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PRACTICE QUESTION PAPER



1. Why is it necessary to revalue assets or liabilities of a firm at the time of admission of a partner?


2. State any two reasons for the preparation of ‘Revaluation Account’ at the time of admission of a partner

3. Apurva, Dimple, Komal and Saloni are partners in a firm sharing profits and losses in the ratio of 2:2:1:1. Dimple and Komal decided to retire from the firm. The goodwill of the firm was valued at Rs. 9,00,000. Apurva and Saloni
decided to share future profits and losses in the ratio of 3:2. Pass necessary journal entry for the treatment of goodwill.

4. Ram, Rahim and Robert were partners sharing profits in 2:3:1 ratio respectively. Due to ill health Robert died on 30 th September, 2017. Balance Sheet as at 31.03.2017

LIABILITIES Capital: Ram Rahim Robert Creditors Workmen’s Compensation Reserve Provision for doubtful debts

RS 1,00,000 2,00,000 3,00,000 3,60,000 20,000 10,000 9,90,000

ASSETS Cash Bank Stock Debtors Investment Land

RS 14,000 2,96,000 80,000 3,00,000 50,000 2,50,000 9,90,000

On the date of Rober’s death i.e., 30 th September, 2017, the following was agreed upon:
a. Goodwill is to be valued at two years’ purchase of average profits of last three completed years i.e.,2016-17- Rs.
1,35,000; 2015-16 -Rs. 90,000 and 2014-15-Rs. 45,000.
b. Robert’s share of profit till the date of his death will be calculated the basis of average profits of last three years.
c. Land was overvalued by Rs. 25,000 and stock overvalued by Rs. 8,000.
d. Provision for doubtful debts is to made at 5% on debtors.
e. Claim for Workmen Compensation Reserve was estimated at Rs. 5,000.
Prepare Robert’s Capital account to be presented to his executors.

5. Pass necessary Journal entries for the following transactions, at the time of dissolution of the firm:
a. Realisation Expenses Rs. 3,000 paid.
b. Realisation expenses paid by the firm Rs. 2,000. Mr. X one of the partners has to bear these expenses.
c. Y, one of the partners, took over a machine for Rs. 20,000.
d. Z, one of the partners agreed to take over the creditor of Rs. 30,000 for Rs. 20,000.
e. X, one of the partners has given loan to the firm of Rs. 10,000. It was paid back to him at the time of dissolution.
f. Y took over part of the stock at Rs. 6,400 (being 20% less than the book value)

6. A, B and C were partners in a firm sharing profits in the ratio of 3:2:1. On 31.03. 2017 their Balance Sheet was as
follows:

lIABILITIES	RS	ASSESTS	RS
Creditors General Reserve Capitals:  A B C	84,000 21,000 60,000 40,000 20,000	Bank Debtors Stock Investments Furniture Fittings Machinery	17,000 23,000 1,10,000 30,000 10,000 35,000

a. The new profit sharing ratio between A, B, C and D will be 2:2:1:1.On the above date D was admitted as a new partner and it was decided that:
b. Goodwill of the firm was valued at Rs. 90,000 and D brought his share of goodwill premium in cash.
c. The market value of investments was Rs. 24,000
d. Machinery will be reduced to Rs. 29,000
e. A creditor of Rs. 3,000 was not likely to claim the amount and hence to be written-off.
f. D will bring proportionate capital so as to give him 1/6th share in the profits of the firm.

7. Mohan and Mahesh were partners in a firm sharing profits in the ratio of 3:2. On 1 st April, 2017, they admitted
Nusrat as a partner in the firm. The Balance Sheet of Mohan and Mahesh on that date was as under:

BALANCE SHEET OF MOHAN AND MAHESH

AS AT 1 ST APRIL, 2017

lIABILITIES	RS	ASSESTS	RS
Creditors Workmen Compensation Reserve General Reserve Capital A/cs: Mohan 1,00,000 Mahesh 80,000	2,10,000 2,50,000 1,60,000 1,80,000 ----------------------------- 8,00,000	Cash at Bank Debtors Stock Machinery Building	1,40,000 1,60,000 1,20,000 1,00,000 2,80,000 ----------------------------- 8,00,000

It was agreed that:
a. The value of Building and Stock be appreciated to Rs. 3,80,000 and Rs. 1,60,000 respectively.
b. The Liabilities of Workmen Compensation were determined at Rs. 2,30,000.
c. Nusrat brought in her share of goodwill Rs. 1,00,000 in cash.
d. Nusrat was to bring further cash as would make her capital equal to 20% of the combined capital of Mohan and
Mahesh after above revaluation and adjustments are carried out.
e. The future profit-sharing proportions will be Mohan 2/5 th , Mahesh 2/5 th and Nusrat 1/5 th .
Pass Journal entries for the above arrangements and give Balance Sheet of the new firm. Also, show clearly the
calculation of Capital brought by Nusrat.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the reconstituted firm.

