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Punjab (PTB) · Half book test · Free

2nd Year Principles of Accounting Second half Book Paper

50 marks · 1 hour 30 minutes · 35 questions. Covers: 4 chapters (CHAP 6: Partnership Accounts Profit Distribution to CHAP 9: Partnership Accounts Dissolution of the Firm).

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2nd Year Principles of Accounting Second half Book Paper

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

Name: ____________Roll No: ________Class/Section: ________Date: ________Total marks: 50Time: 1 hour 30 minutes

Q1. Multiple choice questions (Attempt all · 15 × 1 = 15)

  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. X,Y and Z are partners in a firm, if B is to be admitted as a new partner:

    1. Old partnership has to be dissolved

    2. Old firm has to be dissolved

    3. Both old firm and partnership have to be dissolved

    4. Neither firm nor partnership needs to be dissolved

  3. In the absence of an agreement, interest on loan advanced by a partner to the firm is allowed at the rate of:

    1. Six per cent

    2. Five per cent

    3. Twelve per cent

    4. Seven per cent

  4. The journal entry, for assets taken over by a partner, in case of dissolution will be:

    1. Partner’s capital a/c …Dr To realization a/c

    2. Realization a/c …Dr To liabilities a/c

    3. Cash a/c ..Dr To realization a/c

    4. Realization a/c…Dr To assets a/c

  5. 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

  6. Old  profit sharing ratio minus new profit sharing ratio is equal to:

    1. Sacrificing ratio

    2. Gaining ratio

    3. Distributing ratio

    4. None of these

  7. The essential element of partnership is:

    1. There must be an agreement entered into by all the persons concerned

    2. The agreement must be to share the profits of a business

    3. The business must be carried on by all or any of them acting for all

    4. All of the above

  8. The journal entry, for sale of various assets for cash, in case of dissolution will be:

    1. Liabilities a/c  …Dr To cash a/c

    2. Cash a/c  ..Dr To realization a/c

    3. Cash a/c …Dr To asset a/c

    4. Asset a/c …Dr To realization a/c

  9. 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

  10. On the admission of a new partner in partnership:

    1. Old partnership has to be dissolved

    2. Old firm has to be dissolved

    3. “a” and “b”

    4. None of the above

  11. The current account of a partner:

    1. Will always have a credit balance

    2. Will always have a debit balance

    3. May have a debit balance or a credit balance

    4. None of these

  12. Dissolution due to completion of venture, death of partner, insolvency of partner or expiry of the terms fixed is called:

    1. Dissolution by agreement

    2. Dissolution of notice

    3. Dissolution on the happening of certain contingencies

    4. Dissolution by court

  13. 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

  14.  X and Y are sharing profits in the ratio of 4:3, Z joins and the new ratio among X,Y and Z is 7:4:3, the sacrificing ratio between X and Y will be:

    1. Equal

    2. 4:3

    3. 2:1

    4. 1:2

  15. The interest on capital account in partnership is to credited to:

    1. Interest on capital a/c

    2. Profit & loss a/c

    3. Partner’s capital account

    4. Cash a/c

Q2. Short questions (Attempt any 10 of 15 · 10 × 2 = 20)

  1. Pass journal entry, for sale of unrecorded asset in case of dissolution of firm.

  2. Write three duties of partners in partnership.

  3. What is premium method for the treatment of goodwill on the admission of a new partner?

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

  5. Pass journal entry, for transfer of undivided profit in case of dissolution of firm.

  6. What will be the closing entry for interest on capital in partnership?

  7. What is memorandum revaluation method for the treatment of goodwill on the admission of a new partner?

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

  9. Pass journal entry, for closing various liabilities account in case of dissolution of firm.

  10. Write the three rights of partners in partnership.

  11. Why the necessity of the valuation of goodwill arises?

  12. 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?

  13. Pass journal entry, for transferring loss on realization in case of dissolution of firm.

  14. Write the four points of partnership agreement.

  15. What is revaluation method for the treatment of goodwill on the admission of a new partner?

Q3. Long questions (Attempt any 3 of 5 · 3 × 5 = 15)

  1. The balance sheet of O, P, Q and R showed the following position on dissolution:

    Dr.   Cr.  
    Assets Rs. Liabilities Rs.
    Cash at bank 34,000 Creditors 10,000
    Q’s Capital a/c 10,000 O’s capital 15,000
    R’s Capital a/c 3000 P’s Capital 10,000
        Realisation profit 12,000
      47,000   47,000

    Show the final adjustment among the partners assuming that R is insolvent.

  2. Zufiqar and Fayyaz are partners in a firm sharing profits and losses as Zulfiqar 3/4 and Fayyaz 1/4 on 1st January, 2022, their positions was as given below:

    Assets Rs. Liabilities Rs.
    Plant 80,000 Capital accounts:  
    Stock 20,000 Zulfiqar      100,000  
    Debtors 60,000 Fayyaz      60,000 80,000
    Cash at bank 40,000 Sundry creditors 40,000
      200,000   200,000

    Riaz is now to join the partnership. He agrees to pay the partners Rs.40,000 by way of goodwill and introduce 3/5 of the combined capital of the two existing partners after depreciating plant and stock at 20% and 10% respectively and raising a reserve of 10% against Sundry Debtors. The new partner is to be allowed 1/4th share of the profits of the firm.
    You are asked to record the above transactions in the books of the firm and give the resultant balance sheet of the new firm.

  3. 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.

  4. Calculate the interest payable to A and B for the year ending 31.12.2022.
    A and B started business on 1.1.2022 with capitals of Rs. 120,000 and 80,000 respectively. During the year A introduced Rs. 20,000 as additional capital on 1.7.2022. They withdrew Rs. 1000 p.m. for household expenses in lieu of profits. Interest on capital is to be allowed @ 10%.

  5. A, B and C are partners sharing profits and losses in the proportion of one – half, one – third and one – sixth respectively. The firm balance sheet as on 31st December 2022 was as follows:

    Assets Rs. Liabilities Rs.
    Cash at bank 14,000 Creditors 31,500
    Debtors 32,600 Loan on mortgage 4,500
    Stock 22,400 A’s Capital 30,000
    Fixed assets 15,000 B’s Capital 20,000
    C’s Capital overdrawn 2,000    
      86,000   86,000

    It was resolved the partnership as on this date. The fixed assets and stock realised Rs. 35,000. Bad debts and discounts allowed amounted Rs. 1,600. The mortgage loan was paid off. The creditors paid less discounts of 5%.
    There was a claim for damages pending against the firm which was settled Rs. 5,600. The expenses of realisation was amounted to Rs. 375.
    After realisation of assets C was adjudicated an as insolvent and a dividend of 25 paise in rupee was received in respect of the firm’s claim against his estate.
    You are required to close the books of the firm in accordance with the decision in Garner vs. Murray.