COMPETENCY – BASED TEST ITEMS

CLASS: XII
SUBJECT: ACCOUNTANCY
NAME OF CHAPTER: FUNDAMETALS OF PARTNERSHIP

Q. LEARNING QUESTION MARK

NO OUTCOME
/ASSESSMENT
OBJECTIVE
1 LO: Able to Ishu, Vishu and Nishu are partners in a firm sharing profits and losses in 1
describe the the ratio of 2:3:5. Their fixed capitals were ₹1,50,000, ₹3,00,000 and
treatment of past ₹6,00,000 respectively. After the final accounts have been prepared it
adjustments. was discovered that interest on capital was credited to them @ 12%
AO: To assess the instead of 10%.
competence to (A) Nishu’s Current A/c will be Debited by ₹1,500.
distribute the profit (B) Nishu’s Current A/c will be Credited by ₹1,500.
of the firm as per (C) Nishu’s Capital A/c will be Credited by ₹1,500.
provisions of (D) Nishu’s Capital A/c will be Debited by ₹1,500.
partnership deed of
the firm.
2 LO – Able to Given below are two statements, one labelled as Assertion (A) and the 1
differentiate other labelled as Reason (R)
between Charges Assertion (A): Rent paid to partner is shown in P & L Appropriation
and Appropriations. A/c. Reason (R): Rent paid to partner is a charge against the profits.
AO – To assess the In the context of the above statements, which one of the following is
competence to correct?
distinguish between (A) (A) is correct, but (R) is wrong.
Charges and (B) Both (A) and (R) are correct.
Appropriations of (C) (A) is wrong, but (R) is correct.
the firm. (D) Both (A) and (R) are wrong.
3 LO: Able to make If there exist insufficient profits for appropriations, the available profit is 1
appropriations using distributed in:
insufficient profits. (A) Profit-sharing ratio
AO: To assess the (B) Appropriation ratio
competence to (C) Capital ratio
distribute the profit (D) Equally
of the firm as per
provisions of
partnership deed of
the firm.
4 LO: Able to apply The interest on drawings to be charged from a partner on an amount of 1
the formula for 30,000 @ 5% p.a. will be:
calculation of (A) ₹15,000
interest on drawings (B) ₹1,500
on average period (C) ₹750
basis. (D) ₹150
AO: To assess the
competence to
charge interest on
partner’s drawings
as per provisions of
 partnership deed of
the firm.
5 LO – Able to The journal entry for transfer of profits to reserves will be: 1
differentiate
(A) Reserves A/C ……Dr.
between Charges
To Profit & Loss Appropriation A/C
and Appropriations,
(B) Reserves A/C ……Dr.
observing the rules
To Profit & Loss A/C
of accounting.
AO – To assess the (C) Profit & Loss Appropriation A/C ……Dr.
competence to To Reserves A/C
distinguish between (D) Profit & Loss A/C ……Dr.
Charges and To Reserves A/C
Appropriations of
the firm.
6 LO- Able to Given below are two statements, one labelled as Assertion (A) and the 1
undertake the other labelled as Reason (R)
treatment for raising Assertion(A): Goodwill is raised amongst the old partners, in their old
and writing off ratio and gets written off amongst the partners in their new ratio.
goodwill. Reason(R): Goodwill is the fruit of partner’s past efforts.
AO- To assess the In the context of the above statements, which one of the following is
understandability of correct?
the basis for such a (A) (A) is correct, but (R) is wrong.
treatment. (B) Both (A) and (R) are correct.
(C) (A) is wrong, but (R) is correct.
(D) Both (A) and (R) are wrong.
7 LO- Able to A, B, and C are partner’s sharing profits in the ratio of 5:3:2. According 1
undertake the to the partnership agreement C is to get a minimum amount of ₹ 18,000
treatment for as his share of profits every year .The net profit for the year ended 31st
guarantee of March, 2019 amounted to ₹50,000 .How much amount is contributed?
minimum profits. (A) ₹1,250; ₹3,750
AO- To assess the (B) ₹4,000; ₹4,000
understandability of (C) ₹2,000; ₹5,000
the ratio of
(D) ₹5,000; ₹3,000
contribution of
guaranteed profits,
if question is silent.
8 LO- Able to Seeta and Geeta are partners sharing profits and losses in the ratio 4:1. 1
