Chapter 1.

Fundamental of Partnership
1. Which of the following items is not dealt through Profit and Loss Appropriation Account?
(a) Interest on Partner’s Loan (c) Interest on Partner’s Capital
(b) Partner’s Salary (d) Partner’s Commission
2. One of the partners (Mr.Dev.) in a partnership firm has withdrawn 4,500 at the end of each
quarter. Interest on his drawing is to be calculated at the rate of 6% per annum. Interest on
his drawings will be:
(a) Rs810 (b)Rs 400 (c)Rs 405 (d)Rs 304
3. The written agreement of partnership in most commonly referred to as:
(a) Agreement (c) Partnership contract
(b) Partnership deed (d) Partnership Act
4. In the absence of Partnership Deed, interest on partner’s loan is calculated at:
(a) 8% (b) 6% (c) 5% (d) 7%
5. If a partner withdraws 10,000 in the beginning of every moth and as per the partnership deed
interest on drawings is to be charged @ 10% p.a. interest on his drawings will be:
(a) Rs6,500 (b) Rs12,000 (c) Rs6,000 (d)Rs 7,500
6. Aman and Bobby are partners with a profit-sharing ratio of 2 : 1 and capitals of 3,00,000 and
2,00,000 respec tively. They are allowed 6% p.a. interest on their capitals and are charged 10%
p.a. interest on their drawings. Their drawings during the year were Aman 60,000 and Bobby
40,000. Bobby’s share of net profit and loss appropriation account amounted to 40,000. Net
Profit of the firm before any approptiations was:
(a) Rs1,22,000 (b)Rs 1,13,000 (c)Rs 1,17,000 (d)Rs 1,45,000
7. Under Fluctuaing Method of Capital, what is the treatment of “Interest on Captital”?
(a) Credited to capital account (c) No treatment or adjustment needed
(b) Debited to capital account (d) Credited to current account
8. A and B have capitals of 2,00,000 and 1,00,000 respectively. Interest on capital is to be
allowed as per partnership deed @6% per annum. Their profit-sharing ratio is 2 : 1. The profit
for the year was 15,000. Actual distribution of profit and loss with be:
(a) A Rs12,000 and B Rs6,000 (c) A Rs12,000 and B Rs3,000
(b) Loss to A Rs1,875 and B Rs1,125 (d) A Rs10,000 and B Rs5,000
9. X , Y and Z are Partners in a firm. At the time of division of profit for the year, There was
dispute between the partners. Profit before interest on partner’s capital was 6,000 and Y
determined interest @24% p.a. on his loan of 80,000. There was no agreement on this point.
Calculate the amount payable to X, Y and Z respectively:
(a) Rs2,000 to each partner.
(b) Loss of Rs 4,400 for X and Z; Y will take Rs 14,800
(c) Rs400 for X, Rs5,200 for Y and Rs400 for Z.
(d) None of the above
10. Z is a partner in a firm. He withdrew regularly 2,000 every month for the six months ending
31st March, 2019. If interest on drawings is charged @8% p.a. the interest charged will be:
(a) Rs480 (b) Rs280 (c) Rs200 (d) Rs240
11. A,B and C sharing profits in the ratio of 2 : 2 : 1 have fixed capitals of 3,00,000, 2,00,000 and
1,00,000 respectively. After closing the accounts for the year ending 31 st March 2019 , it was
discovered that interest on capitals was provided @12% instead of 10% p.a. In the adjusting
entry:
(a) Cr. A Rs1,200; Dr. B Rs800 and Dr. C Rs400 (c) Cr. A Rs800; Cr. B Rs400 and Dr. C Rs1,200
(b) Dr. A Rs1,200; Cr. B Rs800 and Cr. C Rs400 (d) Dr. A Rs800; Dr. B Rs400 and Cr. C Rs1,200
12. A partner withdraw 8,000 each on 1st April and 1st October 2021. Interest on his drawings @6%
p.a. on 31st March will be:
(a) Rs480 (b) Rs 720 (c) Rs240 (d) Rs960
13. Ram and Shyam are partners in the ratio of 3 : 2. Before profit destribution, ‘Ram is entitled to
5% commission of the net profit (after charging such commission). Before charging
commission, firm’s profit was 42,000. Shyam’s share in profit will be:
(a) Rs16,000 (b) Rs24,000 (c) Rs26,000 (d) Rs16,400
14. (a) X Rs16,000; Y Rs8,000 (c) X Rs14,400; Y Rs9,600
(b) A Rs8,000; Y Rs4,000 (d) No Interest will be allowed
15. According to Profit and Loss Account, the net profit for the year is 1,50,000. The total interest
on partner’s capital is 18,000 and interest on partner’s drawings Is 2,000. The Divisible profit
as per profit and Loss Appropriation Account will be:
(a) Rs1,66,000 (b) Rs1,70,000 (c) Rs1,30,000 (d) Rs 1,34,000
16. Following are the essential elements of a partnership firm except:
(a) At least two persons (c) Equal share of profits and losses
(b) There is an agreement between all partners (d) Partnership agreement is for some business.
17. Vinod and Anuj are partners sharing profits equally. Vinod gets a commission on sale @ 5%.
Sales were 6,00,000 during the year. Commission of Vinod is to be shown in:
(a) Profit and Loss Account (c) Profit and Loss Appropriation Account
(b) Trading Account (d) In his capital account only
18. Under what circumstance, a partner can get exemption from sharing losses in a firm?
(a) If he is a senior citizen (c) If he is a retiring partner
(b) If he is a minor (d) All of these
19. Need of Profit and Loss Adjustment account is for:
(a) Appropriation of profits (c) Rectification of errors or omissions
(b) Charge against profits (d) None of these
20. A partner withdrew 4,000 per month from 1st July, 2016, on beginning of every month.
Accounts are closed at 31st March, 2017. Calculate interest on drawings while rate of interest
in 10% per annum.
(a) Rs1,600 (b) Rs1,800 (c) Rs1,500 (d) Rs2,200
21. In a firm, 10% of net profit after deducting all adjustments, including reserve is transferred to
general reserve. The net profit after all adjustments but before transfer to general reserve is
 44,000. Calculate the amount wich is to be transferred to reserve.
(a) Rs2,500 (b) Rs4,000 (c) Rs 4,400 (d) Rs2,200
22. Virat and Anushka are partners in a firm sharing profits and losses in 2 : 1 ratio. Their capital
balance were 10,00,000 and 8,00,000 respectively. The firm made profits during the year
amounting to 3,45,000. Both partners are allowed salary of 2,500 per month. Interest on
capital is allowed @ 5% on capital balance.
(a) Virat = Rs12,10,000, Anushka = Rs9,35,000 (c) Virat = Rs13,10,000, Anushka = Rs9,85,000
(b) Virat = Rs12,35,000, Anushka = Rs9,10,000 (d) None of these
23. Net profit before above adjustments are 40,000. Calculate profits to be distributed between
partners.
(a) Rs34,200 (b) Rs32,700 (c) Rs47,300 (d) Rs29,700
24. ‘A’ and ‘B’ were partners in a film. They share profits in 2 : 3 ratio. They close their accounts
on 31st December every year. ‘A’ withdrew a fixed sum of 2,000 at the beginning of every
month starting form 1st July , 2017. You have to calculate interest on drawings while rate of
interest is 12%.
(a) Rs420 (b)Rs 720 (c) Rs440 (d) Rs580
25. The capital balance of a partner at the end of the year (after adjusting for his drawings 3,500
and his share in the profit 2,300) is 12,000. Interest on capital is payable to him at 5% per
annum. What will be the amount of interest on capital?
(a) Rs660 (b) Rs600 (c) Rs540 (d) None of these
26. In case of Partnership, the act of any partner is:
(a) Binding on all partners
(b) Binding on that partner only
(c) Binding on all partners except that particular partner
(d) None of the above
27. Which of the following statement is true?
(a) A minor cannot be admitted as a partner
(b) A minor can be admitted as a partner, only into the benefits of the partnership
(c) A minor can be admitted as a partner but his rights and liabilities are same of adult partner
(d) None of the above
28. Ostensible partners are those who:
(a) do not contribute any capital but get some share of profit for lending their name to the
business
(b) contribute very less capital but get equal profit
(c) do not contribute any capital and without having any enterest in the business, lend their
name to the business
(d) contribute maximum capital of the business
29. Sleeping partners are those who:
(a) take active part in the conduct of the business but provide no capital. However, salary is
paid of them.
(b) do not take any part in the conduct of the business but provide capital and share profits and
losses in the agreed ratio.
 (c) take active part in the conduct of the business but provide no capital. However, share profits
and losses in the agreed ratio.
(d) do not take any part in the conduct of the business and contribute no capital. However,
share profits and losses in the agreed ratio.
30. What of the following is not incorporated in the Partnership Act?
(a) Profit and loss are to be shared equally
(b) no interest is to be charged on capital
(c) all loans are to be charged interest @ 6% p.a.
(d) all drawings are to be charges interest.
31. What is not the essential feature of the partnership firm?
(a) Two or more persons (c) Agreement
(b) Settlement of Disputes (d) Lawful Business
32. Which is not the clause of the Partnership Deed?
(a) Business can be carried on by all or any of the partner’s acting for all
(b) Commencement of business
(c) Rights & Duties of Partner
(d) None of the above
33. Oswal & publisher were partner’s without any deed where Publisher invested the tatal capital
and Oswal had the complete hold on the business as Publisher was the sleeping partner, but
as Publisher invested complete capital demanded to share the profits in the Ratio of 5 : 1 and
Oswal object’s to this.
(a) Oswal’s objection is correct.
(b) Publisher’s demand is correct.
(c) Both (a) and (b) are wrong.
(d) As investment is of publisher he should be given interest on capital.
34. The Net profits of Arpit and Amit were 20,000. Gaurav the manager was to be given the
commission of 6,000; the distribution of profits will be done as:
(a) Rs10,000 to each (c) Rs13,000 to each
(b) Rs7,000 to each (d) None of these
35. Karthik and Ajay are partners in a firm. Karthik is to get commission of 10% of net profit
before charging any commission. Ajay is to get a commission of 10% on net profit after
charging all commissions. Net Profit for the year ended 31st March, 2021 was 55,000. What will
be amount of Profit to be distributed to each?b
(a) Rs 5,500 to Karthik & 4,500 to Ajay (c) Rs22,500
(b) Rs27,500 each (d) None of these
36. Arjun and Karan are partners from 1st April, 2020, without a Partnership Deed and they
introduced capitals of 35,000 and 20,000 respectively. On 1st October, 2020, Arjun advanced
loan of 8,000 to the firm without any agreement as to interest. The Profit and Loss Account for
the year ended 31st March, 2021 shows a profit of 15,000 but the partners cannot agree on
payment of interest and on the basis of division of profits. What amount of profit will be
distributed between them.
 (a)Rs 7,500 to each (c) Rs 7,260 to each
(b)Rs7,380 to each (d) None of these
37. A, B, C, and D are partners in a firm sharing profits as 4 : 3 : 2 : 1 respectively. It earned a profit
of 1,80,000 for the year ended 31st March, 2021. As per the Partnership Deed, they are to
charge a commission @ 20% of the profit after charging such commission, which they will
share as 2 : 3 : 2 : 3. What will be the amount of commission to be paid to the partners.
(a) Rs7,500 each (c) Rs12,000; Rs9,000; Rs6,000; Rs3,000
(b) Rs6,000; Rs9,000; Rs6,000; Rs9,000 (d) None of these
38. Prateek and Prakhar were two partners, they drew for their personal use Rs1,20,000 and
Rs80,000. Interest is chargeable @ 6% p.a. on the drawings. What is the amount of interest
chargeable from each partner?
(a) Rs7,200 to Prateek; Rs4,800 to Prakhar (c) Rs3,900 to Prateek; Rs2,600 to Prakhar
(b) Rs3,600 to Prateek; Rs2,400 to Prakhar (d) Rs4,500 to Prateek; Rs3,000 to Prakhar
39. Vijay and Jay are partners sharing profits equally. Vijay drew regularly Rs4,000 at the end of
every month for six months ended 30th September, 2020. Calculate Interest on drawings @ 5%
p.a. for a period of six months.
(a) Rs250 (b) Rs1,200
(c) Rs41.67 (d) None of these
40. Anil and Sunil are partners sharing Profit and Loss in the ratio of 3 : 2 having Capital Account
balance of Rs50,000 and Rs40,000 on 1st April, 2020. On 1st July, 2020, Anil introduced
Rs10,000 as his additional capital where-as Sunil introduced only Rs1,000. Interest on capital is
allowed to partners @ 10% p.a. Interest on capital for the financial year ended 31 st March,
2021 will be:
(a) Rs5,750 for Anil and Rs4,075 for Sunil (c) Rs750 for Anil and Rs75 for Sunil
(b) Rs5,000 for Anil and Rs4,000 for Sunil (d) None of these
41. Adarsh and Abhay contribute Rs20,000 and Rs10,000 respectively towards capital. They
decided to allow interest on capital @ 6% p.a. Their respective share of profits is 2 : 3 and the
net profit for the year is Rs1,500. Show distribution of profits:
(a) Rs1,200 to Adarsh; and Rs600 to Abhay (c) No interest will be provided
(b) Rs1,000 to Adarsh; and Rs500 to Abhay (d) Rs600 to Adarsh; and Rs900 to Abhay
st
42. Net profit for the year ended 31 March, 2019 is Rs68,460. What amount of profit will be
credited to Profit and Loss Appropriation A/c.
(a) Rs68,460 (b) Rs66,660 (c) Rs56,430 (d) Rs60,390
43. Akshay, Dev and Manish are partners in a firm sharing profits in the ratio of 4 : 2 : 1. It is
provided that Manish share in profits would not be less than Rs3,750. Profits for the year
ended 31st March, 2021 was Rs15,750. What amount of Deficiency will be borne by Akshay.
(a) Rs1,500 (c) Rs750
(b) Rs500 (d) None of these
44. Shubham, Smarth and Jay are partners sharing profits in the ratio of 6 : 4 : 1. Jay is guaranteed
a minimum profit of Rs20,000. The firm incurred a loss of Rs2,20,000 for the year ended 31 st
March, 2021. What amount of deficiency will be borne by Shubham and Smarth.
 (a) Rs10,000 each (c) Rs24,000 by Shubham & Rs16,000 by Samarth
(b) Rs20,000 each (d) Rs12,000 by Shubham & Rs8,000 by Smarth
45. Shivank, Tanveer and Karthik are partners in a firm sharing profits and losses in the ratio of
12 : 8 : 5. Partner karthik is guaranteed a minimum profit of Rs5,000 p.a. by the firm. The
Losses for the year were Rs20,000. What will be the amount of deficiency for Karthik.
(a) Rs9,000 (b) Rs1,000 (d) Rs5,000 (d) Rs4,000
46. If the guarantee is given to the partner by some partners, deficiency on such will be born by:
(a) Partnership firm (c) Partners who had given the guarantee
(b) All of the other partners (d) None of these
47. Which of the following items will not be shown in the Profit & Loss Appropriation account?
(a) Interest on Loan (c) Interest on Drawings

(b) Interest on capital (d) General Reserve

48. If the Partners are maintaining the capital account on Fixed basis, partner’s capital account
will have:
(a) Credit balance (c) Credit or Debit balance
(b) Debit balance (d) May have Nil balance
49. If the partnership deed is silent, interest on drawings will be charged:
(a) @ 6% P.a. (c) Any other Rate
(b) @ 6% P.m (d) Will not be charged
50. Abhivav, Bhavesh and Tanveer entered into partnership on 1st July, 2020 to share profits and
losses in the of 3 : 2 : 1, Abhinav guaranteed that Tanveer’s share of profit after charging
interest on capitals @ 6% p.m. would not be less than Rs36,000 p.a. The capital contributed by
Abhinav – 2,00,000; Bhavesh- 1,00,000; and Tanveer-1,00,000. Profits for the year ended 31 st
March, 2021 was Rs1,38,000. What will be the share of profit of Tanveer to be credited to his
account.
(a) Rs53,000 (b) Rs4,500 (c) Rs40,000 (d) Rs27,000
51. Which of the following will not be shown on the Debit side of Profit & Loss Appropriation
Account:
(a) General Reserve (c) Interest on Drawings
(b) Interest on Capital (d) Share of the Profits
52. Liability of the partners in a partnership firm under Indian Partnership Act, 1932 is:
(a) Limite (c) It is depended on the situation
(b) Unlimited (d) None of these
53. If a partner makes the profit of Rs5,00,000 from the money of the firm Rs50,000, he will have
to return the amount:
(a) Rs5,00,000 (c) Rs5,50,000
(b) Rs50,000 (d) None of these
54. If the partners are following fixed capital method then the amount withdrawn from capital
will be:
(a) Debited to the Current Account (c) Credited to the Current Account
(b) Debited to the Capital Account (d) Credited to the Capital Account
55. Pick the odd one out.
(a) Manager’s commission (c) Rent paid to Partner
(b) Commission to Partner (d) Interest on loan to Partner
56. Pick the odd one out from the point of capital account of partners.
(a) Interest on Drawings (c) Salary
(b) Interest on capital (d) Commission
57. The written document which contains all the teams and conditions of the partners and
registered under the act is known as:
(a) Agreement (c) Document
(b) Partnership Deed (d) None of theses
58. A & B are partners in the firm, A invested Rs10,00,000 in the firm and B did not invested any
amount The profits should be distributed in the ratio:
(a) 5 : 1 (c) 3 : 2
(b) 1 : 1 (d) None of these
59. If a partner is to be given the commission of 10% on the net profits after charging such
commission and the losses for the year are Rs1,10,000, commission will be:
(a) Rs11,000 (c) Will not be charged
(b) Rs10,000 (d) It can be Rs11,000 or Rs10,000 both
60. A, B and C are the partners in the firm with the profit sharing ratio of 5 : 3 : 2, A had given the
guarantee to C that his share of profits will never be less than Rs30,000 in any year. C’s
deficiency was for Rs8,000 it should be borne by partners as:
(a) Rs5,000 by A and Rs3,000 by B (c) Rs8,000 by B
(b) Rs8,000 by A (d) Rs4,000 each
61. P and Q are partners sharing profits in the ratio of 3 : 2. R was admitted for 1/6 th share of
profit with a minimum guaranteed amount of Rs10,000. At the close of the first financial
year ,the firm earned a profit of Rs54,000. Find out the share of profit which P , Q and R will
get.
(a) Rs27,000; Rs18,000; Rs9,000
(b) Rs26,400; Rs17,600; Rs10,000
(c) Loss P Rs600 and Q Rs400, Gain to R Rs1,000
(d) None of the above
62. Kishor, Tanmay and Keshav are partners sharing profits in the ratio of 5 : 4 : 1. Keshav is given
a guarantee that his minimum share of profit in any given year would be at least Rs5,000.
Deficiency, if any, would be borne by Kishor and Tanmay equally. Loses for the year ended 31 st
March 2019 was Rs40,000. Deficiency of Keshav to be borne by Tanmay will be:
(a) Rs9,000 (b) Rs2,500 (c) Rs2,000 (d) Rs4,500
63. The profit for the first year of the partnership are Rs75,000. The gross fee earned by Deepika
for the firm is Rs16,000. What will be the amount of Deficiency of Deepika:
(a) Rs9,000 (b) Rs37,000 (c) Rs28,000 (d) Rs14,000
64. Rent paid to a partner for use of his personal property for business will be:
(a) Debited to the Profit and Loss A/c
(b) Credited to the Profit and Loss Appropriation Account
 (c) Debited to the Profit and Loss Appropriation Account
(d) Credited to the Profit and Loss A/c
65. X and Y are partners sharing profits in the ratio of 3 : 2 with capitals of Rs8,00,000 and
Rs6,00,000 respectively. Interest on capital is agreed @5% p.a. Y is to be allowed an annual
salary of Rs60,000 which has not been withdrawn. Profit for the year ended 31 st March 2019
before interest on capital but after charging Y’s salary amounted to Rs2,40,000. A provision of
5% of the profit is to be made in respect commission to the manager. What will be the amount
of distributable profit:
(a) Rs2,85,000 (b) Rs1,55,000 (c) Rs70,000 (d) Rs60,000
66. Bhanu and Partab are partners sharing profits equally. Their fixed capitals as on 1 st April,2018
are Rs4,00,000 and Rs5,00,000 respectively. Their drawings during the year were Rs50,000 and
Rs1,00,000 respectively. Interest on Capital is a charge is a charge and is to be allowed @ 10%
p.a. and interest on drawings is to be charged @ 15% p.a. Net profit for the year ended 31 st
March, 2019 was Rs1,20,000. What will be the amount of Interest on Drawings of Bhanu:
(a) Rs3,750 (b) Rs7,500 (c) Rs11,250 (d) None of these
67. Reya, Mona and Nisha shared profits & losses in the ratio of 3 : 2 : 1. The profits for the last
three year’s were Rs1,40,000; Rs84,000 and Rs1,06,000 respectively. These profits were by
mistake shared equally to all. Journal entry for the same will be.
(a)

