CBSE Class 12 Accountancy Admission Of A Partner Important Questions Set 04

Very Short Answer Questions (1 Mark)

Question 1. State the need for treatment of goodwill on admission of a partner. [CBSE Delhi 2010]
Answer:
The treatment of goodwill is undertaken at the time of admission of a partner to compensate the old partners for their sacrifice.

Teacher's Note:
1. Goodwill was built up by the old partners, so the new partner pays for his share of it.

Question 2. Atul and Neera were partners in a firm sharing profits in the ratio of 3 : 2. They admitted Mitali as a new partner. Goodwill of the firm was valued at ₹2,00,000. Mitali brings her share of goodwill premium of ₹ 20,000 in cash, which is entirely credited to Atul's Capital Account. Calculate the new profit sharing ratio. [CBSE 2019 (67/1/1)]
Answer:
Mitali's share in profit = 20,000/2,00,000 = 1/10
Atul's new share = 3/5 − 1/10 = 5/10
Neera's new share = 2/5 = 4/10
Mitali's share = 1/10
New ratio = 5 : 4 : 1

Teacher's Note:
1. Premium credited only to Atul means only Atul sacrificed; Neera's share stays the same.

Question 3. A, B and C were partners in a firm sharing profits in the ratio of 3 : 2 : 1. They admitted D as a new partner for 1/8th share in the profits, which he acquired 1/16th from B and 1/16th from C. Calculate the new profit sharing ratio of A, B, C and D. [CBSE Delhi 2016]
Answer:
A's New share = 3/6
B's New share = 2/6 − 1/16 = 26/96, C's New share = 1/6 − 1/16 = 10/96
D's share = 1/8
Thus, the new profit sharing ratio for A, B, C and D will be
= 3/6 : 26/96 : 10/96 : 1/8
= 24 : 13 : 5 : 6

Teacher's Note:
1. Use a common denominator (96) before subtracting; A does not sacrifice, so his share is unchanged.

Question 4. Amit and Beena were partners in a firm sharing profits and losses in the ratio of 3:1. Chaman was admitted as a new partner for \(\frac{1}{6}\)th share in the profits. Chaman acquired \(\frac{2}{5}\)th of his share from Amit. How much share did Chaman acquire from Beena? [CBSE 2018]
Answer:
Chaman admitted for 1/6 th share; Share of profit acquired by Chaman from Amit = 1/6 × 2/5 = 2/30
Therefore, share of profit acquired by Chaman from Beena = 1/6 − 2/30 = 3/30 = 1/10
Or
Share of profit acquired by Chaman from Beena = 3/5 × 1/6 = 3/30 = 1/10

Teacher's Note:
1. Here 2/5 is a fraction of Chaman's share, not of Amit's share; read the question carefully.

Question 5. A and B are partners sharing profits in the ratio of 3 : 2. C was admitted for 1/6th share of profit with a minimum guarantee of ₹10,000. At the close of the first financial year, the firm earned a profit of ₹54,000. Find out the share of profit which A, B and C will get. [CBSE (F) 2011]
Answer:
Let total profit be = 1
C's share = 1/6, Remaining share = 1 − \(\frac{1}{6} = \frac{5}{6}\) (A + B)
A's share = \(\frac{3}{5}\) of \(\frac{5}{6} = \frac{15}{30}\), B's share = \(\frac{2}{5}\) of \(\frac{5}{6} = \frac{10}{30}\)
Hence new profit-sharing ratio \(\frac{15}{30} : \frac{10}{30} : \frac{1}{6}\) = 15 : 10 : 5 = 3 : 2 : 1
C's share of profit with a minimum guarantee of ₹10,000.
The share of profit
A's share = 54,000 × \(\frac{15}{30}\) = ₹27,000, B's share = 54,000 × \(\frac{10}{30}\) = ₹18,000
C's share = 54,000 × \(\frac{5}{30}\) = ₹9,000, A and B must give their share to compensate C.
A's sacrifice = 1,000 × \(\frac{3}{5}\) = ₹600, B's sacrifice = 1,000 × \(\frac{2}{5}\) = ₹400
C's profit = His share + A's sacrifice + B's sacrifice = 9,000 + 600 + 400 = ₹10,000.
Hence, A gets 27,000 − 600 = ₹26,400, B gets 18,000 − 400 = ₹17,600 and C gets ₹10,000.

Teacher's Note:
1. The deficiency (10,000 − 9,000) is borne by A and B in their old ratio 3 : 2 unless the agreement says otherwise. Check: 26,400 + 17,600 + 10,000 = 54,000.

