PM SHRI KENDRIYA VIDYALAYA SILCHAR

QUESTION BANK FOR HIGH ACHIEVERS

ACCOUNTANCY-XII (2024-25)
CHAPTER NO-1 FUNDAMENTAL OF PARTNERSHIP FIRM
SR STATEMENT OF QUESTION M
NO
1 Assertion: In case of losses interest on capital will not be provided. 1
Reason: As interest on capital is treated as the appropriation of the profits and there are
no profits but interest on capital can be provided in case of losses if it is to be treated as
charge.
(A)Both A and R true and R is the correct explanation of A.
(B)Both A and R are true but R is not the correct explanation of A
(C)A is true and R is false
(D)A is false and R is true
2 On 31st March 2006 after the close of accounts the capitals of Mountain, Hill and Rock 1
stood in the books of the firm at Rs.4.00,000, Rs.3,00,000 and Rs.2,00,000
respectively. Subsequently it was discovered that the interest on capitals @ 10% p.a.
had been omitted. The profit for the year amounted to Rs.1, 50,000 and the partner’s
drawings had been Mountain Rs.20, 000, Hill Rs.15, 000 and Rock Rs.10, 000.
Calculate interest on Capitals.
(a) Mountain Rs.27,000 , Hill Rs.16,500 , and Rock Rs.16,000.
(b) Mountain Rs.47,000 , Hill Rs.36,500 , and Rock Rs.16,000
(c) Mountain Rs.37,000 , Hill Rs.26,500 , and Rock Rs.16,000
(c) Mountain Rs.27,000 , Hill Rs.16,500 , and Rock Rs.6,000
3 Seeta and Geeta are partners sharing profits and losses in the ratio 4:1. Meeta was 1
manager who received the salary of ₹ 4,000 p.m. in addition to a commission of 5% on
net profits after charging such commission. Profit for the year is ₹ 6, 30,000 before
charging salary. Find the total remuneration of Meeta.
(A) ₹78,000 (B) ₹88,000 (C) ₹87,000 (D) ₹76,000
4 A, B and C sharing profits in the ratio of 2: 2: 1 have fixed capitals of Rs. 3,00,000, 1
Rs. 2,00,000 and Rs. 1,00,000 respectively. After closing the accounts for the year
ending 31st March 2019 it was discovered that interest on capitals was provided
@ 12% instead of 10% p.a. In the adjusting entry:
(A) Cr. A Rs.1,200; Dr. B Rs.800 and Dr. C Rs.. 400
(B) Dr. A Rs.1,200; Cr. B Rs. 800 and Cr. C Rs.. 400
(C) Cr. A Rs.800; Cr. B Rs.. 400 and Dr. C Rs. 1,200
(D) Dr. A Rs.800; Dr. B Rs.. 400 and Cr. C Rs.1,200
5 Viru and Anil are partners in a firm sharing profits and losses in the ratio 2:1. Their 1
Capital balances were Rs. 10, 00,000 and Rs. 8, 00,000 respectively. The firm made a
profit during the year amounted to Rs.3, 45,000. Both partners are allowed a salary of
Rs. 2,500 per month. Interest on capital is allowed @ 5% on capital balance. What will
be the Capital balance of Anil?
(a) Rs. 9,35,000 (b) Rs. 9,10,000
(c) Rs. 9,85,000 (d) None of these
6 A and B are partners sharing profits and losses in the ratio of 3 : 2. Their capital on 31st 3
March, 2018 after all adjustments stood at Rs.1,65,500 and Rs.1,27,600 respectively.
Profits amounting to Rs.50, 000 for the year 2017-18 were distributed after allowing
interest on drawings @ 12% p.a. During the year A withdrew Rs.15, 000 at the
beginning of every quarter and B withdrew Rs.40, 000 during the year. Partnership
deed is silent on interest on drawings but provides for interest on Capital @ 5% p.a.
Interest on Capital has not been provided.
Showing your workings clearly, pass the necessary adjustment entry to rectify the
above errors.
7 P and Q were partners in a firm sharing profits in 3:1 ratio. Their respective fixed 3
capitals were ₹10, 00,000 and ₹6, 00,000. The partnership deed provided interest on
 capital @ 12 % p.a. even if it will result into a loss to the firm. The net profit of the
firm for the year ended 31st March, 2023 was ₹1, 50,000.
Pass necessary journal entries in the books of the firm allowing interest on capital
and division of profit/loss amongst the partners.
8 A, B and Care partners share profits and losses in the ratio of 3:2:1. Their capitals ₹1, 4
00,000, ₹75,000 and ₹50,000 respectively. They agreed to allow interest on capital @
10 % p.a. and agreed to charge interest on drawings @10% p.a. Their drawings for the
year were ₹10,000, ₹8,000 and ₹6,000 respectively. C was very active getting a salary
of ₹2,000 per month and in return, he guaranteed that firm’s profit would not be less
than ₹80,000 before charging or allowing interest and salary payable to C. Actual profit
for the year 2011 was ₹75,000.