Particular L. Debit Credit

F. (Rs) (Rs)
Nisha’s Capital A/c Dr. 55,000
To Reya’s Capital A/c 55,000
(Being adjustment entry passed)

(b)

Particular L. Debit Credit

F. (Rs) (Rs)
Reya’s Capital A/c Dr. 55,000
To Nisha’s Capital A/c 55,000
(Being adjustment entry passed)
(c)

Particular L. Debit Credit

F. (Rs) (Rs)
Mona’s Capital A/c Dr. 1,10,000
Nisha’s Capital A/c Dr. 55,000
To Reya’s Capital A/c 1,65,000
(Being adjustment entry passed)
 (d)

Particular L. Debit Credit

F. (Rs) (Rs)
Nisha’s Current A/c Dr. 55,000
To Reya’s Current A/c 55,000
(Being adjustment entry passed)

Charpter 2.

Goodwill
1. According to Accounting Standard 26 (AS-26):
(a) Self-generated goodwill is not accounted as an asset OR goodwill should not be raised in the
books of accounts.
(b) Purchased goodwill should not be written off.
(c) Goodwill can be recorded in the books whether money or money’s worth paid for it or not.
(d) Self- generated goodwill is always shown under the fixed assets.
2. Which one of the following is the method of goodwill valuation?
(a) Average capital method (c) Capital intensity method
(b) Super capital method (d) Super profit method
3. When Goodwill is not purchased goodwill account can:
(a) never be raised in the books
(b) be raised in the books
(c) be partially raised in the books
(d) be raised as per the agreement of the partners
4. Identify the factor that affects the valuation of goodwill.
(a) favourable location (c) quality of products
(b) favourable contracts (d) all of these
5. Find out those situations which create need for valuation of goodwill for a partnership firm?
(a) When existing partners change their profit sharing ratio
(b) When a new partner comes into partnership
(c) When an existing partner retires from partnership
(d) All of the above
6. The profits for last 3 years were:
1st year = Rs6,000 (including abnormal gain Rs2,000
2nd year = Rs4,000 (after charging abnormal loss Rs3,000)
3rd year = Rs2,500 (including abnormal income Rs1,500)
(a) Rs12,500 (b) Rs12,000 (c) Rs13,000 (d) Rs16,000
7. Capital employed in a business is Rs2,00,000. Normal Rate of Return on capital employed is
15% During the year, the firm earned a profit of Rs48,000. Calculate goodwill on the basis of 3
years’ purchase of Super Profit.
(a) Rs54,000 (b) Rs60,000 (c) Rs50,000 (d) None of these
8. A firm earns Rs1,20,000 as its annual profits. The normal rate of profit being 10%. Assets of
firm are Rs14,40,000 and liabilities are Rs4,40,000. Find the value of goodwill by Capitalisation
Method.
(a) Rs4,00,000 (b) Rs2,80,000 (c) Rs2,00,000 (d) Rs3,60,000
9. Average profit of firm is Rs3,00,000. Total tangible assets in the firm are Rs28,00,000 and
outside liabilities are Rs8,00,000. In same type of business, normal rate of return is 10% of
capital employed. Calculate goodwill by Capitalisation of Super Profit Method.
(a) Rs14,00,000 (b) Rs16,00,000 (c) Rs18,00,000 (d) Rs10,00,000
10. The excess amount which the firm can get on selling its assets over and above the saleable
value of its assets is called:
(a) Surplus (b) Super profits (c) Reserve (d) Goodwill
11. What is Goodwill?
(a) Fictitious Asset (b) Intangible Asset (c) Current Asset (d) Wasting Asset
12. How many types of Goodwill are there?
(a) 1 (b) 2 (c) 3 (d) 4
13. Pankaj acquired the business of Tanmay for the purchase consideration of Rs2,40,000 paid by
means of draft. The assets and liabilities acquired are:
Furniture Rs50,000; Inventory Rs75,000; Debtors Rs1,00,000; Creditors Rs5,000
What will be the amount of Purchase Goodwill?
(a) Rs1,85,000 (b) Rs2,00,000 (c) Rs20,000 (d) None of these
14. Capital employed by a partnership firm is Rs3,00,000. Its average profits earned is Rs80,000.
The normal rate of return in similar type of business is 20%. What is amount of Super profits?
(a) Rs80,000 (c) Rs60,000 (c) Rs20,000 (d) None of these
15. Capital employed by a partnership firm is Rs4,00,000. Its average profits earned is Rs1,00,000.
The normal rate of return in similar type of business is 20% What is the amount of capitalized
value of average profits?
(a) Rs5,00,000 (b) Rs4,00,000 (c) Rs20,000 (d) Rs1,00,000
st
16. Profits of a firm for the year ended 31 March for the last five year were:

Year Ended 31st March, 31st March, 31st March, 31st March, 31st March
2015 2016 2017 2018 2019

Profit (Rs) 20,000 24,000 30,000 25,000 18,000

What will be the value of goodwill on the basis of three year’s purchase of Weighted Average
Profit after assigning weights 1, 2, 3, 4 and 5 respectively to the profits for years ended 31 st
March, 2015, 2016, 2017, 2018 and 2019.
(a) Rs23,200 (b) Rs3,48,000 (c) Rs69,600 ` (d) None of these
17. Average profit earned by a firm is Rs80,000 Which includes undervaluation of stock of Rs8,000
on an average basis. The capital invested in the business is Rs8,00,000 and the normal rate of
return 8%. What will be the value of goodwill of the firm on the basis of 5 time the super
profit?
(a) Rs64,000 (b) Rs16,000 (c) Rs1,20,000 (d) Rs5,60,000
18. Rakesh and Ashok earned a profit of Rs5,000. They employed capital of Rs25,000 in the firm. It
is expected that the normal rate of return is 15% of the capital. What will be the amount of
super profit, is goodwill is valued at three years’ purchase of super profit?
(a) Rs5,000 (b) Rs3,750 (c) Rs1,250 (d) Rs25,000
19. Capital of the firm of Sharma and Verma is Rs2,00,000 and the market rate of interest is 15%.
Annual salary to partners is Rs12,000 each. The Profits for the last three years were Rs60,000;
Rs72,000 and Rs84,000. Goodwill is to be valued at 2 years’ purchase of last 3 years’ average
super profit. What will be the amount of goodwill of the firm?
(a) Rs48,000 (b) Rs18,000 (c) Rs30,000 (d) Rs36,000
20. A firm earns Rs2,20,000. The normal rate of return is 10% The Assets of the firm amounted to
Rs22,00,000 and liabilities to Rs2,00,000. The capitalished value of Average profits will be:
(a) Rs22,000 (b) Rs22,00,000 (c) Rs20,00,000 (d) Rs2,00,000
21. A business has earned average profit of Rs1,00,000 during the last few years. Find out the
value of goodwill by capitalistion method, given that the assets of the business are
Rs10,00,000 and its external liabilities are Rs1,80,000. The normal rate of return is 10%.
(a) Rs10,00,000 (b) Rs20,000 (c) Rs18,000 (d) Rs1,80,000
22. Following factors affect the value of Goodwill except:
(a) Nature of business (c) Market situation
(b) Capital invested (d) Location of the Customers
23. Capital invested in the business is known as:
(a) Capitalised value of average profits (c) Super Profits
(b) Capitalised value of Super profits (d) Capital employed
24. Patents and Trademarks are the examples of:
(a) Fictitious Assets (c) Tangibel Assets
(b) Intangible Assets (d) Wasting Assets
25. If closing stock is undervalued on an average basis it will be___________to the average
profits.
(a) added
(b) subtracted
(c) once added to the year it is undervalued and then subtracted to the next year
(d) none of the above
26. If closing stock is overvalued on an average basis it will be ___________to the average profits.
(a) added
(b) subtracted
(c) once added to the year it is undervalued and then subtracted to the next year
(d) none of the above
27. Goodwill which is acquired by making the payment is known as:
(a) Tangible Asset (c) Self-Generated Goodwill
(b) Purchased Goodwill (d) Wasting Asset
28. Which AS prescribes that self-generated goodwill is not recognised as an Asset.
(a) AS 3 (b) AS 4 (c) AS 26 (d) None of these
29. Which is not the characteristic of the Goodwill?
(a) It is an Intangible Asset
(b) Value of goodwill is subjective as it depends on the assessment of the valuer
(c) It helps in earning higher profits
(d) Efficient management
30. Profits for the five years ending on 31st March, are as follows:
Year 2015 – Rs4,00,000; Year 2016- Rs3,98,000; Year 2017- Rs4,50,000; Year 2018- Rs4,45,000
and Year 2019- Rs5,00,000.
Higher of the Average profits of 4 or 5 years will be:
(a) Rs4,38,600 (b) Rs17,54,400 (c) Rs4,48,250 (d) Rs17,93,000
31. Abhay, Babu and Charu are partners sharing profits and losses equally. They agree to admit
Daman for equal share of profit. For this Purpose, the value of goodwill is to be calculated on
the basis of four years’ purchase of average profit of last five year. These profits for the year
ended 31st March, were:

Year 2015 2016 2017 2018 2019

Profit (Loss) 1,50,000 3,50,000 5,00,000 7,10,000 (5,90,000)
(Rs)
On 1st April, 2018, a car costing Rs1,00,000 was purchased and debited to Travelling Expenses
Account. on which depreciation is to be charged @ 25% Interest of Rs10,000 on Non-trade
Investments is credit to income for the year ended 31st March, 2018 and 2019. Average profits
will be:
(a) Rs9,40,000 (b) Rs2,35,000 (c) Rs2,24,000 (d) Rs4,60,000
32. A Ltd. purchased the business of B Ltd., by paying the purchase consideration of Rs5,50,000
when the net worth of the business was for Rs4,50,000 the amount of difference of Rs1,00,000
will be:
(a) Shown as Goodwill on the Assets side of Balance Sheet
(b) Shown as Capital Reserve on the Liabilities side of Balance Sheet
(c) Will be adjusted in Sacrificing Ratio
(d) Not be treated in any manner
33. Capital employed by a partnership firm is Rs2,50,000. Its average profit is Rs30,000. The
normal rate of return in similar type of business is 10% The amount of super profit is:
(a) Rs25,000 (b) Rs5,000 (c) Rs3,000 (d) Rs23,000
34. Rohan and Pohan are partners in a Glass business. Balance in Capital and Current account as
on 31st March, 2021 were:

Particular Capital A/c Current A/c

 Rohan 1,00,000 25,000
Pohan 1,20,000 5,000 Dr.
The firm earned an average profit of Rs45,000. If the normal rate of return is 10%. Value of
goodwill by Capitalisation Method will be:
(a) Rs2,10,000 (b) Rs1,05,000 (c) Rs55,000 (d) n Rs1,10,000
35. Average profit of the firm is Rs75,000. Total tangible assets in the firm are Rs7,00,000 and
outside liabilities are Rs2,00,000. In the same type of business, the normal rate of return is
10% of the capital employed, what will be the amount of super profit?
(a) Rs25,000 (b) Rs50,000 (c) Rs37,000 (d) None of these
36. Average profit of the firm is Rs50,000. Total tangible assets in the firm are Rs5,00,000 and
outside liabilities are Rs2,00,000. In the same type of business, the normal rate of return is
10% of the capital employed, what will be the amount of goodwill on the basis of
capitalization of super profit’s?
(a) Rs30,000 (b) Rs20,000 (c) Rs3,00,000 (d) Rs2,00,000
37. Oswal Ltd. has assets of Rs2,50,000 whereas liabilities are Capital Rs1,75,000; General Reserve
Rs30,000 and Creditors Rs45,000. If normal rate of return is 10% and the goodwill of the firm is
valued at Rs45,000 at 2 years purchase of super profits, find average profits of the firm.
(a) Rs43,000 (b) Rs20,500 (c) Rs22,500 (d) Rs2,05,000
38. A firm has long- term contracts for sale and purchase of goods at favourable price. This is the
factor affecting value of the goodwill naming as:
(a) Longer establishment of business (c) Access to supplies
(b) Favourable location (d) Favourable contracts
39. If a firm enjoys good reputation for the quality of its product, there will be the ready sale and
the value of the goodwill will be high. This is the factor affecting value of the goodwill naming
as:
(a) Market Situation (c) Longer establishment of business
(b) Nature of Business (d) None of these
40. The firms earning higher profits year after year, will have better value for goodwill as
compared to firms earning lesser profits or incurring losses with similar amount of capital
employed. This is the factor affecting value of the goodwill naming as:
(a) Risk associated with the business (c) Past performance
(b) Longer establishment of Business (d) Nature of Busine
41. In which case there is no need for the valuation of Goodwill?
(a) When partnership firm is sold as a going concern
(b) When two or more firms amalgamale
(c) In case of Dissolution of Partnership firm
(d) When a partnership firm is converted into a company
42. Which of these is not the feature of the Purchased Goodwill?
(a) It normally arises on the purchase of business
(b) It is not generated internally and is recorded as an assets
(c) It is shown in the balance sheet as an asset
(d) It is amortised at the earliest but not later than its estimated useful life
43. Which of these is not the feature of the Self-generated Goodwill?
(a) AS-26 prescribes that self-generated goodwill is not recognised as an asset.
(b) It is generated internally, generally over the years.
(c) Value of Goodwill is a subjective assessment but it is ascertained when both purchaser and
seller agree to its valuation.
(d) Its valuation is subjective assessment of the valuer, being not based on an evidence.
44. The investments that are made in another enterprise for the furtherance of own business are
known as:
(a) Trade Investments (c) Both Trade and None-trade Investments
(b) Non-trade Investments (d) None of these
45. Capital + Reserves – Goodwill, if any existing in the books-Fictitious Assets – None – trade
Investments is the formula to calculate:
(a) total of liabilities (c) capitalised value
(b) total of assets (d) capital employed
46. While calculating Capital employed, ___________ are taken as part of capital employed.
(a) trade investments (c) advertisement suspense/expense
(b) goodwill (d) none of these
47. Goodwill under super profit method is calculated by multiplying Super profit with:
(a) Normal Rate
100
(b) 100
Noramal Rate
(c) Number of year’s purchase
(d) None of these
48. A firm earned net profit during the years as:

Year 2018 2019 2020 2021

Profit (Rs) 40,000 18,000 20,000 22,000
The capital invested in the firm is Rs60,000 Normal rate of return is 10%. What will be the
amount of goodwill on the basis of three years purchase of the average profits of last three
years?
(a) Rs20,000 (b) Rs14,000 (c) Rs42,000 (d) Rs75,000
49. From the following particulars, calculate Capitalised value of Average profits of a firm by
applying Capitalisation of Average Profit Method:
(a) Rs52,200 (b) Rs2,61,000 (c) Rs61,000 (d) Rs2,00,000
50. A business has earned average profit of Rs2,00,000 during the last few year. Goodwill of the
firm by capitalization method will be________ given that the assets of the business are
Rs20,00,000 and its external liabilities are Rs3,60,000. The normal rate of return is 10%
(a) Rs20,00,000 (b) Rs16,40,000 (c) Rs2,00,000 (d) Rs3,60,000
51. Average Profit earned by a firm is Rs15,00,000 which includes over-valuation of stock of
Rs60,000 on an average basis. The capital invested in the business is Rs84,00,000 and the
normal rate return is 15%. Value of goodwill of the firm on the basis of 3 times the super profit
 will be:
(a) Rs14,40,000 (b) Rs1,80,000 (c) Rs12,60,000 (d) Rs5,40,000
st
52. On 1 April, 2021, an existing firm had assets of Rs1,50,000 including cash of Rs15,000. Its
creditors amounted to Rs10,000 on that date. The firm had a Reserve of Rs20,000 while
Partners’ Capital Accounts showed a balance of Rs1,20,000. If Normal Rate of Return is 20%
and goodwil of the firm is Valued at Rs48,000 at four years’ purchase of super profit, find
average profit per year of the existing firm.
(a) Rs28,000 (b) Rs20,000 (c) Rs40,000 (d) Rs12,000
53. Capital invested in the business is Rs6,00,000. Its average profit is Rs80,000. The normal rate
of return is similar type of business is 10%. What is the amount of Super Profits?
(a) Rs10,000 (b) Rs60,000 (c) Rs20,000 (d) Rs80,000
54. Capital invested in the business is Rs10,00,000. Its average profit is Rs75,000. The normal rate
of return in similar type of business is 10%. What is the amount of goodwill on the basis of
three years of Super Profits?
(a) Rs1,00,000 (b) Rs2,25,000 (c) Rs75,000 (d) None of these
55. When weighted average profit method of calculating goodwill is used?
(a) when profits show a trend (c) when profits are fluctuating
(b) when profits are not equal (d) when profits are same in different years
56. Under capitalization of super profit method, the formula for calculating the goodwill is:
(a) Super profit multiplied by number of years purchase.
(b) Capitalised value of average profits Multiplied by 100 and divided by normal rate of return.
(c) Super profit multiplied by 100 and divided by normal rate of return.
(d) Super profit multiplied by normal rate of return and divided by 100.
57. Arun & Nupur are partners in a firm and they admit Vipin into partnership. They agreed to
value goodwill at 3 years’ purchase of Super Profit Method for which they decided to average
profit of last 5 years. The profits for the last 5 year were:

