ARSHAD COMMERCE

C-78 BDA KOHEFIZA, MOBILE 9893905143

PRACTICE PAPER - 1
1. 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 ` 40,000 as premium for goodwill for its 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 for 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
2. A, B and C share profits and losses in the ratio of 3 : 2 : 1. D is admitted with 1/6 share which he gets
entirely from A. What will be the new ratio?
(a) 2 : 2 : 1 : 1 (b) 3 : 1 : 1 : 1 (c) 2 : 2 : 2 : 1 (d) None of these
3. One of the partners (Mr. Dev ) in a partnership firm has withdrawn ` 4,500 at the end of each quarter.
Interest on his drawings is to be calculated at the rate of 6% per annum. Interest on his drawings will
be______________.
(a) ` 810 (b) ` 400 (c) ` 405 (d) ` 304
4. If the new partner does not brings in his share of goodwill in cash so which account will be debited?
(a) Current A/c (b) Capital A/c (c) Revaluation A/c (d) Balance Sheet
OR
Sale of marketable security will result in
a. Cash in flow b. cash out flow c. no flow d. none of these
5. Partner’s capital account are opened when their capital accounts are: Following options are available:
(i) Fixed (ii) Fluctuating (iii) Both (i) and (ii) (iv) None of these
Choose the correct option:
(a) Only (i) is correct (b) Only (ii) is correct
(c) Only (iii) is correct (d) Only (iv) is correct
6. What is Product Method? Following options are available:
(i) Amount of drawing is uniform. (ii) Amount of drawing is irregular.
(iii) Time intervals between the two drawings is also uniform.
Choose the correct option:
(a) Only (i) is correct (b) Only (ii) is correct
(c) Only (i) and (ii) are correct (d) Only (ii) and (iii) are correct.
Or
Ratio calculated to show margin of safety to lender is :-
a. Current ratio b. Debt – Equity ratio c. Asset to Debt ratio d. Proprietory ratio
7. X and Y are partners sharing profits & losses in the ratio of 5 : 3, they decided to admit Z as a
partner. The new profit sharing ratio after Z's admission is 5 : 3 : 2. On the date of admission of Z
the Balance Sheet showed a balance in Workmen's Compensation Reserve of Rs. 20,000 and claim
on WCR is 21000. X account will be credited by
a. 12,500 b. 625 c. 12,125 d. Nil
8. Drawing out of capital if capital accounts are fixed will be posted to -----A/c.
a. Capital debit b. Capital credit c. Current debit d. Current credit OR
Y ltd is engaged in the construction of houses. State with reason whether sale of houses by the
company will be cash flow operating of investing activity?
9. In which of the following case, revaluation account is debited?
(a) When there is a increase in value of asset (b) When there is a decrease in value of asset
(c) When there is a decrease in value of liability (d) When there is a no change in value of assets
10. Ram and Shyam , Mohan are partners in 3:2:1 ratio. Shyam retires if he acquired 20,000 from Ram and
Rs 12000 from Mohan as his share of goodwill, the new profit sharing ratio will be?.........................
11. The firm of Ravi and Mohan was dissolved on 31.3.2013. According to the agreement Ravi had agreed
to undertake dissolution work for an agreed remuneration of Rs 2000 and bear all realisarion expenses.
Dissolution expenses were 1500. Entry will be:-
Realisation dr 2000 Realisation dr 2000 Realisation dr 1500 None of these
To cash A/c 2000 To Ravi capital To cash A/c 1500
 OR
There was a vehicle loan of 2,00,000 which was paid by surrender of asset to the bank at an
agreed value of 1,40,000 and the shortfall was met from firms bank account.
12. ............................goodwill can not be shown in the books of accounts .
13. Can a partner be exempted from sharing loss under ........................ circumstances .
HYPOTHETICAL QUESTION “-
Following is the hypothetical question, you need to answer the point asked below on the basis of
following information :
A and B are partners sharing profits and losses in the ratio of 2 : 1. On 1st April, 2018 their Capitals
were: A– ` 50,000 and B– ` 40,000.
(i) Interest on Capital is to be allowed @ 5% p.a.
(ii) Interest on the loan advanced by B’s for the whole year, the amount of loan being ` 30,000.
(iii) Interest on partners’ drawings @ 6% p.a. Drawings: A` 10,000 and B 8,000.
(iv) 10% of the divisible profit is to be transferred to Reserve.
Net profit for the year ended 31st March, 2019 is ` 68,460.
14. What amount of profit will be credited to Profit
& Loss Appropriation A/c?
(a) ` 68,460 (b) ` 66,660 (c) ` 58,050 (d) ` 60,390
15. What amount will transferred to Appropriation A/c as net profit ……………
16. What is the amount of reserve ………………
17. Ram and Rahim are partners sharing profits in the ratio 1 : 1. Their capital balances as on 31.3.2014
were Rs. 2,50,000 and Rs. 2,44,000 respectively. On 01.04.2014, they admitted John for 4/5 share
into partnership firm on the condition that he will bring Rs. 30,000 as goodwill and will bring
80% of the adjusted capital of Ram. Their drawings during the year 2013-14 were Ram Rs. 20,000
and Rahim 24,000. At the time of admission of John, loss on revaluation of assets and liabilities
was Rs. 14,000.
Capital to be brought by John is :-
a. 2,38,000 b. 1,16,500 c. 190,400 d. none of these.
18. Virat and Anushka are partners in a firm sharing profit and losses in 2 : 1 ratio. Their capital balance on
1st April was :-
` 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. Calculate Closing balance of capital for Virat and Anushka.
(a) V = ` 12,10,000, A = ` 9,35,000 (b) V = ` 12,35,000, A = ` 9,10,000
(c) V = 13,10,000, A = ` 9, 85,000 (d) None of these
19. ……….. and …………… are two conditions when capital changes under fixed method of capital.
20. Minor can be admitted in partnership firm only under this condition …………….
3 marks Questions
21. Geet and Meet are partners in equal ratio. It was agreed to calculate goodwill at three years purchase
of average profit of last three years. The profits were as follows:
March 2017 – profit 1,60,000 (includes abnormal gain of 50,000)
March 2018- profit 1,50,000 (includes 20,000 loss , being machine became obsolete.)
March 2019- profit 65,000 I(Overhauling expense on second hand machine incurred on july
1st 2018. Rs 1,00,000 was debited to Repair account, which is to be capitalsed now
subjected to depreciation 20%.pa )
22. X and Y are partners in a firm. They admit Z as a partner with 1/4th share in the profits of the firm. Z
brings Rs. 2,00,000 as his share of capital. The value of the total assets of the firm is Rs. 5,40,000 and
outside liabilities are valued at Rs. 1,00,000 on that date. Calculate Z's share of Goodwill and give
journal entry .
23. The partners of a firm distributed the profits for the year ended 31st March 2012 Rs.90000 in the ratio
of 3:2:1 without providing for the following adjustments :
1. A and B were entitled to a salary of Rs. 1500 each per annum.
ii) B was entitled to a commission of Rs. 4500.
i) Profits were to be shared in the ratio of 3:3:2.
ii) Interest on capital 10% on their capitals 2,00,000 and 1,50,000.
iii) Pass necessary journal entry for the above adjustments in the books of the firm.
24. Madhav, Madhusudan and Mukun were partners in jagannath Associates. They decided to
dissolve the firm on 31 st March 2021. Pass necessary journal entries.
 a. Old machine fully written off was sold for 42,000 while a payment of 6000 is made to
bank for a bill discounted by bank.
b. Madhusan accepted am unrecorded asset of 80,000 at Rs 75,000 and the balance through
cheque against the payment of his loan to firm 1,00,000.
c. Stock of book value 30,000 Taken by partners in ratio.
OR
Prepare Comparative Statement of Profit and Loss from the following information:
Particulars March, 2016 March, 2015

