Accountancy: CUET Mock Test - 9 - CUET MCQ

When a new partner is admitted into the partnership firm, he brings some amount of premium for goodwill which will be shared/distributed by the sacrificing partners in their sacrificing ratio

The correct answer is MS Word 2007.

Key Points

• Smart Art is the feature of MS Word 2007.
• To quickly and easily create a visual representation of your data, create a SmartArt graphic.
• To successfully communicate your message or thoughts, you can choose from a variety of layouts. SmartArt visuals can be made and utilized in Excel, Outlook, PowerPoint, and Word.
• A SmartArt Style is a collection of effects, such as line style, bevel, and 3-D, that you may apply to your SmartArt image's forms to give it a unique and professional appearance.
• Colour variants created from the theme colors can be applied to the shapes in your SmartArt graphic.

Important Points

• Adobe Photoshop is a raster graphics editor developed and marketed by Adobe Inc. for Windows and macOS.
• Tally Solutions Pvt. Ltd. is a multinational firm based in India that specializes in enterprise resource planning software.
• CorelDRAW is a vector graphics editor developed by Corel Corporation and distributed under the Corel brand.

The Utility Software is system software that helps to maintain the proper and smooth functioning of a Computer System. It assists the Operating System to manage, organizing, maintaining, and optimizing the functioning of the computer system.

Utility Software performs certain tasks like virus detection, installation, and uninstallation, data backup, deletion of unwanted files, etc. Some examples are antivirus software, file management tools, compression tools, disk management tools, etc.

WinRAR: WinRAR is a proprietary file compression and archiving utility developed and distributed by RARLAB. It is not built on an open-source digital platform and is a commercial software product

The correct answer is the "Dot-matrix printer".

Key Points

• Plotter: The plotter is a kind of printer which is used for printing vector lines. It uses a simple pen and paper.
• Laser printer: The laser printer is an example of a non-impact printer. It uses laser technology to print the content. This kind of printer is used mostly in large companies.
• Inkjet printer: The inkjet printer is an example of a non-impact printer. This kind of printer is used mostly in homes, businesses and so on. It uses a different pattern of ink droplets to print the content.
• Dot-matrix printer: The dot-matrix printer is an example of an impact printer. It has 9-24 pins which are situated at the printer head. It is commonly used for printing in applications like payroll and accounting.

The correct answer is the Dot-matrix printer.

Additional Information

• Printer is referred to as an output device. The printer is divided into two parts. These are impact printers and non-impact printers.
• Impact printers use a kind of pin and hammer system to print a document. It is less costly than the non-impact printer.
• Non-impact printers use ink in any form to print a document. It is the best for printing photographs.

The correct option is 1 i.e., Authentication, Authorization, and Accounting.

Additional Information

• AAA in networking is Authentication, Authorization, and Accounting.
• AAA is a system for tracking user activities on an IP-based network.
• It also controls their access to network resources.
• AAA is implemented as a dedicated server.
• AAA is also referred to as the AAA Protocol.

The correct answer is ₹18,000; ₹72,000.

• Given that Suraj compensates Amrita and Kalyani in the ratio of 1:4 for his share of goodwill:
• Total ratio parts = 1 + 4 = 5 parts
• Amount compensated to Amrita = (1/5) * ₹90,000 = ₹18,000 Amount compensated to Kalyani = (4/5) * ₹90,000 = ₹72,000

So, the correct answer is: 3) ₹18,000; ₹72,000

The correct answer is ₹24,00,000 and ₹16,00,000.

Key Points

First, calculate the total revaluation profit:

• Machinery: ₹27,00,000 - ₹25,00,000 = ₹2,00,000 increase
• Land: ₹50,00,000 - ₹10,00,000 = ₹40,00,000 increase
• Computers: ₹50,000 - ₹2,50,000 = -₹2,00,000 decrease
• Net revaluation profit = ₹2,00,000 + ₹40,00,000 - ₹2,00,000 = ₹40,00,000
• Amrita and Kalyani share the revaluation profit in their original profit-sharing ratio, which is 3:2.

So, the total profit of ₹40,00,000 shared will be:

• Amrita's share = (3/5) * ₹40,00,000 = ₹24,00,000
• Kalyani's share = (2/5) * ₹40,00,000 = ₹16,00,000

So, the correct answer is: ₹24,00,000 and ₹16,00,000

The correct answer is ₹1,80,000.

Key Points

Adjust the Workmen Compensation Fund first for the claim:

• Remaining fund = ₹5,00,000 - ₹2,00,000 = ₹3,00,000
• This fund is distributed in the old profit-sharing ratio, which is 3:2 between Amrita and Kalyani. Amrita’s share:
• = (3/5) * ₹3,00,000 = ₹1,80,000

So, the correct answer is: 2) ₹1,80,000

The correct answer is

Key Points

Writing Off Existing Goodwill

• If there is already goodwill recorded in the books, it may be written off against the existing partners' capital accounts in their old profit-sharing ratio.
• This is because the value of goodwill is assumed to be realized by the new partner's entrance, meaning the 'purchased' goodwill no longer exists as an identifiable asset.
• The accounting entries would decrease the goodwill account and decrease the existing partners' capital accounts proportionately.
• Journal entry will be:

The correct answer is If all the existing partners agree.

