expenditure Account and (i) Balance Sheet as on 31-03-2017. Answer: I & E A/C Deficit ¢ 840, Total of B/S % 78,90007. Following are the Balance Sheet and Receipts and Payments Account of Hassan Sports Club, Hassan. Balance Sheet as on 31-03-2017 Liabilities z Assets z Capital Fund 61,000 [Buildings 64,000 Subscription for 2017-18 1,000 |O/S Subscriptions 1,600 0/8 Office expenses 4,000 |O/S Rent 400 Bank loan 20,000 | Furniture 12,000 Cash in Hand 8,000 86,000 86,000 Receipts and Payments A/C for the year ending 31-03-2018 Dr. cr. Receipts z Payments z To Balance b/d 8,000 |By Office Expenses: ‘To Subscriptions: 2016-17 4,000 2016-17 1,600 2017-18 6,000 2017-18 17,600 |By Subscription to 2018-19 2,800 | Newspapers and ‘To Entrance Fees 4,000 | Journals 2,000 To Rent 4,000 |By Refreshment Expenses 4,000 To Income from Drama 6,000 |By Investments 10,000 ‘To Sale of newspapers 400 |By Bank Loan 8,000 By Salary 4,400 By Balance ¢/d 6,000 44,400 44,400 Adjustments: a) Subscriptions outstanding 31,000, b) Salary outstanding %400, c) Interest payable %2,400, d) Depreciation on buildings %5,000 e) Entrance fees are to be capitalised. Prepare: (i) Income and Expenditure Account and (ii) Balance Sheet as on 31-03-2018. (Answer: I & E A/C Surplus ¢ 5,400, Total of B/S % 88,000) 1008. Followings are the Balance Sheet and Receipts and Payments Account of Buddivardaka Library, Sirsi. Balance Sheet as on 31-03-2017 Liabilities z Assets z Outstanding Rent 200 | Cash in hand 1,400 Capital Fund 23,800 | Books 14,000 Furniture 8,000 O/S Subscriptions 600 24,000 24,000 Receipt and Payment A/C for the year ending 31-03-2018 Dr. cr. Receipts z Payments z To Balance b/d 1,400 |By Rent 2,400 ‘To Subscriptions 12,000 | By Printing 1,200 ‘To Entrance Fees 2,000 |By Office expenses 2,800 To Sale of old newspaper 1,000 |By Books bought 10,000, To Sundry Receipts 600 | (30-09-2017) To Donations 4,000 |By Investments 2,000 By Balance ¢/d 2,600 21,000 21,000 Adjustments: a) Outstanding rent on 31-03-2018 was %300 b) Subscriptions receivable for the year 2017-18 amounted to %400 c) Subscriptions received for the year 2018-19 was 800, d) Half of the entrance fees and half of the donations are to be capitalised, e) Depreciate books at 10% p.a. Prepare: (i) Income and Expenditure Account and (i) Balance Sheet as on 31-03-2018. Answer: I & E Surplus ¢ 7,200, Total of B/S % 35,100. a09. From the following Receipt and Payment Account prepare final accounts of Unity Club, Karwar for the year ended March 31,2018 Receipt and Payment A/C for the year ending 31-03-2018 Dr. cr. Receipts z Payments z To Balance b/d 15,000 | By Furniture 18,000 To Sale of old furniture 4,000 | By Library books 10,000 (Costing %6,000) By Salaries 72,000 To Subscriptions: By General expenses 30,000 2016-17 18,000 By Newspaper 33,800 2017-18 60,000 By Printing & stationery 11,000 2018-19 12,000 90,000 | By Audit fees 40,000 To Sale old newspapers 10,800 |By Balance c/d 33,000 To Profit from entertainments 44,000 ‘To Rent 84,000 2,47,800 2,47,800 Balance Sheet as on 31-03-2017 Liabilities z Assets z Outstanding Salary 6,000 | Cash in hand 15,000 Capital Fund 6,94,000 O/S Subscriptions 18,000 Library Books 30,000 Furniture 37,000 Land and Buildings 6,00,000 7,00,000 7,00,000 Additional Information: 1) The club had 500 members each paying an annual subscription of 7150. 2) On 31-03-2018 salaries outstanding amounted to % 1,200 and salaries paid included € 6,000 for the year 2018-19 3) Provide 5% depreciation on land and building Answer: I & E A/c Surplus % 5,800, Total of B/S %7,13,000. 12Il. Preparation of Income and Expenditure Account and Balance Sheet when Opening Balance Sheet is not Given 10. From the following Receipt and Payment Account and information given below, prepare Income and Expenditure Account and the Balance Sheet of Adult Literacy Orgnisation as on March 31, 2018 Receipt and Payment A/C for the year ending 31-03-2018 Dr. cr, Receipts z Payments z To Balance b/d 19,550 |By General Expenses 3,200 To Subscriptions By News papers 1,850 2017-18 27,700 By Electricity 3,000 2018-19 500 28,200 |By Fixed Deposit with 18,000 To Sale of old newspaper 800 Bank(on 30-06- 17 ‘To Govt. Grant 12,000 @10%) To Sale of old furniture 3,700 |By Books 7,000 (Book value %5,000) By Salary 3,600 ‘To Interest received on By Rent 6,500 Fixed Deposits 900 |By Postage charges 300 By Furniture (purchased) 10,500 By Balance c/d 11,200 65,150 65,150 Additional Information: 1) Subscription due on 31-03-2018 71,500 2) On March 31,2018 Salary outstanding 7600 3) On April 1,2017 Orgnisation owned furniture %12,000, Books %5,000 Answer: I & E Surplus ¢ 23,000, Opening Capital Fund ¢ 36,550, Total of B/S R 1311. From the following Receipt And Payment Account of Jan Kalyan Club, prepare Income and Expenditure Account and Balance Sheet for the year ending Dec 31,2017. Receipt and Payment A/C for the year ending 31-12-2017 Dr. cr. Receipts z Payments z To Cash in Hand 6,800 |By Salaries 24,000 (1-1-2017) By Traveling Expenses 6,000 ‘To Subscriptions 60,200 |By Stationery 2,300 To Donation 3,000 |By Rent 16,000 To Sale of furniture 4,000 |By Repairs 700 (Book value %6,000) By Books purchased 6,000 ‘To Entrance Fees 800 |By Building purchased 30,000 |To Life Membership Fees 7,000 |By Cash in hand 1,800 ‘To Interest on (31-12-2017) Investments (@5% for full year) 5,000 86,800 86,800 Additional information: Particulars Ason Ason 01-01-2017 | 31-12-2017 z z 1)Subscriptions received in advance 1,000 3,200 2) Outstanding subscriptions 2,000 3,700 8) Stock of stationery 1,200 800 4) Books 13,500 16,500 5) Furniture 16,000 8,000 }6) Outstanding rent 1,000 2,000 7) Investments 1,00,000 1,00,000 Answer: I & E Surplus 711,100, Opening Capital Fund %1,37,500, Total of B/S ¢ 1,60,800. 1412) Receipt and Payment Account of Shankar Sports Club is given below: Dr Receipt and Payment A/C for the year ending 31-03-2018 Cr Receipts z Payments z ‘To Cash in Hand 2,600 | By Rent 18,000| To Entrance fees 3,200|By Wages 7,000 To Donation for Buildings 23,000] By Billiard table 14,000] To Locker Rent 1,200|By Furniture 10,000] ‘To Life Membership Fees 7,000|By Interest 2,000 To Profit from By Postage 1,000 entertainments 3,000|By Salary 24,000] ‘To Subscriptions 40,000] By Cash in hand 4,000 80,000 80,000] Prepare Income and Expenditure Account and Balance Sheet with the help of following information: Subscription outstanding on March 31, 2017 is %1,200 and %2,300 on March 31, 2018, Opening stock of postage stamps is 7300 and closing stock is 7200. Rent 71,500 related to 2016-17 and 1,500 is still unpaid. On April 1, 2017, the club owned furniture 715,000, Furniture valued at & 22,500 on March 31, 2018. The club took a loan of €20,000 (@10 p.a,) for the year 2016-17. Answer: I & E deficit ¢ 6,100, Opening Capital Fund % 2,400, Total of B/S % 44,500. 1513. Following Receipt and Payment Account was prepared from the cash book of Bengluru charitable Trust for the year ending March 31, 2018 Receipt and Payment A/C for the year ending 31-03-2018 Dr. cr. Receipts z Payments z To Balance b/d By Charity 11,500 Cash in hand 11,500 |By Rent and taxes 3,200 Cash at Bank 12,600 |By Salary 6,000 To Donations 9,000 |By Printing & postage 900 To Subscriptions 42,800 |By Advertisement 4,500 To Legacies 18,000 |By Insurance 2,000 |To Interest on By Furniture 21,600 Investments 4,500 |By Investments 23,000 To Sale of old newspapers 200 |By Balance e/d: Cash in hand 9,900 Cash at Bank 16,000 98,600 98,600 Prepare Income and Expenditure Account for the year ended March 31, 2018, and a Balance Sheet as on the date after the following adjustments: a) It was decided to treat one-third of the amount received on account of donation as income b) Insurance premium was paid in advance for three months. c) Interest on Investment 71,100 accrued was not received. d) Rent %600 outstanding as on March 31, 2018 Answer: I & E Surplus % 23,300, Opening Capital Fund % 24,100, Total of B/S % 72,000. 