CBSE Class 12 Accountancy Accounting For Partnership Firms Goodwill MCQs

Question: Goodwill can be classified into which categories

a) Purchased Goodwill

b) Self generated Goodwill

c) Both

d) None of the options

Answer: Purchased Goodwill

Question: Super profit method is for goodwill valuation

a) Super profit x No. of years

b) Average profit x No. of years

c) Weighted Average profit x No. of years

d) None of the options

Answer: Super profit x No. of years

Question: Purchased Goodwill is

a) Assets-Liabilities

b) Assets-Profit

c) Both

d) None of the options

Answer: Assets-Liabilities

Question: If the amount of super profit is negative , what does it indicate?

a) There is no goodwill

b) There is average goodwill

c) Both

d) None of the options

Answer: There is no goodwill

Question: Which goodwill is recorded in books of accounts ?

a) Purchased Goodwill

b) Self -generated Goodwill

c) Both

d) None of the options

Answer: Purchased Goodwill

Question: When does need valuation of goodwill

a) Both

b) On Retirement or death of a partner

c) Admission of partner

d) None of the options

Answer: Both

Question: Which Factors affecting the value of Goodwill :

a) All of the options

b) Quality of products

c) Location of business

d) Efficient management

Answer: All of the options

Question: Which Methods of valuation of goodwill

a) All of the options

b) Super profit method

c) Capitalization method

d) Average profit method

Answer: All of the options

Question: When sacrificing ratio is used

a) Admission of New partner

b) dissolution of partnership agreement

c) dissolution of partnership firm

d) None of the options

Answer: Admission of New partner

Question: In which ratio the profit or loss on revaluation is shared by the old partners

a) Old Profit sharing ratio

b) New Profit sharing ratio

c) Equally

d) None of the options

Answer: Old Profit sharing ratio 

Question: Old profit sharing ratio- new profit sharing ratio is equal to

a) Sacrificing Ratio

b) Gaining Ratio

c) Profit sharing Ratio

d) None of the options

Answer: Sacrificing Ratio

Question: A new Partner can be admitted in the firm, When

a) All partners Agreed

b) Some Partners Agreed

c) Dormant Partner agreed

d) None of the options

Answer: All partners Agreed

Question: When a partner does bring cash for goodwill, an account is raised at

a) New Profit sharing

b) Old Profit sharing Value

c) Profit Sharing

d) None of the options

Answer: New Profit sharing

Question: When partners decide to show assets and liabilities at old value, Which accounts is opened

a) Memorandum Revaluation A/C

b) Capital A/c

c) Profit & Loss Appropriation A/c

d) None of the options

Answer: Memorandum Revaluation A/C

Question: When Goodwill account is raised , then credit is given to old partners capital Account in

a) New Profit sharing Ratio

b) Old Profit sharing ratio

c) Gaining Ratio

d) None of the options

Answer: New Profit sharing Ratio

Question: The valuation of goodwill is not necessary in sole trading

a) On closing the firm

b) On making a partner

c) On selling the firm

d) None of the options

Answer: On closing the firm

Question: The profit of the last three years are 42000, 39000, 45000 Rs., Value of goodwill at two years purchase of the average profit will be

a) 84000

b) 42000

c) 126000

d) None of the options

Answer: 84000

Question: find the goodwill of firm using capitalisation method, the total capital employed in the firm 80000 Rs., reasonable rate of return 15%, Profit for the year 120000 Rs.

a) 720000

b) 820000

c) 120000

d) None of the options

Answer: 720000

Question: What do you mean by super profit

a) Average profit - Normal profit

b) Total Profit/No. of years

c) Average profit + Normal profit

d) None of the options

Answer: Average profit - Normal profit

Question: The excess of average profit over the normal profit is called

a) Super Profit

b) Fixed Profit

c) Abnormal Profit

d) Net profit

Answer: Super Profit

Question: Weighted Average method of calculating goodwill is used when

a) Both

b) Profit has increasing trend

c) Profit has decreasing trend

d) None of the options

Answer: Both

Question: The monetary value of reputation of the business is called

a) Goodwill

b) Super profit

c) Surplus

d) None of the options

Answer: Goodwill

Question: When the value of goodwill is not given at the time of admission of a new partner, it IS inferred from the capital of the new firm and profit sharing ratio. This concept is called

a) Hidden Goodwill

b) Purchased Goodwill

c) Average Goodwill

d) None of the options

Answer: Hidden Goodwill

Question: Why new partner needs to bring goodwill?