Key Points

When a new partner is admitted, it results in the reconstitution of the partnership. Here’s a general overview of conditions and considerations involved in this process:

• Consent of Existing Partners: Typically, the admission of a new partner requires the unanimous consent of all existing partners unless the partnership agreement specifies otherwise. This is crucial because the addition of a new partner changes the dynamics, responsibilities, and profit-sharing ratios within the partnership.

• Valuation of the Partnership: Before a new partner is admitted, there often is a need to accurately value the partnership's assets and liabilities. This helps in determining the amount the incoming partner should contribute as capital to the partnership for acquiring a certain ownership interest or stake in the partnership.

• Capital Contribution: The new partner usually needs to bring in capital or assets as part of their admission into the partnership. This contribution could be in the form of cash, property, or other valuable assets. The amount or value of the contribution often corresponds to the share of the profits and losses the new partner will be entitled to.

• Amending the Partnership Agreement: The admission of a new partner requires the existing partnership agreement to be amended or a new agreement to be drafted to include terms that cater for the new partner. This revised agreement should outline the new profit-sharing ratios, responsibilities, capital contributions, and any other rights and obligations specific to the new partner.

• Revaluation of Assets: In many cases, the admission of a new partner triggers a revaluation of the partnership's assets and liabilities to their current market values. This ensures that the existing partners are not unfairly advantaged or disadvantaged by the entry of the new partner based on outdated valuations.

• Goodwill: The issue of goodwill often arises when a new partner is admitted. If the partnership has goodwill, the new partner might be required to pay for their share of it. Goodwill represents the value of the partnership's reputation, location, client base, and other intangible assets. The treatment of goodwill varies and needs to be agreed upon by all partners.

• Adjustments to Existing Capital Accounts: The admission of a new partner usually leads to adjustments in the capital accounts of the existing partners, either because of the revaluation of assets or because of the specifics of how the new partner's investment is structured.

• Legal Requirements and Documentation: Depending on the jurisdiction, there may be legal requirements to fulfill, such as registering the change in partnership composition with relevant authorities or publishing a notice of the partnership's reconstitution. All necessary legal documents must be prepared, signed, and, where necessary, registered.

The passage emphasizes that ratio analysis points out areas that need further investigation, making it crucial for financial decision-making.

Ratio analysis is described as a technique that uses arithmetic relationships to regroup data, though its interpretation can be complex.

The passage mentions that while ratio analysis involves arithmetic relationships, its interpretation is complex and requires a deep understanding.

Ratio analysis is highlighted as indispensable for understanding the results of financial statements and providing useful insights.

The passage states that ratio analysis is crucial for providing financial information that helps interpret the financial health of the business.

(A) Correct: A new partner has the right to share the assets and profits of the partnership after admission.
(B) Correct: The new partner must contribute capital either in cash or kind.
(C) Incorrect: The profit-sharing ratio among existing partners changes when a new partner is admitted.
(D) Correct: The sacrificing ratio is used to calculate how much the old partners give up for the new partner.
(E) Incorrect: The old partners’ profit-sharing ratio changes when a new partner is admitted.

(A) Incorrect: Goodwill is not always brought by the new partner in cash; it may also be adjusted in the capital accounts.
(B) Correct: The super profits method is used to value goodwill when the firm earns excess profits.
(C) Incorrect: Goodwill must be valued if there are changes in the profit-sharing ratio or a new partner is admitted, even if the firm earns normal profits.
(D) Correct: Revaluation of assets and reassessment of liabilities is required when a new partner is admitted.
(E) Correct: Goodwill is shared between the old partners in their sacrificing ratio when a new partner is admitted.

(A) Correct: The existing partners compensate the new partner’s share of goodwill in their sacrificing ratio.
(B) Incorrect: The capital of each partner may vary and is not always equal to the new partner’s capital contribution.
(C) Correct: A change in the profit-sharing ratio among existing partners is common when a new partner is admitted.
(D) Correct: Sacrificing ratio is determined by subtracting the old ratio from the new ratio.
(E) Incorrect: The capital accounts of existing partners may change based on adjustments such as goodwill and revaluation of assets.

(A) Correct: Goodwill is an intangible asset in the firm's accounts.
(B) Incorrect: Goodwill is generated when a firm earns super profits, not just normal profits.
(C) Incorrect: The new partner’s goodwill contribution can be in cash or capital adjustments, not always in cash.
(D) Correct: The amount of goodwill paid by the new partner is credited to their capital account.
(E) Correct: If goodwill is already in the books, it must be written off when a new partner is admitted.

(A) Incorrect: The capital of the new partner is based on their share of the total capital, which includes contributions for goodwill.
(B) Correct: If the new partner does not bring goodwill, the sacrificing partners adjust it in their capital accounts.
(C) Incorrect: The new partner's capital is not always equal to the goodwill amount; it is based on their share in the profits and the total capital.
(D) Correct: Revaluation affects the capital accounts of existing partners when the revaluation surplus or deficit is transferred.
(E) Correct: A revaluation account is used to adjust the values of assets and liabilities upon the admission of a new partner.

