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Punjab (PTB) · Chapter test · Free

2nd Year Principles of Accounting Chapter 8 TestPartnership Accounts Retirement and Death

30 marks · 40 minutes · 21 questions. Covers: CHAP 8: Partnership Accounts Retirement and Death.

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2nd Year Principles of Accounting Chapter 8 Test

2nd Year · Principles of Accounting · Punjab (PTB)

Name: ____________Roll No: ________Class/Section: ________Date: ________Total marks: 30Time: 40 minutes

Q1. Multiple choice questions (Attempt all · 10 × 1 = 10)

  1. The entry for goodwill raised but written off, in case of retirement should be:

    1. Retiring partner’s capital A/c….Dr To Goodwill A/c

    2. Remaining partner’s capital A/c….Dr To Goodwill A/c

    3. Goodwill A/c….Dr To All Partner’s capital A/c

    4. All Partner’s capital A/c….Dr To Goodwill A/c

  2. In case of retirement amount of general reserve or any other profit is credited to all the partners in:

    1. Old profit sharing ratio

    2. New profit sharing ratio

    3. Sacrifice ratio

    4. Gaining ratio

  3. On the death of a partner, the amount received from joint policy should be credited to:

    1. Deceased partner’s capital accounts in the old profit sharing ratio

    2. Remaining partners’ capital accounts in the old profit sharing ratio

    3. All partners’ capital account equally

    4. All partners’ capital account in the old profit sharing ratio

  4. Interest on retiring partner loan in the absence of an agreement is paid @ rate of:

    1. 3% p.a

    2. 5% p.a

    3. 6% p.a

    4. 8% p.a

  5. In case of retirement funds for repayment may be provided out of:

    1. Firm’s own resources

    2. Borrowing by the firm

    3. Additional funds may be bought in by continuing partners

    4. All of the above

  6. In case of retirement, when goodwill is raised with retiring partner’s share is credited to:

    1. Retiring partners’ capital A/c

    2. Cash A/c

    3. Goodwill A/c

    4. None of these

  7. Retirement of a partner dissolves:

    1. Partnership

    2. Firm

    3. Business

    4. “b & c”

  8. Gaining ratio is calculated on:

    1. Admission

    2. Retirement

    3. Death

    4. ‘b’ & ‘c’

  9. At the time of payment to the retiring partner, the following journal entry will be passed:

    1. Retiring partner's capital A/C.....Dr to Cash/Bank/ A/c   

    2. Cash/Bank A/c.... Dr to Retiring partner's capital A/c

    3. Remaining partners capital A/c ..... Dr to Cas/Bank A/c

    4. None of these

  10. Suppose A, B & C are partners, sharing profits in the ratio of 2:2:1 respectively. What will be the new ratio if C retires in the absence of an agreement?

    1. 2 : 2

    2. 2 : 1

    3. 2 : 3

    4. 1 : 2

Q2. Short questions (Attempt any 6 of 8 · 6 × 2 = 12)

  1. What is the treatment of Reserves and undistributed profit in case of retirement of a partner?

  2. Pass the journal entry for interest on capital of deceased’s partner.

  3. Suppose A, B and C are partners sharing profit in the ratio of 4:5:7. A dies on 31st March 2016. The sales and profit during 2015 were Rs.2, 40, 000 and 60,000 respectively. The sales upto March 31st, 2016 amounted to Rs.80, 000. Calculate A’s share in profit on sales basis?

  4. What will be the new profit sharing ratio, if a partner retires and there is no fresh agreement?

  5. Suppose A, B and C are equal partner, profit and loss account for the year ended December 31st 2015 revealed net profit Rs.36000. A dies on March 31st, 2016. Calculate the A’s share of profit based on previous year’s profit?

  6. What journal entry will have to be made, when the capital account of a retiring partner is transferred to loan account?

  7. What journal entries will have to be made in case of retirement if the goodwill is raised at full value and written off?

  8. What journal entry will have to be made, in case of retirement, if the goodwill is not raised?

Q3. Long questions (Attempt any 2 of 3 · 2 × 4 = 8)

  1. A, B and C are partners, sharing profits equally. The balance sheet on December 31st 2022 is as follows:

    Balance Sheet
    Assets Rs. Liabilities Rs.
    Cash at bank 4000 Sundry creditors 4000
    Bills receivable 3000 Capitals:  
    Sundry debtors 20000   A 12,000
    Less: Reserve for bad debts  1,000 19,000 B 18000
    Stock 18,000 C 7500
    Fixtures 3500 Reserve 6000
      47,500   47,500

    B retires on that date and following adjustments are to be made for the purpose:
    (a) Goodwill of the firm is valued at Rs 12,000
    (b) Fixtures to be Depreciated by 5%
    (c) Stock to be appreciated to be 10%
    (d) Reserve for bad debts to be increased by rs. 500.
    Draw up the revaluation account, Capital Accounts of partners and opening balance sheet of the continuing partners.

  2. A, B and C are partners sharing profits and losses in proportions of 3:2:1and their balance sheet on 31st December, 2021 was as follows:

    Balance Sheet
    Assets Rs. Liabilities Rs.
    Cash in hand 250 Bill payable 7560
    Cash at bank 960 Creditors 12300
    Bills receivable 3,300 General reserves 3000
    Debtors 7,450 Capitals:  
    Stock 12,470 A               10000  
    Investments 10,430 B               6000  
    Buildings 8,000 C               4000 20,000
      42,860   42,860

    B died on February 28th, 2022 and according to partnership agreement his executor is entitled to be paid out as follows:
    (a) The capital to his at the time of his death and the interest up to the time of his death at 6% per annum.
    (b) His appropriate share of general reserves.
    (c) His share of profit to the date of his death which is to be taken on the basis of proceeding years’ profits.
    (d) His share of goodwill which is calculated at two year’s purchase of the average profit of the preceding three years.
    The investments were sold for Rs. 16,020 and B’s executor was paid off. The profits in the three years were 2019 – Rs. 7800, 2020 - Rs.9000, 2021 Rs. 9600.
    Pass the journal entries and write the account of B.

  3. Amjad, Anwar and Arif were partners sharing profits and losses in the ratio of 3:2:1. Their balance sheet on 31st December 2022 was as follows:

    Balance Sheet
    Assets Rs. Liabilities Rs.
    Cash at bank 3500 Sundry creditors 15000
    Bills receivable 2000 Bills payable 5000
    Investments 6500 Capitals:  
    Debtors 6000 Amjad          10,000  
    Stock 5000 Anwar          10,000  
    Furniture 2000 Arif               10,000 30,000
    Buildings 25000    
      50,000   50,000

    Arif retired on the above date and the partners agreed that:
    (a) Goodwill should be calculated on the basis of two years’ profits of average of the preceding years’ profits. The profits for the year 2019, 2020 and 2021 were Rs. 16,000. Rs. 12,000 and Rs. 14,000 respectively.
    (b) Rs. 510 to be provided for doubtful debts.
    (c) Stock to be reduced to 10%.
    (d) There was an appreciation in the value of building by 5%.
    Show the revaluation account and the balance sheet of the continuing partner.