1614, From the following Receipt and Payment Account of a club, prepare Income and Expenditure Account for the year ended March 31, 2018 and_ the Balance Sheet as on that date. Receipt and Payment A/C for the year ending 31-03-2018 Dr. Cr. Receipts z Payments z To Balance b/d 3,500 |By General Expenses 900 To Subscription: By Salary 16,000 2016-17 2,000 By Postage 1,300 2017-18 70,000 By Electricity charges 7,800 2018-19 _3,000 78,000 |By Furniture 26,500 To Sale of old books 2,000 |By Books 13,000 (costing %2,300) By Newspapers 600 To Rent from use of Hall 17,000 |By Meeting expenses 7,200 To Sale of Newspapers 400 |By T.V. set bought 16,000 To Profit from By Balance ¢/d 15,900 entertainment 7,300 1,05,200 1,05,200 Additional information: a) The club has 100 members each paying an annual subscription of %900. Subscriptions outstanding on March 31, 2017 were 23,600. b) On March 31, 2018 salary outstanding amounted to %1,000, Salary paid included = 1,000 for the year 2016-17 c) On April 1, 2018, the club owned the Land and Buildings $25,000, Furniture 72,600 and Books %6,200 Answer: I & E Surplus % 80,600, Opening Capital Fund % 39,900, Total of B/S % 1,24,500. 17Section E: Practical Oriented Question for 5 Marks 1) Prepare Receipt and Payment Account with any 5 imaginary figures 2) Classify the following into Revenue and Capital Items (Any 5 items)-(few examples are given below) Example: 1 Classify the following into Revenue and Capital Items 1. Legal charges incurred in connection with the purchase of land. Brokerage paid for raising a loan for the purpose of business. Expenses incurred for white washing the old building. Amount spent on repair to second hand motor car before it is used. . Periodical repairs and replacement of plant Example: 2 How do you treat the following items? Life membership fees Sales proceeds of old tennis balls Prize amount received from a lottery Honorarium paid to the secretary. . Legacies received. Example: 3 Classify the following into revenue and capital Cost of installing lights and fans. Special subscriptions received for special purpose. Laboratory expenses incurred by the science department of a college. Prizes awarded to students on the college day. 5.Match expenses met out of match fund. Example: 4 Classify the following items into revenue and capital item: Honorarium paid to a surgeon by a hospital. Installation charges of a new machinery. Subscriptions to newspaper and periodicals. A9Ponr APOn seers Cost of construction of pavilion by a sports club. APeonr . Donation received for constructing a swimming pool. Example: 5 Classify the following items into revenue and capital item: 1. Carriage paid goods purchased. Salary paid to ground men for up keep of ground. Sale of old sports materials. Locker rent paid. Interest on loan taken from construction of building APOn 18Key Answers: I. Fill in the Blanks: (1) Society , (2) Trading, Business, (3) Cash, Bank (4) Profit and Loss A/C (5) Capital fund (6) Members (7) Legacies (8) Income and Expenditure A/C (9) Revenue (10) Balance Sheet Il. Multiple choice questions: (1) b Qa ec (aya (ec ©b Me Ul. True/ False: (1) False (2)False (3) True (4) False (5) False (6) True (7) True (8) False (9) False (10) True weer 19BOOK-1 CHAPTER - 2 ACCOUNTING FOR PARTNERSHIP : BASIC CONCEPTS Section A: One mark questions: I. Fill in the blank questions: 1 2. 3. 4. aa 10. 11. 12, 13, 14, 15. 16. 17. 18. Section of Indian Partnership Act, 1932 defines Partnership. A partnership has no separate entity. In order to form a partnership, there should be at least persons. Partnership is the result of between two or more persons todo business. and share its profits and losses. It is preferred that the partners have a. agreement. The agreement should be to carry on some business. Each partner carrying on the business is the principal as well as the for all other partners. The liability Of a partner for his acts is. In the absence of Partnership Deed Interest on advance from Partner will be charged @ percentage per annum, Under Method, the capitals of the partners shall remain fixed. Under Fluctuating Capital Method, the partners capital account balances from time to time. Profitand Loss Appropriation Account is merely an extension of. Account of firm. Profit and Loss Appropriation Account Dr To. account. (Transferring int. on capital to P/L Appropriation a/c) Account Dr To Salary to Partners account (Transferring partners salary to P/L Appropriation a/c) P/L Appropriation A/c Dr To Partners Capital /Current A/c. (2) When fixed amounts is withdrawn at the end of every month, interest on the total amount for the year ending is calculated for months. Under fluctuating capital method, all the transactions relating to partners are directly recorded in the__ accounts. Under fixed capital method, the amount of capital remains -~ 2019. Under fixed capital method, all the transactions relating to a partner are recorded in a separate account called Account. 20. There is not much difference in the final accounts of a sole proprietary concern and that of a Il, Multiple Choice Questions: 1. The agreement between the partner should be in: a) Oral b) Written ©) Oral or Written d) None of the above 2. Partnership deeds contains; a) Name of firm b) Name and address of the partners ©) Profit and loss sharing ratio d) All of the above 3. If any partner has advanced some money to the firm beyond the amount of his capital, he shall be entitled to get interest on the amount at the rate of : a) 5% pa. b) 6% pa. ©) 8% pa. d) None of the above 4. Interest on capital is generally provided for in that situations when: a) The partners contribute unequal amounts of capital but share profits equally. b) The capital contribution is same but profit sharing is unequal ©) Both the situations above. d) None of the above. 5. When fixed amount is withdrawn on the first day of every month, interest on total amount for the year ending will be calculated for: a) 2 &1/2 months b) 4 &1/2 months ©) 6 &1/2 months d) None of the above 6. When varying amounts are withdrawn at different intervals, the int. is calculated using: a) Simple Method b) Average Method ©) Product Method d) None of the above 7. Adjustment for correction of omission and commission can be made: a) Profit and loss Adjustment account b) Directly in the Capital Accounts of concerned partners ©) Both the situations above. 4) None of the above 8. In order to form a Partnership there should be at least: a) One person b) Two persons ©) Seven persons d) None of the above 219. The business of a partnership concern may be carried on by: a) All the partners b) Any of them acting for all ¢) All Partners or any of them acting for all ) None of the above 10. The agreement between Partners must be to share: a) Profits b) Losses ©) Profits and losses d) None of the above 11. The liability of a Partner for acts of the firm is: a) Limited b) Unlimited ©) Both the above. d) None of the above 12. The partnership Deed should be properly drafted and prepared as per the provisions of the: a) Partnership Act. b) Stamp Act ©) Companies Act d) None of the above 13. The clauses of Partnership Deed can be altered with the consent of: a) Two Partners b) Ten Partners c) Twenty Partners d) All the Partners ‘True or False Questions: 1. The agreement between partners must be in writing. 2. The clauses of partnership deed can be altered with the consent of all the Partners. 3. If the partnership deed is silent about the profit sharing ratio, the profit and loss of the firm is to be shared equally. 4. A partner is entitled to claim interest at the rate of 10% p.a. on the amount of capital contributed by him, if there is no agreement in the firm. a In the absence of Partnership Deed, no partner is entitled to get salary. Under fixed capital method the Partner’s Capital Accounts will always show a credit balance. os 7. Under Fixed Capital Method the Partners’ Capital Accounts will always show a debit balance. 