Year Ended Profit (Rs)

st
31 March, 2017 1,50,000
31st March, 2018 1,80,000
st
31 March, 2019 1,00,000 (Including abnormal loss of Rs1,00,000)
st
31 March, 2020 2,60,000 (Including abnormal gain (profit) of Rs40,000)
st
31 March, 2021 2,40,000
The firm has total assets of Rs20,00,000 and Outside Liabilities of Rs5,00,000 as on that date.
Normal Rate of Return in similar business is 10% The amount of capital employed is:
(a) Rs1,98,000 (b) Rs15,00,000 (c) Rs48,000 (d) Rs1,44,000
58. Total Capital of the firm Rs16,00,000. Normal rate of return 10%. Profit for the year.
Rs2,00,000. Super profits will be:
(a) Rs16,00,000 (b) Rs4,00,000 (c) Rs40,000 (d) Rs1,60,000
Charper 3

Reconstitution of Partnership:
Admission of a Partner
1. On admission of a partner, which of the following items in the Balance Sheet are transferred
to the credit of Capital Accounts of old partners in the old profit sharing ratio, if Capital
Accounts are maintained following Fluctuating Capital Accounts Method.
(a) Deferred Revenue Expenditure (c) Profit and Loss Account (Credit Balance)
(b) Profit and Loss Account (Debit Balance) (d) Balance in Drawings Account of Partner
2. When the new partner brings cash for goodwill, the amount is credited to:
(a) Realisation Account (c) Premium for Goodwill Account
(b) Cash Account (d) Revaluation Account
3. A and B are partners in a firm having a capital of Rs54,000 and Rs36,000 respectively. They
admitted C for 1/3rd share in the profits C brought proportionate amount of capital. The
Capital brought in by C would be:
(a) Rs90,000 (b) Rs45,000 (c) Rs5,400 (d) Rs36,00
4. Ramesh and Suresh are partners sharing profits in the ratio of 2 : 1 respectively, Ramesh
capital Rs1,02,000 and Suresh capital are Rs73,000. They admit Mahesh and agree to give him
1/5th share in future profit. Mahesh brings Rs14,000 as his share of goodwill. He agrees to
contribute capital in the new profit-sharing ratio. How much capital will be brought by
Mahesh?
(a) Rs 43,750 (b) Rs45,000 (c) Rs 47,250 (d) 48,000
5. In case of Admission of a Partner, the entry for Unrecorded Investments is:
(a) Debit Partner’s Capital A/c and Credit Investment A/c.
(b) Debit Revaluation A/c and Credit Investments A/c.
(c) Debit Investments A/c and Credit Revaluation A/c.
(d) None of the above
6. If at the time of Admission there is an Unrecorded Liability, it is:
(a) debited to Revaluation Account. (c) debited to Goodwill Account.
(b) credited to Revaluation Account. (d) credited to Partners’ Capital Accounts.
7. At the time of Admission of a Partner, undistributed profits appearing in the balance sheet of
the old firm is transferred to the capital account of:
(a) Old partners in old profit sharing ratio
(b) Old partners in new profit sharing ratio
 (c) All the partners in new profit sharing ratio
(d) None of these
8. Kartik and Rana are partners sharing profits in the ratio of 4 : 1. Their capitals were Rs90,000
and Rs70,000 respectively. They admitted Kuldeep for 1/3rd share in the future profits.
Kuldeep brought Rs1,00,00 as his capital. Firm’s Goodwill is:
(a) Rs40,000 (b) Rs1,40,000 (c) Rs3,00,000 (d)Rs2,60,000
9. A new partner may be admitted to a partnership:
(a) with the consent of all partners
(d) with the consent of two third of hold partners
(c) with the consent of any one of the partners
(d) without consent of old partners
10. Which account should be debited when capital is introduced by a partner?
(a) Current Account (d) Cash Account
(b) Owner’s Equity Account (d) Current Account
11. At the time of Admission of a new partner, General Reserve is:
(a) debited to capital of old partners
(b) credited to capital of old partners
(c) allowed to remain in balance sheet
(d) debited to current account
12. At the time of admission of a partner building appreciated by Rs2,00,000 the journal entry will
be:
(a) Building A/c Dr. 2,00,000
To Old Partner’s A/c 2,00,000
(b) Revaluation A/c Dr. 2,00,000
To Building A/c 2,00,000
(c) Building A/c Dr. 2,00,000
To Revaluation A/c 2,00,000
(d) Old Partner’s A/c Dr. 2,00,000
To Revaluation A/c 2,00,000
13. A and B are partners sharing profits and losses as 2 : 1. C is admitted and profit sharing ratio
becomes 4 : 3 : 2. Goodwill is valued at Rs94,500. C brings required goodwill in cash. Goodwill
amount will be credited to:
(a) A Rs14,000 and B Rs7,000 (c) A Rs21,000
(b) A Rs12,000 and B Rs9,000 (d) A Rs94,500
14. Partners A,B and C share the profits of a business in the ratio of 3 : 2 : 1 respectively. They
admit D who brings in Rs60,000 for his share of goodwill. A, B, C and D decided to share the
profits respectively in the ratio of 5 : 3 : 2. Credit will be given to:
(a) A Rs6,000; B Rs6,000 (c) A Rs30,000; B Rs20,000; C Rs10,000
(b) A Rs30,000; B Rs18,000; C Rs12,000 (d) A Rs30,000; B Rs30,000
15. Capitals of Sumit and Raj, after all adjustments, were Rs2,00,000 and Rs1,50,000 respectively.
They decided to admit Kamal as a new partner for 1/5th share. Kamal brought Rs1,00,000 as
capital. He has to bring appropriate amount of goodwill share. How much he will bring as his
 share of goodwill:
(a) Rs50,000 (b) Rs40,000 (c) Rs20,000 (d) Rs10,000
16. At the time of Admission of a new partner, General Reserve given in the old balance sheet is
distributed to the old partners due to the reason:
(a) it belongs to first partner
(b) it belongs to all the partners including new partner
(c) it belongs to only sacrificing partners
(d) it belongs to all old partners
17. AK and BK are partners in a firm. They admit CK as a partner for 1/4 th share in the profits of
the firm. CK brings Rs2,00,000 as his share of capital. The value of total assets of the firm is
Rs5,40,000 and outside liabilities are valued at Rs1,00,000 on that date. CK’s premium share
for goodwill:
(a) Rs30,000 (b) Rs90,000 (c) Rs50,000 (d) Rs60,000
18. At the time of admission of a new partner, the following adjustment related to asset was
found: “Stock is overvalued by10%, Rs66,000 Book value”. Actual value of stock is:
(a) Rs66,000 (b) Rs59,400 (c) Rs60,000 (d) Rs72,600
19. What is the treatment of Profit and Loss Account (Cr. Balance) given in Balance Sheet, at the
time of admission of a new partner?
(a) Transfer to Revaluation Account
(b) Transfer to Balance Sheet of reconstituted firm.
(c) Transfer to Incoming partner.
(d) Transfer to Old Partners’ Capital Accounts.
20. Reserve or general reserve appearing in the balance sheet will be divided among old partners
during admission in ______ratio.
(a) gaining (b) new (c) sacrificing (d) old
21. ‘A’, ‘B’ and ‘C’ share profits and losses in the ratio of 3 : 2 : 1. ‘D’ is admitted with 1/6 th share
which he gets entirely from ‘A’. New ratio will be:
(a) 2 : 2 : 1 : 1 (c) 2 : 2 : 2 : 1
(b) 3 : 1 : 1 : 1 (d) None of these
22. ‘X’ and ‘Y’ are partners sharing profits equally. ‘Z’ was admitted for 1/5the share. Calculate
new profit sharing ratio.
(a) 2 : 3 : 1 (b) 3 : 3 : 1 (c) 6 : 5 : 2 (d) 2 : 2 : 1
23. ‘A’ and ‘B’ are partners sharing profits and losses in the ratio of 5 : 3. On admission, ‘C’ brings
Rs70,000 cash and Rs48,000 against goodwill. New profit sharing ratio between ‘A’,’B’ and ‘C’
is 7 : 5 : 4. The sacrificing ratio among ‘A’ and ‘B’ is:
(a) 4 : 1 (b) 4 : 7 (c) 5 : 4 (d) 3 : 1
24. A firm has an unrecorded investment of Rs5,000. Entry in the firm’s journal on admission of a
partner will:
(a) Unrecorded Investment A/c Dr. 5,000
To Revaluation A/c 5,000
(b) Partners’ Capital A/c Dr. 5,000
To Unrecorded Investment A/c 5,000
 (c) Revaluation A/c Dr. 5,000
To Unrecorded Investment A/c 5,000
(d) None of the above
25. ‘A’ and ‘B’ share profits in the ratio of 3 : 2. ‘A’s’ capital is Rs40,000, ‘B’s’ capital is Rs30,000.
‘C’ is admitted for 1/5th share in profits. What is the amount of capital which ‘C’ should bring?
(a) Rs17,500 (b) Rs16,000 (c) Rs1,00,000 (d) Rs64,000
26. ‘A’ and ‘B’ carry on business and share profits and losses in the ratio of 3 : 2. Their respective
capitals are Rs1,20,000 and Rs4,000. ‘C’ is admitted for 1/5 th share in profits and brings
Rs1,20,000 as his share of capital. Capitals of ‘A’ and ‘B’ to adjusted according to ‘C’s’ share.
(a) Rs30,000 (b) Rs1,68,000 (c) Rs60,000 (d) Rs28,000
27. ‘A’ and ‘B’ are partners in a firm sharing profits in 3 : 2 ratio. They admitted ‘C’ as a new
partner and the new profit sharing ratio will be 2 : 1 : 1. ‘C’ brought in Rs40,000 as premium
for goodwill for it’s share. What will be the journal entry for the premium of goodwill shared
by old partners as per sacrificing ratio?
(a) Premium for goodwill A/c Dr. 40,000
To A’s Capital A/c 16,000
To B’s Capital A/c 24,000
(b) A’s Capital A/c Dr. 16,000
B’s Capital A/c Dr. 24,000
To Premium for Goodwill A/c 40,000
(c) Premium to Goodwill A/c Dr. 40,000
To Bank A/c 40,000
(d) Bank A/c Dr. 40,000
To Premium for Goodwill A/c 40,000
th
28. A and B are partners sharing profits in the ratio of 3 : 1. They admit C for 1/4 share in the
future profits. The new profit sharing ratio between A : B : C will be :
(a) 9 : 3 : 4 (b) 8 : 4 : 4 (c) 10 : 2 : 4 (d) 8 : 9 : 10
29. X and Y share profits in the ratio of 3 : 2. Z was admitted as a partner who gets 1/5 th share.
New profit sharing ratio, if Z acquires 3/20th from X and 1/20th from Y would be:
(a) 9 : 7 : 4 (b) 8 : 8 : 4 (c) 6 : 10 : 4 (d) 10 : 6 : 4
30. Asha and Nisha are partners’ sharing profits in the ratio of 2 : 1. Asha’s son Ashish was
admitted for 1/4th share of which 1/8th was gifted by Asha to her son. The remaining was
contributed by Nisha. Goodwill of the firm is valued at Rs40,000. How much of the goodwill be
credited to the old partners’ capital account.
(a) Rs2,500 each (b) Rs5,000 each (c) Rs20,000 each (d) None of these
31. On the Admission of a new partner, increase in the value of assets is debited to:
(a) Profit and Loss Adjustment Account (c) Old Partners’ Capital Accounts
(b) Asset Account (d) None of these
32. When the incoming partner brings his share of premium for goodwill in cash, it is adjusted by
crediting to:
(a) his Capital Account (c) sacrificing Partners’ Capital Accounts
(b) premium for Goodwill Account (d) none of these
33. A, B and C were partners in a firm sharing profits in 3 : 2 : 1 ratio. They admitted D for 10%
profits. Calculate new Profit-Sharing Ratio.
(a) 15 : 9 : 8 : 7 (c) 9 : 6 : 3 : 2
(b) 31 : 14 : 10 : 15 (d) 13 : 10 : 7 : 5
34. X and Y are partners sharing profits in the ratio of 3 : 2. Z is admitted for 1/4 th share in profits
which he acquires equally from X and Y. The new ratio will be:
(a) 9 : 6 : 5 (c) 3 : 3 : 2
(b) 19 : 11 : 10 (d) None of these
35. For which of the following situations, the old profit sharing ratio of partners is used at the
time of admission of a new partner?
(a) When new partner brings only a part of his share of goodwill.
(b) When new partner is not able to bring his share of goodwill.
(c) When at the time of admission, goodwill already appears in the balance sheet
(d) When new partner brings his share of goodwill in cash.
36. A and B share profits and losses in the ratio of 3 : 1. C is admitted into partnership for 1/4 th
share. The sacrificing ratio of A and B is:
(a) Equal (b) 3 : 1 (c) 2 : 1 (d) 3 : 2
37. When there is no partnership agreement exists partners, what will be the profit sharing ratio
between the partners?
(a) Equal (c) It will depend on a partner’s capital
(b) Unequal (d) It will depend on the experience of a partner
38. A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. A new partner C is
admitted. A surrenders 1/5th share of his profit in favour of C and B surrenders 2/5 th of his
share in favour of C. The new ratio will be:
(a) 8 : 4 : 3 (b) 12 : 6 : 7 (c) 4 : 8 : 3 (d) 26 : 42 : 7
39. An incoming partner pays his share of goodwill in cash, and profit sharing ratio of old partner
is changed, goodwill be distributed among old partners:
(a) as their old profit ratio (c) according to sacrifice ratio
(b) according to new ratio (d) none of these
40. Ram and Sita are partners sharing profits in the ratio of 5 : 4. They admit Lakshman as a
partner for 1/10th share of profits which he acquires in equal proportion from Ram and Sita.
The new ratio of the partners will be:
(a) 5 : 4 : 1 (c) 91 : 18 : 71
(b) 31 : 30 : 8 (d) 91 : 71 : 18
41. A and B are partners sharing profits and losses in the ratio of 4 : 3. They admit C with 3/7 th
share, which he gets 2/7th from A and 1/7th from B. The new ratio of partners would be:
(a) 1 : 1 : 1 (b) 2 : 3 : 2 (c) 3 : 2 : 3 (d) 2 : 2 : 3
42. A and B are partners in a firm sharing profits in the ratio of 3 : 2. They admit C into partnership
for 1/5th share. C brings Rs30,000 as capital and Rs10,000 as premium for goodwill. New profit
sharing ratio will be 5 : 3 : 2. How much amount of premium is to debited/credited in B’s
Capital Account?
(a) Debit Rs3,000 (b) Credit Rs3,000 (c) Debit Rs5,000 (d) Credit Rs5,000
 43. A and B are partners sharing profits and losses in the ratio of 7 : 5. They agree to admit C, their
manager, into partnership who to get 1/6th share in the profits. He acquires this share as
1/24th from A and 1/8th from B, The new profit sharing ratio will be:
(a) 13 : 7 : 4 (b) 7 : 13 : 4 (c) 7 : 5 : 6 (d) 5 : 7 : 6

Chapter 4.