a) To compensate the sacrificing partners

b) For Revaluation Account

c) For Revaluation Assets

d) All of the options

Answer: To compensate the sacrificing partners

Question: The balance of revaluation A/c is transferred to old partners capital account in their

a) Old Profit sharing ratio

b) New profit sharing ratio

c) Equal ratio

d) None of the options

Answer: Old Profit sharing ratio

Question: Interest on partners capital is calculated on

a) Capital in the beginning

b) Capital in the end

c) Average capital

d) None of the options

Answer: Capital in the beginning

Question: Account is prepared only one time in during the life of firm

a) Realisation Account

b) Revaluation A/c

c) Profit & loss A/c

d) None of the options

Answer: Realisation Account

Question: Revaluation account is prepared on

a) Reconstitution of partnership firm.

b) Dissolution of partnership firm

c) Both

d) None of the options

Answer: Reconstitution of partnership firm.

Question: Goodwill can be classified into which categories

a) Purchased Goodwill

b) Self generated Goodwill

c) Both

d) None of the options

Answer: Purchased Goodwill

Question: When a partner does bring cash for goodwill, an account is raised at

a) New Profit sharing

b) Old Profit sharing Value

c) Profit Sharing

d) None of the options

Answer: New Profit sharing

Question. Ram, Raghav, and Raghu are partners in a firm sharing profits in the ratio of 5:3:2. As per Partnership Deed, Raghu is to get a minimum amount of ₹ 10,000 as profit. Net profit for the year is ₹ 40,000. Find the deficiency amount in the above case.
(a) ₹ 750
(b) ₹ 1,000
(c) ₹ 1,500
(d) ₹ 2,000
Answer : B

Question. As per AS-26 -------------------Goodwill is recorded in the books of accounts.
(a) Purchased
(b) Self-generated
(c) Both (a) and (b)
(d) None of these
Answer : D

Question. A B and C are partners sharing profits equally. A drew regularly ₹ 4,000 at the beginning of every month for six months ended 30th September 2020. Calculate interest of A’s draw-ing @ 5% p.(a)
(a) ₹ 200
(b) ₹ 1,200
(c) ₹ 350
(d) ₹ 700
Answer : B

Question. On 1st April 2018, a partner introduced additional capital of ₹ 50,000 to the firm but Part-nership Deed is silent. The partner demands interest on capital @ 5% p.(a) How much inter-est on capital will be payable to the partner:
(a) ₹ 3,000
(b) Interest on capital will not be allowed
(c) ₹ 2,500
(d) ₹ 1,800
Answer : C

Question. Capital employed by a partnership firm is ₹. 5, 00,000. Its average profit is ₹. 60,000. The normal rate of return for a similar type of business is 10%. The amount of super profit is.
(a) ₹ 50000
(b) ₹ 10000
(c) ₹ 6000
(d) ₹ 56000
Answer : C

Question. If super profit is zero or negative, it means that the actual average profit is less than or equal to the normal profit
(a) True
(b) False
(c) Partially true
(d) Can’t say
Answer : B

Question. The average profit over the last five years was ₹. 60000. The normal yield on capital in-vested in such a business is estimated at 10% p(a) Capital invested in the business is ₹. 500000. Amount of goodwill, it is based on 3 years purchase of last 5 years super profit will be
(a) 1, 00,000
(b) 1, 80,000
(c) 30000
(d) 1, 50,000.
Answer : A

Question. Steps involved in the distribution of profit under minimum guarantee to partner will be…………………..
i) Calculate the amount of deficiency
ii) Calculate distributable profit between/among the partners
iii) Distribute the amount of deficiency between/among the partners who have given the guarantee
iv) Calculate the actual share of profit of each partner
(a) (ii) iv) i) iii)
(b) (i) ii) iii) iv)
(c) (iii) ii) iv) i)
(d) (iv) iii) ii) i)
Answer : B

Question. X & Y are partners sharing profits and losses in the ratio of 2:1 with capitals ₹.1,00,000 and ₹.80,000 respectively. The interest on capital has been provided to them @8% instead of 10%. In the rectifying entry
(a) Y will be debited by ₹.400
(b) Y will be credited by ₹.400
(c) Y will be debited by ₹.800
(d) Y will be credited by ₹.800
Answer : B

Question. In the absence of Partnership deed, the profits of a firm are divided among the partners
(a) In the ratio of capital
(b) Equally
(c) In the ratio of time devoted for the firm’s business
(d) According to the managerial abilities of the partners
Answer : B