Prepare Profit and Loss Appropriation Account and Partners Capital Account.
9 Sanjay, Sudha and Shakti are partners in a firm sharing profits in the ratio of 3:1:1. 4
Their fixed capital balances are ₹4, 00,000, ₹1, 60,000 and ₹1, 20,000 respectively. Net
profit for the year ended 31st March, 2020 distributed amongst the partners was
₹1,00,000, without considering the following adjustments:
(a) Interest on capitals @ 2.5% p.a.
(b) Salary to Sanjay ₹18,000 p.a. and commission to Shakti ₹12,000.
(c) Sanjay was allowed a commission of 6% of divisible profit after charging such
commission.
Pass a rectifying journal entry in the books of the firm. Show workings clearly.
10 Ajay, Binod and Chandra entered into partnership on 1st April 2019 with a capital of 4
₹3,00,000, ₹2,00,000 and ₹1,00,000 respectively. In addition to capital Chandra has
advanced a loan of ₹1, 00,000. Since they had no agreement to guide them, they faced
following issues during and at the end of the year.
1. Ajay wanted interest on capital to be provided @8% pa but Binod and Chandra did
not agree.
2. Chandra wanted that interest on loan be paid to him @ 10% pa but Ajay and Binod
wanted to pay @ 5% pa.
3. Ajay and Binod demanded to share profits in the ratio of their capital contribution,
Chandra is not in agreement with this proposal.
4. Binod, being working partner, demands a lump sum payment of ₹40,000 as
remuneration for which the other two partners are not in agreement.
You are required to suggest and help them resolve these issues.
11 Moli, Bhola and Raj were partners in a firm sharing profits and losses in the ratio of 3: 6
3: 4. Their partnership deed provided for the following :
(i) Interest on capital @ 5% p.a.
(ii) Interest on drawing @ 12% p.a.
(iii) Interest on partners’ loan @ 6% p.a.
(iv) Moli was allowed an annual salary of Rs. 4,000; Bhola was allowed a commission
of 10% of net profit as shown by Profit and Loss Account and Raj was guaranteed a
profit of Rs. 1,50,000 after making all the adjustments as provided in the partnership
agreement. Their fixed capitals were Moli : Rs. 5,00,000; Bhola : Rs. 8,00,000 and Raj
: Rs. 4,00,000. On 1st April, 2016 Bhola extended a loan of Rs. 1, 00,000 to the firm.
The net profit of the firm for the year ended 31st March, 2017 before interest on
Bhola’s loan was Rs. 3, 06,000.
Prepare Profit and Loss Appropriation Account of Moli, Bhola and Raj for the year
ended 31st March, 2017 and their Current Accounts assuming that Bhola withdrew Rs.
5,000 at the end of each month, Moli withdrew Rs. 10,000 at the end of each quarter and
Raj withdrew Rs. 40,000 at the end of each half year.
12 The partners of the firm Alia Bhatt , Bhanu Pratap & Chetan Sharma distributed the 6
profits for the year ended 31st March 2017 Rs.80,000 in the ratio of 3 : 3 : 2 without
providing for the following adjustments:-
(a) Alia Bhatt and Chetan Sharma were entitled to a salary of Rs 1,500 p.m.
(b) Bhanu Pratap was entitled for a commission of Rs. 4,000
(c) Bhanu Pratap and Chetan Sharma had guaranteed a minimum profit of Rs.35, 000
to Alia Bhatt. Any deficiency to be borne by equally by Bhanu Pratap & Chetan
Sharma.
Pass Adjustment entry to rectify above effect.
 CHAPTER NO- 2 CHANGE IN PROFIT SHARING RATIO &
VALUATION OF GOODWILL
SR STATEMENT OF QUESTION M
NO
1 A firm has earned average profits of the Rs.1, 00,000 during the last few years and the 1
normal rate in similar business is 10%. Find the value of goodwill by: Capitalisation of
average profit. The firm has assets of Rs.10, 00,000 and external liabilities Rs.1,
80,000.
(a) Rs. 2,80000 (b) Rs.1,80,000 (c) Rs.3,80,000 (d) Rs.4,80,000
2 Assertion(A):The value of Goodwill calculated on Average profit Method and Super 1
profit Method is not the same
Reason (R): The value of Goodwill calculated on Average profit Method and Super
profit Method is not the same as the basis of valuation is different In the context of the
above two statements, which of the following is correct?
(a)Both Assertion(A) and Reason (R) are true and Reason(R) is the correct explanation
of Assertion(A)
(b)Both Assertion(A) and Reason (R) are true and Reason(R) is not the correct
explanation of Assertion(A)
(c) Assertion(R) is true but the Reason(R) is false
(d)Assertion(R) is false but the Reason(R) is true
3 Assertion: Revaluation of assets is necessary at the time of change in profit sharing 1
ratio as their current value differs from their book value.