8. P/L Appropriation A/c shows how the profits are appropriated among the partners. 9. When fixed amount is withdrawn during the middle of every month, interest on total amount is calculated for 6 months. 10. If there is loss, no interest on capital is to be paid to partners, even if there is a provision in Partnership Deed. 11. Accounting treatment for Partnership is similar to that of a sole Proprietorship Business. 2212. 13, 14, 15. There are two methods by which the capital accounts of partners can be maintained. Profit and Loss appropriation account is merely an extension of the Profit and Loss Account of a firm. Interest on partners capital is debited to Partners’ Capital Accounts. In case of Guarantee of profit to a partner, assurance may be given by only one partner. Very Short Answer Questions: 1. 2. 3. 4. 11. 12, 13. 14, 15. 16. 17. 18, 19, 20. Who is a Partner? What do you mean by Partnership Firm? State any one features of Partnership What is the minimum number of partners in a firm? Name any one contents of Partnership Deed. Name any one method of maintaining capital accounts of Partners. Name any one final accounts of partnership firm. How do you distribute profit or loss among the partners in the absence of partnership deed? Why the Profit and Loss Appropriation account is prepared? |. At what rate Interest on advances by Partners is to be paid as per Partnership Act? When interest is charged on partners drawings? When Partners Current Accounts are prepared in partnership firms? State any one special aspect of partnership accounts. When the Current Accounts of Partners are opened? Under fluctuating capital method, how many accounts are maintained for each partner? State any one feature of fluctuating capital method. State any one situation in which provision of payment of interest on capital to partner is made. Find out Interest at 8% p.a. on capital of 250,000 for 9 months. Which is the suitable method for calculation of Interest on drawings, when fixed amount is withdrawn every month? Give one example for past adjustment? Section B: Two Marks questions: . What is Partnership? Define Partnership? State any two features of Partnership. What is Partnership Deed? What are the methods of maintaining capital account of partners? 23pana 10. . What do you mean by past adjustments? 12. 13. 15. 16. 17. 18. 19. 20. What is fixed capital method? What is fluctuating capital method? State any two differences between fixed and fluctuating capital methods. What do you mean by Profit and Loss Appropriation Account? What is guarantee of profit to a partner? State any two final accounts of a Partnership firm. In the absences of partnership deed, specify the rules relating to the followings: a) Sharing of profit and losses b) Interest on partners capital State the rules relating to the followings in the absence of Partnership Deed: a) Interest on drawings b) Interest on advances from Partners. Name any two methods for calculation of Interest on drawings. When the Interest on drawings is generally provided to partners? How do you close Profit and Loss Appropriation Account in Partnership? State any two special aspects of Partnership Accounts. Name any two contents of Partnership Deed. Section C: Six Marks questions: Simple Problems on Preparation of P & L Appropriate A/c . Sachin and Pratham commenced business in partnership on 01.04.2015 with a capital of 21,00,000 and % 80,000 respectively agreeing to Share profits and losses in the ratio of 3:2. For the year ending 31.03.2016, they earned the profits of ¥ 36,000 before allowing: i) Interest on capital at 5% p.a. ii) Interst on drawings: Sachin %600 and Pratham %1,000 iii) Yearly salary of Pratham 6,000 and commissiom to Sachin 74000. iv) Their drawings during the year: Sachin $16,000 and Pratham € 20,000. Prepare Profit and Loss Appropriation Account. (Ans: Net Profit 7 18,600) . Shiva and Basava are partners sharing profits in the ratio of 2:1 with capitals of 2 25,000 and 15,000 respectively. Interest on capital is agreed @6% p.a. Basava is to be allowed an annual salary of % 1,500. During the year 2015-16, they earned the profits of % 10,000. A provision of %2000 is to be made in respect of commission to the manager Interest on drawings being; Shiva-%1,500 and Basava 71000. Prepare Profit and Loss Appropriation Account. 243. X &Y are Partners commenced Partnership business on 1.1.2016 sharing profits & losses in 3:2 ratio with capitals of Rs 100,000 and 80,000 respectively. They earned profits of ¥ 15,000 for the year before allowing: a) Interest on Capitals @ 10% p.a. b) Interest on drawings: X 71,000 & Y 7800 ©) Commission payable to X 22000 4) Salary payable to ¥ 73000 Prepare P & L Appropriate A/c for the year ending 31.12.2017 4. Arun & Varun are the partners sharing profits & losses in the ratio of 2:1 Their opening capital being 7 80,000 & 50,000 respectively. They earned a profit of % 20,000 before allowing the following: a) Interest on capital @ 8% p.a. b) Interest on drawings: Arun & 2,000 Varun %2,500 ©) Salary to Arun %3,000 p.a. 4) Commission to Varun % 2,000 p.a. Prepare P & L Appropriate A/c Problems on Calculation of Interest on Drawings 1. Yasashvi and Tapashvi are partners in a firm. During the year ended on 31st March 2016, Yasashvi makes the drawings as under : Date of Drawings Amount & 01.08.2015 5,000 31.12.2015 10,000 31.03.2016 15,000 Partnership Deed provided that partners are to be charged interest on drawings @ 12% p.a. Calculate the interest on drawings of Yasashvi_ under Product Method. (Ans: 7 700) 2. Sahana and Saniya are partners in firm. Sahana’s drawings for the year 2016-17 are given as under: % 4,000 on 01.06.2016 %6,000 on 30.09.2016 % 2,000 on 30.11.2016 % 3,000 on 01.01.2017 Caluculate interest on Sahan’s drawings at 8% p.a. for the year ending on 31.03.2017, under product method. (Ans: ¢ 620) 25. Murthy and Patil are partners in a firm sharing profits and losses in the ratio of 3:2. Murthy withdraw % 4,000 quarterly at the beginning of each quarter. Calucutlate the interest on drawings at 9% p.a. for the year ending 31.03.2017, under product method. (Ans: 7 900) . Calculate interest on drawings of Mr. Kamalakar @10% p.a if he withdrew % 1,000 per month by the short cut method: (i) At the beginning of each month (ii) At the end of each month. (Ans: (i) 2650, (ii) 7550 ) . Calculate interest on drawings of Purohit @10%p.a. if he withdrew 748,000 in year evenly. (i) At beginning of each quarter. (ii) At end of each quarter. (Ans: i)%2,600, ii) 72,200) Problems on Guarantee of a Profit . Sachin and Rahul were partners in a firm sharing profits and losses in the ratio of 3:2. They admit Dhoni for 1/6th share in profits and guaranteed that his share of profits will not be less than % 25,000. Total profits of the firm were % 90,000. Calculate share of profits for each partner when the Guarantee is given by a firm. Prepare Profit and Loss Appropriation Account. ( Ans: Deficiency born by Sachin, 76,000 and Rahul 74,000) . Roja and Usha were partners in a firm sharing profits and losses in the ratio of 3:2. They admit Sahana for 1/6th share in profits and guaranteed that his share of profits will not be less then % 25,000. Total profits of the firm were % 90,000. Calculate share of profits for each partner when the Guarantee is given by Roja.Prepare Profit and Loss Appropriation Account. ( Ans: Deficiency born by Roja 710,000 ) . Sandya and Neela were partners in a firm sharing profits and losses in the ratio of 3:2. They admit Lalitha for 1/6th share in profits and guaranteed that his share of profits will not be less then % 25,000. Total profits of the firm were @ 90,000. Calculate share of profits for each partner when: Guarantee is given by Sandya and Neela equally. Prepare Profit and Loss Appropriation account. ( Ans: Deficiency born by Sandya and Neela each ¢ 5,000) . Aarav and Neerav share profits and losses in the ratio of 2:1. They admit Sourav