Question. X and Y are partners in a firm having Rs.4, 00,000 & Rs.8, 00,000 respectively. The part-nership deed provides for charging interest on drawings @5% p (a) X withdrew Rs.1, 00,000 for his personal use during the year 2020-21.Y withdrew Rs.1, 00,000 from his capital on 1.9,2020. The amount of interest that will be charged on partners’ drawings are
(a) X-.₹.2,000 & Y-₹.4,000
(b) ₹.5,000 from X &Y
(c) X-₹.5,000 &Y- Nil
(d) X-₹.2,500 & Y-Nil
Answer : D

Question. P and Q are partners in a firm. They had advanced a loan of ₹.60, 000, contributed equally to the firm on 1st August 2020.The Partnership Deed is silent regarding the rate of interest on loan. What amount of interest on loan is payable to P, if the firm closes its books of ac-count on 31st March every year.
(a) ₹.1200
(b) ₹.3,600
(c) ₹.1,800
(d) None of these
Answer : A

Question. Interest on Capital of Partners is a
(a) Charge on profit
(b) Loss to the firm
(c) Profit to the firm
(d).None of these
Answer : B

Question. Which of the following transactions is always recorded in the partner’s Capital account ir-respective of whether the partners’ capitals are fixed or fluctuating?
(a) Additional capital introduced
(b) Withdrawal of Capital by a partner
(c) Interest on partner’s loan
(d) Both (a) & (b)
Answer : D

Question. As per the Companies Act 2013, the Central Government is empowered to prescribe the maximum number of partners in a firm, but the number of partners cannot be more than ---
(a) 50
(b) 100
(c) 20
(d) 10
Answer : B

Question. Nima & Hima are partners sharing profits and losses equally. On 1st April 2020, their cap-ital accounts showed balance of Rs.4, 00,000 & 1, 00,000 respectively. Calculate the share of divisible profit of the partners if the partnership deed provided for interest on capital @ 10% p.(a) and the firm earned a profit of Rs.50,000 for the year ended 31st March 2021
(a) Nima ₹.40,000 & Hima ₹.10,000
(b) Nima ₹,000 & Hima ₹.25,000
(c) Nima Nil & Hima Nil
(d) None of these
Answer : C

Question. Bobby and Sanjay were partners sharing profits & losses in the ratio of 5:3. On 1st April 2020, their capital accounts showed balances of ₹.3, 00,000 and ₹.2, 00,000 respectively. The Partnership Deed provided for interest on capital @10% p.a and the firm earned a profit of Rs.45, 000 for the year ended 31st March 2021. The interest on partners’ capitals to Bobby & Sanjay will be:
(a) ₹.22,500 to both partners
(b) ₹.27,000 & ₹.18,000 respectively
(c) ₹.28,125 & ₹.16,875 respectively
(d) None of the above
Answer : B

Question. A partnership Deed provides for the payment of interest on capital, but there was a loss in-stead of profits during the year 2020-21. At what rate will the interest on capital be al-lowed?
(a) 6% p.a
(b) 12%p.a
(c) The rate specified in the partnership deed
(d) No interest on capital will be allowed
Answer : D

Question. Goodwill of the firm on the basis of 2 years’ purchase of average profit of the last 3 years is ₹.25, 000. Find Average profit
(a) ₹.50, 000,
(b) ₹.37, 500
(c) ₹.12, 500
(d) None of these
Answer : C

Question. Which of the following will be shown on the credit side of Profit & Loss Appropriation account
(a) Interest on Capital
(b) Interest on Loan
(c) Interest on drawings
(d) Salary to partners
Answer : C

Question. Capital employed of a firm is ₹.25, 00,000.Its average profit is ₹.3, 10,000. The normal rate of return in similar type of business is10%.What is the amount of super profit?
(a) ₹.2, 50,000
(b) ₹.60, 000
(c) ₹.50, 000
(d) None of these
Answer : B

Question. Goodwill is valued at the time of
(a) Change in profit sharing Ratio
(b) Admission of a partner
(c) Retirement of a partner
(d) All of the above
Answer : D

Question. A, B & C are partners in a firm sharing profits & losses in the ratio of 5:3:2. A guaranteed profit of ₹.20, 000 to (c) Net profit for the year ending 31st March 2021, was ₹.80, 000. A’s share in the profit of the firm will be
(a) ₹.36,000
(b) ₹.16,000
(c) ₹.38,000
(d) ₹.44,000
Answer : A

ASSERTION –REASON-BASED QUESTIONS

Question. Assertion(a) : A guarantee of minimum profit may be given to a partner
Reason (R) : Minimum profit must be guaranteed by the remaining partners in equal ratio
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
Answer : C