A) Debenture: A debenture is a written acknowledgment of a debt by a company, issued to raise long-term funds, usually with interest. It’s a general term for such instruments. Matches (I) "A debt instrument acknowledged by a company, typically for raising long-term funds" because this definition captures the essence of a debenture comprehensively
B) Secured Debenture: These debentures are backed by a specific charge (e.g., fixed or floating) on the company’s assets, providing security to holders in case of default. Matches (II) "Debentures with a specific charge on company assets" as it directly describes the security feature.
C) Convertible Debenture: These allow holders to convert their debentures into equity shares or other securities at a specified time or rate. Matches (III) "Debentures that can be converted into shares or other securities" because this is the defining characteristic of convertibility.
D) Registered Debenture: These are recorded in the company’s debenture register, and ownership transfer requires a formal deed, unlike bearer debentures. Matches (IV) "Debentures recorded with the company that are transferable by deed" as it precisely describes the registration and transfer process.

A) Secured Debenture: These are protected by a charge on company assets (fixed or floating), ensuring repayment if the company defaults. Matches (IV) "Debenture backed by a charge on company assets" because security is the key feature here.
B) Unsecured Debenture: Also called naked debentures, these lack any asset backing and rely on the company’s creditworthiness. Matches (II) "Debenture without any charge on the company’s assets" as it defines the absence of security.
C) Redeemable Debenture: These are repaid at a specified time or in instalments during the company’s life. Matches (I) "Debenture repayable after a specified period or in instalments" because redeemability implies a repayment schedule.
D) Irredeemable Debenture: These have no fixed repayment date and are repaid only when the company winds up (or at its discretion). Matches (III) "Debenture repayable only on the winding-up of the company" as it reflects their perpetual nature.

A) Specific Coupon Rate Debenture: These carry a defined interest rate, which can be fixed (e.g., 5% p.a.) or floating (e.g., tied to a benchmark). Matches (I) "Debentures with a fixed rate of interest, either fixed or floating" as it covers both possibilities
B) Zero Coupon Rate Debenture: These pay no periodic interest (coupon = 0%) and are issued at a discount, redeemed at face value for profit. Matches (II) "Debentures without any interest but issued at a discount" because this is their hallmark.
C) Convertible Debenture: These can be converted into equity shares or other securities, a key feature distinguishing them. Matches (IV) "Debentures that can be converted into shares" as it directly defines convertibility.
D) Non-Convertible Debenture: These cannot be converted and remain debt instruments until redemption. Matches (III) "Debentures that cannot be converted into shares or other securities" as it specifies non-convertibility.

A) Issue at Par: Debentures are issued at their nominal/face value (e.g., ₹100 debenture sold for ₹100). Matches (I) "Debentures issued at their face value" as it’s the exact definition.
B) Issue at Discount: Sold below face value (e.g., ₹100 debenture for ₹90) to attract investors. Matches (II) "Debentures issued at a price lower than their face value" because it describes the discount precisely.
C) Issue at Premium: Sold above face value (e.g., ₹100 debenture for ₹110) due to high demand or creditworthiness. Matches (III) "Debentures issued at a value higher than their face value" as it captures the premium concept.
D) Issue for Consideration other than Cash: Issued to settle non-cash transactions, like purchasing assets. Matches (IV) "Debentures issued as payment for assets instead of cash" because it reflects this specific purpose.

A) Lump Sum Payment: The full debenture amount is repaid in one go at maturity. Matches (III) "The entire debenture amount is paid at once" as it describes a single payment
B) Payment in Installments: Repayment occurs in parts over time (e.g., annual instalments). Matches (IV) "The company repays the debenture amount in parts over a period" because it fits the instalment approach
C) Purchase in Open Market: Company buys back debentures from the market before maturity, often at a discount. Matches (I) "Debentures are redeemed by buying them back from the market" as it’s the exact process.
D) Conversion into Shares: Redeemed by converting into equity or new debentures instead of cash. Matches (II) "Debentures are converted into equity shares or new debentures" because it defines conversion redemption.

When there is no proper guidelines or when there is no partnership deed or when partnership deed is silent on the issue of admission of a new partner. In such a case all provisions of the Partnership Act, 1932 will be applicable according to which a new partner can be admitted into the partnership only with the consent of all existing partners.

A new partner can acquired his share from one partner or two partners or from all partners in an agreed ratio. He may acquire his share in old ratio of the partners or in an agreed ratio for sacrifice but not in the new ratio of all the partners because new ratio will be fixed after adjusting his share.

Sacrificing ratio refers to that ratio in which old partners will sacrifice their share in the favour of a new partner. To calculate the sacrificing ratio new share should be deducted from the old share of the existing partners’ i.e. old ratio – new ratio.

At the time of admission of a new partner, the main use of sacrificing ratio is to adjust the premium for goodwill brought by a new partner.

Distribution of profit is to be done in new profit sharing ratio:
X = 30,000 × 1/3 = 10,000
Y = 30,000 × 1/3 = 10,000
Z = 30,000 × 1/3 = 10,000