Retirement and death of a

partner
1. At the time of retirement of a partner, if goodwill appears in the Balance sheet, it must be
written off, the Partner’s Capital Accounts must be debited in_________
(a) the old profit-sharing ratio (c) the capital ratio
(b) the new profit-sharing ratio (d) the gaining ratio
2. In the event of retirement of a partner, the amount of General Reserve is transferred to
Partner’s Capital Accounts in
(a) the new profit-sharing ratio (c) the capital ratio
(b the old profit-sharing ratio (d) the gaining ratio
3. Retiring partner is compensated for parting with the firm’s future profits favouring remaining
partners. The remaining partners contribute to such compensation amount is:
(a) Gaining Ratio (c) Sacrificing Ratio
(b) Capital Ratio (d) Profit Sharing Ratio
4. A, B and C are partners sharing profits in the ratio of 2: 2: 1. C retired. The new profit-sharing
ratio between A and B will be:
(a) 2: 1 (b) 1: 2 (c) 3: 1 (d) 1: 1
5. As per AS-10, no goodwill is to be shown in the Balance Sheet unless it is a/an________
(a) self-generated goodwill (c) either (a) or (b)
(b) purchased goodwill (d) mentioned in partnership agreements
6. The total amount due to a retiring partner may NOT include:
(a) interest or salary, if any, payable to him (c) share in the general reserve
(b) share in the goodwill (d) share in the future profit
7. Pick odd one out from the following.
(a) A, B and C were partners sharing profit in the ratio of 2 : 2 : 1. When A retires, gain to B and C is
in 2 : 1.
(b) A, B and C were partners sharing profits in the ratio of 2 : 1 : 2. When B retires, gain to A and C
is in 2 : 1.
(c) A, B and C were partners sharing profits in the ratio of 1 : 2 : 1. When C retires, gain to A and B
is in 2 : 1.
(d) A ,B and C were partners sharing profits in the ratio of 2 : 1 : 1. When A retires, gain to B and C
is in 2 : 1.
8. Choose the correct formula for calculating the hidden goodwill of the firm with respect to
Retirement of a partner.
(a) Amount agreed to be paid in full settlement less retiring partner’s capital (after all
adjustments).
(b) Amount agreed to be paid in full settlement less retiring partner’s capital (before all
adjustments).
(c) Amount agreed to be paid in full settlement less retiring partner’s capital (after all
adjustments).
(d) Amount agreed to be paid in full settlement less retiring partner’s capital (before all
adjustments).
9. X, Y and Z were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Z retired and new profit-
sharing ratio between X and Y will be 3 : 2. The gaining ratio will be:
(a) 2 : 1 (b) 1 : 1 (c) 1 : 1 (d) 2 : 3
10. A, B and C are partners in a firm sharing profits in the ratio of 3 : 2 : 1. C retires and at that time
no goodwill account is to be raised in books of account. The goodwill of the firm has been valued
at Rs15,000. B’s contribution to the amount of goodwill in the favour of C will be:
(a) Rs3,000 (b) Rs1,000 (c) Rs2,000 (d) Rs2,500
11. The entry for the amount of profit distributed after retirement of a partner will be credited to
existing partner’s capital account and debited to which account?
(a) Profit & loss A/c (c) Profit & loss Appropriation
(b) Revaluation A/c (d) Cash A/c
12. The journal enty for the treatment of goodwill already exists in the books of account at the
time of retirement or death of a partner will be:
(a) All partner’s capital A/c Dr….
To Goodwill A/c
(b) All partner’s current A/c Dr….
 To Goodwill A/c
(c) Existing partner’s capital A/c Dr….
To Goodwill A/c
(d) Either (a) of (b)
13. On the decrease in the value of asset, the journal entry for the same will be:
(a) Revaluation A/c Dr….
To Asset A/c
(b) Asset A/c Dr….
To Revaluation A/c
(c) Revaluation A/c Dr….
To Partner’s capital A/c
(d) Partner’s Capital A/c Dr….
To Revaluation A/c
14. Complete the missing term in the journal entry for distributing reserves in lieu of partnership
firm.________ Dr.
To All partner’s capital A/c
(a) General Reserve (c) Profit & Loss A/c
(b) Reserve Fund (d) All of these
15. Complete the missing journal entry for the settlement of retiring partner’s A/c for the amount
due to him.
Partner’s capital A/c Dr.
To Retiring Partner’s A/c
(a) Old, capital (c) Retiring, loan
(b) Old, loan (d) Retiring, capital
16. Revaluation account is _________account.
(a) real (c) personal
(b) nominal (d) representative
17. Retiring partner’s share of goodwill is adjusted through remaining partner’s capital account in
which ratio?
(a) Gaining ratio (c) New profit-sharing ratio
(b) Old profit-sharing ratio (d) Sacrificing ratio
18. Gaining ratio’ means:
(a) Old Ratio – New Ratio (c) Old Ratio – Sacrificing Ratio
(b) New Ratio – Old Ratio (d) New Ratio – Sacrificing Ratio
19. In the absence of any information regarding the acquisition of share in profit of the retiring
partner by the remaining partners. It is assumed that they will acquires his/her share in:
(a) old profit-sharing ratio (c) equal Ratio
(b) new profit-sharing ratio (d) none of these
20. An account operated to ascertain the loss or gain at the time of retirement of a partner is called:
(a) Realisation Account (c) Revalution Account
(b) Executors Account (d) Deceased Partners capital account
21. On retirement of a partner, the retiring partner’s capital account will be credited with:
(a) his / her share of goodwill (c) shares of goodwill of remaining partners
(b) goodwill of the firm (d) none of these
22. A, B and C share profits and losses of the firm equally. B retires from business and his share is
purchased by A and C in the ratio of 2 : 3. New profit-sharing ratio between A and C respectively
would be:
(a) 1 : 1 (b) 2 : 2 (c) 7 : 8 (d) 3 : 5
23. X, Y and Z were partners in a firm sharing profits in the ratio of 3 : 2 : 1. X retired and the new
profit-sharing ratio between Y and Z will be 5 : 4. On X’s retirement, the goodwill of the firm was
valued at Rs54,000. Journal entry will be:
(a) Y’s Capital A/c Dr. 24,000 Z’s Capital A/c Dr. 30,000 To X’s Capital A/c 54,000
(b) Y’s Capital A/c Dr.15,000 Z’s Capital A/c Dr. 12,000 To X’s Capital A/c 27,000
(c) Y’s Capital A/c Dr. 12,000 Z’s Capital A/c Dr. 15,000 To X’s Capital A/c 27,000
(d) X’s Capital A/c Dr. 27,000 To Y’s capital A/c 12,000 To Z’s Capital A/c 15,000
24. Jamuna, Ganga and Krishna are partners in a firm. Krishna retired from the firm. After making
adjustments for Reserves and Revaluation of Assets and Liabilities, the balance in Krishna’s
Capital Account was Rs1,20,000. Jamuna and Ganga paid Rs1,80,000 in full settlement fo Krishna.
From the above information answer the following
(a) Identify the item for which Jamuna and Ganga paid Rs60,000 more to Krishna.
(i) Revaluation profit (iii) Accumulated reserve
(ii) Share of goodwill (iv) None of these
(b) What will be the entry for the above identified transaction?
(i) Jamuna’s Capital A/c and Ganga’s Capital A/c Dr. To Revaluation A/c
(ii) Jamuna’s Capital A/c and Ganga’s Capital A/c Dr. To Accumulated Reserve A/c
(iii) Jamuna’s Capital A/c and Ganga’s Capital A/c Dr. To Krisna’s Capital A/c
(iv) Revaluation A/c Dr. To Jamuna’s Capital A/c and Ganga’s Capital A/c
25. A, B and C are partners sharing profits in the ratio of 3 : 4 : 2. B wants to retire from the firm. The
proft on revaluation on that date was Rs36,000.
From using abve information answer the following:
(a) New profit-sharing ratio between A and C after B’s retirement will be:
(i) 3 : 4 (ii) 4 : 2 (iii)2 : 1 (iv) 3 : 2
(b) Profit on revaluation will be distributed as:
(i) A Rs16,000; B Rs12,000; C Rs8,000 (iii) A Rs22,500; C Rs13,500
(ii) A Rs12000 B Rs16,000; C Rs8,000 (iv) A Rs23,625; C Rs12,375
26. A, B and C were partners in a firm sharing profits and losses in the ratio of 2 : 2 : 1. The capital
balance are Rs50,000 for A Rs70,000 for B, Rs35,000 for C. B decided to retire form the firm and
balance in reserve on the date was Rs25,000. If goodwill of the firm was valued at Rs30,000 and
profit on revaluation was Rs7,500.
From using above information answer the following:
(a) B’s share of goodwill on his retirement will be:
(i) Rs10,000 (ii) Rs12,000 (iii) Rs6,000 (iv) Rs5,000
 (b) What amount is payable to B?
(i) Rs60,000 (ii) Rs90,000 (iii) Rs45,000 (iv) Rs25,000
27. A, B and C were partners with capitals of Rs1,00,000, Rs75,000 and Rs50,000 respectively. On C’s
retirement, his share is acquired by A and B in the ratio of 6 : 4 respectively.
(a) What will be the new profit-sharing ratio of existing partners?
(i) 1 : 1 (ii) 3 : 2 (iii) 8 : 7 (iv) 7 : 8
(b) The gaining ratio between A and B will be:
(i) 6 : 4 (ii) 2 : 3 (iii) 4 : 6 (iv) 3 : 2
28. X, Y and Z were partners in a firm sharing profits in the ratio of 3 : 2 : 1 Z retired and the new
profit-sharing ratio between X and Y will be 1 : 2. On Z’s retirement the goodwill of the firm was
valued at Rs30,000.
You are required to answer the following using above information.
(a) Z’s share of goodwill on his retirement using above information.
(i) Rs5,000 (ii) Rs10,000 (iii) Rs15,000 (iv) Rs20,000
(b) What will be the journal entry for the treatment of goodwill on Z’s retirement without
opening the goodwill account?
(i) X’s capital A/c Dr. Rs5,000; Y’s capital A/c Dr. Rs5,000 To Z’s capital A/c Rs10,000.
(ii) Y’s capital A/c Dr. Rs10,000 To X’s capital A/c Rs5,000; To Z’s capital A/c Rs5,000.
(iii) X’s capital A/c Dr. Rs10,000; Y’s capital A/c Dr. Rs5,000 To Z’s capital A/c Rs15,000.
(iv) Y’s capital A/c Dr. Rs15,000 To X’s capital A/c Rs5,000; Z’s capital A/c Rs10,000
29. Increase and decrease in the value of assets and liabilities are recorded through:
(a) Partner’s Capital A/c (c) Profit & Loss A/c
(b) Revaluation A/c (d) Balance Sheet
30. A and B are partners in a firm sharing profits in the ratio of 3 : 2. They decided to share future
profits equally. Calculate A’s gain or sacrifice.
(a) 2/10 (sacrifice) (b) 5/10 (gain) (c) 1/10 (gain) (d) 1/10 (sacrifice)
31. In case of change in profit-sharing ratio, the gaining partner must compensate the sacrificing
partners by paying the proportionate amount of:
(a) capital (b) cash (c) goodwill (d) none of these
32. In case of change in profit-sharing ratio, the accumulated profits are distributed to the partners
in:
(a) new ratio (b) old ratio (c) sacrificing ratio (d) equal ratio
33. Retiring partner is compensated for parting with the firm’s future profits in favour of remaining
partners. The remaining partners contribute to such compensation amount in:
(a) gaining ratio (c) sacrificing ratio
(b) capital ratio (d) profit sharing ratio
34. A and B were partners. They shared profits as A-1/2; B-1/3 and carried to reserve 1/6. B died.
The balance of reserve on the date of B’s death was Rs30,000. B’s share of reserve will be:
(a) Rs10,000 (b) Rs8,000 (c) Rs12,000 (d) Rs9,000
35. On retirement/death of a partner, the retiring / deceased Partner’s capital account will be
credited with:
 (a) their share of goodwill (c) share of goodwill of remaining partners
(b) goodwill of the firm (d) none of these
36. An account prepared to ascertain the loss or gain at the time of death of a partner is called:
(a) Realisation Account (c) Executor’s Account
(b) Revaluation Account (d) Deceased Partner’s Capital Account
37. On the death of a partner, the amount due to him will be credited to :
(a) All Partner’s Capital Accounts (c) His Executor’s Account
(b) Remaining Partner’s Capital Accounts (d) Governments’ Revenue Account
38. A partnership ends immediately whenever a partner dies, although the firm may continue with
the remaining partners by purchasing the share of which type of partner?
(a) Retired (b) All (c) Admitted (d) Deceased
39. Calculation of share of profit up to date of death is calculated based on:
(a) Time basis (b) Turnover basis (c) Both (a) and (b) (d) None of these
40. How is deceased partner’s executors account settled?
(a) By Paying off immediately (c) By Paying in instalments with interest
(b) By Paying in instalments without interest (d) All of these
41. On the death of a partner, his share in the profits of the firm till the date of his death is
transferred to the :
(a) Debit of Profit and Loss Account.
(b) Credit of Profit and Loss Account.
(c) Debit of Profit and Loss Suspense Account.
(d) Credit of Profit and Loss Suspense Account.

Chapter 5.
Dissolution of a Partnership
Firm
1. In which condition a partnership firm is deemed to be dissolved?
(a) On a partner’s admission (c) On expiry of the period of partnership
(b) On retirement of a partner (d) On loss in partnership
2. Court can make an order to dissolve the firm when:
(a) some partner has become fully mad (c) continued future profits are expected
(b) partnership deed is fully followed (d) firm is running legal business
3. On dissolution of a firm, realisation account is debited with:
(a) all the assets to be realized (c) cash received on sale of assets
(b) all outside liabilities of the firm (d) any asset taken over by one of the partners
4. On dissolution of a firm, out of the proceeds received from the sale of assets who will be paid
first of all?
(a) Partner’s Capital (c) Partner’s additional capital
(b) Partner’s Loan to firm (d) Outside Creditors
5. At the time of dissolution of firm, at which stage the balance of partner’s capital accounts is
paid?
(a) After making the payment to third parties loans
(b) Before making the payment to partners in respect of their loans
(c) After making the payment to third party for their loans as well as partner’s loans
(d) None of the above
6. At the time of dissolution of firm, “Loan of partners” (Loans given by partners to the firm) is
paid out of the amount realised on sale of assets:
(a) after making the payment of loans given by third party.
(b) after making the payment of balance of
7. On firm’s dissolution, which one of the following accounts should be prepared at the last?
(a) Realisation Account (c) Cash Account
(b) Partner’s Capital Accounts (d) Partner’s Loan Account
8. In the event of dissolution of a partnership firm, the provision for doubtful debts is transferred
to:
(a) Realisation Account (c) Sundry Debtors Account
(b) Partner’s Capital Accounts (d) None of these
9. On dissolution, if a partner undertake to make payment of a liability of the firm then it is to be
debited in:
(a) Profit & Loss Account (c) Partner’s Capital Account
(b) Realisation Account (d) Cash Account
10. Unrecorded liability, when paid on dissolution of a firm is debited to:
(a) Partner’s Capital A/c (c) Liabilities A/c
(b) Asset A/c (d) Realisation A/c
11. On dissolution of a partnership firm, profit or loss on realisation is distributed among the
partners:
 (a) in capital ratio (c) equally
(b) in profit sharing ratio (d) none of these
12. Realisation A/c is a:
(a) Nominal A/c (c) Personal A/c
(b) Real A/c (d) Real A/c as well Personal A/c
13. In the event of dissolution of firm, the partner’s personal assets are first used for payment of:
(a) firm’s liabilities (c) none of the two
(b) the personal liabilities (d) any of the two
14. Pick odd-one out in case of a partnership firm is compulsorily dissolved:
(a) when the business of the firm is declared illegal
(b) when a partner of the firm dies
(c) when a partner of the firm becomes insolvent
(d) when a partner transfers his share to some other person without the consent of other
partners.
15. Which of the following is CORRECT in respect of change in the existing agreement between
the partners:
(a) Dissolution of Firm
(b) Dissolution of Partnership
(c) Dissolution of Business
(d) All of these
16. Which of the following is TRUE in lieu of dissolution of a partnership firm?
(a) The balance of ‘Profit & Loss Account’ appearing on the assets side of a Balance Sheet is
transferred to the debit of Realisation Account.
(b) The balance of ‘Profit & Loss Account’ appearing on the assets side of a Balance Sheet is
transferred to the credit of Realisation Account.
(c) The balance of ‘Profit & Loss Account’ appearing on the assets side of a Balance Sheet is
transferred to the debit of Partner’s Capital Account.
(d) The balance of ‘Profit & Loss Account’ appearing on the assets side of a Balance Sheet is
transferred to the credit of Partner’s Capital Account.
17. On dissolution of firm, loss calculated in realisation account is debited/credited to which
account?
(a) Cash Account (Credit) (c) Partner’s Capital Account (Credit)
(b) Partner’s Capital Account (Debit) (d) Realisation Account (Debit)
18. Which of the following is transferred to Realisation Account?
(a) Balance of Cash Account (c) Amount realised on sale of assets
(b) Balance of Profit & Loss Account (d) Reserves
19. Complete the missing term in the journal entry on taking responsibility of payment of
realisation expenses by a partner on dissolution of partnership firm.
Realisation A/c Dr.
To______________A/c
(a) Realisation Account (c) Partner’s Capital A/c
(b) Cash Account (d) None of these
20. Complete the missing journal entry for (at the time of dissolution of partnership firm) the
amount of ‘Bills Payable’ shown in the liability side of Balance Sheet
Bills Payable A/c Dr.
To_____________A/c
(a) Capital Accounts of Partners (c) Cash Account
(b) Realisation Account (d) Loan Account of Partners
21. Which of the following is not transferred to Realisation Account?
(a) Balance of Cash Account (c) Balance of Profit & Loss Account
(b) Balance of Reserves (d) All of these
22. On taking responsibility of payment of a liability of Rs50,000 by a partner, the journal entry
will be:
____________A/c Dr. 50,000
To partner’s capital A/c 50,000
(a) Realisation Account (c) Capital Account of the Partner
(b) Cash Account (d) Liability Account
23. On firm’s dissolution, when a partner voluntarily gives his personal asset to firms’ creditor as
payment, the journal entry will be:
Realisation A/c Dr.
To___________A/c
(a) Realisation A/c (c) Cash A/c
(b) Partner’s Capital A/c (d) None of these
24. On dissolution, when a partner takes over an unrecorded asset, the journal entry for the same
will be:
(a) Realisation A/c Dr.
To Partner’s Capital A/c
(b) Partner’s Capital A/c Dr.
To Unrecorded Asset A/c
(c) Partner’s Capital A/c Dr.
To Realisation A/c
(d) Realisation A/c Dr.
To Unrecorded Asset A/c
25. On dissolution of a firm, its Balance Sheet revealed total creditors Rs50,000; Total Capital
Rs48,000; Cash Balance Rs3,000. Its assets were realised at 12% less. From using above
information answer the followings:
(i) Loss on realisation will be:
(a) Rs6,000 (b) Rs8,600 (c) Rs11,400 (d) Rs11,720
(ii) The amount realised on sale of assets will be:
(a) Rs95,000 (b) Rs83,600 (c) Rs85,000 (d) Rs79,600
26. On dissolution of a firm, its Balance Sheet revealed total assets are Rs2,00,000; total liabilities
(creditors) are Rs40,000; amount realised on sale of assets is Rs1,75,000 and realisation
expenses are Rs3,000. From using above information answer the following:
(i) Profit of loss on realisation will be:
 (a) Rs25,000 Loss (c) Rs25,000 Profit
(b) Rs28,000 Profit (d) Rs28,000 Loss
(ii) The loss on realised assets will be:
(a) Rs25,000 (b) Rs22,000 (c) Rs35,000 (d) Rs32,000
27. On dissolution of a firm, Balance Sheet reveals Total Debtors at Rs50,000, Total Creditors are
not to be paid and the remaining creditors agreed to accept 5% less amount . Provision for
Doubtful Debts appear at Rs1,500. Bad debts amount to Rs10,000 and remaining debtors are
realised at a discount of 5%.
How much amount will be paid to Creditors?
(a) Rs18,750 (b) Rs19,000 (c) Rs19,750 (d) Rs20,000
28. On dissolution of a firm, A’s opening capital is Rs2,00,000 and his share of realisation profit
amounts to Rs10,000 and he has taken over assets valuing Rs25,000 from the firm. Also
Investments valued Rs2,00,000 were not shown in the books. One of the creditors took over
these investments in full satisfaction of his debt of Rs2,20,000
How much amount will be deducted from creditors?
(a) Rs20,000 (c) Rs4,20,000
(b) Rs2,20,000 (d) Rs2,00,000
29. At the time of dissolution of a firm, total assets are worth Rs3,00,000 and external liabilities
are worth Rs1,20,000. If assets realised 120% and realisation expenses paid were Rs4,000.
(a) Rs3,60,000 (b) Rs3,00,000 (c) Rs4,60,000 (d) Rs6,60,000
30. After transferring liabilities like creditors and bills payables in the realisation account, in the
absence of any information regarding their payment, such liabilities are treated as:
(a) fully paid (b) partly paid (c) never paid (d) none of these
31. On dissolution of the firm , partner’s capital accounts are closed through:
(a) Drawing’s accouny (c) Realisation account
(b) Bank account (d) Partner’s capital account
32. W, X, Y and Z are equal partners. W, X , Y and Z died together in plane crash. This accident
results in:
(a) Dissolution of Partnership as well as firm (c) Dissolution of firm
(b) Dissolution of partnership (d) None of these
33. In case of dissolution, assets are transferred to Realisation Account:
(a) At Book Value
(b) At Market Value
(c) Cost or Market Value, whichever is lower
(d) None of these
34. Sundry Creditors amounted to Rs8,000. These were paid at a discount of 5%. Realisation
account will be debited by:
(a) Rs8,000 (b) Rs7,600 (c) Rs400 (d) Rs8,400
35. Settlement of accounts in case of dissolution of partnership is dealt with which section of
Partnership Act 1932?
(a) Section 45 (b) Section 46 (c) Section 47 (d) Section 48
 36. Section 41 of Partnership Act 1932 deals with dissolution of a firm as:
(a) by mutual agreement (c) by notice
(b) by compulsory dissolution (d) by order of court.
37. At the time of firm’s dissolution credit balance of profit and loss account is credited to:
(a) Realisation account (c) Cash account
(b) Partner’s capital account (d) Profit and loss account
38. If in case of dissolution of partnership, there was no Workmen Compensation Fund and firm
had to pay Rs3,000 as compensation to workers where will be this Rs3,000 recorded in the
books of accounts?
(a) Debit side of Realisation Account (c) Debit side of Partner’s Capital Account
(b) Credit side of Realisation Account (d) Credit side of Partner’s Capital Account
39. On dissolution, Realisation Account is debited with
(a) all assets to be realised (c) cash realised on sale of asset
(b) all outside liabilities (d) all outstanding expenses
40. Meeta and Seeta are partners in a firm. Meeta had taken a loan of Rs85,000 from the firm.
How will Meeta’s loan be closed in the event of dissolution of the firm?
(a) By crediting it to Meeta’s Capital A/c (c) By crediting it to Realisation A/c
(b) By debiting it to Meeta’s Capital A/c (d) By debiting it to Cash A/c

Chapter 6.

