# Test: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- Assertion & Reason Type Questions

## 8 Questions MCQ Test Accountancy Class 12 | Test: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- Assertion & Reason Type Questions

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Attempt Test: Reconstitution of a Partnership Firm : Retirement/Death of a Partner- Assertion & Reason Type Questions | 8 questions in 16 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): When a partner retires, all the unrecorded assets and liabilities, the increase or decrease in the value of assets and liabilities are done with the help of a revaluation account.Reason (R): A Revaluation Account is prepared in order to ascertain net gain (loss) on revaluation of assets or reassessment of liabilities and bringing unrecorded items into firm's books and the same is transferred to the capital account of all partners including retiring/deceased partner in their old profit sharing ratio.

Solution: The revaluation account helps in recording the unrecorded assets and liabilities, the increase and decrease in the value of assets and liabilities, to bring the items into the firm's books and transfer the same to the capital account of all partners in the old profit sharing ratio.
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): Ram, Rahim and Ron share profits in the ratio 2:3:5. Ram decides to retire. The new profit sharing ratio is 3:5. If the profit earned was ₹1,50,000 before retirement. Rahim’s share is ₹45,000.Reason (R): The profits are shared in the new profit sharing ratio.

Solution: Rahim will get ₹45,000 as his share of profit but the profits are shared in the old profit sharing ratio.
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): There is only need of finding the gaining ratio in case of retirement and death of a partner.Reason (R): The gaining ratio is used by the remaining partner to compensate the share of the outgoing or dead partner.

Solution: At the time of death or retirement, it is important to determine the gaining ratio of partners, as the gaining partners need to pay the retiring partner or the dead partner’s legal heir.
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): Nisha, Okra and Piya are partners. Nisha retires and her capital account after making adjustment for reserves and profit on revaluation exists at ₹`90,000. Okra and Piya have agreed to pay her ₹1,30,000 in full settlement of his claim. It implies that ₹40,000 (₹1,40,000 – ₹90,000) is Nisha’s share of goodwill of the firm. This will be treated by debiting ₹40,000 in Okra’s and Piya’s Capital Accounts in their gaining ratio and crediting Nisha’s Capital A/c.

Reason (R): If the firm has agreed to settle the account of the retiring partner by paying him/her a lump-sum amount, then the amount paid to him/her in excess of his adjusted capital shall be treated as his/ her share of goodwill.

Solution: In case of hidden goodwill, the amount in excess of the capital paid by the remaining partners to the retiring or deceased partner is treated as his share of goodwill.
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): Retirement of partner is legal when done at will and with the consent of the partner.

Reason (R): According to Section 32 (1) of the Indian Partnership Act, 1932, “a partner may retire from the firm with the consent of all the partners or at his will, by giving written notice to all the other partners of his intention to retire.”

Solution: A partner can retire with the consent of the other partners and a person can be introduced in the partnership by the consent of the other partners. The reconstituted firm can carry on its business in the same firm's name till dissolution.
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): On retirement, the old partnership agreement comes to an end and a new partnership agreement comes into existence between the remaining partners.

Reason (R): Retirement of the partnership leads to the reconstitution of the firm.

Solution: Retirement of a partner leads to the reconstitution of the partnership which leads to ending the old agreement and start of a new agreement.
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): Partnership comes to an end with the death of a partner but the firm may continue its business with a new partnership agreement.

Reason (R): Death of a partner leads to the restructuring of the firm and not to the dissolution of the partnership firm.

Solution: Partners need to make a new agreement when there is a death of a partner as the partnership ceases to exist but the firm still goes on and can continue with a new agreement.
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): When goodwill is not appearing in the books, retiring or deceased partner’s capital account is to be credited with his share of goodwill and gaining partners' capital accounts are to be debited in gaining ratio.

Reason (R): Goodwill needs to be compensated by the gaining partners in the gaining ratio.

Solution: The gaining partner transfers the amount of goodwill to the retiring or deceased partners in proportion in order to compensate for the sacrificed goodwill as per the gaining ratio.
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