calculate manager’s Meeta was manager who received the salary of ₹ 4,000 p.m. in addition
commission on net to a commission of 5% on net profits after charging such commission.
profit after charging Profit for the year is ₹ 6,30,000 before charging salary. Find the total
commission. remuneration of Meeta.
AO- To assess the (A) ₹78,000
understandability of (B) ₹88,000
conversion of (C) ₹87,000
formula when (D) ₹76,000
manager’s
commission on net
profit after charging
commission is to be
calculated with the
given value of net
profit before
charging such
commission.
9 LO- Able to Assertion (A): Number of years purchase is multiplied in the calculation 1
understand the of goodwill of the firm.
concept of number Reason (R): It is the measure of firm’s reputation out of its past efforts.
of years purchase A. Both Assertion (A) and Reason (R) are true.
AO- To assess the B. Both Assertion (A) and Reason (R) are false.
understandability of C. Assertion (A) is true and Reason (R) is false.
the concept in D. Assertion (A) is false and Reason (R) is true.
calculation of
goodwill.
10 LO- Able to A partnership firm earned divisible profit of ₹ 5,00,000, interest on 1
understand the capital is to be provided to partner is ₹3,00,000, interest on loan taken
sequence of from partner is ₹50,000 and profit-sharing ratio of partners is 5:3.
repayments in case Sequence the following in correct way:
of partnership. A. Distribute profits between partners
AO- To assess the B. Charge interest on loan to Profit and Loss A/c
understandability of C. Calculate the net profit Transfer to Profit and Loss appropriation
difference between A/C.
charge and D. Provide interest on capital
appropriation.
11 LO- Able to P and Q were partners in a firm sharing profits in 3:1 ratio. Their 3
journalise the respective fixed capitals were ₹10,00,000 and ₹6,00,000. The
appropriations in partnership deed provided interest on capital @ 12 % p.a. even if it will
case of partnership. result into a loss to the firm. The net profit of the firm for the year ended
AO- To assess the 31st March, 2023 was ₹1,50,000.
understandability of Pass necessary journal entries in the books of the firm allowing interest
difference between on capital and division of profit/loss amongst the partners.
charge and
appropriation and
pass necessary
journal entries in
case of loss.
12 LO- Able to On 01.04.2018 Raheem and Kareem started partnership business. 3
understand the Raheem contributed for ₹72,00,000 first and increased by ₹3,00,000 after
calculations for seven months. K a r e e m contributed₹ 3,00,000 first and increased it to
charging interest on ₹4,00,000 after five months and he withdrew out of capital₹ 2,00,000
capital in case of after nine months
partnership. Calculate interest on capital on 31.03.2019 if rate of interest on capital is
AO- To assess the 12% p.a.
understandability of
charging interest on
capital in case of
partnership for
different time
periods.
13 LO- Able to D, S and M are partners sharing profits and losses in the ratio of 3:2:1. 3
calculate the With effect from 1st April, 2022 they agree to share profits equally. For
goodwill of the firm this purpose, goodwill is to be valued at two year’s purchase of the
using average profit average profit of last four years which were as follows: Year ending on
method. 31st March,2019 ₹ 50,000 (Profit) Year ending on 31st March,2020 ₹
AO- To assess the 1,20,000 (Profit) Year ending on 31st March,2021 ₹ 1,80,000 (Profit)
understandability of Year ending on 31st March,2022 ₹ 70,000 (Loss) On 1st April, 2021 a
calculation of Motor Bike costing ₹ 50,000 was purchased and debited to travelling
goodwill of the firm expenses account, on which depreciation is to be charged @ 20% p.a by
using average profit Straight Line Method. The firm also paid an annual insurance premium
method. of ₹ 20,000 which had already been charged to Profit and Loss Account
 for all the years. Calculate the amount of Goodwill.