as a partner with % share in profits with a guarantee that his share of profit shall be at least % 25,000. The net profit of the firm for the year ending March 31, 2016 was % 80,000. Prepare Profit and Loss Appropriation Account. ( Ans: Deficiency Received from Aarav ¢ 3,334, Neerav 71,666 } 268. Charan and Sharan share profits and losses in the ratio of 3:2. They admit Sachin into their firm for 1/6 share in profits. Charan personally guaranteed that Sachin’s share of profit, after charging interest on capital @ 10% p.a. would not be less than % 15,000 in any year. The capital provided was as follows: Charan % 1,25,000, Sharan % 1,00,000 and Sachin % 75,000. The profit for the year ending March 31, 2016 amounted to % 75,000 before providing interest on capital. Show the Profit and Loss Appropriation A/c if the new profit, sharing ratio is 3:2:1 ( Ans: Deficiency Received from Charan % 7,500 ) 6. Sandesh and Kailesh share profits and losses in the ratio of 2:1. From April 01, 2015 they admit Basavesh into their firm who is to be given a share of 1/10 of the profits with a guaranteed minimum of % 50,000. Sandesh and Kailesh continue to share profits as before but agree to bear any deficiency on account of guarantee to Basavesh in the ratio of 3:2 respectively. The profits of the firm for the year ending March 31, 2016 amounted to % 2,40,000. Prepare Profit and Loss Appropriation Account. ( Ans: Deficiency from Sandesh @ 15,600, Kailesh 7 10,400 ) Key Answers Part A: (One mark questions) Fill in the Blank questions: 1)4, 2) Legal, 3) 2, 4) Agreement, 5) Written, 6) Lawfull, 7) Agent, 8) Unlimited, 9) Int. 10) Fixed Capital, 11) Fluctuates, 12) P/L A/C, 13) Int. on Capital, 14) P/L Appropriation A/C, 15) Profit ‘T/F to Partners Capital/ Current A/C, 16) 5 %, 17) Partners Capital A/C, 18) Fixed, 19) Partners Current A/C, 20) Partnership firms. Multiple choice questions: 1.0, 2D, 3B, 40, 5.6, 6.¢C, 7.C, 8B, 9.C, 10.C, 11B, 124, 13. D. True or False questions: 1. False, 2. True, 3. True, 4. False, 5.False, 6. True, 7. False, 8. True, 9.True, 10. True, 11 True, 12. False, 13.True, 14, False, 15.True. see 27BOOK-1 CHAPTER-S3. RECONSTITUTION OF A PARTNERSHIP FIRM ADMISSION OF A PARTNER Section A: One Mark Questions I. Fill In The Blanks: 1. ratio is used to distribute accumulated profits and losses at the time of admission of a new partner. 2. Profit or loss on revaluation is shared among the old partners in ___ ratio 3. Old ratio - New ratio = 4. Accumulated losses are transferred to the capital accounts of the old partners at the time of admission in their __ ratio. 5. General reserve is to be transferred to accounts at the time of admission of a new partner. 6. Goodwill brought in by new partner in cash is to be distributed among old partners in ratio. 7. If the amount brought by new partner is more than his share in capital, the excess is known as Account is debited for the increase in the value of an asset. 9. Unrecorded asset is to be credited to account, 10. A and B are partners sharing profits & losses equally with capitals of 745,000 each. C is admitted for 1/3rd share and he brings in 760, 000 as his capital. Hidden Goodwill is @__. 11. Due to change in profit sharing ratio, some partners will gain in future profits while others will » 12. Goodwill is an asset. 13. account is credited for cash brought in by new partner for his share of goodwill 14, ___ ratio is required for sharing future profits and also for adjustment of capitals. Il. Multiple Choice Questions: 1. At the time of admission of a new partner, general reserve appearing in the old balance sheet is transferred to: a) All Partners Capital Account b) New Partner’s Capital Account c) Old Partners Capital Account d) None of the above 282. A, Band C are partners in a firm. If D is admitted as a new partner: a) Old firm is dissolved b) Old firm and old partnership are dissolved c) Old partnership is reconstituted ) None of the above 3. On the admission of a new partner, increase in the value of asset is credited to a) Profit and Loss Adjustment(Revaluation) Account b) Asset Account c) Old Partners Capital Account ) None of the above 4. At the time of admission of a partner, undistributed profits appeared in the balance sheet of the old firm is transferred to the capital accounts of: a) Old partners in old profit sharing ratio b) Old partners in new profit sharing ratio c) All the partners in new profit sharing ratio ) None of the above Old Partners’ Capital Account in: 5. If new partner brings cash for his share of goodwill, goodwill is transferred to a) Sacrificing ratio b) Old profit sharing ratio ©) New profit sharing ratio d) None of the above 6. Which of the following are treated as reconstitution of a Partnership Firm? a) Admission of a partner b) Change in profit sharing ratio c) Retirement of a partner d) All the above 7. Profit or Loss on revaluation is shared among the partners in the: a) Old profit sharing ratio b) New profit sharing ratio ©) Capital ratio d) Equal ratio 8. Assets and Liabilities are recorded in Balance Sheet after the admission of a partner at: a) Original value b) Revalued value c) Realisable value d) None of the above 9. On the admission of a new partner, the increase in the value of an asset is credited to: a) Revaluation Account b) Asset Account d) None of the above 10. Old Profit Sharing Ratio - New Profit Sharing Ratio is = a) Sacrificing ratio b) Gaining ratio ©) Both the above d) None of the above c) Old partners’ Capital Account 2911. In the absence of an agreement to the contrary, it is implied that old partners will contribute to new partner’s share of profit in the ratio of: a) Capital b) Old profit sharing ratio ©) Sacrificing ratio d) Equally 12. The balance of reserves and other accumulated profits at the time of admission of a new partner are transferred to: a) All partners in the new ratio b) Old partners in the new ratio ©) Old partners in the old ratio d) Old partners in the sacrificing ratio 13. Goodwill raised in books at the time of admission of partner will be written off in: a) Old profit sharing ratio b) New profit sharing ratio ©) Sacrificing ratio d) None of the above 14, Revaluation Account is debited for the: a) increase in provision for doubtful debts b) increase in the value of building ©) decrease in the amount of creditors d) transfer of loss on revaluation 15. A and B are partners sharing profits in the ratio of 3:1. C is admitted into partnership for 1/4th share. The sacrificing ratio of A and B will be: a) Equal b) 3:1 6) 21 d) 3:2 ‘True or False Type Questions: 1. Goodwill brought in cash by new partner is distributed among old partner in their Sacrificing ratio. 2. In case of admission of a partner, profit or loss on revaluation is transferred to Old Partners’ Capital Accounts. 3. Accumulated profit is transferred to all partners’ capital Accounts including new partner. 4. The debit balance of Profit and Loss Account shown in the assets side of the Balance Sheet will be debited to Old Partners Capital Accounts. 8. Increase in the value of an asset is credited to Revaluation Account 6. The traditional name of ‘Revalution A/c’ is ‘Profit and Loss Adjustment A/c’. 7. Goodwill is an intangible asset. 8. Decrease in the value of liability is debited to Revaluation Account. 9. Sacrifice ratio is required to distribute the cash brought by new partner among old partners for his share of goodwill. 10. Share sacrificed = Old share ~ New share. 30Very Short Answer Type: 1, What is Partnership? 2. What do you mean by reconstitution of a Partnership Firm? 3. State any one reason for admission of a new partner. 4. State any one right acquired by a newly admitted partner. 58. Why the NPSR is required at the time of admission of a partner? 6. What is Goodwill? 7. State any one factor affecting the value of goodwill. 8. What is normal profit? 9. State any one method of valuation of goodwill. 