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12th Accountancy - Retirement and Death of a Partner Practice Question Paper

Published on: 04/01/2020

Retirement and Death of a Partner

Download Tamil Nadu 12th Standard Accountancy question papers, model tests, one-mark questions, important questions, and public exam papers in PDF format. Free study materials and answer keys for TN State Board students.

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Questions:

Generic 2

4 x 2 = 8

Raji, Mohana, Sonu were partners in a firm sharing profits in the ration of 4;3;2 Mohana retired. Her share was taken over equally by Raji and Sonu. In which ratio will be profit or loss on revaluation of assets and liabilities on the retirement of Mohana be transferred to the capital accounts of the partners.

Mani, Gani and Soni are partners sharing the profits and losses in the ratio of 4:5:6. Mani retires from the firm. Calculate the new profit sharing ratio and gaining ratio.

Suresh, Senthamarai and Raj were partners in a firm sharing profits and losses in the ratio of 3:2:1. Suresh retired from partnership. The goodwill of the firm on the date of retirement was valued at Rs. 36,000. Pass necessary journal entries for goodwill on the assumption that the fluctuating capital system is followed.

Mary, Meena and Mariam are partners of a firm sharing profits and losses equally. Mary retired from the partnership on 1.1.2019. On that date, their balance sheet showed accumulated loss of Rs. 75,000 on the asset side of the balance sheet. Give the journal entry to distribute the accumulated loss.

Generic 5

4 x 5 = 20

A, B, and C are partners in affirm sharing profits and losses equally. Their balance sheet as on 31^st 1March 2018 is as follows

Liabilities	Rs	Rs	Assets	Rs	Rs
Capital accounts			Office equipment		70,000
A	80,000		Machinery		1,40,00
B	60,000		Sundry debtors	52,000
C	1,00,000	2,40,000	Less: Provision for doubtful debts	2,000	50,000
Sundry creditors		1,20,000
			Stock		60,000
			Cash at bank		40,000

		3,60,000			3,60,000

'C' Retired on 31st March 2018 Subject to the following conditions
(i) Machinery is valued at Rs.1,30,000
(ii) Value of office equipment is brought down by Rs. 2,000
(iii) Provision for doubtful debts should be increased to Rs.3,000
(iv) Investment of Rs..25,000 not recorded in the books is to be recorded now. Pass necessary journal entries and prepare revaluation account and capital account of partners

Mukil, Mohit and Sonu are partners sharing profit in the ratio 3:2: 1. Mukil retires from the partnership.
In order to settle his claim, the following revaluation of assets and liabilities was agreed upon:
(i) The value of Machinery is increased by Rs. 25,000.
(ii) The value of Investment-is-increased by Rs 2,000.
(ill) A Provision for outstanding bill standing in the books at Rs.1,000 is now not required.
(iv) The value of Land and Building is decreased by Rs.12,000.
Give journal entries and prepare Revaluation account

Distinguish between sacrificing ratio and gaining ratio.

Charles, Muthu and Sekar are partners, sharing profits in the ratio of 3 : 4 : 2. Their balance sheet as on 31^st December, 2018 is as under:

Liabilities	Rs.	Rs.	Asset	Rs.
Capital accounts:			Furniture	20,000
Charles	30,000		Stock	40,000
Muthu	40,000		Debtors	30,000
Sekar	20,000	90,000	Cash at bank	42,000
Workmen compensation fund		27,000	Profit and loss A/c (loss)	18,000
Sundry creditors		33,000
		1,50,000		1,50,000

On 1.1.2019, Charles retired from the partnership firm on the following arrangements.
(i) Stock to be appreciated by 10%
(ii) Furniture to be depreciated by 5%
(iii) To provide Rs. 1,000 for bad debts
(iv) There is an outstanding repairs of Rs. 11,000 not yet recorded
(v) The final amount due to Charles was paid by cheque
Prepare revaluation account, partners’ capital account and the balance sheet of the firm after retirement.

Multiple Choice Question

6 x 1 = 6

When a partner withdraws his capital from the partnership firm, it is called _______of a partner

(a)

Admission

(b)

Death

(c)

Retirement

(d)

All of these

10.

Hari, Roy and Prasad are partners in the ratio of 3:5:1 respectively. Roy wants to retire. His share is being purchased by Prasad. What would be the new ratio of Hari and Prasad respectively?

(a)

1:2

(b)

2:1

(c)

3:5

(d)

Equal

11.

An account operated to ascertain the loss or gain at the death of a partner is called ___________

(a)

Realization A/c

(b)

Revaluation A/c

(c)

Executors A/c

(d)

Decreased partner’s A/c

12.

O, P, and Q are partners sharing the profits in the ratio of 3:2: 1. If P retires the new profit ratio for O and Q will b ______________

(a)

3:2

(b)

3:1

(c)

2:1

(d)

1: 3

13.