14 LO- Able to The average net profits Expected of the firm in future are ₹ 68,000 per 3
calculate the year and capital invested in the business by the firm is ₹ 3,50,000. The
goodwill of the firm rate of interest expected from capital invested in this class of business is
using super profit 12%. The remuneration of the partners is estimated to be ₹ 8,000 for the
method. year. You are required to find out the value of goodwill on the basis of 2
AO- To assess the years purchase of super profits.
understandability of
calculation of
goodwill of the firm
using super profit
method.
15 LO- Able to Sanjay, Sudha and Shakti are partners in a firm sharing profits in the 4
journalise the ratio of 3:1:1. Their fixed capital balances are ₹4,00,000, ₹1,60,000 and
appropriations in ₹1,20,000 respectively. Net profit for the year ended 31st March, 2020
case of partnership. distributed amongst the partners was ₹1,00,000, without taking into
AO- To assess the account the following adjustments:
understandability of (a) Interest on capitals @ 2.5% p.a.
difference between (b) Salary to Sanjay ₹18,000 p.a. and commission to Shakti ₹12,000.
charge and (c) Sanjay was allowed a commission of 6% of divisible profit after
appropriation and charging such commission.
pass necessary Pass a rectifying journal entry in the books of the firm. Show workings
journal entries in clearly.
case of loss.
16 LO- Able to Ajay, Binod and Chandra entered into partnership on 1st April 2019 with 4
journalise the a capital of ₹3,00,000, ₹2,00,000 and ₹1,00,000 respectively. In addition
appropriations in to capital Chandra has advanced a loan of ₹1,00,000. Since they had no
case of partnership. agreement to guide them, they faced following issues during and at the
AO- To assess the end of the year.
understandability of 1. Ajay wanted interest on capital to be provided @8% pa but Binod
difference between and Chandra did not agree.
charge and 2. Chandra wanted that interest on loan be paid to him @ 10% pa but
appropriation and Ajay and Binod wanted to pay @ 5% pa.
pass necessary 3. Ajay and Binod demanded to share profits in the ratio of their
journal entries in capital contribution, Chandra is not in agreement with this proposal.
case of loss. 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.
17 LO- Able to A business has earned average profits of ₹1,00,000 during the last few 4
calculate the years and the normal rate of return in similar business is 10%. Find out
goodwill of the firm the value of goodwill by
using capitalization (i) Capitalisation of super profit method.
of super profit and (ii) Super profit method, if the goodwill is valued at 3 years’ purchase of
super profit method. super profit. The assets of the business were ₹10,00,000 and its external
AO- To assess the liabilities ₹1,80,000.
understandability of
calculation of
goodwill of the firm
using capitalization
 of super profit and
super profit method.
18 LO: Able to apply A, B and Care partners share profits and losses in the ratio of 3:2:1. 6
the formula for Their capitals ₹1,00,000, ₹75,000 and ₹50,000 respectively. They agreed
calculation of to allow interest on capital @ 10 % p.a. and agreed to charge interest on
interest on drawings drawings @10% p.a. Their drawings for the year were ₹10,000, ₹8,000
on average period and ₹6,000 respectively. C was very active getting a salary of ₹2,000 per
basis and calculation month and in return, he guaranteed that firm’s profit would not be less
of contributions for than ₹80,000 before charging or allowing interest and salary payable to
the purpose of C. Actual profit for the year 2011 was ₹75,000. Prepare Profit and Loss
guaranteed profit. Appropriation Account and Partners Capital Account.
AO: To assess the
competence to
charge interest on
partner’s drawings
and allow
guaranteed profits as