Question. Assertion (a) : Mohit, a partner in the firm gave a loan of ₹.2,00,000 to the firm without an agreement as to the rate of interest. At the year-end, the remaining partners agreed to allow interest on the loan of @6% p.a
Reason (R) : In the absence of a Partnership deed, provisions of the Partnership Act 1932 is applicable and hence interest on loan of @6% p.a can be provided 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
Answer : A

Question. Assertion(a) :The value of Goodwill calculated on Average profit Method and Super 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
Answer : A

Question. Assertion(a) :A partnership firm can have a maximum of 50 partners
Reason (R) : Maximum limit of partners is prescribed in Indian Partnership Act,1932 In the context of 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
Answer : C

Question. Assertion(a) : Rent to partner is shown in Profit& Loss Appropriation Account
Reason (R) : Rent to partner is a charge against profit
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
Answer : D

Case studies – MCQs.

Question. Read the hypothetical text and answer the following questions.
Arun, Varun, and Tarun were partners in firm sharing profits equally. On 1st April, 2020, their capitals stood at ₹ 2, 00,000, ₹ 1, 50,000 and ₹ 1, 00,000 respectively. As per the provisions of the Partnership Deed:
1) Arun was entitled to a salary of ₹ 2,500 p.m.
2) Partners were entitled to interest on capital @ 10% p.(a)
The net profit for the year ended 31st March 2021, ₹ 1, 50,000 were distributed among the partners without providing for the above items.

Question. What is the amount of distributable profit for the partners after providing salary and interest on capital to the partners?
(a) ₹ 50,000 each
(b) ₹ 25,000 each
(c) ₹ 10,000 each
(d) ₹ 15,000 each
Answer : B

Question. Arun’s Capital A/c will be credited with Rs…………….for giving the adjustment to the above omissions.
(a) Rs 20,000
(b) Rs15,000
(c) Rs 25,000
(d) Rs10,000
Answer : C

Question. What is the amount of interest on capital Varun?
(a) ₹ 20,000
(b) ₹ 15,000
(c) ₹ 10,000
(d) ₹ 30,000
Answer : A

Question. Capital Account/Accounts of …………………… will be debited to give the effect of the above adjustments.
(a) Varun
(b) Tarun and Arun
(c) Arun and Varun
(d) Varun and Tarun
Answer : D

Question. Read the hypothetical text and answer the following questions.
A, B, and C are partners in a firm. Their capitals are ₹ 30,000, ₹ 20,000 and ₹ 10,000 respectively. As per the partnership deed,
i) C is to be allowed remuneration of ₹ 3,000 p.(a)
ii) Interest on capital @ 5% p.(a)
iii) Profits should be distributed in the ratio of 2:2:1.
Ignoring the above terms, a net profit of ₹ 18,000 was distributed among the partners equally.

Question. How much interest on capital is to be credited to partner A?
(a) ₹ 1,500
(b) ₹ 1,000
(c) ₹ 900
(d) ₹ 800
Answer : B

Question. How much profit is to be credited to Partner B after all adjustments?
(a) ₹ 2,400
(b) ₹ 4,800
(c) ₹ 1,000
(d) ₹ 1,200
Answer : C

Question. What is the total profit to be credited to A, B, and C after all adjustments?
(a) ₹ 12,000
(b) ₹ 8,000
(c) ₹ 9,000
(d) ₹ 10,000
Answer : C

Question. What is the amount of the past adjustment entry?
(a) ₹ 350
(b) ₹ 450
(c) ₹ 250
(d) ₹ 55
Answer : C

Case studies – MCQs.

Question. Read the hypothetical text and answer the following questions.
X and Y started business on 1St April 2020 with a capital of ₹ 5,00,000 each. As per the partnership Deed, both X and Y are to get a monthly salary of ₹ 10,000 each, and interest on capital is ₹ 50,000 each. Interest in drawings is as follows X: ₹ 3,000 and Y: ₹ 5,000.
During the year, the firm incurred a loss of ₹ 2,00,000.

Question. What is the amount to be transferred to the Profit and Loss Appropriation Account?
(a) ₹ 5,00,000
(b) ₹ 2,00,000
(c) ₹ 3,00,000
(d) ₹ 1,50,000
Answer : B

Question. What amount of loss is to be transferred to the capital account of both partners?
(a) ₹ 1,92,000
(b) ₹ 2,00,000
(c) ₹ 1,96,000
(d) ₹ 1,80,000
Answer : C

Question. What is the share of loss of X?
(a) ₹ 1,00,000
(b) ₹ 96,000
(c) ₹ 98,000
(d) ₹ 90,000
Answer : D