10. Give the formula for sacrifice ration 11. Which account is to be debited to record the increase in the value of an asset? 12, What is Revaluation Account? 13, What account will be credited when there is a loss on revaluation? 14, What account will be debited when the cash is brought by a new partner for his share o goodwill? 15. What is hidden goodwill? Section B: Two Marks Question: 1. When the goodwill is distributed among old partners in the sacrificing ratio? 2. State any two methods of valuation of goodwill. 3. State any two rights acquired by a new partner. 4. What do you mean by hidden goodwill? 5. Pass the journal entry to write off the goodwill raised to the extent of full value. 6. State any two matters which need adjustments in the books of the firm at the time of admission of a new partner. 7. What is sacrifice ratio? 8. Why the sacrifice ratio is calculated? 9. What is the need for the revaluation of assets and liabilities on the admission of a partner? 10. State any two reasons for admitting a new partner. 11. How do you close revaluation account when there is a profit? 12, State any two factors which determine the goodwill of the firm. 13, What is average profit method of valuation of goodwill? 14, Goodwill of the firm valued at two years purchase of the average profit of last four years. The total profits for last four years is 740,000. Calculate the goodwill of the firm. 15. Pass the journal entry for increase in the value of building on the admission of a partner. 16. Pass the journal entry for the decrease in the value of a liability. 31Section-C: Six Marks Questions Problems on calculation of NPSR . Anil and Vishal are partners sharing profits in the ratio of 3:2. They admitted Sumit as a new partner for 1/5th share in future profits of the firm. Calculate new profit sharing ratio of Anil, Vishal and Sumit. (Ans: 12:8:5) . ‘A’ and ‘B’ are partners in a firm sharing profits and losses in the ratio of 3:2. They admit ‘C’ into the partnership for 1/6th share in the profits. Calculate the new profit sharing ratio. (Ans: 3:2:1) . ‘A’, ‘B’ and ‘C’ are partners sharing profits and losses in the proportion of 2/8th, 3/8th and 3/8th . They admit ‘D’ for 1/4th share. Calculate the new profit sharing ratio of all partners. (ans: 8) . Veena and Vani are partners sharing profits in the ratio of 3:2. They admit Rani as a new partner for 1/5th share in the future profits of the firm, which she gets equally from Veena and Vani. Calculate new profit sharing ratio of Veena, Vani and Rani. (Ans: 5:3:2) . Amar and Akbar are partners sharing profits and losses in the ratio of 6:4. They admit Antony into the partnership giving him 6/20th share, which he obtains 4/20th from Amar and 2/20th from Akbar. Calculate the new profit sharing ratio. (Ans: 4:3:3) . Raga and Tala are partners sharing profits and losses in the ratio of 7:3. They admit Shruti into the partnership. Raga surrenders 1/2nd of his share and Tala 1/4th of her share in favour of Shruti. Calculate new profit sharing ratio of Raga, Tala and Shruti. (Ans: 14:9:17) . Chaya and Maya are partners in a firm sharing profits and losses in the ratio of 3:2. They admit Shreya as a new partner. Chaya agrees to surrender 1/4th of her share and Maya agrees to surrender 1/3rd of her share in favour of Shreya. Calculate new profit sharing ratio of Chaya, Maya and Shreya. (Ans: 27:16:17) . Pradeep and Sandeep are partners sharing profits and losses in the ratio of 5:3. They admit Pramod into the partnership and offer him 1/6th of the share which he acquired in the ratio of 3:1 from the old partners. Calculate the new profit sharing ratio. (Ans: 12:8:4 or 3:2:1) 3210. Prakash and Akash are partners sharing profits and losses in the ratio of 2:1. They admit Ramesh into the partnership giving him 1/5th share which he acquired from Prakash and Akash in 1:2 ratio. Calculate new profit sharing ratio. (Ans: 9:3:3 or 3:1:1) Saraswati and Laxmi are partners in a firm sharing profits in ratio of 4:1. They admit Parvati as a new partner for 1/4th share in future profits, which she acquired wholly from Saraswati. Calculate the new profit sharing ratio of the all partners. (Ans: 11:4:5) Problems on sacrifice ratio . Mohan and Madan are partners sharing profits and losses in the ratio of 4:3. They admit Murali into partnership. The new profit sharing ratio is agreed at 7:4:3 respectively. Find out the sacrifice ratio of old partners. (Ans: 1:2) Dinesh and Mahesh are partners sharing profits and losses in the ratio of 3:2. They admit Ramesh into business and the new ratio was agreed to be 5: Calculate the sacrifice ratio. (Ans: 11:4) ‘A’ and ‘B’ are partners in a firm sharing profits in the ratio of 5:3. They admit ‘C’ as a new partner for 1/7th share in the future profit. The new profit sharing ratio will be 4:2:1. Calculate the sacrifice ratio of ‘A’ and ‘B. (Ans: 3:5) . Anil and Sunil are partners in a firm sharing profits and losses in the ratio of 3:2. They admit Ashok as a new partner for 1/4th share. The new profit sharing ratio between Anil and Sunil will be 2:1. Calculate the sacrifice ratio. (Ans: 2:3) ‘X and ‘Y’ are partners in a firm sharing profits and losses in the ratio of 3:2. They admit ‘7’ into the partnership. ‘X’ agrees to surrender 1/2nd_ of his share and ‘Y’ agrees to surrender 1/4th of his share in favour of ‘2’. Calculate the sacrifice ratio. (Ans: 3:1) Ram and Rahim are partners sharing profits and losses equally. They admit Charlin into the partnership. Ram agrees to surrender 1/3rd of his share and Rahim agrees to surrender 1/4th of his share to Charlin. Calculate the sacrifice ratio. (Ans: 4:3) Radha and Rukmini are partners sharing profits and losses in the ration of 4:3. They admit Sita into the partnership. The new profit sharing ratio is 7:4:3 respectively. Find out the sacrifice ratio of the old partners (Ans: 1:2) 338. Arati and Bharati are partners sharing profits and losses in the ratio of 3: ‘They admit Keerti into the partnership. The new profit sharing ratio is 4:3: Calculate the sacrifice ratio of Arati and Bharati. (Ans: 2:1) 9. Ravi and Shankar are partners sharing profits and losses in the ratio of 2:1. They admit Shiva into the partnership and gave him 1/6th share. Ravi and Shankar agree to share the remaining share in the ratio of 3:2. Calculate the sacrifice ratio. (Ans: 5:0 or 1:0) Section-D:12 Marks Questions 1, ‘A’ and ‘B’ are partners sharing profits and losses in the ratio of 2:1. Their Balance Sheet as on 31.3.2018 was as follows: Balance Sheet as on 31.03.2018 Liabilities Rs Assets Rs Creditors 20,000|Cash in Hand 3,000 Bills Payable 10,000] Stock 15,000} Reserve Fund 12,000|Debtors 20,000} Capitals: Machinery 30,000 A 60,000) Buildings 60,000) B 40,000) Trvestments 12,000) 142,000) 142,000) On 01.04.2018, ‘C’ is admitted into partnership on the following conditions: a. ‘C’ should bring in cash % 25,000 as his capital and % 15,000 goodwill for his 1/5" share in future profits. b. Appreciate buildings at 20% and stock is revalued at ¢ 12,000. c. Provision for doubtful debts maintained at 5% on debtors. d, Outstanding salary @ 2,000. Prepare: i) Revaluation Account. ii) Partners’ Capital Accounts & iii) New Balance Sheet of the firm. (Ans:- Profit on Revaluation Account ? 6,000, Capital Account balance A - % 82,000, B -% 51,000, C - % 25,000, Cash Account % 45,000,Balance Sheet total = 1,90,000) 342. Sachin and Dravid are partners in a firm sharing profits and losses in the ratio of 3:2. Their balance sheet is given below: Balance Sheet as on 31.03.2017 Liabilities Rs Assets Rs [Creditors 18,000|Cash in Hand 2,000) Bills Payable 12,000|Cash at Bank 18,000} Reserve Fund 3,000)Sundry debtors 25,000 |Capitals: iLess: PDD 000 23,000] Sachin 50,000 Stock 10,000} Dravid $0,000 100.000) Furniture Buildings IP & L Account 133,000) On 01.04.2017, they admit Ashwin as a new partner into partnership on the following terms: a) He brings in % 40,000 as capital and % 18,000 towards goodwill for 1/4" share in future profits. b) Depreciate furniture by 10% and buildings are revalued at % 45,000. c) PDD is increased to 7 3,500. 