Issue of Sharee
1. A company purchased machinery for Rs6,00,000, out of which Rs1,00,000 was paid
immediately and the balance amount was discharged by issue of equity shares of Rs10 each at
25% premium. How many shares will be issued by the company to the vendor?
(a) 50,000 shares (c) 60,000 shares
(b) 40,000 shares (d) 48,000 shares
2. Reserve Capital is not a part of:
(a) Authorised Capital (c) Unsubscribed Capital
(b) Subscribed Capital (d) Issued Share Capital
3. A company forfeited 4,000 shares of Rs10 each on which application money of Rs3 has been
paid. Out of these 2,000 shares were reissued as fully paid up and Rs4,000 has been
transferred to capital reserve. Calculate the rate at which these shares were reissued.
(a) Rs10 Per share (b) Rs9 Per share (c) Rs11 Per share (d) Rs8 Per share
4. Share for which amount is paid by public are called __________shares.
(a) authorized (b) paid up (c) bonus shares (d) all of these
5. Vinod Ltd. forfeited a share of Rs50 issued at a premium of 20% for non-payment of first call
of Rs15 per share and final call of Rs5 per share. At what minimum price it can be reissued?
(a) Rs50 (b) Rs30 (c) Rs40 (d) Rs20
6. The Directors of Vinod Ltd. forfeited 70,000 Equity Share of Rs10 each, Rs10 called up, for non-
payment of final call of Rs1 per share. Half of the forfeited shares were reissued at Rs20 per
share fully paid up. On reissue of forfeited shares, the following amount will be transferred to
the Capital Reserve Account:
(a) Rs70,000 (b) Rs1,40,000 (c) Rs4,20,000 (d) Rs3,15,000
7. Money received in advance from shareholders before it is actually called-up by the directors
is:
(a) Debited to calls in advance account
(b) Credited to calls in advance account
(c) Debited to calls account
(d) None of the above
8. Which of the following capital is not shown in company’s Balance Sheet?
(a) Authorised capital (c) Called and paid up capital
(b) Issued and subscribed capital (d) Reserve Capital
9. Vinod Ltd. forfeited 150 Equity Shares of Rs10 each issued at a premium of Rs5 per share, for
non-payment of allotment money of Rs8 per share (including premium of Rs5 the first call of
Rs2 and final call of Rs3 per share. Out of these 100 shares were reissued at 14 per share. The
capital reserve will be:
(a) Rs750 (b) Rs300 (c) Rs400 (d) Rs200
10. When shares are forfeited, the share capital account is debited with______and the share
forfeiture account is credited with:
(a) Paid-up capital of shares forfeited; Called up capital of shares forfeited.
(b) Called up capital of shares forfeited; Calls in arrear of shares forfeited.
(c) Called up capital of shares forfeited; Amount received on shares forfeited.
(d) Calls in arrears of shares forfeited; Amount received on shares forfeited.
11. A Company invited applications for 1,00,000 shares and it received applications for 1,50,000
shares. Applications for 30,000 shares were rejected and the remaining shares were allotted
on prorate basis. How many shares an applicant for 3,000 shares will be allotted?
(a) 2,500 Shares (c) 4,500 Shares
(b) 3,600 Shares (d) 2,000 Shares
12. When a company has not called up the total nominal (face) value of the share, it is known as:
(a) Issued Capital (c) Subscribed and Fully paid up
(b) Unissued Capital (d) Subscribed but not fully paid up
13. On Equity Shares dividend is proposed by the Board of Directors every year but rate of
dividend is fixed on:
(a) Debentures (c) Loan to outsiders
(b) Equity Shares (d) preference Shares
14. Vinod Ltd. is registered with 50,000 shares @ Rs 10 each. It issued 40,000 shares to the public
@ Rs 10 each. Applications were received on for 38,000 shares and allotment was made to all
the applicants.
(a) Rs3,80,000 (b) Rs4,00,000 (c) Rs2,80,000 (d) Rs5,00,000
15. Maximum limit of premium on shares is:
(a) 5% (c) No limit
(b) 10% (d) Not more than 100%
16. Voluntary return of shares for cancellation by the shareholders is called:
(a) Cancellation of shares (c) Surrender of shares
(b) Forfeiture (d) None of these
17. If a share of Rs10 issued at a premium of Rs3 on which the full amount has been called is
forfeited then the capital account should be debited with:
(a) Rs5 (b) Rs8 (c) Rs10 (d) Rs13
18. When a company issues its shares through IPO, it means shares are issued to:
(a) Promoters (b) Creditors (c) Vendors (d) General Public
19. Vinod Ltd. was formed with a Nominal Share Capital of Rs40,00,000 divided into 4,00,000
shares of Rs10 each. The Company offers 1,30,000 shares to the public payable Rs3 per share
on Application, Rs3 per share on Allotment and the balance on First and Final Call.
Applications were received for 1,20,000 shares. All money payable on Allotment was duty
received, except Rs2,000 shares held by Y. First and Final Call was not made by the Company.
Call in arrears will be of:
(a) Rs6,000 (b) Rs4,000 (c) Rs5,000 (d) Rs7,000
20. ABC Ltd. purchased Furniture of Rs10,00,000 form KK Ltd. and paid 20% of the amount by
accepting a bill of exchange in favour of KK Ltd. The remaining amount was paid by issuing
Equity Shares of Rs100 each at a premium of 25% to KK Ltd. No of Equity Shares to be issued?
(a) 6,000 (b) 6,400 (c) 10,000 (d) 7,000
21. Issue of shares at discount is not allowed under which section of the Companies Act, 2013?
(a) Section 52 (b) Section 53 (c) Section 54 (d) Section 55
22. S.K Ltd. invited application for 10,000 Equity Share of Rs10 each. Application were received for
15,000 shares and pro-rata allotment was made to all the applications. If Mohan (one
shareholder) was allotted 82 shares, find the shares applied by him.
(a) 80 (b) 100 (c) 150 (d) 120
23. Company formed by special act is called:
(a) Chartered company (c) Registered company
(b) Statutory company (d) None of these
24. Own shares purchased by a company with a view to reduce its capital is called:
(a) Sale (c) Buy-back
(b) Purchase (d) Private placement
25. Shares which have preferential rights are called:
(a) Equity share (c) Debenture
(b) Preference share (d) Bond
26. At the time of winding-up of the company which capital is called?
(a) Capital reserve (c) Secure capital
(b) Reserve capital (d) Authorised capital
27. Which kind of Preference Share entitles its holders to receive arrear of dividends of previous
years?
 (a) Cumulative preference share (c) Convertible preference share
(b) Non-cumulative preference share (d) Non-convertible dividend share
28. Which document is an invitation offer to public to subscribe for company’s share?
(a) Red herring prospectus (c) In lieu of prospectus
(b) Prospectus (d) None of these
29. The balance of Share Forfeiture Account can be used to:
(a) provide for discount given at the time of re-issue
(b) write-off preliminary expenses
(c) write-off bad debts
(d) none of above
30. If company wants to calculate amount forfeited on re-issued shares, then which amongst the
given formula will be used?
(a) Total Amount Forfeited
Number of Share Forfeited
(b) Total Amount Forfeited
Number of Shares
(c) Number of Share Forfeited * Share re-issue
Total Amount Forfeited
(d) Total Amount Forfeited * Number of Share re-issued
Number of Share Forfeited
31. Sing who was allotted 200 equity share of Rs20 each by a company, failed to pay Rs8 each on
final call. Shares were re-issued to Kumar at Rs20 each. What will be the journal entry on re-
issue?
(a) Bank A/c Dr. 4,000
To Equity Share Capital A/c 4,000
(b) Equity Share Capital A/c Dr. 4,000
To Bank A/c 4,000
(c) Bank A/c Dr. 4,000
To Share Forfeiture A/c 4,000
(d) Share Forfeiture A/cDr. 4,000
To Bank A/c 4,000
32. A company issued 25,000 shares and received applications for 35,000 shares. Company wants
to allot shares to everyone who has applied. What will be the ratio for allotment?
(a) 6 : 7 (b) 7 : 5 (c) 5 : 7 (d) 7 : 6
33. A company issued 10,000 shares of Rs10 each. Amount is payable as Rs2 on Application, Rs5
on Allotment and Rs3 on First and Final call. A shareholder who had 1,000 shares failed to pay
allotment and first call amount on due date. After a month, he paid the due amount. What
will be the amount received by company against issue of shares?
(a) Rs92,000 (c) Rs1,00,000
(b) Rs90,000 (d) Rs8,000
 34. Equity Shareholders are:
(a) creditors (c) customers of the company
(b) owners (d) none of these
35. Shares can be forfeited:
(a) for non-payment of call money (c) for failure to repay the loan to the bank
(b) for failure to attend meetings (d) for which shares are pledged
36. The profit on re-issue of forfeited shares is transferred to:
(a) general reserve (c) capital reserve
(b) capital redemption reserve (d) revenue reserve
37. Balance of share forfeiture account is shown in the balance sheet under the item:
(a) Current liabilities and provisions (c) Share Capital
(b) Reserves and surpluses (d) Unsecured loans
38. Arrange the following in proper sequence as types of “Share Capital”:
(i) Paid up Capital (iii) Subscribed Capital
(ii) Issued Capital (iv) Called up Capital
Choose the correct option:
(a) (ii) – (iii) –(iv) –(i) (c) (i) – (ii) – (iv) – (iii)
(b) (i) – (ii) – (iii) – (iv) (d) (iv) – (i) – (ii) – (iii)
39. When forfeited shares are re-issued the amount of discount allowed on these shares cannot
exceed:
(a) 10% of called-up capital per share
(b) 6% of paid-up capital per share
(c) The amount received per share on forfeited shares
(d) The unpaid amount per share on forfeited shares

Chapter 7.

Issue of Debentures
1. Pick the odd one out from the following.
(a) Debentures can be issued in lieu of dividends
(b) Debentures can be issued for cash
(c) Debentures can be issued for consideration other than cash
(d) Debentures can be issued as collateral security
2. Which of the following debentures are transferable by mere delivery?
(a) Registered debentures (c) Bearer debentures
(b) First Debentures (d) None of these
3. J.K. Co. Ltd purchased assets worth Rs15,30,000. It issued debentures of Rs100 each at a
discount of 10 percent in full satisfaction of the purchase consideration. The number of
debentures issued to vendor is:
(a) 17,000 (b) 15,300 (c) 16,000 (d) 30,000
4. Under which head of balance sheet discount on issue of debentures is shown?
(a) Debenture Account (c) Other non-current assets
(b) Statement of Profit and Loss (d) None of these
5. Tika Ltd. Purchased machinery for Rs50,00,000. It issued debentures of Rs100 each at a
discount of 10% for purchase consideration. What is the formula for calculating the number of
debentures issued?
(a) Purchase consideration divided by face value
(b) Purchase consideration divided by issued price
(c) Purchase consideration divided by discount value
(d) Either (b) or (c)
6. What is the percentage of discount on issue of debentures in the above transaction?
(a) 15% (b) 5% (c) 10% (d) 8%
7. A vendor issued debenture of Rs5,00,000 in consideration of assets of Rs5,60,000 and
liabilities of Rs1,00,000.
The balance of Rs40,000 debited to:
(a) General Reserve Account (c) Goodwill Account
(b) Capital Reserve Account (d) Statement of Profit & Loss
8. A company took a loan of Rs20,00,000 from HDFC Bank and issued 10% debentures of
Rs24,00,000 of Rs100 each as a collateral security.
Which account is debited while passing journal entry for this transaction in respect of issue of
debentures?
(a) Bank Account (c) Debenture Suspense Account
(b) Debenture Account (d) HDFC Account
9. When debentures are issued at a discount and are redeemable at a premium, which of the
following accounts is bebited at the time of issue?
(a) Debenture’s account
(b) Premium on redemption of debentures account,
(c) Loss on issue of debentures account
(d) Securities Premium Reserve Account
10. Jeevan Ltd. invited applications for 6000; 12% Debentures of Rs100 each at a premium of Rs15
per debentures. Full amount was payable on application. Application were received for 4000
debentures. Applications for 1000 debentures were rejected and application money was
refunded. Debentures were allotted to the remaining applicants.
Which of the following journal entry is correct for the above situation?
(a) Debentures Application and Allotment A/c Dr. 7,90,000
To 12% Debentures A/c 6,00,000
To Security Premium Reserve A/c 90,000
To Bank A/c 1,00,000
 (b) Debentures Application and Allotment A/c Dr. 5,75,000
To 12% Debentures A/c 4,00,000
To Security Premium Reserve A/c 60,000

To Bank A/c 1,15,000

(c) Debentures Application and Allotment A/c Dr. 4,60,000
To 12% Debentures A/c 3,00,000
To Security Premium Reserve A/c 45,000
To Bank A/c 1,15,000
(d) Debentures Application and Allotment A/c Dr. 3,45,000
To 12% Debentures A/c 3,00,000
To Security Premium Reserve A/c 45,000
11. A Ltd. need capital of Rs5,00,000. For arranging capital, Board of Company thought of the
following option: Issue 2500 shares of Rs200 each or take loan form bank and issue 5,000 10%
debentures. Then they finally decided to issue 5,000, 10% debentures of Rs100 each on April
01,2020 at a discount of 10% redeemable at a premium of 10%. Interest was paid half yearly
on September 30 and March 31 and tax deducted at source is 10%
(a) What is the amount of loss at the time of issue of debenture A/c
(i) Rs50,000 (iii) Rs1,00,000
(ii) Rs25,000 (iv) None of these
(b) In the due entry of interest on debentures, debenture holder account is credited with:
(i) Rs50,000 (iii) Rs25,000
(ii) Rs22,500 (iv) Rs45,000
st
12. On January 1 2020 Y Ltd. issued 20,000, 8% debentures of Rs100 each at a premium of 5% to
be redeemable at a premium of 10% after 5 years.
The entire amount was payable on application. The issue was oversubscribed to an extent of
10,000 debentures and the allotment was made proportionately to all the applicants. The
securities premium account has not been utilized for any other purpose during the year.
By which amount bank account is debited at the time of issue of debenture?
(i) Rs21,00,000 (iii) Rs10,50,000
(ii) Rs31,50,000 (iv) None of these
13. Naveen Ltd. invites application for the issue of 20,000, 10% debentures of Rs100 each payable
as to Rs25 on application, Rs60 on allotment and the balance on call. The company receives
applications for 30,000 debentures, out of which applications for 16,000 debentures are
allotted in full, 10,000 only 40% and the remaining rejected. The surplus money on partially
allotted applications is utilized towards allotment. All the sums due are duly received.
(a) How much surplus money received at the time of application which is adjusted for
allotment?
(I) Rs1,50,000 (iii) Rs3,50,000
(ii) Rs2,50,000 (iv) None of these
(b) What amount of money refunded to debenture holder?
(i) Rs2,50,000
 (ii) Rs3,50,000
(iii) Rs1,00,000
(iv) No refund, all money adjusted on allotment
14. Premium on Debentures cannot be used to:
(a) write off the discount on issue of shares or debentures
(b) write off premium on redemption of shares or debentures
(c) pay dividends
(d) write off capital loss
15. Convertible debentures cannot be issued at a discount if;
(a) they are to be immediately converted
(b) they are not to be immediately converted,
(c) both (a) and (b)
(d) none of these
16. Rajnish Limited purchased a running business from Kiran traders for a sum of Rs15,00,000
payable Rs3,00,000 by cheque and for the balance issued 9% debentures of Rs100 each at 20%
premium. The assets and liabilities consisted of the following: Plant and Machinery Rs4,00,000
Building Rs6,00,000 Stock Rs5,00,000 Debtors Rs3,00,000 Creditors Rs2,00,000.
(a) Calculate amount of capital reserve.
(i) Rs2,00,000 (iii) Rs1,50,000
(ii) Rs1,00,000 (iv) None of these
(b) How much shares issued by Rajnish Ltd to Kiran trader?
(i) 12,000 (ii) 15.000 (iii) 18,000 (iv) 10,000
17. Meena had been allotted for 1200 debentures by a Jiya Ltd on pro rata basis which had issued
two debentures for every three applied. For how many debentures Meena applied?
(a) 1200 (b) 800 (c) 1800 (d) None of these
18. Which of the following is a type of debentures on the basis of coupon rate?
(a) Secured (b) Convertible (c) Both (a) and (b) (d) None of these
19. After redemption of debentures the balance in the debentures redemption fund account is
transferred to:
(a) Statement of profits and loss (c) Capital reserve
(b) General reserve (d) Any of these
20. Discount on issue of debentures is a __________asset.
(a) current profit (b) fixed (c) fictitious (s) intangible
21. Discount at the time of issue of debenture is:
(a) capital profit (b) capital loss (c) normal profit (d) normal loss
22. Which of the following is correct with respect to own debentures?
(a) the company allots to its own promoters
(b) the company allots to its directors
(c) the company purchases from the market and keeps them as investments
(d) all of the above
23. Which statement is true with respect to issue of debentures as collateral security?
(a) No entry is made in the books of accounts since no liability is created by such issue
 (b) The issue of debentures as a collateral security may be recorded by means of journal entry
(c) Neither (a) nor (b)
(d) Either (a) or (b)
24. “Debenture includes debenture stock, bond or any other instrument of a company evidencing
a debt, whether constituting a charge on the company’s assets or not”. This definition is
defined in which section of the companies Act 2013.
(a) Sec 2(30) (b) Sec30(2) (c) Sec3(20) (d) Sec20(3)
25. __________refer to those debentures where a charge is created on the assets of the company
for the purpose of payment in case of default. The charge may be fixed or floating.
(a) Secured debentures (c) Convertible debentures
(b) Unsecured debentures (d) Unconvertible debentures
26. Anuj Ltd. Issued 50,000 15% debentures of 10 each at a discount of Rs2. At the end of year it
paid interest on debenture on:
(a) amount received on issue (c) on premium
(b) nominal (Face) value (d) on discount
27. Debenture Application a/c is_________.
(a) real account (c) personal account
(b) nominal account (d) current account
28. Which of the following statements is true?
(a) The debentures cannot be issued at a discount of more than 10% of the face value.
(b) Perpetual debentures are also known as irredeemable debentures.
(c) Debentures cannot be converted into shares
(d) Debentures cannot be issued at a premium.
29. ZPick the odd one out from the following.
(a) Collateral security may be defined as a subsidiary security
(b) Collateral security may be defined as a primary security
(c) Collateral security may be pledging some assets as a secured loan against the said loan
(d) Collateral security may be mortgaging some assets as a secured loan against the said loan.
30. Pick the odd one out form the following.
(a) A firm can buy its own debentures and shares.
(b) A Company can issue convertible debentures.
(c) A business can issue debentures with voting rights.
(d) An organization can issue redeemable debentures
31. J Ltd. took over asset of R9,00,000 and creditors of Rs1,80,000 from T Ltd. J Ltd. issued 12%
debentures of Rs20 each at a premium of 20% as purchase consideration to T Ltd.
(a) Find the amount of purchase consideration?
(i) Rs9,00,000 (ii) Rs1,80,000 (iii) Rs10,80,000 (iv) Rs7,20,000
(b) What is the number of debentures issued by J Ltd?
(i) 36,000 (iii) 40,000
(ii) 30,000 (iv) None of these
32. As per Companies Act 2013 which company can issue debentures for more than 10-years
maturity period?
 (a) Manufacturing Companies (c) Service Companies
(b) Infrastructure Companies (d) None of these
33. What is the formula for calculating interest on deep discount bond?
(a) Redemption Price – Issue Price (c) There is specific rate of interest
(b) Issue Price – Redemption Price (d) None of these
34. As per Companies Act 2013, condition of minimum subscription is applied on every security
including debentures, Which section of companies Act 2013 mentions this?
(a) Section 32 (a) Section 32 (c) Section 36 (d) Section 39
35. Which Accounting Standard (AS) is applied for the treatment of discount/premium on issue of
debenture?
(a) AS – 15 (b) AS – 16 (c) AS – 17 (d) AS – 18
36. When debentures are issued at premium but when nothing is mentioned, then premium is
generally charged at the time of :
(a) application (c) call
(b) allotment (d) either (a) or (b)
37. Teena Ltd. purchased asset of Divya Ltd. as under:
Plant & Machinery Rs10,00,000
Land & Building Rs50,00,000
The purchased consideration was Rs60,00,000. Rs15,00,000 were paid through bank and the
remaining by issue of 12% Debentures of Rs100 each at a premium of 20%.
What is the face value of issued debentures for purchased consideration?
(a) Rs60,00,000 (c) Rs37,50,000
(b) Rs45,00,000 (d) None of these
38. When debenture is issued at discount and redeemed at par, which account is debited with the
amount of discount on issue of debenture while doing due journal entry for recording the
transaction?
(a) Loss on issue of debenture A/c (c) Either (a) or (b)
(b) Discount on issue of debenture A/c (d) None of these
Chapter 8.