per provisions of
partnership deed of
the firm.
19 LO: Able to apply Aman and Chaman are partners sharing profits and losses in the ratio of 6
the formula for 2:1. On 1st April, 2011 their capitals were Aman - ₹50,000 and Chaman -
calculation of ₹40,000.
interest on drawings
Prepare the Profit and Loss Appropriation Account and the Partners’
on average period
basis and calculation Capital Account at the end of the year after considering the following
of contributions for items:
the purpose of a) Interest on Capital is to be allowed @ 5% p.a.
guaranteed profit. b) Interest on partners’ drawings @ 6% p.a. Drawings: Aman –
AO: To assess the ₹10,000 and Chaman – ₹8,000.
competence to c) Aman is entitled to get a salary @ ₹500 per month.
charge interest on
d) 10% of the divisible profit is to be transferred to Reserve.
partner’s drawings
and allow They earned profit of ₹70,500 for the year ended 31st March, 2012.
guaranteed profits as
per provisions of
partnership deed of
the firm.
20 LO- Able to From the following information, calculate value of goodwill of M/s 6
calculate the Amrit and Amar :
goodwill of the firm 1. At three years purchase of average profit.
using capitalization 2. At three years purchase of super profit.
of super profit and 3. On the basis of capitalization of super profit.
super profit method 4. On the basis of capitalization of average profit.
with adjustments. Information:
AO- To assess the a. Average capital employed- ₹10,00,000.
understandability of b. Net profit/loss of the firm for the past years 2021- ₹1,60,000;
calculation of 2022- ₹1,40,000; 2023- ₹2,70,000
goodwill of the firm c. Normal Rate of Return on capital is 11%.
using capitalization d. Remuneration to each partner for his service to be treated as a
of super profit and charge on profit ₹2,500/month
super profit method Assets excluding goodwill- ₹11,00,000. Liabilities- ₹1,00,000.
with adjustments.
ANSWERS:
Q. NO. ANSWER
1 (A)Nishu’s Current A/c will be Debited by ₹1,500.
2 (C) (A) is wrong, but (R) is correct.
3 (B)Appropriation ratio
4 © ₹750
5 (A)Profit & Loss Appropriation A/C ……Dr.
To Reserves A/C
6 (B) Both (A) and (R) are correct.
7 (D) ₹5,000; ₹3,000
8 ₹78,000
9 A. Both Assertion (A) and Reason (R) are true.
10 BCDA
11 Date Particulars Dr. (₹) Cr. (₹)
31 Profit & Loss A/c Dr. 150000
Mar. To Profit & Loss Appropriation A/c 150000
2023 (Net profit transferred to Profit & Loss Appropriation
A/c)
Interest on Capital A/c Dr. 192000
To P’s Current A/c 120000
To Q’s Current A/c 72000
(Interest on Capital Credited to Partners’ Capital A/c)
P & L Appropriation A/c Dr. 192000
To Interest on Capital A/c 192000
(Interest on Capital debited to Profit & Loss
Appropriation A/c)
P’s Current A/c Dr. 31500
Q’s Current A/c Dr. 10500
To Profit & Loss Appropriation A/c 42000
(Loss on Appropriation transferred)
12 Interest on capital:
Raheem ₹39,000
Kareem ₹37,000
13 Calculation of goodwill: CALCULATION OF NORMAL PROFIT Year Ended Profit/ Loss
Adjustments Normal Profit 31st March,2019 ₹50,000 ---- ₹50,000 31st March,2020 ₹1,20,000 -----
₹1,20,000 31st March,2021 ₹1,80,000 ----- ₹1,80,000 31st March,2022 ₹ (70,000)+₹50,000-
₹10,000 ₹ (30,000) Total ₹3,20,000 Goodwill =Average Profits X No. of years Purchase Average
Profits = Total Normal Profits/Number of years = 3,20,000/4 = ₹80,000 Goodwill= 80,000 X 2=
₹1,60,000 A’s share of goodwill= 1,60,000 X 1/6= ₹26,667.
14 Average profit = 68,000-8000 = ₹60,000
Normal profit = 3,50,000 X 12/100 = ₹42,000
Super profit= 60,000- 42,000 = ₹18,000
Goodwill = 18,000 X 2 = ₹36,000
15 Books of Sanjay, Sudha and Shakti
Adjustment Entry
Date Particulars Dr. Cr
Sudha’s Current A/c Dr. 6,000
To Sanjay’s Current A/c 1,000
 To Shakti’s Current A/c 5,000
(Interest on capital, salary and commission to
partners missed in distributing
profits, now adjusted)