4) Prepaid insurance % 2,000. Prepare: i) Revaluation Account. ii) Partners’ Capital Accounts & iii) New Balance Sheet as on 01.04.2017 (Ans:- Loss on Revaluation Account % 7,000, Capital Account balance: Sachin - 7 55,400, Dravid - ¢ 53,600, Ashwin -% 40,000, Bank Account % 78,000, Balance Sheet total ¢ 1,79,000) 8. Suresh and Shankar are partners in a firm sharing profits and losses in the ratio of 1:1. Their balance sheet as on 31.03.2017 was as follows. Balance Sheet as on 31.03.2017 Liabilities Rs Assets Rs [Creditors 40,000|Cash at Bank 30,000) [Bills Payable 45,000|Stock 25,000 Reserve Fund 15,000|Debtors 40,000 ICapital Accounts Less:PDD 2,000 38,000) Suresh 60,000 Furniture 10,000] Shankar 40,000 100,000] Machinery 1,000] Profit and Loss A/e 30,000] Buildings. 92,000 Patents 20,000) 230,000] 230.000) On 01.04.2017, they admit Jagadish as a new partner for 1/4" share in the future profits on the following terms: 35a, Jagadish should bring in cash @ 50,000 as his capital and ? 25,000 towards goodwill b. Depreciate Machinery by 10%, c. Increase provision for doubtful debts by % 4,000. d. Buildings are revalued at % 1,20,500 Prepare: i) Revaluation Account ii) Partners’ Capital Accounts & iii) New Balance Sheet of the firm. (Ans:- Profit on Revaluation Account % 23,000, Partners’ Capital Account balance: Suresh - 7 1,06,500, Shankar - % 86,500, Jagadish - 7 50,000, Bank Account 7 1,058,000, Balance Sheet total ¢ 3,28,000) . Rajesh and Rakesh are partners in a firm sharing profits and losses in the ratio of 3:2, Their balance sheet as on 31.03.2018 stood as follows: Balance Sheet as on 31.03.2018 Liabilities Rs Assets Rs (Creditors 41,500|Cash at Bank 22,500] JGeneral Reserve 4,000] Bills Receivable 3,000] Capital Accounts: Debtors 18,000 Rajesh 30,000|Less: PDD 1,000 17,000] Rakesh 16,000}Stock 20,000] Buildings 25,000] Machinery 4,000] 91,500] 91,500] On 01.04.2018, they admit Shyam as a new partner and offered him 1/5" share in the future profits on the following terms: a) He has to bring in ¢ 10,000 as his capital and % 5,000 towards goodwill. b) Appreciate buildings by 20%. c) Maintain 5% PDD on debtors. ) Provide for outstanding repair bills € 1,000. Prepare: i) Revaluation Account ii) Partners’ Capital Accounts & iii) New Balance Sheet of the firm. (Ans: Profit on Revaluation Account % 4,100, Partners Capital Account balance: Rajesh - < 37,860, Rakesh - ¢ 21,240, Shyam - ~ 10,000, Bank Account % 37,500, Balance Sheet total 7 1,11,600) 365. ‘A’ and ‘B’ are partners in a firm sharing profits and losses in the ratio of 6:4. Their balance sheet as on 31.03.2017 was as follows. Balance Sheet as on 31.03.2017 Liabilities Rs Assets Rs Creditors 20,000|Cash at Hand 5,000 Bills Payable 6,000 Debtors 20,000 Reserve Fund 4,000|Less:PDD 2,000 18,000] Capitals: Stock 17.000} A 40,000 Buildings. 30,000 B 30,000 70,000) Furniture 30,000 100,000 100,000) On 01.04.2017, ‘C’ is admitted into the partnership on the following terms: a) He brings 25,000 as capital and % 8,000 towards goodwill for 1/6 share in the future profits. b) Depreciate furniture at 10% and appreciate buildings by 20%. ©) Provision for doubtful debts is no longer. d) Provide % 1,000 for repair charges. e) Goodwill is to be withdrawn by the Old Partners. Prepare: i) Revaluation Account ii) Partners’ Capital Accounts & iii) Balance Sheet of the firm after admission. (Ans: Profit on Revaluation Account ¢ 4,000, Capital Account balance: A - % 44,800, B - 7 33,200, C - 7 25,000, Cash Account 7 38,000, Balance Sheet total % 1,30,000) 6. Surekha and Sunita are partners ina firm. Their balance sheet as on 31.03.2017 was as follows: Balance Sheet as on 31.03.2017 Liabitities Rs Assets, Rs [Creditors 150,000|Cash at Bank 50,000} |General Reserve 50,000]Stock 50,000} Furniture 120,000 Capitals: Debtors 40,000 Surekha 120.000| Buildings 100,000 Sunita 80,000] Investments 40,000 400.000) 400,000 On 01,04.2017 Kavita is admitted into the parmership on the following terms: a) She brings in 7 60,000 as her capital and % 20,000 towards goodwill for 1/4" share in the future profits. Goodwill is to be withdrawn by the Old Partners. 37b) Depreciate furniture by 10% and appreciate buildings by % 22,000. ¢) Investments are to be revalued at % 50,000. d) Provide % 2,000 for outstanding salary. Prepare: i) Revaluation Account ii) Partners’ Capital Accounts & iii) New Balance Sheet of the firm. (Ans: Profit on Revaluation Account ¢ 18,000, Capital Accounts: Surekha- @ 1,54,000, Sunita - t 114,000, Kavita - ¢ 60,000, Bank Account ? 1,10,000, Balance Sheet total ¢ 4,80,000) . Raja and Rani are partners in a firm sharing profits and losses in the ratio of 3:2. Their balance sheet as on 31.03.2018 was as follows: Balance Sheet as on 31.03.2018 Liabilities Rs ‘Assets Rs (Creditors 40,000|Cash 5,000 Bills Payable 20,000|Machinery 60,000} |General Reserve 25,000| tock 25,000 Capitals: [Debtors 23,000 Raja 60,000 Less:PDD 3,000 20,000 Rani 40,000 100,000| Buildings 50,000} Investments 20.000] IP & L Account 5,000 185,000] 185,000] On 01.04.2018, they admit Mantri as a new partner and offer him 1/5" share in the future profits on the following terms: a. Mantri has to bring in € 30,000 as his capital and ¢ 10,000 towards goodwill. Goodwill is to be withdrawn by the old partners. b. Depreciate Machinery by 5%. c. Appreciate buildings by 10%. d. PDD is reduced to ¢ 2,000 and investments are to be revalued at % 25,000. Prepare: i) Revaluation Account ii) Partners’ Capital Account & iii) New Balance Sheet of the firm. (Ans: Profit on Revaluation Account % 8,000, Capital Account: Raja - ~ 76,800, Rani -? 51,200, Mantri - 7 30,000, Cash Account 7 35,000, Balance Sheet total % 2,18,000) 388, Pujari and Purohit are equal partners. Their Balance Sheet as on 31.03.2017 was as follows: Balance Sheet as on 31.03.2017 ‘Liabilities Rs Assets Rs Bills Payable 6,600|Cash_ 1,800] Sundry Creditors 12,800]Stock 23,600} Capitals Accounts: Sundry debwrs 25,000 Pujari 40,000 Less: PDD 5,000 20,000} Purohit 30,000 70,000] Furniture 4,000) Buildings 40,000} 89,400) 89,400] On 01.04.2017, they admit Pandit as a new partner and offered him 1/4" share in the profit on the following terms: a) He should bring in % 30,000 as capital and % 18,000 towards goodwill. b) Half of the goodwill should be withdrawn by the old partners. ©) Stock and furniture to be depreciated by 10% each. d) PDD is reduced by @ 3,000. Prepare: ji) Revaluation Account ii) Partners’ Capital Accounts & iii) New Balance Sheet of the firm. (Ans: Profit on Revaluation Account % 240, Capital Account: Pujari - 7 44,620, Purohit - 2 34,620, Pandit - 7 30,000, Cash Account % 40,800, Balance Sheet total = 1,28,640) 9, Anil and Sunil are partners in a firm sharing profits in the ratio of 2:1. Their Balance Sheet as on 31.03.2016 was as follows: Balance Sheet as on 31.03.2016 Liabilities Rs ‘Assets Rs Bills Payable 16,000[Cash. 4,000] Sundry Creditors 5,000|Sundry debtors 30,000) Reserved Fund 9,000|Stock 32,000) Capitals: Furniture 8.000] Anil 60,000] Buildings 56,000) Sunil 50,000|Motor Car 10,000 140,000] 140,000] On 01.04.2016,they admitted Vimal for 1/4" share in future profits under the following terms: 39a) He should bring cash for capital t 40,000 and @ 30,000 for goodwill. b) Half of the goodwill amount withdrawn by the old partners. c) Buildings are revalued at % 66,000 and make a provision for legal charges 700. d) Stock and Motor Car be depreciated by 10% each €) Provide provision for doubtful debts at 5% on debtors. Prepare: i) Revaluation Account ii) Partners’ Capital Accounts & iii) Balance Sheet of the new firm. (Ans: Profit on Revaluation Account % 3,600, Partners Capital Account balance: Anil - % 78,400, Sunil - 7 59,200, Vimal - ¢ 40,000, Cash Account 7 59,000, Balance Sheet total 7 1,99,300) 10. Arati and Bharati are partners in a firm sharing profits and