Reason: The difference arising out of change in value should be recorded in the books
of accounts.
A. Both Assertion and reason are true and reason is correct explanation of
assertion.
B. Assertion and reason both are true but reason is not the correct explanation of
assertion.
C. Assertion is true, reason is false.
D. Assertion is false, reason is true.
4 Which of the following items are added to previous year’s profits for finding normal 1
profits for valuation of goodwill?
(a) Loss on sale of fixed assets (b) Loss due to fire, earthquake etc
(c) Undervaluation of closing stock (d) All of the above
5 A, B and Care partner sharing profits in the ratio of 2: 4: 6. On 1-4-2022 they decided 3
to share the profits equally. On the date there was a credit balance of Rs.1,20,000 in
their Profit and Loss Account and a balance of Rs.1,80,000 in General Reserve
Account. Instead of closing the General Reserve Account and Profit and Loss Account,
it is decided to record an adjustment entry for the same.
6 Arun and Varun were partners sharing profits in the ratio of 2: 3. With effect from 1st 3
May 2003 they agreed to share profits in the ratio of 1: 2. For this purpose the goodwill
of the firm is to be valued at two year’s purchase of the average profits of the last three
years which were Rs.1, 50,000, Rs. 1, 40,000 and Rs. 2, 20,000 respectively. Reserve
appear in the books at Rs.1, 10,000. Partners neither want to show goodwill in the
books nor want to distribute the reserves. You are required to give effect to the
change by passing a single journal entry.
7 Compute of the firm on the basis of the last 3 years’ purchase of the Average profits of 4
last 4 years. The profits of the last 4 years were: 2011- Rs.25,000, 2012-Rs.30,000,
2013- Rs.24,000, and 2014- Rs. 38,000.Following information is supplied to you:
(a) In 2013 a major repair was made in plant and Machinery to Rs.10, 000 on 1st July
which was charged to revenue account. The said sum is agreed to be capitalised for
goodwill computation subject to depreciation @10% p.a. on reducing balance method.
(b) The closing stock of 2012 was overvalued by Rs.3, 000.
(c) Management cost is Rs.3, 000 annual.
Assuming that accounts are closed at 31st December each year.
8 Asha and Aditi are partners in a firm sharing profits and losses in the ratio of 3: 2. They 4
admit Raghav as a partner for 1/4 th share in the profits of the firm. Raghav brings Rs.
6, 00,000 as his capital and his share of goodwill in cash. Goodwill of the firm is to be
valued at two years’ purchase of average profits of the last four years. The profits of the
firm during the last four years are given below :
Year Profit (Rs.)
2013 – 14 3,50,000
2014 – 15 4,75,000
2015 – 16 6,70,000
2016 – 17 7,45,000
The following additional information is given :
(i) To cover management cost an annual charge of Rs. 56,250 should be made for the
purpose of valuation of goodwill.
(ii) The closing stock for the year ended 31.3.2017 was overvalued by Rs. 15,000.
9 P, Q and R are partners in a firm and sharing Profits and losses in the ratio of 5: 4: 3. 6
On 31st March 2003 their Balance sheet was as follows:-
LIABILITIES AMOUNT ASSETS AMOUNT
Sundry creditors 50,000 Cash at bank 40,000
Outstanding expenses 5000 Sundry debtors 2,10,000
General reserve 75,000 Stock 3,00,000
Capital A/c Furniture 60,000
P 4,00,000 Plant & Machinery 4,20,000
Q 3,00,000
R 2,00,000

10,30,000 10,30,000
It was decided that with effect from 1st April 2003 the profit sharing ratio will be 4 : 3 :
2.For this purpose the following revaluation were made:-
(i) Furniture be taken at 80% of its book value.
(ii) Stock be appreciated by 20%.
(iii) Plant and Machinery be valued at Rs.4, 00,000.
(iv) Create provision for doubtful debt for Rs.10, 000 on debtors.
(v) Outstanding expenses be increased by Rs.3, 000.
Partners agreed that altered values are not to be recorded in the books and they
also do not want to distribute the general reserve.
You are required to post a single journal entry to give the effect of the above. Also
prepare the revised Balance sheet.
10 From the following information, calculate value of goodwill of M/s Amrit and Amar: 6
1. At three years purchase of average profit.
2. At three years purchase of super profit.
3. On the basis of capitalization of super profit.
4. On the basis of capitalization of average profit.
Information:
a. Average capital employed- ₹10, 00,000.
b. Net profit/loss of the firm for the past years 2021- ₹1,60,000; 2022- ₹1,40,000;
2023- ₹2,70,000
c. Normal Rate of Return on capital is 11%.
d. Remuneration to each partner for his service to be treated as a charge on profit
₹2,500/month
Assets excluding goodwill- ₹11, 00,000. Liabilities- ₹1, 00,000.