Worksheet Solutions: Reconstitution of a Partnership Firm : Admission of a Partner | Accountancy Class 12 - Commerce PDF Download

MCQ Questions

Q3: Match the following with respect to journal entries for treatment of goodwill.

(a) i- B, ii-C, iii-A, iv-D
(b) i- C, ii-D, iii-A, iv-B
(c) i- D, ii-C, iii-A, iv-B
(d) i- D, ii-C, iii-B, iv-A
Ans: 

True Or False

Ans: True

Q2: Hidden goodwill arises when total capital is computed based on the new partner’s capital is less than total capitals of remaining partners after all adjustments.
Ans: False

Q3: New partner may or may not contribute capital at the time of admission.
Ans: True

Q4: New partner may bring his share of goodwill premium in kind.
Ans: True

Q5: Employee Provident Fund is a part of Accumulated profits and reserves.
Ans: False

Q6: The need for valuation of goodwill also arises when the firm is dissolved involving sale of business as a going concern.
Ans: True

Q7: New partner brings goodwill in the firm to get share in the past profits.
Ans: False

Q8: At the time of admission, reserves may be carried forwarded by the partners.
Ans: True

Q9: “As per Section 26 of the Indian Partnership Act, 1932, a person can be admitted as a new partner if it is agreed in the Partnership Deed”.
Ans: False

Q10: Claim of workmen compensation if more than workmen compensation reserve, is debited to revaluation account.
Ans: True

Fill in the blanks

Q1: In case of upward revaluation of a liability, revaluation account is____
Ans: Debited

Q2: A and B are partners sharing profits equally. They admit C for 1/3 share in profits. A debtor whose dues of Rs.5000 were written off as bad debts, paid Rs.4000 in full settlement. Bad debts recovered Rs.4000 will be debited to ____ and credited to ____
Ans: Cash account, revaluation account

Q3: On the admission of a new partner, after revaluation has been done, the value of assets and liabilities appear in the books of the firm at ____
Ans: their current value

Q4: At the time of admission of a partner, new profit sharing is used for sharing future ____
Ans: Profit

Q5: when the value of goodwill of the firm is not given but has to be inferred on the basis of net worth of the firm, it is called ____
Ans: Hidden goodwill

Q6: At the time of admission, it the book value and the market value of investment is same then investment fluctuation reserved is transferred to ____ account of the old partners in their ____ ratio.
Ans: Capital accounts of old partners, old profit sharing ratio

Q7: At the time of admission, the assets are revalued and liabilities are reassessed. The increase or decrease in the values is debited or credited in ____
Ans: Revaluation account

Q8: Revaluation account is a ____
Ans: Nominal account

Q9: The newly admitted partner brings his/ her share of capital for which he/she will get ____ in firm.
Ans: Profit share

Q10: Goodwill appearing in the books oat the time of admission of a new partner is written off by debiting ____ and crediting ____
Ans: Old partners'capital accounts, goodwill account

Q11: Why is it necessary to revalue assets and reassess liabilities of a firm in case of admission of a new partner?
Ans: The assets are revalued and liabilities of a firm are reassess, at the time of admission of a partner because the new partner should; neither benefit nor suffer because change in the value of assets and liabilities as on the date of admission.

Q12: What are the accumulated profit and accumulated losses?
Ans: The profit accumulated over the years and have not been credited to partners’ capital A/c are known as accumulated Profit or undistributed profit, e.g. the General Reserve, Profit and Loss A/c (credit balance). The losses which have not yet been written off to the debit of Partners’ Capital A/c are known as accumulated Losses, e.g. the Profit and Loss A/c appearing on the assets side of Balance Sheet, etc.

Q13: Explain the treatment of goodwill in the books of a firm on the admission of a new Partner when goodwill already appears in the Balance sheet at its full value and the new partner brings his share of good will in cash.
Ans: By following accounting standard - 10, the existing goodwill (i.e. goodwill appearing in the Balance Sheet) is written off to the old partners’ Capital a/c in their old profit sharing ratio.
Old partners’ capital A/c           Dr.
To Goodwill A/c
[Being the existing g/w written off in the old ratio.]

Q14: Under what circumstances the premium for goodwill paid by the incoming Partner will not recorded in the books of Accounts?
Ans: When the premium for goodwill is paid by the incoming partner privately, it is not recorded in the books of A/c as it is as a matter outside the business.