losses in the ratio of 3:2. Their Balance Sheet as on 31.03.2017 stood as follows: Balance Sheet as on 31.03.2017 Liabilities Rs Assets Rs Bills Payable 14,000[Cash 15,000 |Creditors 16,000}Buildings Patents 6,000) [Capitals Machinery 35,000} Arati 50,000] Debtors 20,000 Bharati 25,000}Less: Provisions 600 19,400 Stock 4,600) 105,000] 105,000) On 01.04.2017, Jayanti is admitted into the partnership on the following terms: a) Jayanti Pays 7 20,000 as capital. The Goodwill of the firm is valued at 20,000 and Goodwill Account should not remain in books. b) Buildings are appreciated by € 5,000 & machinery is depreciated by 20%. ¢) Provision for doubtful debts is increased by % 1,000. d) The new profit sharing ratio between the partners is 5:3:2. Prepare: i) Revaluation Account ii) Partners’ Capital Accounts & iii) Balance Sheet of the firm after admission. (Ans: Loss on Revaluation Account % 3,000, Partners Capital Account balance: Arti - < 50,200, Bharati - ¢ 25,800, Jayanti - ¥ 16,000, Cash Account % 35,000, Balance Sheet total % 1,22,000)11, ‘A’, ‘B’ and ‘C’ are partners in a firm sharing profits and losses in the ratio of 4:3:3. Their Balance Sheet as on 31.03.2017 was as follows: Balance Sheet as on 31.03.2017 Rs Assets, Rs 100,000] Cash at Bank 17,000] Reserve 32,000] Bills Receivable 19,000] Bank OD 8,000| Debtors 1,20,000, Capitals: Less: PDD. 6,000 114,000] A 40,000] Stock 80,000 B 50,000) Buildings 60,000] c 60.000) 290,000) 290,000) On 01,04.2017, they admit ‘D’ into the partnership on the following terms: a) ‘D’ brings % 50,000 as his capital. b) Goodwill Account is created for ¥ 64,000 and agreed to write off by all partners in their new profit sharing ratio i.e., 6:9:9:8. ©) Reduce stock by 10% and increase buildings to ¥ 69,000. d) Provision for doubtful debts decreased by @ 2,000. Prepare: i) Revaluation Account ii) Partners’ Capital Accounts 8. iii) New Balance Sheet of the new firm. (Ans: Profit on Revaluation Account 7 3,000, Partners Capital Account balance: A - % 67,600, B - 2 61,700, C - % 71,700, D - % 34,000, Bank Account % 67,000, Balance Sheet total % 3,43,000) 12. Sharat and Bharat are sharing profits and losses in the ratio 2:1. Their Balance Sheet as on 31.03.2018 was as follows: Balance Sheet as on 31.03.2018 Liabilities Rs “Assets Rs [Creditors 12,000|Cash in Hand 10,000] Bills Payable 8,000] Debtors, 5,000] [Reserve Fund 9,000]Stock 10,000} Capitals: Furniture 4,000] Sharat 20,000 Buildings 40,000| Bharat 20,000 40,000) 69,000] 69,000| They admit Kamat into partnership giving him 1/5" share in the future profits on the following terms: a) The new partner should bring ¢ 25,000 as his capital. b) The Goodwill Account is to be raised at 24.000. 4113. ¢) Value of buildings is to be appreciated by % 7,000 and furniture to be appreciated by 1,000 d) Stock is valued at 10% less than the book value and there is an outstanding printing. bill for 7400 Prepare: i) Revaluation Account ii) Partners’ Capital Accounts &. iii) Balance Sheet of the new firm. (Ans: Profit on Revaluation Account % 6,600, Capital Account balance: Sharat - ¢ 46,400, Bharat - ¢ 33,200, Kamat - 7 25,000, Cash Account ¢ 35,000, Balance Sheet total ¢ 1,25,000) Vani and Sandhya are partners sharing profits and losses in the proportion of 3/5 and 2/5. Their Balance Sheet as on 31.03.2018 was as follows: Balance Sheet as on 31.03.2018 Liabilities Rs Assets Rs [Creditors 77,500|Cash at Bank 21,500 Reserve 20,000)Stock 39,000] IP & L Account 5,000|Debtors 60,000 [Capitals Less: PDD 3,000 57,000] ‘Vani 60,000) Furniture 10,000 ndhya 30,000) Buildings 40,000 Machinery 25,000 192.500 192,500 On 01.04.2018, Chaya is admitted into partnership on the following terms: a) She should bring @ 40,000 as capital for 1/4" share and goodwill of the firm is valued at 25,000 b) Depreciate furniture by 10%. ©) Appreciate buildings by 20%. d) PDD is increased by ? 3,000. e) An amount of % 2,000 due to a creditor is not likely to be claimed and hence to be written off. Prepare: i) Revaluation Account, ii) Partners’ Capital Accounts &. iii) New Balance Sheet of the firm. (Ans: Profit on Revaluation Account % 6,000, Partners Capital Account balance: Vani - 7 93,600, Sandhya - 7 52,400, Chaya - 7 40,000, Bank Account % 86,500, Balance Sheet total < 2,61,500) 42Problems on Adjusments on Capitals 14, Mahendra and Surendra are equal partners in a firm. Their Balance Sheet as ‘on 31.03.2017 stood as follows: Balance Sheet as on 31.03.2017 Liabilities Rs Assets Rs Creditors 40,000|Stock 39,000) Bank Loan 8,000|Debtors 32,000 Less: PDD. 4,000 31,000) Capitals Land & Buildings, 40,000) Mahendra 80,000] Machinery 36,000) Surendra 40,000] 120,000|Motor Car 8,000] [Cash at Bank 14,000 168,000] 168,000] On 01.04.2017, Chandra is admitted into partnership for 1/6" share in profits on the following terms: a) Chandra brings ¢ 26,000 as capital. b) Goodwill of the firm is valued at ® 14,000 and itis to be retained in business ©) Motor car and Machinery are to be depreciated by 20% and % 3,800 respectively. d) Prepaid rent % 600, e) Provision for doubtful debts is to be maintained at 10%. f) The Capital Accounts of all the partners are to be adjusted in their new profit sharing ratio 3:2:1, based on Chandra’s Capital (Adjustments are to be made in cash) Prepare: i) Revaluation Account ii) Partners’ Capital Account & iii) New Balance Sheet of the firm. (Ans: Loss on Revaluation Account ¢ 7,000, Partners Capital Account balance: Mahendra - % 78,000, Surendra - ¢ 52,000, Chandra - 7 26,000, Bank Account 43,000, Balance Sheet total 7 2,04,000)18. Ganga and Yamuna are partners in a firm, Following is their Balance Sheet as on 31.03.2017 Balance Sheet as on 31.03.2017 Liabilities Rs Assets Rs (Creditors, 20,000|Cash in Hand 7,000} Bills Payable 4,000|Stock 15,000] Debtors. 16,000 (Capitals: Less: Provision 500 15,500] Ganga 40,000] Furniture 4,500 Yamuna 20,000 60,000|Patents 4,000) Plant & Machinery 18,000} Land & Building 20,000] 84,000) 84,000] On 01,04.2017, Kaveri is admitted into partnership on the following terms: a) Kaveri should bring t 13,000 as capital b) Goodwill of the firm is valued at % 6,000 c) Provision for doubtful debts is to be increased by % 1,200. 4) Patents and machinery are to be reduced by 20% and @ 2,000 respectively. e) Land & Buildings are to be increased by 4,000. ) Capital Accounts of partners are to be adjusted in their new profit sharing ratio 3:2:1, based on Kaveri’s Capital (Adjustments to be made in cash) Prepare: i) Revaluation Account ii) Cash Account. iii) Partners’ Capital Accounts 8 iv) New Balance Sheet of the firm. (Ans: No Profit and No Loss on Revaluation Account, Capital Account balance: Ganga - 7 39,000, Yamuna - 7 26,000, Kaveri - 7 13,000, Cash Account ¢ 19,000, Balance Sheet total ¥ 102,000) 16, Gouri and Ganesh are partners in a firm sharing profit equally. Following is their Balance Sheet as on 31.03.2017. Balance Sheet as on 31.03.2017 Liabilities Rs ‘Assets Rs [Creditors 20,000|Cash in Hand 7,000 Bills Payable 4,000|Stock 25.000} |General Reserve 6,000] Buildings 40,000} [Capital Debtors 17,000 Gouri 80,000|Less: PDD 1,s00 15,500] Ganesh 40,000] Furniture Patents 30,000} Plant & Machinery 18.000) 150,000 150,000] On 01.04.2017, Shiva is admitted into partnership on the following terms: 4417. a) Shiva should bring % 25,000 as capital. b) Goodwill of the firm is valued at € 16,000. c) Stock is to be increased by 8% 4) Provision for doubtful debts is increased to % 2,600. e) Capital accounts of partners are to is be adjusted in their new profit sharing ratio 3:2:1, based on Shiva’s capital (Adjustments to be made in cash) Prepare: i) Revaluation Account. ii) Partners’ Capital Accounts & iii) Balance sheet of the new firm. (Ans: Profit on Revaluation Account ¢ 900, Capital Account balance: Gouri - 775,000, Ganesh - 7 50,000, Shiva - 7 25,000, Cash Account % 14,100, Balance Sheet total 7 1,74,000) Vani and Veena are partners sharing profits and losses in the