Past Year Questions: Partnership and LLP Accounts | Accounting for CA Foundation PDF Download
Q 1. State with reasons, whether the following statements are True or False: 6 × 2 = 12 Marks
(i) Partners in a partnership firm will share the profits of the business according to their capital contribution in the absence of any agreement. (May 2025)
Answer: False. In the absence of a Partnership agreement, Profits and losses are to be shared equally among partners.
(ii) Revaluation Account is also known as Profit and Loss Adjustment account. (Jun 2024)
Answer: True. Revaluation is also called as profit and loss adjustment account. It is used to record the gain/loss arising from the revaluation of assets and liabilities of a firm at the time of reconstitution.
(iii) LLP should have two designated partners who are resident in India. (May 2025)
Answer: False. As per Section 7 of the LLP Act, every limited liability partnership should have at least two designated partners who are individuals, and at least one of them should be a resident in India.
(iv) Legal heirs of a deceased partner are entitled to his capital account balance only. (Sep 2024)
Answer: False. Legal heirs of a deceased partner are entitled to all the dues of the deceased partner.
Q 2. X and Y are partners sharing profits and losses in the ratio of their effective capital. As on 1st April, 2023, they had ₹ 2,80,000 and ₹ 1,60,000 respectively in their Capital Accounts. (5 Marks, Jan 2025)
X introduced a further capital of ₹ 20,000 on 1st June, 2023 and another ₹ 15,000 on 1st October 2023. On 31st January 2024, X withdrew ₹ 25,000. On 1st August, 2023, Y introduced further capital of ₹ 30,000.
During the Financial year 2023-24, the partners drew the following amounts in anticipation of profit:
X drew ₹ 5,000 at the beginning of each quarter and Y drew ₹ 1,500 per month at the end of each month beginning from April 2023.
As per the partnership agreement, the profits were to be shared in a capital ratio. The interest on Capital @ 12% p.a. is allowable, and interest on drawings @ 10% p.a. is chargeable.
You are required to calculate:
(i) Profit-sharing ratio.
(ii) Interest on capital; and
(iii) Interest on drawings.
Answer:
Q 3. Amal, Bimal & Kamal were in partnership sharing profits in the proportions of 3:2:1. The balance sheet of the firm as on 31st March, 2024, was as under: (10 Marks, May 2025)
Amal had been suffering from ill-health and gave notice that he wished to retire. An agreement was, therefore, entered into as on 31st March, 2024, the terms of which were as follows:
(i) The profit and loss account for the year ended 31st March, 2024, which showed a net profit of ₹ 1,50,000, was to be re-opened. Bimal was to be credited with ₹ 30,000 as bonus, in consideration of the extra work which had devolved upon him during the year. The profit-sharing ratio was to be revised to enable partners to share profits/losses equally w.e.f. 1st April, 2023.
(ii) Goodwill was to be valued at three years’ purchase of the average profits of the preceding four years. The following were the amounts of profit for the past four years:
(iii) Fixtures were revalued at ₹ 1,00,000. Building was to be appreciated by 10%. Inventories were to be written down by ₹ 25,000. A provision of 2.5% was to be made for doubtful debts, and the remaining assets were to be taken at their book values.
Bimal and Kamal agreed, as between themselves, to continue the business, sharing profits in the ratio of 3:2. The amount due to Amal is to be transferred to his loan account to be settled later.
You are required to prepare:
(1) Revaluation Account
(2) Partners’ Capital Accounts.
Answer: Revaluation Account 
Partners’ Capital Accounts 
Working Note:
1. Calculation of Goodwill
Calculation of Profit through simple average method since profit of the previous years has no trend. 
Average profit (5,00,000/4) = 1,25,000 Goodwill (3 years purchase) = 3 X 1,25,000 = ₹ 3,75,000
2. Calculation for adjustment of Amount of Goodwill 
Amal’s share = 1/3rd of 3,75,000 = ₹1,25,000. Amal's share of goodwill distributed among the remaining partners in sacrificing ratio i.e., 4:1
Bimal’s share= 1,25,000 x 4/5 = ₹1,00,000
Kamal’s share =1,25,000 x 1/5 = ₹ 25,000
Q 4. A, B and C are partners sharing profits and losses in the ratio of 2:2:1. Their Balance Sheet as on 31st March, 2024, is as follows: (10 Marks, May 2025)
The partners have agreed to take D as a partner w.e.f. 1st April, 2024, on the following terms:
(i) D shall bring ₹ 7,500 towards his capital and the required sum of goodwill.
(ii) The value of stock should be increased by ₹ 3,750.