Profits and losses of previous years which are not distributed to the partners are known as ___________

(a)

Accumulated profit and losses

(b)

general reserve

(c)

Reserve fund

(d)

workmen compensation fund

14.

If the final amount due to a retiring partner is not paid immediately, it is transferred to

(a)

Bank A/c

(b)

Retiring partner’s capital A/c

(c)

Retiring partner’s loan A/c

(d)

Other partners’ capital A/c

Generic 3

1 x 3 = 3

15.

Janani, Janaki and Jamuna are partners sharing profits and losses in the ratio of 3:3:1 respectively. Janaki died on 31^st December, 2017. Final amount due to her showed a credit balance of Rs. 1,40,000. Pass journal entries if,
(a) The amount due is paid off immediately.
(b) The amount due is not paid immediately.
(c) Rs. 75, 000 is paid and the balance in future.

Odd one out

1 x 2 = 2

16.

(a) Revaluation of assets and liabilities
(b) Adjustment for goodwill
(c) Distribution of accumulated profits, reserves and losses
(d) Separate legal entry

Assertion and reason

1 x 2 = 2

17.

Assertion : Any amount kept aside as 5. Reserve, General reserve, Reserve fund, contingency reserve etc.,
Reason : At the time of retirement of a partner, should be transferred to the capital accounts of all partners including retiring partner in the old profit sharing ratio.
(a) Both (A) and (R) are true and (R) is the correct explanation of (A)
(b) Both (A) and (R) are true and (R) is not the correct explanation of (A)
(c) (A) is true, but (R) is false
(d) (A) is false, but (R) is false

One or Two Words / Correct Statement

1 x 1 = 1

18.

(a) At the time of retirement of a partner, the partner the remaining partners acquire some portion of the retiring partner's share of profit.
(b) This necessitates the calculation of new profit sharing ratio of the remaining New partners.
(c) where the partnership at will by giving notice in writing to all the old partners of his intention to retire in company.
(d) Certain adjustments have to be made in the books to ascertain the amount due to him from the Company.
(a) (i) is correct
(b) (ii) is correct
(c) (i) and (ii) are correct
(d) (i), (ii) and (iii) are corrrect

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Answers Key:

Generic 2

4 x 2 = 8

The profit or loss on revaluation of assets and liabilities on the retirement of Mohana will be transferred to the capital accounts of the partners in their old ratio i.e. 4:3:2.

Since, New profit sharing ratio, share gained and the proportion of share gained is not given, the new share is calculated by assuming that the share gained in the proportion of old ratio. Therefore the new profit sharing ratio and the gaining ratio between the continuing partners, Gani and Soni is their old profit sharing ratio, that is 5 : 6.

As the new profit sharing ratio and gain made by the continuing partners is not mentioned, it is assumed that they gain in their old profit sharing ratio of 2:1. Therefore, gaining ratio is 2:1.
Suresh’s share of goodwill \(=36000\times\frac{3}{6}=Rs.18000\)

Journal Entries
Particulars		Debit Rs.	Credit Rs.
Senthamari’s capital A/c (18,000 × 2/3)	Dr.	12,000
Raj’s capital A/c (18,000 × 1/3)	Dr.	6,000
To Suresh’s capital A/c			18,000
(Suresh’s share of goodwill adjusted)

Journal entry
Date	Particulars		Debit Rs.	Credit RS.
2019 January 1	Mary’s capital A/c	Dr.	25,000
	Meena’s capital A/c	Dr.	25,000
	Mariam’s capital A/c	Dr.	25,000
	To Profit and loss a/c			75,000
	(Accumulated loss transferred to all partners’ capital account in the old profit sharing ratio)

Generic 5

4 x 5 = 20

Journal entries
Date	Particulars		Depit Rs	Credit Rs
2018 Dec.31	Revaluation A/c	Dr	13,000
	To Machinery A/c			10,000
	To Office equipment A/c			2,000
	To Provision for doubtful debts A/c			1,000
	(Depreciation on machinery and furniture and
	provision made for doubtful debts adjusted)
2018 Dec.31	Investments A/c	Dr	25,000
	To Revaluation A/c			25,000
	(unrecorded investment brought into accounts)
2018 Dec.31	Revaluation A/c	Dr	12,000
	To A's capital A/c			4,000
	To B's capital A/c			4,000
	To C's cpital A/c			4,000
	(profit on revaluation transferred to capital accounts)

Dr Revaluation Account Cr
Particulars	Rs	Rs	Particulars	Rs
To Machinery A/c		10,000	By Investments A/c	25,000
To office equipment /c		2,000
provision for doubtful debts		1,000
To profit on revaluation transferred to
A's capital A/c (12,000 X1/3)	4,000
B's capital A/c (12,000 X1/3)	4,000
C's capital A/c (12,000 X1/3)	4,000	12,000
		25,000		25,000

