Unit 5: Admission of a Partner — Online MCQ Test
ACCOUNTANCY · CLASS 12th · Tamil Nadu State Board
Practice Unit 5: Admission of a Partner with a free chapter-wise online MCQ test.
This chapter covers: This unit covers accounting treatments required when a new partner joins an existing partnership firm. It details the recalculation of profit-sharing ratios (sacrificing ratio) rev....
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Unit 5: Admission of a Partner — Important Questions & Answers
What is the ratio in which existing partners give up a part of their share in favour of a newly admitted partner called?
- A. Gaining ratio
- B. Sacrificing ratio
- C. Profit-sharing ratio
- D. Capital ratio
Answer: B. Sacrificing ratio
The sacrificing ratio shows the share of profit given up by the old partners. It is generally calculated as old ratio minus new ratio.
The sacrificing ratio shows the share of profit given up by the old partners. It is generally calculated as old ratio minus new ratio.
Which account is prepared to record the increase or decrease in the value of assets and liabilities at the time of admission of a partner?
- A. Revaluation Account
- B. Profit and Loss Account
- C. Capital Account
- D. Drawing Account
Answer: A. Revaluation Account
Revaluation Account is prepared to record all changes in asset and liability values on admission. Its balance shows profit or loss on revaluation.
Revaluation Account is prepared to record all changes in asset and liability values on admission. Its balance shows profit or loss on revaluation.
When a new partner is admitted, goodwill is generally brought into the books in order to compensate for:
- A. Past losses of the firm only
- B. The sacrificing share of existing partners
- C. Depreciation of assets
- D. Increase in liabilities
Answer: B. The sacrificing share of existing partners
Goodwill adjustment compensates the old partners for surrendering a part of their profit share. It is shared by them in the sacrificing ratio.
Goodwill adjustment compensates the old partners for surrendering a part of their profit share. It is shared by them in the sacrificing ratio.
Which of the following is credited to the new partner’s capital account when he brings in cash for goodwill?
- A. Share of losses
- B. His capital only
- C. Old partners’ capital accounts indirectly through cash received
- D. Revaluation gain
Answer: B. His capital only
When a new partner brings cash for goodwill, the amount received is usually credited to his capital account and separately adjusted for goodwill. The cash itself is part of his capital contribution.
When a new partner brings cash for goodwill, the amount received is usually credited to his capital account and separately adjusted for goodwill. The cash itself is part of his capital contribution.
A new partner is admitted by bringing in Rs. 50,000 as capital and Rs. 10,000 for goodwill. If goodwill is retained in the business and not withdrawn, what entry is primarily made for the goodwill amount?
- A. Debit Cash Account and credit Goodwill Account
- B. Debit New Partner’s Capital Account and credit Old Partners’ Capital Accounts
- C. Debit Revaluation Account and credit Cash Account
- D. Debit Goodwill Account and credit New Partner’s Capital Account
Answer: B. Debit New Partner’s Capital Account and credit Old Partners’ Capital Accounts
When goodwill is retained in the business, the new partner’s goodwill contribution is adjusted through his capital account and credited to the old partners in sacrificing ratio. No cash withdrawal from goodwill is assumed in this adjustment.
When goodwill is retained in the business, the new partner’s goodwill contribution is adjusted through his capital account and credited to the old partners in sacrificing ratio. No cash withdrawal from goodwill is assumed in this adjustment.