(iii) Provision for bad and doubtful debts should be provided at 10% of the debtors.
(iv) Furniture should be depreciated by 10%.
(v) The value of Land and Buildings should be enhanced by 20%.
(vi) The value of the goodwill is fixed at ₹ 22,500.
(vii) General Reserve will be transferred to the Partners’ Capital Accounts.
(viii) The new profit-sharing ratio of A, B, C and D shall be 5:5:3:2.
(ix) The outstanding liabilities include ₹ 1,500 due to R has been paid by A. Necessary entry was not made in the books.
You are required to prepare:
(1) Revaluation A/c
(2) Capital Accounts of the Partners.
(3) Balance sheet as at 1st of April, 2024.
Answer: Revaluation Account 
Partners’ Capital Accounts 
Balance Sheet of M/s. A, B, C and D as at April 1, 2024 (after Admission of D) 
Working Note: (a) Calculation of sacrificing ratio
(b) D’s Share of Goodwill = ₹ 22,500 × 2/15 = ₹ 3,000
Sacrifice by Mr. A and Mr. B = ₹ 1,500 each
(c) Cash and Bank Balance:
Balance Sheet as on 31st March, 2024
C died on 30th June, 2024. As per Partnership deed, the following arrangement was to be put into effect:
i. Goodwill of firm was to be valued at 2 years' purchase of average profit of four years to 31st March preceding the death of partner. The profits were as under:
31st March, 2021 ₹ 1,14,000
31st March, 2022 ₹ 1,22,000
31st March, 2023 ₹ 1,19,000
31st March, 2024 ₹ 1,25,000
Goodwill Account will not be opened in the books of accounts, and C was to be credited with his share. The new profit-sharing ratio of A and B will be 5:3.
ii. Profit till the date of death to be ascertained based on average profit of the previous four years, and share of C was to be credited to his capital account.
iii. Assets were to be revalued: Land & Building was appreciated by 15%, Machinery to be depreciated by 5%, Furniture & Fixtures to be revalued at ₹ 1,00,000 and the value of Stock to be taken at ₹ 90,000.
iv. Provision for doubtful debts to be increased by ₹ 1,800.
v. A sum of ₹ 2,40,000 was received from the insurance company against Joint Life Policy.
vi. Amount due to C was paid to the executors.
You are required to prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet as on 30th June, 2024, along with necessary workings.
Answer: Revaluation Account 
Partners’ Capital Accounts
Balance Sheet of M/s ABC as at 30th June,2024 
Working Note: 1. Calculation of goodwill and C’s share of profit
Calculation of Gaining Ratio 
2. Bank A/c
Q 6. X, Y and Z were in a firm sharing profit and loss as 3:2:1. Their Balance Sheet on 31st March, 2024 was as follows: (15 Marks, Sep 2024)
Z retired on the above date on the following terms:
(1) Goodwill of the firm was valued at ₹ 60,000.
(2) Value of patents was to be reduced by 20% and that of machinery to 90%.
(3) Provision for doubtful debts was to be raised to 10%.
(4) Liability on account of Provident fund was only ₹ 6,000.
(5) Liability for workmen's compensation to the extent of ₹ 6,000 is to be created.
(6) Z took over the investment at market value.
(7) Amount due to Z is to be settled on the following basis: 50% on retirement, 50% of the balance within one year and the balance by a bill of exchange (without interest) at 3 months.
You are required to:
(i) Show entries for the treatment of goodwill,
(ii) Prepare Revaluation Account,
(iii) Partner Capital Account, &
(iv) Balance Sheet.
Answer: (i) Entries for the treatment of goodwill
Total goodwill of the firm is ₹ 60,000
Z’s share (1/6 x ₹ 60,000) =₹ 10,000
- X’s Capital A/c Dr. 6,000
Y’s Capital A/c Dr. 4,000
Z’s Capital A/c Dr. 2,000
To Goodwill A/c 12,000
(Being existing goodwill written off) - X’s Capital A/c Dr. 6,000
Y’s Capital A/c Dr. 4,000
To Z’s Capital A/c 10,000
(Being Z’s share of goodwill credited to him and debited to gaining partners in gaining ratio)
(ii) 
(iii) Partners’ Capital Account
(iv) Balance Sheet as on 1stApril, 2024
Working Notes: 1. Gaining ratio of existing partners:
X 3/5-3/6=3/30
Y 2/5-2/6=2/30
*It is assumed that Workmen’s Compensation is treated as liability.
Q 7. P, Q, and R were partners sharing profit & losses in the ratio of 3:2:1. They decided to dissolve the business as on 31st March, 2024 when their Balance Sheet was as follows: (8 Marks, Jun 2024)
The following information is given to you:(i) There was an unrecorded investment which was sold for ₹ 30,000.