Revenue from Operations (% of Materials Consumed) 125% 200%

Cost of Materials Consumed 6,72,000 3,00,000
Other Expenses (% of Operating Revenue) 10% 10%
Tax Rate 30% 30%

25. On the death of Y on June 30, 2023 , his capital balance showed 1,00,000 to be paid , it was
decided to transfer this balance to his executor account and the amount will be paid in two
equal instalments with 10% p.a. interest . you are required to prepare Executor loan A/c
OR
Under which major heading and sub-heading will the following items be shown in the Balance Sheet of
a company as per Schedule III, Part I of the Companies Act, 2013?
(i) Long-term Borrowings (ii) Trade Payables (iii) Provision for Tax (iv)Money Received Against
Share Warrants (v) Patents(vi) Accrued Incomes(vii) Cheques/Draft in Hand (viii) Calls-in-Advance
26. P,Q and R were partners in 3:2:1 ratio, on the 31 st march , p retired from the firm , goodwill is
valued at Rs 60,000 and new ratio is decided as 1:2. Give entry for recording goodwill.
4 Marks – questions
27. Archna, Suresh and Deepak are partners in firm. On 1st April, 2011 the balance in their capital
accounts stood at Rs/- 6,00,000, Rs/- 5,00,000 and Rs/- 4,00,000 respectively. They shared profits in
the proportion of 4:2:3 , Partners are entitled to interest on capital @ 7% per annum and salary to
Suresh @ Rs/- 10,000 per quarter and a commission of Rs/- 2,000 p.m. to Deepak as per the provisions
of the partnership deed. Suresh's share of profit excluding interest on capital is guaranteed at Rs/-
30,000 p.a. Deepak's share of profit including interest on capital but excluding salary is guaranteed at
Rs/- 60,000 p.a. Any deficiency arising on that account shall be met by Archna. The profit of the firm
for the year ended 31st March, 2012 amounted to Rs/- 2,59,000. Prepare 'Profit and Loss Appropriation
.
28. A,B,C were partners in a firm sharing profits in the ratio of 3:2:1. on 1st April, 2016 their balance
sheet was as follows Balance Sheet as at 1st April, 2016