Dr Capital Account Cr
Particulars	A Rs	B Rs	C Rs	Particulars	A Rs	B Rs	C Rs
To Balance c/d	84,000	64,000		By Balance b/d	80,000	60,000	1,00,000
To C's loan Ale			1,04,000	By Revaluation A/c	4,000	4,000	4,000

	84,000	64,000	1,04,000		84,000	64,000	1,04,000
				By Balanced b/d	84,000	64,000

Journal entries
Particulars		Depit Rs	Credit Rs
Machinery A/c	Dr	25,000
Investments A/c	Dr	2,000
Provision for outstanding bill A/c	Dr	1,000
To Revaluation A/c			28,000
(Increase in value of Assets i.e., Machinery and investment and reduction in provision)
Revaluation A/c	Dr	12,000
To Land and Building A/c			12,000
(Decrease in value of assets)
Revaluation A/c	Dr	16,000
To Mukil's capital A/c			8,000
To Mohit's capital A/c			5,333
To Sonus capital A/c			2,667
(Profit on revaluation credited to all partners capital Ale in old profit sharing ratio)

Dr Revaluation Account Cr
Particulars	Rs	Particulars	Rs
Land and Building	12,000	Machinery	25,000
Profit transferred to		Investments	2,000
Mukil's capital 8,000
Mohit's capital 5,333
Sonu's capital 2,667	16,000
	28,000		28,000

Basic Sacrificing ratio Gaining ratio 1. Meaning It is the proportion of the profit which is sacrificed by the old partners in favour of a new partner It is the proportion of the profit which is gained by the continuing partners from the retiring partner 2. Purpose It is calculated to determine the amount to be adjusted towards goodwill for the sacrificing partners It is calculated to determine the amount to be adjusted towards goodwill for the gaining partners 3. Method of Calculation It is the difference between the old ratio and the new ratio Sacrificing ratio = Old profit sharing ratio - New profit sharing ratio It is the difference between the new ratio and the old ratio Gaining ratio = New profit sharing ratio - Old profit sharing ratio 4. Time of calculation It is calculated at the time of admission of a new partner It is calculated at the time of retirement of a partner

Dr. Revaluation Account Cr.
Particulars	Rs.	Particulars		Rs.
To Furniture A/c	1,000	By Stock A/c		4,000
To Provision for bad debts A/c	1,000	By Loss on revaluation transferred to
To Outstanding repairs	11,000	Charles capital A/c (3/9)	3,000
		Muthu’s capital A/c (4/9)	4,000
		Sekar’s capital A/c (2/9)	2,000	9,000
	13,000			13,000

Dr. Capital Account Cr.
Particulars	Charles Rs.	Muthu Rs.	Sekar Rs.	Particulars	Charles Rs.	Muthu Rs.	Sekar Rs.
To Profit and loss A/c	6,000	8,000	4,000	By Balance b/d	30,000	40,000	20,000
To Revaluation A/c (loss	3,000	4,000	2,000	By Workmen’s compensation fund	9,000	12,000	6,000
To Bank	30,000	-	-
		40,000	20,000
	39,000	52,000	26,000		39,000	52,000	26,000
				By Balance b/d	-	40,000	20,000

Balance Sheet as on 1st January 2019
Liabilities	Rs.	Rs.	Asset	Rs.	Rs.
Capital accounts:			Furniture	20,000
Muthu	40,000		Less: Depreciation	1,000	19,000
Sekar	20,000	60,000	Stock	40,000
Sundry creditors		33,000	Add: Appreciation	4,000	44,000
Outstanding repairs		11,000	Debtors	30,000
			Less: Provision for bad debts	1,000	29,000
			Cash at bank	42,000
			Less: Amount paid to Charles	30,000
		1,04,000			1,04,000

Multiple Choice Question

6 x 1 = 6

10.

(a)
1:2

11.

(b)
Revaluation A/c

12.

(b)
3:1

13.

(a)
Accumulated profit and losses

14.

Generic 3

1 x 3 = 3

15.

Journal entries
Date	Particular		Debit Rs	Credit Rs
31st	(a)Janaki's Executor's A/c		1,40,000
Dec 2017	To BankA/c			1,40,000
	(Amount due paid immediately)
31st	(b) Janaki's Executor's A/c	Dr	1,40,000
Dec 2017	To Janakis Executor's loan A/c			1,40,000
	(Amount due transferred to loan account)
31st	(c) Janaki's Executor's A/c	Dr
Dec 2017	To Bank A/c		1,40,000	75,000
	To Janaki's Executor's loan A/c			65,000
	(Rs. 75,000 paid and the balance transferred to loan account)

Odd one out

1 x 2 = 2

16.

Separate legal entry
Reason : Company has a separate legal entity which is separate and distinct from its members.Other three are necessary at the time of retirement of a partner.

Assertion and reason

1 x 2 = 2

17.

Both (A) and (R) are true and (R) is the correct explanation of (A)

One or Two Words / Correct Statement

1 x 1 = 1

18.