ratio of 3:2. Their Balance Sheet as on 31.03.2017 was as follows: Balance Sheet as on 31.03.2017 Liabilities Rs Assets (Creditors: 40,000|Cash at Bank Reserve 15,000]Stock Debtors Capitals: Furniture Vani 60,000] Machinery Veena 40,000] Goodwill 155,000] 155,000) On 01.04.2017, they admit Rani as new partner into partnership on the following Conditions: a) Rani is to bring in @ 30,000 as capital and offer 1/6" share in future profits b) Goodwill of the firm is valued at ¢ 25,000. ¢) Machinery is appreciated by 10% and stock is reduced by 10%. d) Furniture revalued at % 18,000 and investments worth % 2,000 is not recorded in the books, now it is to be taken into account. e) PDD is created at 5% on debtors. Prepare: i) Revaluation Account. ii) Partners’ Capital Accounts & iii) New Balance Sheet of the firm. (Ans: Profit on Revaluation Account % 2,100, Partners Capital Account balance: Vani - t 76,260, Veena - ¢ 50,840, Rani - ¥ 30,000, Bank Account % 36,000, Balance Sheet total ¢ 1,97,100)u. Mm. 18. Surya and Chandra are partners sharing profits and losses in the ratio of 3:2. ‘Their Balance Sheet as on 31.03.2016 was as follows. Balance Sheet as on 31.03.2016 Liabilities Rs Assets Rs (Creditors 10,000[Cash at Bank 10.000] Bills Payable 8,000|Debtors 20,000} Reserve 12,000|Less: PDD. 1,000} 19,000] Capitals Stock 8,000] Surya 30,000]Building 20,000] Chandra 20,000] Furninure 5,000] Goodwill 9,000] P & L Account 9,000] 80,000| 80,000] On 01,04.2016, they admit Akash into partnership on the following terms: a) Akash should bring % 25,000 as capital for 1/5 share in future profits. b) The Goodwill of the firm is valued at % 6,000. ©) PDD is reduced to ¢ 500. 4) Building is appreciated by 10% and Stock is revalued at % 7,000. Prepare: i) Revaluation Account. ii) Partners’ Capital Accounts & iii) Balance Sheet as on 01.04.2016. (Ans: Profit on Revaluation Account % 1,500, Partners Capital Account balance: Surya - % 30,900, Chandra - ¢ 20,600, Akash - % 25,000, Bank Account ¢ 35,000, Balance Sheet total ¢ 94,500) Key Answers |. Fill in the blanks: 1. Old Ratio 2. Old Ratio 3. Sacrific Ratio 4, Old Ratio 5. Capital 6. Sacrifice Ratio 7, Goodwill 8. Asset 9. Revaluation 10. 230,000 11, loose 12, Intangible 13. Goodwill 14.New Profit Sharing Ratio. Multiple choice questions: 1. Qe 3.b 4a 5.a 6d Ta 8.b oa 10.a 11.b 12.¢ 13. b 14a 15.b ‘True or False 1.True 2. True 3. False 4.True 5. True 6. True 7.True 8. False 9. True 10. TrueBOOK-1 CHAPTER-4 RECONSTITUTION OF A PARTNERSHIP FIRM- RETIREMENT/DEATH OF A PARTNER (A) RETIREMENT OF A PARTNER Section A: One Mark Questions I, Fill in the blanks: 1 g 10. 11. 12. 13. 14, 15. ratio is used to distribute accumulated profits and losses at the time of retirement of a partner. Profit or loss on revaluation is shared among the partners in ratio on retirement of a partner. New ratio - Old ratio = Accumulated losses are transferred to the Capital Accounts of the partners at the time of retirement in their ratio. General reserve is to be transferred to Accounts at the time of retirement of a partner. Goodwill raised to the extent of retiring partner’s share only is to be debited to continuing partners capital accounts in ratio. In the absence of any instruction Retiring Partner’s Capital A/c is closed by transferring its balance to Ale ratio is used for adjustment of continuing partners capitals. XY and Z are the partners sharing profits and losses in the ratio of 3:2:1.1f Y retires, the new ratio of X and Z will be Share gained is calculated by deducting share from the New Share. The ration in which the remaining partners’ will share future profits after retirement is called ratio. The balance in the retiring partner’s loan A/c is shown on the side of the B/S till the last installment is paid. The amount paid to the Retiring Partner in excess of what is due to him is called goodwill. In the absence of any agreement as the disposed of amount due to Retiring Partner, Sec a. of the Indian Partnership Act, 1932 is applicable. If goodwill already appears in the books, if will be written off by debiting A/c in their OPSR. 47Il, Multiple Choice Questions: 1. Abhishek, Rajat and Vivek are partners sharing profits in the ratio of 5:3:2. Vivek retires, the New Profit Sharing Ratio between Abhishek and Rajat will be~ (a) 3:2 (b) 5:3 () 5:2 (d) None of the above 2. The old profit sharing ratio among Rajender, Satish and Tejpal were 2:2:1.The New Profit Sharing, Ratio after Satish’s retirement is 3:2. The gaining ratio is (a) 3:2 (b) 2:1 (4 (d) 2:2 3. Anand, Bahadur and Chander are partners. sharing profit equally. On Chander’s retirement, his share is acquired by Anand and Bahadur in the ratio of 3:2. The New Profit Sharing Ratio between Anand and Bahadur will be: (a) 8:7 (b) 4:5 (©) 3:2 (d) 2:3, 4. In the absence of any information regarding the acquisition of share in the profit of the retiring/deceased partner by the remaining partners, it is assumed that they will acquire his/her share:- (a) Old Profit Sharing Ratio (b) New Profit Sharing Ratio (c) Equal Ratio (d) None of the above 5. On retirement/death of a partner, the Retiring/Deceased Partner’s Capital Account will be credited With: (a) his/her share of goodwill. (b) goodwill of the firm. (c) shares of goodwill of remaining partners (d) none of the above. 6. Govind, Hari and Pratap are partners. On retirement of Govind, the goodwill already appears in the Balance Sheet at % 24,000. The goodwill will be written- off by debiting: (a) All Partners’ Capital Accounts in their old profit sharing ratio. (b) Remaining Partners’ Capital Accounts in their new profit sharing ratio. (c) Retiring Partners’ Capital Accounts from his share of goodwill. (d) none of the above. 7. Chaman, Raman and Suman are partners sharing profits in the ratio of 5:3:2. Raman retires, the new profit sharing ratio between Chaman and Suman will be 1:1. The goodwill of the firm is valued at ® 100,000 Raman’s share of goodwill will be adjusted by: (a) debiting Chaman’s Capital Account and Suman’s Capital Account with % 15,000 each. (b) debiting Chaman’s Capital Account and Suman’s Capital Account with % 21,429 and 8,571 respectively. (c) debiting only Suman’s Capital Account with % 30,000. (d) debiting Raman’s Capital Account with % 30,000. 4388. On retirement/death of a partner, the remaining partner(s) who have gained due to change in profit sharing ratio should compensate the: (a) retiring partners only. (b) remaining partners (who have sacrificed) as well as retiring partners. (c) remaining partners only (who have sacrificed). (d) none of the above. Ill. True or False Type Questions: 1. Profit or loss on revaluation is transferred to All Partners’ Capital Accounts in. case of retirement of a partner. 2. Accumulated profit is transferred to Continuing Partners Capital Accounts. 3. Adjustment of partners’ capitals of the remaining partners is to be made in the New Ratio. 4. New Share = Old share + share sacrificed. 5. Share gained is computed by deducting Old share from the New Share. 6. Increase in the value of asset is debited to Revaluation Account 7. Gain ratio is used to adjust the goodwill raised to the extent of retiring partner share only. 8. Full value of goodwill raised on retirement is credited to All Partners Capital Accounts including retiring partner in their old ratio. 9. Sec 87 of the Indian Partnership Act, 1932 states that the outgoing partner has an option to receive either interest @ 6% p.a. till the date of payment or such share of profits which has been earned with his money. Key Answers: I. Fill in the blanks: (1) Old (2) Old (3) Gain Ratio (4) Old (5) All the Partners capital (6) Gain (7) Retiring Partner’s Loan (8) New (9) 31 (10) Old (11) GR (12) Liabilities (13) Hidden (14) 37 (15) All Partners’ Capital Il, Multiple Choice Questions: () b (Q) ¢ @B) a (4) a () a ©) a Mc (8) b Ill, True or False: (1) True (2) False (3) True (4). False (5) True (6) False (7) True (8) True (9) True 49