Test: Reconstitution of a Partnership Firm: Admission of a Partner- Assertion & Reason Type Questions


10 Questions MCQ Test Accountancy Class 12 | Test: Reconstitution of a Partnership Firm: Admission of a Partner- Assertion & Reason Type Questions


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Attempt Test: Reconstitution of a Partnership Firm: Admission of a Partner- Assertion & Reason Type Questions | 10 questions in 20 minutes | Mock test for Commerce preparation | Free important questions MCQ to study Accountancy Class 12 for Commerce Exam | Download free PDF with solutions
QUESTION: 1

Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

Assertion (A): If goodwill is not brought in cash, it can be adjusted only through the new partner’s capital account.

Reason (R): The adjustment will reduce the capital of the partner.

Solution: If goodwill is not brought in cash, it can be adjusted through the new partner’s capital account or current account as the case may be.
QUESTION: 2

Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

Assertion (A): It is the right of a new partner on the firm’s assets and liabilities.

Reason (R): Old Partners of the firm sacrifice some profit according to the new profit sharing ratio in favour of incoming partners.

Solution: It is the right of a new partner on the firm’s assets and liabilities on behalf of capital which is brought by him/her, as he/ she brings the required amount of capital and goodwill.
QUESTION: 3

Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

Assertion (A): When the new partner brings his share of goodwill in cash and it is to be paid to the existing partners privately, no entry is passed in the books.

Reason (R): The intention of the partners is not to show any amount/transaction relating to goodwill for any of the reasons.

Solution: The amount of goodwill brought by the new partner may be either transferred to the capital accounts of the existing or sacrificing partners or may be recorded in the books. The existing partners may either withdraw the whole amount or only some portion of it. This is done following the rule 'debit what comes in'.
QUESTION: 4

Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

Assertion (A): Whenever a new partner brings goodwill in cash, he should bring the amount of goodwill, only for his share.

Reason (R): It is a common rule that the gaining partner should compensate the sacrificing partner to the extent of his gain.

Solution: New or Incoming partner may bring his share of Premium for Goodwill in the form of the assets. In this situation, the assets brought in debited individually with their values and Premium for Goodwill Account is credited with his share of goodwill and also new Partner's capital Account with his capital.
QUESTION: 5

Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

Assertion (A): At the time of admission of a partner if there is any General Reserve, Reserve Fund or the balance of Profit & Loss Account appearing in the balance sheet, it should be transferred to old partners’ capital/current accounts in their old profit sharing ratio.

Reason (R): The General reserve, Reserve Fund or the Balance of Profit and Loss Account are the result of the past profits when the new partner was not admitted.

Solution: All accumulated profits, reserves need to be written off as they are the result of the past profits of the firm.
QUESTION: 6

Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

Assertion (A): Profit or loss on revaluation of assets and reassessment of liabilities is transferred to the old partners' capital/current accounts in old profit sharing ratio.

Reason (R): All the accumulated profit or loss and reserves are transferred to the old partners' capital/ current accounts in the old profit sharing ratio.

Solution: Profit or loss on revaluation of assets and reassessment of liabilities is transferred to the old partners' capital/current accounts in old profit sharing ratio, as it is a

result of the under or over valuation of the old partners but it is not an accumulated profit.

QUESTION: 7

Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

Assertion (A): A new partner can be admitted into a partnership firm with the consent of all the existing partners.

Reason (R): According to Section 31 of the Indian Partnership Act, 1932, a new partner shall not be introduced into a firm without the consent of all the existing partners, unless it is agreed otherwise by the partners in the partnership deed.

Solution: According to the Partnership Act 1932, a new partner can be admitted into the firm only with the consent of all the existing partners unless otherwise agreed upon. With the admission of a new partner, the partnership firm is reconstituted and a new agreement is entered into to carry on the business of the firm.
QUESTION: 8

Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

Assertion (A): New Profit Sharing Ratio is the ratio in which old partners including the new partner, share the profits or losses of the firm.

Reason (R): When a new partner is admitted to the firm it is necessary to calculate the new profit sharing ratio with the help of the share agreed to forgo by the old partners.

Solution: New Profit Sharing Ratio is the ratio in which old partners including the new partner, share the profits or losses of the firm, calculated as agreed by the partners, as the future profit and loss need to be shared differently as a new partner is added to the firm.
QUESTION: 9

Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

Assertion (A): If goodwill is already appearing in the book, old goodwill should always be written off among old partners in the old ratio.

Reason (R): The amount of goodwill should be adjusted through partners’ capital/current accounts.

Solution: If goodwill is already appearing in the book, old goodwill should always be written off among old partners in the old ratio through the Capital or Current Accounts as per the AS 26.
QUESTION: 10

Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

Assertion (A): On admission of a new partner, Assets and liabilities are revalued.

Reason (R): Assets and liabilities are revalued so as to show the proper financial position of the firm and the capital held by the partners at the time of admission.

Solution: At the time of admission of a new partner, the assets are revalued and liabilities are reassessed. The assets are revalued and liabilities are reassessed so that: The assets are overstated or understated are revalued. The liabilities are brought in the books at their correct values.
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