(ii) One of the creditors agreed to take over some items of furniture of Book value ₹ 25,000 at ₹ 24,000. The rest of the creditors were paid at a discount of 5%.
(iii) Out of the Debtors ₹ 9,000 proved bad, remaining were fully realized.
(iv) The other assets were realised as under:
Land & Building ₹ 5,25,000
Machinery ₹ 1,70,000
Furniture Remaining taken over by P at ₹ 75,000
Stock ₹ 60,000
(v) Expenses of dissolution amounted to ₹ 18,700.
(vi) There was an outstanding bill for repairs which had to be paid for ₹ 3,500.
You are required to prepare:
(1) Realisation A/c
(2) Cash & Bank A/c
(3) Partner’s Capital A/c in the books of the partnership firm.
Answer: Realisation Account 
Partner’s Capital Accounts
Bank Account
Working Note 1: Payment to Trade Creditors:
Q 8. Anu and Manu are carrying on business in partnership and sharing profits & losses in the ratio of 5:3. The firm’s Balance Sheet as on 31st March, 2024 was as follows: (12 Marks, Jun 2024)
Balance Sheet as on 31st March, 2024
They decided to admit Ranu as a partner with effect from 1st April, 2024 on the following terms:
(i) Ranu will be paid 1/5 share in the future profits and new profit sharing ratio would be 5:3:2.
(ii) Ranu will bring ₹ 1,00,000 as his capital.
(iii) Goodwill of firm is to be valued at 2 years’ purchase of average profit of past 3 years and Ranu will bring his share of goodwill in cash. The profits of past 3 years ending on 31st March were as under:
31st March, 2022 ₹ 87,000
31st March, 2023 ₹ 1,06,000
31st March, 2024 ₹ 1,22,000
(iv) It was also agreed that the partners will not withdraw their share of goodwill nor will the goodwill appear in the books of account.
(v) It was also decided to value the assets:
Building is to be appreciated by ₹ 50,000 and Machinery is to be depreciated by 10%. Furniture is revalued at ₹ 80,000, Investments at ₹ 16,000 and Inventories at ₹ 47,500. Provision for doubtful debts is to be created on debtors @ 5%.
You are required to prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of the reconstituted firm as on 1st April, 2024.
Answer: Revaluation Account 
Partner’s Capital Accounts 
Balance Sheet (after admission of Ranu) as on 1st April, 2024 
Working Notes:
1. Calculation of Goodwill: Average profit = (87,000+1,06,000+1,22,000)/3 = ₹ 1,05,000
Two years’ purchase of average profits= 1,05,000 x 2= ₹ 2,10,000
Goodwill to be brought in by Ranu=₹ 2,10,000 x 2/10=₹ 42,000
2. Calculation of Sacrificing Ratio = Old- New Ratio
Anu = 5/8-5/10 = 5/40
Manu = 3/8-3/10 = 3/40
Goodwill brought in by Ranu shared (at the profit sacrificing ratio) by: 
3. Bank balance after admission of Ranu:
Bank Account 
Q 9. The following is the Balance Sheet of Krish and Bala, sharing profit and loss in the ratio 3:2: (10 Marks, Sep 2024)
On admission of Sobha for 1/6th share in the profits, it was decided that:
(1) Value of land and buildings to be increased by ₹ 5,000.
(2) Value of stock to be increased by ₹ 3,500.
(3) Provision of doubtful debts to be increased by ₹ 1,500.
(4) Liabilities of workmen's compensation reserve were determined to be ₹ 8,000.
(5) Sobha was to bring in further cash of ₹ 25,000 as her capital.
(6) Sobha brought in her share of goodwill ₹ 12,000 in cash.
Prepare the Revaluation Account, the Capital Account and the Balance Sheet of the new firm.
Answer: Revaluation A/c
Balance Sheet of the Firm (after admission of Sobha) 
Working Note: (1) Calculation of Sacrificing Ratio
(2) Bank A/c 
It may be noted that Advertisement expenses are not permitted to be deferred. It must be written off when incurred, as it does not result in the acquisition or creation of an intangible or recognisable asset. That is why it is routed through the partner’s capital account. 68 videos|459 docs|83 tests |
FAQs on Past Year Questions: Partnership and LLP Accounts - Accounting for CA Foundation
| 1. What is the difference between a partnership and a Limited Liability Partnership (LLP)? |  |
| 2. How are profits shared in a partnership? | |
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| 4. What is the significance of a partnership deed? | |
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