Liabilities Amt(Rs) Assets Amt(Rs)

General reserve 100,000 Building 6,00,000
Creditors 200,000 Machine 2,00,000
Capital A/c Sock 1,00,000
A 2,00,000 Debtors 70,000
B 2,50,000 Cash 30,000
C 2,50,000 7,00,000

10,00,000 10,00,000
From the above date partners decided to share the future profits in the ratio of 1:1:1. for this purpose the
goodwill of the was valued at Rs. 100,000. It was also considered that
1. Creditor of Rs 10,000 will not be claimed ; building reduced to 90%; bad debts of Rs 5000 and
create provision for debtors 10%. Partners decided not to show the altered values in the
balance sheet . Give journal entries
 29. X,Y and Z were partners in a firm sharing profits in equal ratio . On 31 march
Liabilities Assets
X's Capital A/c 40,000 Building 1,40,000
Y's Capital A/c 60,000 Machinery 60,000
Z's Capital A/c 1,00,000 Stock 8,000
Employees' Provident Reserve 16,000 Debtors 12,000
Workmen Compensation Reserve 12,000 Cash 8,000
2,28,000 2,28,000
Y died on 30 th june . executor is entitled to the following:
(i) Amount standing to the credit of deceased Partner's Capital Account.
(ii) Interest on capital @ 10% p.a.
(iii) Share of goodwill. The goodwill of the firm on Y's death was valued at 2,40,000.
(iv) Share of profit from the closing of last financial year to the date of death on the basis of
last year's profit. Profit of the year ended 31st March, 2016 was Rs 15,000.
(v) 46,750 to be paid immediately and balance later . prepare Y’s capital account .
OR
Inventory Turnover Ratio 5 Times, Inventory at the end is Rs. 20,000 more than that in the beginning.
Revenue from Operations Rs. 8,00,000. Rate of Gross Profit on Cost 1/4, Current Liabilities Rs.
2,40,000. Quick Ratio 0.75. Calculate Current Ratio.
6 MARKS – QUESTIONS
30. Atal and Madan were partners in a firm sharing profits in the ratio of 5:3. On 31.03.2015 they
admitted Mehra as a new partner for 1/5th share in the profits.the Balance Sheet is
Liabilities Rs. Assets Rs.
Capitals Land - Building 150000
Atal 150000 Machinery 40000
Madan 90000 240000 Patents 5000
Provision for Bad Debts 1200 Stock 27000
Creditors 20000 Debtors 47000
W.C.R 32000 Bank 4200
Profit and Loss 20000
293200 293200
On Mehra's admission it was agreed that new ratio will be 5:3:2.
i) Mehra will bring Rs. 40,000 as his capital and Rs. 16000 for his share of goodwill premium
half of which was withdrawn by Atal and Madan.
ii) A provision of 5% for bad and doubtful debts was to be created.
iii) Included in the Sundry Creditors was an item of Rs. 2500 which was not to be paid.
iv) A provision was to be made for an outstanding bill for electricity Rs. 3000.
v) A claim of Rs. 325 for damages against the firm was likely to be admitted. Provision for the
same was to be made. After the above adjustment's the capitals of the Atal and Madan were to
be adjusted on the basis of Mehra's capital. Actual cash was to be brought in or to be paid off to
Atal and Madan as the case may be , prepare Revaluation capital accounts of the partners.
31. A, B & C were in partnership sharing profits in proportion to their capitals. Their Balance Sheet
on 31st march, 2014 were as follows.
Liabilities Rs. Assets Rs.
Creditors 15600 Cash 16000
Reserve 6000 Debtors 20000
Capital A/c Less Provision 400 19600
for Bed Debts
A's Capital 90000 Stock 18000
B's Capital 60000 Machinery 48000
C's Capital 30000 Building 100000
201600 201600
On the above date B retired to ill health and the following adjustments were agreed upon.
 1. Building to be appreciated by 10%.
2. Provision for Doubtful debts to be increased to 5% of Debtors.
3. Machinery to be depreciated by 15%.;
4. Goodwill of the firm be valued at Rs. 36,000 and be adjusted into the Capital Account of A &
C who will share profits in future in ratio of 3:1;
5. A provision be made for outstanding repairs bill for Rs. 3000;
6. Included in the value of Creditors is Rs. 1800 for an outstanding legal claim, which is not
likely to arise.’
7. Out of the insurance premium paid Rs. 2000 for the next near. The amount was debited to
Profit and Loss Account.The partners decide to fix the capital of the new firm as Rs. 120000
in the profit sharing ratio. Give journal entries .
32. X,Y and Z are partners in equal ratio. Their capital were 3,00,000 (credit); 2,50,000(credit) 20,000
debit respectively. It was agreed that :partners are allowed interest on capital 5% pa, and interest on
drawing6% p.a
10% of net profit to be transferred to General reserve; Z is entitled salary of 60,000 p,a; X is entitled
10% of net profit as remuneration; Y is entitled commission of 10% of net profit before interest on
drawing but after charging appropriations. During the year X withdrew 3000 in the beginning of every
month; Y drew 3000 in the mid of the month and Z drew 3000 at the end of the month. On 1 st October
of the year Z gave loan of Rs 5,00,000; the manger is entitled salary of 2000 p.m and commission of
10% of net profit after charging his salary and commission. Profit for the year 237000. Prepare profit
and loss appropriation A/c ..
33. Bharti, Charu and Dilip are partners sharing profits and losses in the ratio of 3:2:1. Their Balance sheet
as at 31st December 2012 was as follows :
Liabilities Rs. Assets Rs.
Creditors 87,000 Cash 30,000
Reserves 42,000 Debtors 62000
Profit & Loss A/C (Profits) 21,000 Less : Provision for
Capital Accounts : Doubtful debts 2000 60,000
Bharati 3,00,000
Charu 3,00,000 Stock 1,80,000
Dilip 50,000 6,50,000 Furniture 30,000
Plant 2,00,000
Building 3,00,000
8,00,000 8,00,000
The partners agreed that from Ist January 2013, they will share profits and losses in the ratio of 4:4:1.
Stock is to be valued at 20% less; Provisions for doubtful debts to be increased by Rs. 1500.
Goodwill is valued at Rs. 45,000.
Partners do not want to record the altered values of assets and liabilities in the books and want to leave
the reserves and profits undistributed. They also decided not to show goodwill in the books. You are
required to pass a single journal entry to give effect to the above and prepare balance sheet.
34. Michale, Jackson and John are three partners sharing profits in the ratio of 3:1:1. On 31 st March,
2012, they decided to dissolve their firm. On that date their balance sheet was:
Liabilities Rs. Assets Rs.