Working Notes: Adjustment Table

particulars Sanjay Sudha Shakti Firm
Profit already
distributed Dr. 60000 20000 20000 100000
1. Interest in
Capital Cr. 10,000 4000 3,000 17000
2. Salary Cr. 18,000 - - 18000
3.Commission Cr. 3,000 - 12000 15000
Share of
Profit Cr. 30,000 10000 10000 50000
Total Cr. 61000 14000 25000 100000
Net effect 1000Cr. 6000Dr. 5000Cr. -
16 1. If Ajay wanted interest on capital to be provided @8% pa but Binod and Chandra did not
agree, the same cannot be given as there should be a unanimous consent of all the partners.
2. If Chandra wanted that interest on loan be paid to him @ 10% pa but Ajay and Binod wanted
to pay @ 5% pa, it will be provided @6% p.a. in the absence of the deed.
3. If Ajay and Binod demanded to share profits in the ratio of their capital contribution, Chandra
is not in agreement with this proposal, it will be shared equally in absence of the partnership deed.
4. If Binod, being working partner, demands a lump sum payment of ₹40,000 as remuneration for
which the other two partners are not in agreement, the same cannot be provided for, as there should
be a unanimous consent of all the partners.
17 Given,
Average Profit = ₹1,00,000
Normal Rate of Return=10%
Super Profit= Actual Profit- Normal Profit
Normal Profit=capital employed*Normal Rate of Return/100
Capital Employed=Net Asset – External Liability
10,00,000-1,80,000
= ₹8,20,000/-
8,20,000*10/100 = ₹82,000/-
Super profit = 1,00,000-82,000
= ₹18,000/-
Goodwill = Super Profit *Numbers of years purchase
= 18,000*3
= ₹54,000/-

Capitalisation of Super Profit:

Goodwill = Super Profit *100/Normal Rate of Return
= 54,000*100/10
= ₹5,40,000/-

18 Profit & Loss Appropriation A/c

Particulars Amount Particulars Amount
(Rs.) (Rs.)
To interest on capitals By P/L a/c 75,000
A 10,000 By C’s capital A/c 5,000
B 7,500 (guarantee)
C 5,000 22,500 By interest on drawing
 To C’s salary 24,000 A 500
To Partner’s Capital A/c B 400
(profit) C 300 1,200
A : 17,350
B : 11,567
C : 5,783 34,700
81,200 81,200
Partner’s Capital A/C

Particulars A B C Particulars A B C
To Drawings 10,000 8,000 6000 By Balance 1,00,000 75,000 50,000
To Interest b/d
on drawings 500 400 300 By Interest 10,000 7,500 5,000
To P/L app. ---- ----- on capital ---- ----
To Balance 1,16,850 85,667 5,000 By salary 17,350 11,567 24,000
c/d 73,483 By P/L app. 5,783
1,27,350 94,067 84,783 1,27,350 94,067 84,783
19

Profit and Loss Appropriation A/c

Particulars Amount Particulars Amount
(Rs.) (Rs.)
Interest on Capital A/c : Profit and Loss A/c 70,500
Aman : 2,500 Interest on Drawings :
Chaman : 2,000 4,500 Aman : 300
Salary A/c : Chaman : 240 540
Aman 6,000
General Reserve A/c 6,054
Profit Transferred to Cap
A/c :
Aman : 36,324
Chaman : 18,162 54,486
71,040 71,040

Partners’ Capital A/c

Particulars Aman Chaman Particulars Aman Chaman

Drawings A/c 10,000 8,000 Balance b/d 50,000 40,000
Interest on Drawings 300 240 Int on Capital 2,500 2,000
Balance c/d 84,524 51,922 Salary 6,000 -----
P/L App (profit) 36,324 18,162
94,824 60,162 94,824 60,162
20 1 Calculation of goodwill at three years purchase of average profit
Average Profit =1,60,000+1,40,000+2,70,000/3=5,70,000/3
=₹1,90,000/-
Average Normal Profit=1,90,000-Remuneratuion of partner
1,90,000-(2500*2*12)=1,90,000-60,000
=₹1,30,000/-
Goodwill =Average Normal Profit *No. of years purchase
 =1,30,000*3 = ₹3,90,000/-
2 Calculation of goodwill at three years purchase of super profit
Normal Profit = Capital Employed *Normal Rate of Return /100
10,00,000*11/100= ₹1,10,000/-
Super Profit = Average – Normal Profit
1,30,000- 1,10,000 = ₹20,000/-
Goodwill = Super Profit* No. of years purchase
= 20,000*3 = ₹60,000/-
3 Calculation of goodwill under capitalization of super profit
goodwill= Super Profit * 100/Normal Rate of Return
20,000*100/11
=₹1,81,818
4 Calculation of Goodwill under Capitalization of Average Profit
Goodwill = Total capitalized value of business – Net Assets
Total capitalized value of the firm = Average Normal Profit *100/Normal Rate of Return
1,30,000*100/11= ₹11,81,818 .