Redemption of Debenture
1. Pick the odd one out from the following.
(a) Debenture is a form of public borrowing
(b) It is customary to prefix debentures with the agreed rate of interest
(c) Debenture interest is a charge against profits
(d) The issue price and redemption value of debentures cannot differ
2. Debentures can be redeemed by company out of:
(a) profit (b) provision (c) capital (d) all of these
3. Which of the following is not true regarding redemption of debentures?
(a) Debentures can be redeemed at Par
(b) Debentures can be redeemed at Premium
(c) Debentures can be redeemed at Discount
(d) None of the above
4. Profit on sale of debenture redemption fund investments in the first instance is credited
to:
(a) Debenture redemption fund account (c) General reserve account
(b) Profit and loss appropriation account (d) None of these
5. The formula for calculating premium on redemption of debenture is:
(a) Par value of share / Rate of Premium on redemption / 100
(b) Par value of share * Rate of Premium on redemption / 100
(c) Issued value of shares * Rate of Premium on redemption / 100
(d) None of the above
6. Tina Ltd. issued 40,000, 10% debentures of Rs10 each at par. The debentures are
redeemable at a premium of 15% after 5 years.
(a) Rs50,000 (b) Rs40,000 (c) R60,000 (d) Rs15,000
7. K Limited has outstanding 10,000, 20% debentures of Rs100 each that are redeemable at a
premium of Rs10 each. Out of these 5000 debentures are to be redeemed on 31 st
December 2021.
(a) Rs75,000 (b) Rs82,500 (c) Rs1,50,000 (d) Rs1,65,000
8. Yamini Ltd. wants to redeem 5,000, 5% Debentures of Rs100 each at 5% premium. It has
already a balance of Rs10,000 in Debenture Redemption Reserve Account.
How much amount it must transfer to Debenture Redemption Reserve?
(a) Rs40,000 (b) Rs15,000 (c) Rs2,00,000 (d) Rs2,50,000
9. XYZ Ltd. issued 200, 15% debentures of Rs100 each on April 01, 2020 al discount of 20%
redeemable at premium of 10% out of profits. Company passed the following entry in its
books of account:
Debenture Application and Allotment A/c Dr. 16,000
 Loss on issue of Debenture A/c Dr. 5,800
To 15% Debenture A/c 20,000
To Premium on Redemption of Debentures A/c 1,800
Later it was discovered that there is error in the above entry identify the error:
(a) Premium calculated on par value instead of issued price of debenture
(b) Discount on issue is not calculated correctly
(c) Premium calculated on issued price instead of par value of debenture
(d) None of the above
10. Reema Ltd has the following balances appear in the balance sheet: Security Premium
Reserve Rs25,00,000
12% Debentures Rs1,50,00,000
Underwriting Commission Rs10,00,000
The company decided to redeem 12% debentures at 10% premium.
Which of the following is correct regarding utilization of security premium reserve?
(a) Rs10,00,000 utilised to write off Underwriting Commission
(b) Rs15,00,000 utilised for redemption of debentures
(c) Rs25,00,000 utilised for redemption of debentures
(d) Both (a) and (b)
11. On 1st April, 2019, the following balances appeared in the books of Monika Ltd.
10% Debentures Rs14,00,000
Debenture Redemption Reserve Rs75,000
the debentures were to be redeemed at a premium of 10% in two equal annual
installments beginning form 31st March, 2021. The company transferred the balance
amount to Debenture Redemption Reserve on 31st March, 2019.
(a) What is the amount transferred to DRR before the redemption of debentures?
(i) Rs65,000 (iii) Rs1,40,000
(ii) Rs3,50,000 (iv) None of these
(b) What is the amount Transferred to DRR before the redemption of debenture when
Monika Ltd. is NBFCs registered with RBI?
(i) Rs75,000 (iii) Rs1,40,000
(ii) Rs3,50,000 (iv) None of these
12. Annual contribution to the DRR was made on 31st March every year. On 31-3-2021,
balance at bank was Rs7,50,000 before receipt of interest. The investment was realised at
par for redemption of debentures at a premium of 10% on the above date.
(a) What is the amount required to transfer in DRR account?
(i) Rs75,000 (iii) Rs1,87,500
(ii) Rs50,000 (iv) None of these
(b) What is the amount of interest on DRR investment on 31 st march 2021?
(i) Rs1,12,500 (iii) Rs11,250
(ii) Rs75,000 (iv) None of these
(c) What amount is paid to debenture holder at the time of redemption?
 (i) Rs8,25,000 (iii) Rs8,00,000
(ii) Rs7,50,000 (iv) None of these
13. REETA Ltd. has 40,000 15% Debentures of 100 each due for redemption March 2021.
Debenture Redemption Reserve has a balance of Rs2,90,000 March, 2020.
It was decided to invest the required amount towards Debenture Redemption Investment.
Investments were realised at 115% less 0.5% brokerage and Debenture were redeemed.
(a) What is the amount required to be transferred to DRR?
(i) Rs3,00,000 (iii) Rs50,000
(ii) Rs1,90,000 (iv) Rs1,10,000
(b) What is the required amount invested by the company in Debenture Redemption
Investment?
(i) Rs4,00,000 (iii) Rs8,00,000
(ii) Rs6,00,000 (iv) None of these
(c) What is the amount realised form investment when rate of TDS is 10%
(i) Rs60,000 (iii) Rs80,595
(ii) Rs90,000 (iv) Rs89,550
14. In case the question is silent, DRR is created on the nominal value of outstanding redeemable
debentures to the extent of:
(a) 10% (b) 25% (c) more than 25% (d) all of these
15. Honey Ltd. purchased for cancellation its own 15,000, 12% Debentures of 100 each for
Rs95 per debenture.
The brokerage charges Rs15,000 were incurred. The amount to be transfer to Capital
Reserve.
(a) Rs75,000 (b) Rs60,000 (c) Rs14,25,000(d) None of these
16. Which of the following is not true for redemption of debenture?
(a) Listed companies are not required to create DRR
(b) Listed companies including NBFCs registered with RBI do not require to create DRR
(c) HFCs registered with National Housing Bank (NHB) do not require to create DRR
(d) Unlisted companies do not require to create DRR
17. The correct formula for calculating loss on issue of debenture when debentures issued at
discount and redeemed at premium?
(a) Loss on issue of debenture = Face value of share – premium on redemption
(b) Loss on issue of debenture = Premium on redemption + Discount on issue
(c) Loss on issue of debenture = Premium on redemption - Discount on issue
(d) Loss on issue of debenture = Discount on issue – Premium on redemption
18. Premium paid at the time of redemption of debentures is a :
(a) liability account (c) expense Account
(b) asset Account (d) none of these
19. _________refers to extinguishing or discharging the liability on account of debentures in
accordance with the terms of issue.
 (a) Repayment of debentures (c) Redemption of debentures
(b) Amortisation of debentures (d) None of these
20. Which of the following is true with regard to 10% Debentures issued at a discount of 20%
(a) The carrying amount of debentures gets reduced each year at a rate of 20%
(b) Issue price and the carrying amount of debentures are equal
(c) At the time of redemption, the debenture holder will be paid the issue price
(d) The face value and the carrying amount of debentures are equal
21. Debentures are redeemed setting aside 10% of nominal value (Face Value ) of Debentures
to Debenture Redemption Reserve. It is called:
(a) Redemption out of capital (c) Both (a) and (b)
(b) Redemption out of profit (d) None of these
22. When debentures are issued at par and redeemable at 12% Premium, the premium
payable is debited to:
(a) Profit and loss account
(b) Premium on Redemption of Debentures Account
(c) Loss on issue of Debentures account
(d) None of the above
23. For debenture are issued b unlisted company (other than NBFCs and HFCs), Debenture
Redemption reserve is maintained at:
(a) 25% of the value of debentures issued through public issue
(b) 10% of the value of debentures issued through public issue
(c) 0% of the value of debentures issued through public issue
(d) Either (a) or (b)
24. Debentures may be redeemed in:
(a) Lump-sum (c) Purchase form open market
(b) Draw of lots (d) All of these
25. According to the guidelines issued by Securities and Exchange Board of India (SEBI) what
percentage of the amount of debentures must be transferred to ‘Debentures Redemption
Reserve’ before the commencement of redemption of debentures, in case of convertible
debentures?
(a) 25% (b) 0% (c) 100% (d) Zero
26. If debentures of Rs50,000 are issued at par but redeemable at a premium of 10%. By what
principal of accounting, the loss on issue of debentures account will be debited with 5,000
while passing the issue entry?
(a) Principle of Revenue recognition
(b) Principle of Materiality
(c) Principle of Conservatism/Prudence
(d) Principle of Full Disclosure
27. Pick the odd one out from the following.
(a) Equity is owner’s stake and the debenture is a debt
(b) Rate of interest on debentures is fixed
 (c) Debenture holders get preferential treatment over the equity holders at the time of
liquidation
(d) Interest on debentures is an appropriation of profits
28. When debentures are redeemed out of profit, an equivalent amount is transferred to:
(a) General Reserve (c) Capital Reserve
(b) Debenture Redemption Reserve (d) Statement of Profit & Loss a/c
29. Riya Ltd. is a HFC registered with National Housing Bank issued 84,000, 10% Debentures of
Rs100 each on 1st April 2015, redeemable at a premium of 5% on 31st March 2019.
(a) Calculate the amount transferred to Debenture Redemption Reserve before the
redemption on debentures?
(i) Rs8,40,000 (iii) Rs42,00,000
(ii) Rs21,00,000 (iv) None of these
(b) What is the amount of Debenture Redemption investment?
(i) Rs12,60,000 (iii) Need not to deposit any amount
(ii) Rs21,00,000 (iv) None of these
30. According to which section of Companies Act 2013 Banking company is not required to
create Debenture Redemption Reserve?
(a) Section 70(4)
(d) Section 71(4)
(c) Section 72(4)
(d) Section 73(4)
31. Ankit Enterprises Ltd issued 24,000 12% Debentures of Rs100 each at a discount of 10%.
On September 1, 2011 debentures redeemable at a premium of 5% as under:
On March 31, 2017 8,000 Debentures
On March 31, 2018 6,000 Debentures
On march 31 2019 10,000 Debentures
The board of directors has also decided to transfer the require amount to Debenture
Redemption Reserve in four equal installments starting with March 2013.
(a) What is the amount of loss at the time of issue of debentures?
(i) Rs2,40,000 (ii) Rs1,20,000 (iii) Rs3,60,000 (iv) No Loss
(b) What amount of money paid to debenture holder as on 31 st March 2019?
(i) Rs10,50,000 (iii) Rs5,00,000
(ii) Rs10,00,000 (iv) None of these
(c) Calculating the amount paid to debenture holder as on 31 st March 2019?
(i) Rs80,000 (ii) Rs60,000 (iii) Rs70,000 (iv) Rs1,00,000
32. After redemption of debenture following entry passed in the books of account:
Debentures Redemption Reserve A/c Dr.
To Capital Reserve
Later on, it is found that there is an error in the above entry, The error in the above entry
is rectified by:
(a) Credit statement of profit & loss instead of Capital Reserve
 (b) Credited sinking fund account instead of Capital Reserve
(c) Credited General Reserve instead of Capital Reserve
(d) No correction required
33. Redemption of debentures can be done by the following ways:
(a) by issuing new shares (c) both (a) & (b)
(b) by using accumulated profit (d) none of these
34. Hemendra Ltd. wants to redeem 10,000 debentures of Rs100 each at a premium of Rs15%
How much amount it must transfer to Debenture Redemption Reserve if it has already a
balance of Rs80,000 in Debenture Redemption Reserve?
(a) Rs10,000 (b) Rs20,000 (c) Rs30,000 (d) Rs40,000
35. Premium paid at the time of redemption of debentures is:
(a) Personal account (c) Real account
(b) Nominal account (d) Current account
36. Which of the companies are exempted from creating debentures redemption reserve by
the SEBI:
(a) Debentures issued by Banking companies
(b) Housing finance companies registered with national housing bank
(c) Debentures issued by all India Financial institution regulated by RBI
(d) All of the above
37. Which of the following statements is true?
(a) A debenture holder is an owner of the company
(b) A debenture issued can get his money back only on the liquidation
(c) A debenture issued at a discount can be redeemed at a premium
(d) A debenture holder receives interest only in the event of profits
38. When no profits are set aside for redemption of debenture is called:
(a) Redemption out of profit (c) Redemption out of capital
(b) Both (a) and (b) (d) None of these

Chapter 9.