Creditors 12,000 Cash 6,400

Loan 3,000 Debtors 48,400
Capital A/cs: Less: Provision for Doubtful 46,000
Michale 55,000 Debts 2,400 15,600
Jackson 20,000 Stock-in-trade 2,000
John 14,000 89,000 Furniture 34,000
1,04,00 Sundry Assets 1,04,000

(a) Michale is to take over Furniture at Rs 1,600 and Debtors amounting to Rs 40,000 at Rs
34,400; the Creditors of Rs 12,000 to be paid by him at this figure.
(b) Jackson is to taken over all the stock in trade at Rs 14,000 and some of the sundry Assets at
Rs 14,400 (Being 10% less than book value)
 (c) John is to take over the remaining Sundry Assets at 90% of the book value less Rs 200 as
discount and assumed the responsibility for the discharge of the Loan together with accrued interest of
Rs 60 which has not been recorded in the book.
(d) The expenses of dissolution were Rs 540. The remaining Debtors were sold to a debt
collecting agency for 50% of the book value. Prepare Realisation accounts to close the book of the
firm.
OR
From the following balance sheets prepare cash flow statement of Yogita Ltd.
Particulars Note No. 31st March 2024 31st March 2023
1.EQUITY AND LIABILITIES
1. Shares holders Funds
a. Share capital 1 4,00,000 2,00,000

b. Reserves and Surplus 2 2,00,000 1,00,000

2. Non current liabilities
a. Long term borrowings 3 - 2,00,000
3. Current liabilities
a) Short term borrowing 10% loan 1,50,000 20,000
a) Trade Payable 4 70,000 50,000
b) Short term provisions (provision for 50,000 30,000
tax)
Total 2,48,400 2,09,800
II. ASSETS
1. Non Current assets
i) Tangible Assets 7,00,000 4,00,000

2. Current assets
a) Inventories 1,70,000 1,00,000
b) Trade Receivables 1,00,000 50,000
c) Cash and Cash equivalents (1,00,000) (1,00,000)
5

Total 8,70,000 6,00,000

Notes to Accounts :
Particulars 31st March 2024 (Rs) 31st March 2023 (Rs)
Equity share capital 3,00,000 1,00,000
12% Preference share capital 1,00,000 1,00,000
Additional Information :Depreciation during the year was Rs. 50,000; Dividend paid on equity shares @ 10%.;
Tax provisions created during the year amounted to Rs. 60,000.; 10% of the tax paid includes dividend tax.
Loan was taken on 31st December 2011.