8. Pihu, Geeta and Nita are partners in a firm, sharing profits and losses in the ratio of 3:2:1. On 31 st March, 2017, their
Balance Sheet was as under:

lIABILITIES	RS	ASSESTS	RS
Sundry Creditors General Reserve Capital A/cs Pihu Geeta Nita	15,000 9,000 79,000 70,000 61,000 --------------------- 2,34,000	Cash at Bank Sundry Debtors 25,000 Less: Provision 1,300 Stock Plant and Machinery Land and Building	16,000 23,700 14,300 60,000 1,20,000 ------------------------- 2,34,000

Nita retires on 1 st April, 2017, subject to the following adjustments:
a. Land and Building to be reduced by 10%
b. Goodwill to be valued at Rs. 54,000
c. Provision for Doubtful Debts to be raised to 10% of the debtors, the excess provision being created from General
Reserve. The balance of General Reserve to be adjusted amongst the partners.
d. Creditors of Rs. 3,000 were paid by Pihu for which she is not to be reimbursed.

e. The continuing partners to share profits and losses in future in the ratio of 5:4.
f. Nita to be paid Rs. 29,800 on retirement and the remaining amount in two equal annual instalments together with
interest @ 10% p.a. on the outstanding balance. The first instalment to be paid on 31 st March, 2018.
You are required to prepare:
a. Revaluation Account.
b. Partners’ Capital Accounts.
c. Nita’s Loan Account till it is finally closed.

9. Kushal, Kumar and Kavita were partners in a firm sharing profits in the ratio of 3:1:1. On 1 st April, 2017, their
Balance Sheet was as follows:

BALANCE SHEET OF KUSHAL, KUMAR AND KAVITA

AS AT 1 ST APRIL, 2017

lIABILITIES	RS	ASSESTS	RS
Creditors Bills payable General Reserve Capital A/cs Kushal 3,00,000 Kumar 2,80,000 Kavita 3,00,000	1,20,000 1,80,000 1,40,000 8,80,000 ------------------------- 13,20,000	Cash Debtors 2,00,000 Less Provision 10,000 Stock Furniture Building Land Advertisement Expenditure	70,000 1,90,000 2,20,000 1,20,000 3,00,000 4,00,000 20,000 ------------------- 13,20,000

On the above date Kavita retired and the following was agreed:
a. Goodwill of the firm was valued at Rs. 40,000 and Kavita’s share of the same be adjusted in the accounts of
Kushal and Kumar who decide to share future profits in the proportion of 3/4 th and 1/4 th respectively.
b. Land was to be appreciated by 30% and building was to be depreciated by Rs. 1,00,000.
c. Value of furniture was to be reduced by Rs. 20,000
d. Provision for Doubtful Debts is to be increased to Rs. 15,000.
e. 10% of the amount payable to Kavita was paid in cash and the balance was transferred to her Loan Account.
f. Capitals of Kushal and Kumar will be in proportion to their new profit sharing ratio. The surplus/deficit, if any, in
their capital accounts will be adjusted through current accounts.
Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of Kushal and Kumar after Kavita’s
retirement.

10. Prashant and Rajesh were partners in a firm sharing profits in the ratio of 3:2. In spite of repeated reminders by the
authorities, they kept dumping hazardous material into a nearby river. The court ordered for the dissolution of their
partnership firm on 31 st March2015. Prashant was deputed to realize the assets and to pay the liabilities. He was paid
Rs. 1,000 as commission for his services. The financial position of the firm as on 31 st March was as follows:
Liabilities Rs. Assets Rs.

lIABILITIES	RS	ASSESTS	RS
Creditors Mrs. Prashanth’s Loan Rajesh’s Loan Investment Fluctuation Fund Capitals: Prashant Rajesh	80,000 40,000 24,000 8,000 42,000 42,000 ------------------------- 2,36,000	Building Investment Debtors 34,000 Less: Provision 4,000 Bills Receivable Cash Profit and Loss A/c Goodwill	1,20,000 30,600 30,000 37,400 6,000 8,000 4,000 ----------------- 2,36,000

Following was agreed upon:
a. Prashant agreed to pay off his wife’s loan.
b. Debtors realized Rs. 24,000
c. Rajesh took away all investments at Rs. 27,000
d. Buildings realized Rs. 1,52,000
e. Creditors were payable after 2 months. They were paid immediately at 10% discount
f. Bills Receivable were settled at a loss of Rs. 1,400
g. Realisation expenses amounted to Rs. 2,500

Prepare Realisation Account, Partners’ Capital Account and Cash Account to close the books of the firm.