Final Accounts of Companies

1. The type of Analysis which used by the investor to identify whether the firm is fulfilling his
expectation with regard to dividends, capital appreciation, etc. is known as:
 (a) Security Analysis (c) Debt Analysis
(b) Dividend Decision (d) Credit Analysis
2. Which of the following items appear as Short – term Provision in the Financial Statements
of a Company?
(a) Interest Accrued but not due
(b) Current Maturities lf Long – term Debt
(c) Provision for Employee Benefits
(d) All of these
3. The detailed and accurate type of analysis done by the management of the enterprise to
determine the financial position and operational efficiency of the organization is known
as________
(a) External Analysis (c) Internal Analysis
(b) Static Analysis (d) Horizontal Analysis
4. Which of the following is not a part of Finance Cost (in statement of profit and loss)?
(a) Bank Caharges (c) Interest Paid on Public Deposits
(b) Interest Paid on Debentures (d) Loss on Issue of Debentures
5. Which of the following is not a limitation of Financial Statement Analysis?
(a) It is affected by personal bias (c) Lack of qualitative analysis
(b) Inter-firm comparative study possible (d) Ignores price level changes
6. Analysis of any Financial Statement comprises:
(a) Balance Sheet (c) Trading account
(b) Profit and Loss Account (d) All of these
7. Which of the following is not presented under ‘Current Liabilities’ in the Balance Sheet of
a company?
(a) Short – term Borrowings (c) Short –term Provisions
(b) Debentures (d) Trade Payable
8. ‘Shares Forfeiture Account’ appears in the Balance Sheet of the company under the
subhead:
(a) Reserves and Surplus (c) Share Capital
(b) Long – term Provisions (d) Other Current Liabilities
9. Expenses allowed on issue of shares appears in a Company’s Balance Sheet under:
(a) Share Capital (c) Unamortised Expenditure
(b) Current Liability (d) Contingent Liability
10. Which one of the following is (Mandatory) Commitment of the company?
(a) Proposed Dividend
(b) Interim Dividend
(c) Unpaid/Unclaimed Dividend
(d) Dividend Arrears on Cumulative Preference Shares
11. Balance Sheet of a company is required to be prepared in the format given in______
(a) Schedule III Part II (c) Schedule III Part III
(b) Schedule III Part I (d) Table A
12. Where will you show the Securities Premium Reserve in company’s Balance Sheet?
(a) Current Liabilities (c) Share Capital
(b) Reserves and Surplus (d) None of these
13. Liability which may become payable depending on an event happening in future
(a) Current Liabilities (c) Debentures
(b) Long Term Borrowings (d) Contingent Liabilities
14. Which of the following items is shown under the head ‘Non-Current Assets’ while
preparing the Balance Sheet of a company?
(a) Underwriting Commission (c) Inventory
(b) Current Investment (d) Patents
15. Gain on sale of property plant and equipment and intangible assets by a financial
company is shown in the Statement of Profit and Loss as:
(a) Revenue from operations (c) Both (a) and (b)
(b) other Income (d) None of these
16. Goodwill appears in a Company’s Balance Sheet under the Sub-head________
(a) Intangible assets (c) Property Plant and Equipment
(b) Fictitious assets (d) Current assets
17. Trade Investment appear in a Company’s Balance Sheet under the Sub-head:
(a) Current Investments (c) Intangible Assets
(b) Non-Current Investments (d) Short-term Loans and Advances
18. Under Financial Statement Analysis, this analysis is made to review and analyse the
financial statements of one year only. Name of this analysis is:
(a) External Analysis (c) Horizontal Analysis
(b) Internal Analysis (d) Vertical Analysis
19. Call in advance appear in a company’s Balance under:
(a) Share Capital (c) Long-term Borrowings
(b) Current Liability (d) Reserves and Surplus
20. The basic Financial Statements include:
(a) Statement of Cash Flows (c) Balance Sheet and Income Statement
(b) Statement of Retained Earnings (d) None of these
21. Which of the following is not a part of Short-term Provisions while preparing Balance Sheet
of a Company?
(a) Provision for Tax (c) Provision for Expenses
(b) Provision for doubtful debts (d) Provision for Gratuity
22. Accrued incomes are shown in a Company’s Balance Sheet under:
(a) Inventories (c) Trade Receivables
(b) Other Current Assets (d) Other Non-Current Assets
23. While preparing Company’s Balance Sheet, Self-Generated Goodwill is shown under:
(a) Property Plant and Equipment (c) Current Assets
(b) Intangible Assets (d) None of these
24. Proposed Dividend comes under which heading:
(a) Short term Provisions (c) Share Capital
(b) Long term Provisions (d) Contingent Liability
25. Creditors comes under which headings:
(a) Trade Receivable (c) Reserves and Surplus
(b) Short term Provisions (d) Current Liabilities
26. Bills Payable comes under:
(a) Short term Provision (c) Other Current Liabilities
(b) Short term Borrowings (d) Trade Payable
27. Short-term Provisions are shown under:
(a) Provision for Tax (c) Other Current Liabilities
(b) Provision for Doubtful Debts (d) Current Liabilities
28. Which of the Following statement is not correct in case of Financial Statement Analysis?
(a) Horizontal Analysis is a part of comparison
(b) Vertical analysis is a step towards comparison
(c) Shareholders are the internal users
(d) Ratio analysis helps in understanding Cash inflows and Cash outflows
29. Which of the following is not a part of Reserves and Surplus in a Company’s Balance
Sheet?
(a) General Reserve (c) Capital Reserve
(b) Revaluation Reserve (d) Reserve Capital
30. Which of the following is correct example of Capital work in progress
(a) Purchase of current assets
(b) Conversion of raw material into final goods
(c) Office building under construction
(d) Increase in patents
31. Which of the following are not users of Financial Statement Analysis?
(a) Shareholders (c) Investors
(b) Debenture holders (d) Stock Exchanges
32. Which of the following items is not a part of Inventories?
(a) Loose Tools (c) Work in progress
(b) Stores and Spares (d) Capital work in Progress
33. Accrued Commission of Rs60,000 will come under which heading while preparing Balance
Sheet of a company:
(a) Inventories (c) Other Non-current Assets
(b) Trade Receivables (d) Other Current Assets
34. Prepaid rent is a:
(a) current asset (c) current liability
(b) fixed asset (d) none of these
35. Staff welfare expenses are included in:
(a) cost of material consumed (c) employees benefit expense
(b) revenue from operation (d) none of these
36. You are required to find heading and sub-heading under which sundry debtors can be
shown?
(a) Property Plant and Equipment and Intangible Assets, trade receivables
(b) Current assets, trade receivables
(c) Property Plant and Equipment and Intangible Assets, trade payable
(d) Current assets, trade payable
37. Directors of a company proposed dividend to its shareholders. You are required to show
this proposed dividend in balance sheet of the company under:
(a) long-term liability (c) short-term provision
(b) current assets (d) notes to accounts
38. A Company got its mining right recently. You are required to show this right in Financial
Statements of the Company as:
(a) expense (c) current asset
(b) Property plant and equipment (d) intangible asset
39. A company issued capital. A shareholder paid all money on allotment while first call is not
called by company. So, you are required to show this advance in balance sheet of
company as:
(a) current liability (c) current assets
(b) long-term liability (d) none of these
40. A company issued shares calling application, allotment and first and final call. A holder of
shares not paid allotment and first call. His shares are forfeited but not re-issued. As on
balance sheet date, you are required to show these forfeited shares in the balance sheet
of company under the head.
(a) Current Liability (c) Current Assets
(b) Shareholders’ Fund (d) None of these
41. Preliminary expenses are those expenses which are paid before incorporation of a
company. A company paid its preliminary expenses to its promoters. Accountant of
company is in view that this is an expense, so it will be fully written-off in statement of
profit and loss account. How this should have been shown?
(a) Statement of profit and loss account by full amount
(b) Current asset
(c) Deduct form reserves and surplus
(d) None of the above
42. From following information, calculate other incomes.
Sale of product = Rs54,000
Sale of services = Rs60,000
Commission received = Rs1,20,000
Dividend form investment = Rs20.000
(a) Rs1,40,000
(b) Rs2,54,000
(c) Rs(46,000) loss
(d) None of these
 43. From the following information, you are required to computer profit after tax.
I. Revenue from operation = Rs80,00,0000
II. Cost of material consumed = Rs10,00,000
III. Purchase of stock-in trade = Rs30,00,000
IV. Employees salary = Rs4,00,0000
V. Tax rate = 50%
(a) Rs20,00,000 (c) Rs15,00,000
(b) Rs24,00,000 (d) Rs18,00,000
44. A company purchased a business of a firm. When accountant was tallying all assets and
liabilities, he found that the company has paid more amount than the worth of it’s assets.
You are required to find what this difference be called and where it will be shown?
(a) Capital reserve, reserves and surplus
(b) Goodwill, intangible assets
(c) Accountants totaling is wrong, assets and liabilities always tally without adjustment
(d) None of the above
45. Nominal accounts are related to:
(a) Expense + Income (c) Assets
(b) Liability (d) None of these
46. Which of the following is not the limitation of Financial Statements?
(a) lgnore qualitative aspects
(b) Personal bias
(c) Ignores price level change
(d) Provide information about the profitability of the business

Chapter 10.

Financial Statement Analysis

1. Pick the odd one out from the following.

(a) Comparative statements are known as 100% statements since all the items are
expressed as percentage of the base item.
(b) Common size financial statement is vertical analysis of financial statement.
(c) Common size statement may be prepared for balance sheet as well as income
 statement.
(d) Comparative statement helps to analyse and determine the reasons for change in
financial performance.
2. Do you agree with the statement that Comparative Balance Sheet, Comparative
Statement of Profit and Loss and Common-size Statement are intra firm analysis?
(a) No, it is Inter firm analysis
(b) No, it is used for both inter and intra firm analysis
(c) Yes, it is intra firm analysis
(d) Partially true, it is more than intra analysis
3. Which of the following is NOT the objective of common size statement?
(a) Study the trend in different item of Income and Expenses
(b) Comparison with other firms and industry performance
(c) Analysis change in individual item of income statement
(d) Efficiency of the firm could easily be assessed
4. Which tool of financial analysis can be used to known the reason for changes in financial
performance of an enterprise?
(a) Comparative statement (c) Ration analysis
(b) Common size statement (d) All of these
5. Comparative statement are also known as:
(a) Horizontal analysis (c) Vertical analysis
(b) Dynamic analysis (d) External analsis
6. Property plant and equipment and intangible assets on 31st March, 2021 were Rs123.00
lakhs and on 31st March, 2020 was Rs105.00 lakhs what was the percentage change in
property plant and equipment and intangible assets?
(a) 18.00 (b) 17.10 (c) 17.14 ` (d) 18.14
7. Other expenses in the statement of Profit and Loss of World Class Limited, for the year
ended 31st March, 2020 and 2021 was Rs1 lakhs and Rs2 lakhs respectively. What was the
absolute change?
(a) Rs3,00,000 (b) Rs1,00,000 (c) Rs2,00,000 (d) Rs50,000
8. Profit after tax in the statement of Profit and Loss Account for the year ended 31 st March,
2021 of Welcome Services Limited was Rs6,00,000 and rate of tax was 40%. What was the
profit before tax?
(a) Rs10,00,000 (b) Rs24,00,000 (c) Rs8,00,000 (d) Rs12,00,000
9. In the Common-size statement of XYZ Ltd, purchase of stock in trade and change in
inventory of stock-in-trade have decrease from 75% to 68% in the financial year 2020-
2021. What could be the possible reason for his change:
(a) Efficient functioning of the purchase and production department
(b) Increase in sale price of the product without corresponding increase in the cost of inputs
(c) Both (a) and (b)
(d) None of the above
10. Which of the following statements are false?
(i) When all the comparative figures in a balance sheet are stated as percentage of the total,
 it is termed as horizontal a
(ii) When financial statements of several years are analysed, it is termed as vertical analysis.
(iii) Vertical Analysis is also termed as time series analysis.
(a) Both (i) and (ii) (c) Both (ii) and (iii)
(b) Both (i) and (iii) (d) All three (i),(ii,(iii)
11. Which of the following is the most commonly used tools for financial analysis:
(a) Horizontal Analysis (c) Both (a) and (b)
(b) Vertical Analysis (d) None of these
12. Which of the following is related to significance of financial statement analysis?
(a) It judges financial position and operational efficiency of company
(b) It ignores qualitative aspects
(c) It is affected b personal bias of the analysis
(d) None of the above
13. A company’s working capital is Rs10 Lakhs (Negative balance) in the year 2020. It became
Rs15 Lakhs (positive balance) in the year 2021. What is the percentage of change?
(a) 150% (b) 100% (c) 250% (d) 50%
14. The correct formula for calculation of percentage is:
(a) First year absolute figure / Absolute Increase or Decrease * 100
(b) Absolute Increase for Decrease / Second year absolute figure * 100
(c) Absolute Increase or Decrease / First year absolute figure * 100
(d) None of the above
15. Analysis of financial statements of two or more enterprises is_________.
(A) Cross-Sectional Analysis (c) Horizontal Analysis
(b) Time Series Analysis (d) Internal Analysis
16. Analysis of financial statement is not useful for_________.
(a) Share market (c) Chief Minister
(b) Taxing officer (d) Shareholder
17. Which of the following statement is not False.
(a) Comparative study determines trends of assets, equity and liabilities which help in
planning
(b) Meaningful comparison is not possible for the firm following same accounting policies
(c) Financial statement considers qualitative elements and ignore quantitative elements
(d) Comparative balance sheet is a vertical analysis in which item of assets, equity and
liability is analysed
18. Which of the following is true for Horizontal Analysis?
(a) Financial statement of one year (c) Half yearly financial statement
(b) Financial statement of more than one year (d) Quarterly financial statement
19. The financial statement of a business enterprise include:
(a) Balance sheet
(b) Statement of Profit and Loss Account
(c) Cash-Flow Statement
(d) All of the above
20. Which of the following is limitation of financial statement analysis?
(a) Financial analysis is just a study of reports of the company
(b) Monetary information alone is considered in financial analysis while non-monetary
aspects are ignored
(c) The financial statements are prepared on the basis of accounting concept, as such, it
does not reflect the current position
(d) All of the above
21. A Company’s current liabilities decreased for Rs8,00,000 to Rs6,00,000. What is the
percentage of change?
(a) 25% (b) 33.3% (c) 20% (d) 40%
22. Revenue from Operations Rs4,00,000; Cost of Revenue from Operations is 60% of Revenue
from Operations; Operating expenses Rs30,000 and Rate of Income Tax is 40%. What will
be the amount of profit after tax?
(a) 64,000 (b) 78,000 (c) 52,000 (d) 96,000
23. Which of the following is compared in comparative financial analysis?
(a) Balance Sheet (c) Both (a) and (b)
(b) Income Statement (d) None of these
24. Which of the following are the objectives of Interpretation of Financial Statements:
(a) Criticisms and Analysis (c) Drawing Conclusion
(b) Comparison and Trend Study (d) All of these
25. In which of the following each item is expressed as a percentage of some common base:
(a) Common size statement (c) Cash Flow Statement
(b) Fund Flow Statement (d) Comparative statement
26. Which of the following is the feature of financial statement analysis?
(a) Easy form (c) Comparable form
(b) Convenient and rational groups (d) All of these
27. Pick the odd one out from the following:
(a) To make inter – firm comparison
(b) To calculate income tax
(c) To assess operating efficiency of firm
(d) To assess the short term and long-term financial position
28. Revenue from operations Rs15,00,000
Cost of Material Consumed Rs6,00,00
Employees Benefit Expenses Rs1,50,000
Other expenses Rs90,000
What is the amount of profit before tax?
(a) Rs9,00,000 (b) Rs7,50,000 (c) Rs6,60,000 (d) Rs8,10,000
29. Comparative financial statement shows price level changes as all the items are recorded at
cost and value of money in the latest year.
(a) True (c) False (c) Partially true (d None of these
30. Choose the correct option from the following:
 Column I Column II

1. Comparative (i) Arithmetic

2. Common-size (ii) AS-3

3. Ratio (iii) Horizontal

4. Cash flow (iv) vertical

(a) (iv) (i) (iii) (ii)

(b) (i) (ii) (iii) (iv)
(c) (iv) (iii) (ii) (i)
(d) (iii) (iv) (i) (ii)

31. Common size statements are accounting statements which are expressed in percentage of
some base figure rather than as absolute numerical figures.
(a) True (b) False (c) Partially true (d) Can’t say
32. Choose the odd one out.
(a) Vertical analysis is made on the basis of financial statement of several years
(b) Vertical analysis is also known as static analysis
(c) Vertical analysis is made on the basis of single set of financial statement
(d) In vertical analysis each element of financial statement are shown as percentage
33. Intangible asset of a company increased form Rs12,00,000 to Rs16,00,000. Total of
Balance Sheet is Rs45,00,000.
What is the percentage of intangible asset when Common size Balance Sheet is prepared?
(a) 33.33 (b) (33.33) (C) (8.89) (d) 8.89
34. What is the formula for calculating Gross Profit?
(a) Operating profit – Cost of goods sold
(b) Net Profit – Cost of goods sold
(c) Sale – Cost of goods sold
(d) Sales + Cost of goods sold
35. What is break-even point?
(a) Total sales are equal to total cost (c) Total sales are more than total cost
(b) Total sales are less than total cost (d) No relation between total cost and total
sales
36. If revenue from operation is Rs15,00,000, other expenses are Rs4,50,000. Rate of tax is
22.5%. Find out profit after tax?
(a) Rs10,50,000 (b) Rs9,50,000 (c) Rs8,13,750 (d) Rs7,13,750
37. If equity share capital of company is increased by 23.57%. What does it indicate?
(a) It makes financial position of company weak
(b) It makes financial position of Company strong
 (c) It has no effect on financial position of company
(d) Can say anything from given information

Chapter 11.

Cash Flow Statement

1. Pick the odd one out from the following.

(a) Issue of shares (c) Dividend received by JK Ltd.
(b) Sale of Machinery (d) Purchase of Investment
2. Cash flow statement is useful in which type of financial planning?
(a) Long-term (b) Short-term (c) Medium-term (d) None of these
3. Which accounting standard classifies business activities as operating, financing and
investing activities?
(a) AS – 1 (b) AS – 2 (c) AS – 3 (d) AS – 4
4. Dividend paid by a company to the shareholder is an ________activity.
(a) investing (b) financing (c) operating (d) all of these
5. The formula for calculating cash flow from investing activities is:
(a) Purchase of Asset + Dividend Paid + Rent received – Sale of Asset
(b) Purchase of Asset – Dividend Paid + Rent received – Sale of Asset
(c) Sale of Asset – Dividend Paid + Rent received – Purchase of Asset
(d) Sale of Asset – Dividend Paid + Rent paid – Purchase of Asset
6. Followings are the extracts from the balance sheet of MAHAN Ltd. as at 31 st march 2021:

Particulars 31st March, 2021 31st March,2020

Surplus i.e., balance in statement of P/L 10,00,000 5,00,000

Dividend Payable 50,000 _____

Additional information:
Proposed dividend for the year ending 31st March, 2020 and 31st March, 2021 are
Rs4,00,000 and Rs5,00,000 respectively. Find out net profit before tax and extraordinary
item for 31.3.2020
(a) Rs5,50,000 (b) Rs15,00,000 (c) Rs9,00,000 (d) Rs10,00,000
7. A Mutual Fund Company receives a dividend of Rs30 Lakhs on its investments in another
company’s shares. This dividend is treated as:
(a) Cash Flow from Operating Activities
(b) Cash Flow from Investing Activities
(c) Cash Flow from Financing Activities
(d) No Cash Flow
8. If the net profits made during the year are Rs60,000 and the bills receivables have
decreased by Rs15,000 during the year then find out the cash flow from operating
activities?
(a) Rs45,000 (b) Rs60,000 (c) Rs15,000 (d) Rs75,000
9. Which of the following will be deducted while calculating cash flow from operating
activities?
(a) Decrease in Prepaid Expenses
(b) Increase in Trade Payables
(c) Increase in Trade Receivables
(d) Decrease in Trade Receivables
10. Which of the following will decrease the cash flow from operating activities?
(a) Increase In Current Assets (c) Decrease in Current Liabilities
(b) Neither of the two (d) Both (a) and (b)
11. D.K. Ltd. provides you the following information:
Non-Current Investments as on 31-03-2020 is Rs1,20,000
Non-Current Investments as on 31-03-2021 is Rs40,000
During the year 2021, the company sold 80% of its original investments at a profit of 20%
on book value.
(a) What is the proceeds from sale of investment?
(i) Rs1,15,400 (ii) Rs1,15,000 (iii) Rs1,16,000 (iv) Rs1,15,200
(b) What is the value of investment purchased during the year?
(i) Rs15,000 (ii) Rs16,200 (iii) Rs16,000 (iv) Rs14,000
12. Jitu Ltd., made a profit of Rs1,00,000 after charging depreciation of Rs20,000 on assets
and a transfer to general reserve of Rs30,000. The goodwill amortised was Rs7,000 and
gain on sale of machinery was Rs3,000. Other information available to you (changes in
the value of current assets and current liabil
13.
14. ities ) are trade receivables showed an increase of Rs3,000; trade payable an increase of
Rs6,000; prepaid expenses an increase of Rs200; and outstanding expenses a decrease of
Rs2,000.
(a) What is the gain on sale of machinery?
(i) Rs4,000 (ii) Rs5,000 (iii) Rs6,000 (iv) Rs3,000
(b) Find out cash flow from operating activities?
(i) Rs1,54,000 (ii) Rs1,51,000 (iii) Rs1,60,000 (iv) Rs1,54,800
15. Suchita Ltd. has given you the following information:
Machinery as on April 01,2020 50,000
Machinery as on March 31,2021 60,000
Accumulated Depreciation on April 01,2020 25,000
Accumulated Depreciation on March 31,2021 15,000
During the year, a Machine costing Rs25,000 with Accumulated Depreciation of Rs15,000
was sold for Rs13,000.
(a) Find out profit on sale of machinery?
 (i) Rs4,000 (iii) Rs5,000
(ii) Rs3,000 (iv) None of these
(b) What is the value of depreciation provided during the year?
(i) Rs5,000 (iii) Rs15,000
(ii) Rs6,000 (iv) None of these
(c) Find out cash flow from investing activity?
(i) Rs35,000 (iii) Rs22,000
(ii) Rs13,000 ` (iv) None of these
16. A company receives a dividend of Rs3 Lakhs on its investment in other company’s
shares. If this company is Finance Company, it will be classified as?
(a) Cash Flow from Operating Activities
(b) Cash Flow from Investing Activities
(c) Cash Flow from Financing Activities
(d) None of these
17. Purchase of property plant and equipment and intangible assets will be classified as
operating activity for non-finance company:
(a) No, it is financing activity (c) Not to be recorded
(b) No, it is investing activity (d) Yes, it is operating activity
18. Sanika Ltd. has given you the following information:
Building as on April 01,2020 1,00,000
Building as on March 31,2021 1,20,000
Accumulated Depreciation on April 01,2020 50,000
Accumulated Depreciation on March 31,2021 40,000
During the year, a Building costing Rs50,000 with Accumulated Depreciation of Rs20,000
was sold for Rs26,000.
(a) What is the value of Building purchased during the year?
(i) Rs1,50,000 (iii) Rs20,000
(ii) Rs1,00,000 (iv) Rs70,000
(b) What is the amount of profit/loss on the sale of building?
(i) Rs4,000 (iii) Rs14,000
(ii) Rs(4,000) (iv) None of these
19. Which of the following is related to operating activities?
(a) Increase in current assets (c) Decrease in current assets
(b) Increase in current liabilities (d) All of these
20. Which of the following formula is used to find out net operating profit before working
capital?
(a) Net Profit before Taxation + Depreciation + Goodwill amortised – Gain on sale of
Assets
(b) Net profit before Taxation + Depreciation + Goodwill amortised + Loss on sale of Asset
(c) Net profit before Taxation + Depreciation + Goodwill amortised – Loss on sale of Asset
(d) Both (a) and (b)
21. Sale of copyright is concerned with which of the following activities?
(a) Investing activities ` (c) Operating activities
(b) Financing activities (d) All of these
22. Purchase of goodwill is a _________activity.
(a) operating (c) investing
(b) financing (d) both (a) and (b)
23. Cash Flow Statement is also known as:
(a) statement of changes in financial position on cash basis.
(b) statement accounting for variation in cash.
(c) both (a) and (b)
(d) none of the above
24. While calculating operating profit which of the following will be added to bet profit?
(a) Preliminary Expenses Written off (c) Loss on Sale of Asset
(b) Depreciation (d) All of these
25. Which of the following is an example of cash flow from operating activity?
(a) Purchase of own debentures
(b) Sale of property plant and equipment and intangible assets
(c) Interest paid on term-deposits by a bank
(d) Issue of equity share capital
26. Cash deposit with the bank with a maturity date after two months belongs to which of
the following in the cash flow statement?
(a) Investing activities (c) Cash and Cash equivalent
(b) Financing activities (d) Operating activities
27. Interest paid by an Investment company will come under which kind of activity while
preparing cash flow statement?
(a) Cash Flow from Operating Activities (c) Cash Flow from Financing Activities
(b) Cash Flow from Investing Activities (d) No Cash Flow
28. While preparing cash flow statement dividend paid by a manufacturing company is
classified as:
(a) Cash Flow from Operating Activities (c) Cash Flow from Financing Activities
(b) Cash Flow from Investing Activities (c) No Cash Flow
29. A customer deposit money in Axis Bank, is classified as:
(a) Cash Flow from Operating Activities (c) Cash Flow from Financing Activities
(b) Cash Flow from Investing Activities (d) No Cash Flow
30. Loan given by J.K. Finance company is treated as:
(a) Cash Flow from Operating Activities (c) Cash Flow from Financing Activities
(b) Cash Flow from Investing Activities (d) No Cash Flow
31. Which of the following is the main revenue genera ting activity of the enterprises?
(a) Cash flow from management activities (c) Cash flow from investing activities
(b) Cash flow from financing activities (d) Cash flow from operating activities
32. Riya Ltd. is a manufacturing company which buy back Rs5,00,000 shares from market.
While preparing cash flow statement this activity is classified as:
 (a) Operating activity (c) Investing activity
(b) Financing activity (d) Both (a) and (c)
33. Sheetal Ltd. company received a refund of Rs50,000 from income tax department. This
refund of tax is treated as ________activity while preparing cash flow statement.
(a) outflow of cash (c) no change in cash
(b) inflow of cash (d) none of these
34. Mohit Ltd. company declared dividend and paid dividend tax. Dividend tax is treated
as________ activity while preparing cash flow statement.
(a) operating (b) financing (c) investing (d) both (a) and (b)
35. Which of the following is a financial activity?
(a) Dividend Received (c) Interest received
(b) Bank overdraft (d) None of these
36. What is the treatment of Preliminary Expenses written of in cash flow statement?
(a) Deduct in operating activities (c) Deduct in financing activities
(b) Deduct in investing activities (d) Add in operating activities
37. Teena Ltd. made a profit of Rs2,00,000 after charging depreciation of Rs40,000 on asset
and transfer to general reserve is Rs60,000. The goodwill write off was Rs14,000 and
profit on sale of Machinery was Rs6,000. The other information is as follows:
At the end of the year Trade Receivable showed an increase of Rs10,000. Trade Payable
increase by Rs15,000. Prepaid expenses increase by Rs2,000.
(a) What is the amount of net change from non-operating items?
(i) Rs(48,000)(ii) Rs(54,000) (iii) Rs54,000 (iv) Rs48,000
(b) Calculate net cash flow/used from operating activities?
(i) Rs(3,11,000) (ii) Rs3,11,000 (iii) Rs3,08,000 (iv) Rs(3,08,000)
38. Particulars Purchased (Rs) Sold (Rs)
Plant 8,20,000 3,00,00
Investment 1,40,000 60,000
Goodwill 50,000 ____
Patents ___ 90,000
Interest received on debentures held as investment Rs16,000
Interest paid on debentures issued Rs30,000
Dividend paid on equity share capital Rs50,000
(a) What is the effect of goodwill on investing activities?
(i) No effect on investing activities
(ii) Cash flow investing activities increase by Rs50,000
(iii) Cash flow from investing activities decrease by Rs50,000
(iv) Cash flow from investing activities increase by Rs40,000
(b) If rate of interest on debenture is 6% p.a., then what is the value of investment in
debentures?
(i) Rs5,00,000 (ii) Rs4,00,000 (iii) Rs80,000 (iv) Rs3,00,000
(c) Calculate cash flow/used from financing activities?
(i) Rs50,000 (ii) Rs80,000 (iii) Rs20,000 (iv) Rs(80,000)
 39. The following information is available for Plant and Machinery of Naveen Lted.:
Plant and Machinery balance as on 1st 20202 9,20,000
st
Plant and Machinery balance as on 31 2021 10,70,000
Depreciation charge during the year is Rs85,000
What is the value of Machinery purchased during the year?
(a) Rs2,00,000 (c) Rs65,000
(b) Rs2,35,000 (d) None of these
40. Opening and closing balance of patent were Rs3,50,000 and Rs2,00,000 respectively.
Patent having book value of Rs1,20,000 was sold for Rs1,80,000.
Find out the value of patent written off during the year?
(a) Rs60,000 (b) Rs30,000 (c) Rs1,50,000 (d) Rs80,000
41. Provision for taxation opening and closing balance are Rs3,50,000 and Rs4,60,000
respectively. Rs2,10,000 tax paid during the year.
What is amount of Provision for tax made during the year?
(a) Rs3,50,000 (b) Rs4,60,000 (c) Rs2,10,000 (d) Rs3,20,000

Capter 12.

Ratio Analysis

1. Current Ratio is calculated by:

(a) Current Liabilities/Current Assets (c) Current Assets/Long-term Liabilities
(b) Current Assets/Current Liabilities (d) Long-term Assets/Long-term Liabilities
2. The ideal Current ration is:
(a) 1. 25 : 1 (b) 2 : 1 (c) 1 : 2 (d) 10%
3. The two basic measures of operational efficiency of a company are:
(a) Inventory turnover Ratio and Working Capital Turnover Ratio
(b) Liquid Ratio and Operating Ratio
(c) Liquid Ratio and Current Ratio
(d) Gross Profit Margin and Net Profit Margin
4. If Total Assets are Rs13,20,000, Non-Current Assets Rs6,00,000 and Capital Employed is
Rs12,00,000. Which of the following correctly represents the current ratio for the
venture?
(a) 2 : 1 (b) 4 : 1 (c) 6 : 1 (d) 7 : 1
5. In case if the current ratio of a business is 0.8:1, state if payment of final dividend
already declared the current ratio:
 (a) will improve (c) will have no impact on
(b) will decline (d) may or may not impact
6. Debt to Equity Ratio:
(a) Long-term Debts (c) Short-term Debts
Shareholder’s Funds Revenue from Operations
(b) Short-term Debts (d) Gross Profit
Shareholder’s Funds Revenue from Operations
7. Current Ratio is 2 : 1. On the sale of property plant and equipment and intangible assets
(Book value Rs20,000) for Rs18,000, state whether the Current Ration will:
(a) Improve (b) Decline (c) Will not change (d) Can’t say
8. A transaction involving a decrease in both Current Ration and Quick Ratio is:
(a) Sale of Non-Current Asset for cash. (c) Cash payment of a Current Liability
(b) Sale of Stock-in Trade at loss. (d) Purchase of Stock-in-Trade on credit.
9. From the following which ration is not of Activity Ratio?
(a) Inventory Turnover Ratio (c) Working Capital Turnover Ratio
(b) Trade Receivables Turnover Ratio (d) Debt to Equity Ratio
10. The _______may indicate that the firm is experiencing stock outs and lost sales.
(a) Average payment period (c) Average collection period
(b) Inventory turnover ratio (d) Quick ratio
11. Current ratio of Vidur Pvt. Ltd. is 3 : 2 Accountant wants to maintain it at 2 : 1. Following
options are availale:
(i) He can repay Bills Payable
(ii) He can Purchase goods on credit
(iii) He can take short term loan
Choose the correct option:
(a) Only (i) is correct (c) Only (i) and (iii) are correct
(b) Only (ii) is correct (d) Only (ii) and (iii) are correct
12. Debt equity ratio of a company is 1 : 2. Which of the following transactions will increase
it?
(a) Issue of new shares for cash (c) Issue of Debenture for cash
(b) Redemption of Debentures (d) Goods purchased on credit
13. Assuming that the current ratio is 2 : 1 purchase of goods on credit would:
(a) Increase current ratio (c) No effect on current ratio
(b) Decrease current ratio (d) Decrease gross profit ratio
14. On the basis of following information received from a firm, its Proprietary Ratio will be:
Property Plant and Equipment and Intangible Assets Rs3,30,000; Current Assets
Rs1,90,000; Preliminary Expenses Rs30,000; Equity Share Capital Rs2,44,000; Preference
Share Capital Rs1,70,000; Reserve Fund Rs58,000.
(a) 70% (b) 80% (c) 85% (d) 90%
15. Satisfactory Ratio between Long-term Debts and Shareholder’s Funds is:
(a) 1 : 1 (b) 3 : 1 (c) 1 : 2 (d) 2 : 1
16. Opening Inventory of a firm is Rs80,000. Cost of revenue from operation is Rs6,00,000.
Inventory Turnover Ratio is 5 times. Its closing Inventory will be:
(a) Rs1,60,000 (c) Rs80,000
(b) Rs1,20,000 (d) Rs2,00,000
17. The formula for calculating the Trade Receivables Turnover Ratio is:
(a) Total Revenue from Operations
Average Debtors
(b) Credit Revenue from Operations
Average Debtors
(c) Net Credit Revenue from Operations
Average Debtors + Average Bills Receivable
(d) None of the above
18. Inventory Turnover Ratio is:
(a) Average Inventory / Revenue from Operations
(b) Average Inventory / Cost of Revenue from Operation
(c) Cost of Revenue from Operations/Average Inventory
(d) G.P./ Average Invesntory
19. Which of the following is not a part of Activity Ratio and Turnover Ratio?
(a) Trade Receivable Turnover Ratio (c) Interest Coverage Ratio
(b) Trade Payable Turnover Ratio (d) Working Capital Turnover Ratio
20.

Amount
Particular (Rs)

I EQUITY AND LIABILITIES 8,00,000

Current Liabilities

II ASSETS 10,00,000
Current Assets

Subsequently it purchased goods for Rs1,00,000 on credit. Quick ratio will be_____.
(a) 1 .11 : 1 (b) 1 .22 : 1 (c) 1.38 : 1 (d) 1 .25 : 1

21. If Current Ratio of a company is 3 : 2, identify which combination is correct?

(a) Current Assets Rs50,000 and Current Liabilities Rs50,000
(b) Current Assets Rs60,000 and Current Liabilities Rs50,000
(c) Current Assets Rs90,000 and Current Liabilities Rs70,000
(d) Current Assets Rs90,000 and Current Liabilities Rs60,000
22. Which of the following assets are not part of Current Assets while calculating the
Current Ratio?
 (a) Cash in hand (c) Marketable securities
(b) Cash at bank (d) Loose tools

23.

S.NO. Items Amount

1. Paid-up Share Capital 6,00,000

2. 6% Debenture 3,00,000

3. 9% Loan 1,00,000

4. DRR 2,00,000

5. Closing Inventory 1,00,000

Debt equity ratio will be:

(a) 0.5 : 1 (b) 0.66 : 1 (c) 1.6 : 1 (d) 1.25 : 1
24. In which of the following ratio “Total Assets” are used for calculation purpose?
(a) Proprietary Ratio (c) Current Ratio
(b) Inventory Turnover Ratio (d) Return on Investment
25. Ratio analysis under financial analysis is significant as it:
(a) ignores qualitative factors
(b) helps in window-dressing
(c) does not requires any standards
(d) helps in locating weak points of the firm
26. An ideal quick ratio is said to be:
(a) 1 : 1 (c) 0.5 : 1
(b) 2 : 1 (d) 1 : 1.5
27. Test of solvency of a business undertaking means:
(a) its ability to meet the interest costs
(b) its ability to meet the interest costs
(c) its ability to pay dividends to equity shareholders
(d) all of the above
28. The immediate solvency ratio is:
(a) quick ratio (c) debtors turnover ratio
(b) current ratio (d) stock turnover ratio
29. The following groups of ratios that primarily measure risk:
(a) liquidity , activity and profitability (c) liquidity , activity and debt
(b) liquidity , activity and inventory (d) liquidity , debt ad profitability
30. The________ratios are primarily measures of return.
(a) liquidity (b) activity (c) debt (d) profitability
31. The _______ of business firm is measured by its ability to satisfy its short-term
obligations as they become due
(a) activity (b) liquidity (c) debt (d) profitability
32. _________ ratios are a measure of the speed with which various accounts are converted
into revenue from operations or cash.
(a) Activity (c) Debt
(b) Liquidity (d) Profitability
33. The two basic measures of liquidity are:
(a) inventory turnover and current ratio
(b) current ratio and liquid ratio
(c) gross profit margin and operating ratio
(d) current ratio and average collection period
34. The ________ is a measure of liquidity which excludes______, generally the least liquid
asset.
(a) current ratio, trade receivable (c) current ratio, inventory
(b) liquid ratio trade receivable (d) liquid ratio, inventory
35. The credit sale of M/s. Dinesh & Sons is Rs21,00,000. It’s debtors and bills receivables at
the end of the accounting period amounted to Rs2,00,000 and Rs1,50,000 respectively.
What will be the debtor’s turnover ratio?
(a) 4 times (b) 5 times (c) 6 times (d) 7 times
36. Total purchase Rs1,70,000, cash purchases Rs16,000, purchase return Rs8,000, creditors
at the end of the year Rs32,000, creditors in the beginning Rs24,000. What will be the
creditors turnover ratio?
(a) 5. 12 times (b) 5.16 times (c) 5.21 times (d) 5.25 times
37. Consider the following information.
Long-term borrowings Rs2,00,000
Long-term provision Rs1,00,000
Current liabilities Rs50,000
Non-Current assets Rs3,60,000
Current assets rs90,000
Proprietary ratio will be:
(a) 22.2% (b) 2.8% (c) 36% (d) None of these
38. Calculating Operating Ratio, if cost of revenue from operations Rs50,000, Revenue from
operations Rs1,50,000 and Operating expenses Rs20,000.
(a) 45% (b) 46.7% (c) 48.1% (d) 42.2%
39. The _______ is useful in evaluating credit and collection policies.
(a) average payment period (c) average collection period

(b) current ratio (d) current assets turnover

40. The _______ measures the activity of a firm’s inventory.
(a) average collection period (c) liquid ratio
(b) inventory turnover (d) current ratio
41. ABC Co. extends credit terms of 45 days to its customers. Its credit collection would be
considered poor it its average collection period was.
(a) 30 days (b) 36 days (c) 47 days (d) 37 days
42. _______ are especially interested in the average payment period, since it provides
them with a sense of the bill-paying patterns of the firm.
(a) Customers (c) Lenders and suppliers
(b) Stockholders (d) Borrowers and buyers
43. The ______ ratio provide the information critical to the long-run operation of the firm.
(a) liquidity (b) activity (c) solvency (d) profitability
44. Which of the following transactions will improve the current ratio?
(a) Cash collected from trade receivables
(b) Purchase of goods for cash
(c) Payment to trade payables
(d) Credit purchase of goods
45. Operating ratio is:
(a) Cost of revenue from operations + Selling expenses/Net revenue from operations
(b) Cost of production + Operating expenses/Net revenue from operations
(c) Cost of revenue from operations + Operating expenses/Net revenue from operations
(d) Cost of production/Net revenue from operations
46. Proprietary ratio is:
(a) Long-term debts/Shareholders’ funds
(b) Total assets/Shareholders’ funds
(c) Shareholders’ funds/Total assets
(d) Shareholders’ funds/Property plant and equipment and intangible assets