Question 6. S, T and U were partners in a firm sharing profits equally. They admitted V as a new partner. S and T sacrificed 1/3rd and 1/4th of their share respectively in favour of V. Calculate the new profit sharing ratio of S, T, U and V. [CBSE 2019 (67/3/2)]
Answer:
S's sacrifice = 1/3 × 1/3 = 1/9
T's sacrifice = 1/4 × 1/3 = 1/12
U's sacrifice = Nil
S's new share = 1/3 − 1/9 = \(\frac{3-1}{9} = \frac{2}{9} = \frac{8}{36}\)
T's new share = 1/3 − 1/12 = \(\frac{4-1}{12} = \frac{3}{12} = \frac{9}{36}\)
U's new share = 1/3 = \(\frac{12}{36}\)
V's new share = 1/9 + 1/12 = \(\frac{4+3}{36} = \frac{7}{36}\)
New Ratio = 8 : 9 : 12 : 7

Teacher's Note:
1. '1/3rd of their share' means a fraction of the partner's own share, so multiply by the old share first.

Question 7. How is new partner admitted to a firm?
Answer:
A person can be admitted as a new partner only with the consent of all the existing partners.

Teacher's Note:
1. This is Section 31(1) of the Indian Partnership Act, 1932, unless the agreement provides otherwise.

Question 8. Why is the profit/loss on revaluation not transferred to New Partner's Capital Account?
Answer:
Because a new partner is not concerned or affected by revaluation of assets and liabilities, it is done just prior to the admission of a new partner.

Teacher's Note:
1. Revaluation changes relate to the period before admission, so only old partners share them, in the old ratio.

Question 9. A, B, and C are partners sharing profit in the ratio of \(\frac{1}{2}\) : \(\frac{1}{3}\) : \(\frac{1}{6}\). D is admitted in the firm for \(\frac{1}{6}\) share. C's share will remain unchanged, calculate new ratio.
Answer:
Old ratio = \(\frac{1}{2} : \frac{1}{3} : \frac{1}{6} = \frac{3:2:1}{6}\) = 3 : 2 : 1
Let total share = 1
Remaining Share = 1 − [C's share + D's share]
= 1 − \(\left[\frac{1}{6}+\frac{1}{6}\right] = 1 - \frac{2}{6} = \frac{4}{6} = \frac{2}{3}\)
A's new share = \(\frac{2}{3} \times \frac{3}{5} = \frac{2}{5}\), B's new share = \(\frac{2}{3} \times \frac{2}{5} = \frac{4}{15}\)
New ratio = \(\frac{2}{5} : \frac{4}{15} : \frac{1}{6} : \frac{1}{6} = \frac{12:8:5:5}{30}\)
= 12 : 8 : 5 : 5.

Teacher's Note:
1. Since C keeps his share, A and B share the remaining 2/3 between themselves in their own ratio 3 : 2.

Question 10. Harpreet, Trihaan and Roy are partners in a firm sharing profits in ratio of 3:2:1. They admit Gupta for 1/5th share in profit. Gupta brought Capital of ₹50,000 but he is unable to bring his share of goodwill in cash. Partners' capital accounts have to be adjusted on the basis of Gupta's Capital. The goodwill of the firm has been valued at ₹60,000. Where will you debit new partners share of goodwill and why?
Answer:
Gupta's Current Account will be debited by his share of goodwill, i.e., ₹12,000 because when new partner is unable to bring his share in goodwill and old partners' capitals have to be adjusted on the basis of his capital, then goodwill is adjusted through new partner's current account.

Teacher's Note:
1. Debiting his capital would reduce it below ₹50,000 and upset the base used for adjusting the old partners' capitals.

Question 11. Why is General Reserve distributed amongst old partners before a new partner is admitted especially when there is no legal requirement to do so? [HOTS]
Answer:
This is because general reserve prior to admission belonged to the old partners. Since they have sacrificed a part of their profits to create it and hence it does not belong to the new partner as such and so he is not entitled to get it.

Teacher's Note:
1. Reserves are distributed in the old ratio, not the new ratio.

Question 12. When the partners decide to retain assets and liabilities at their existing values, what account should be adopted to ensure that no partner is put on advantage or disadvantage without affecting old values of assets and liabilities? [HOTS]
Answer:
In such a case, Memorandum Revaluation Account is prepared.

Teacher's Note:
1. In a Memorandum Revaluation A/c, the net result is first given to old partners in the old ratio and then reversed in the new ratio.

Question 13. M and N are partners sharing profits and losses in equal ratio. P is admitted for 1/4th share which he acquires completely from M. P brings ₹45,000 as goodwill and ₹2,00,000 as capital. Mention the amount of goodwill, each partner acquires at the time of admission of P.
Answer:
M will acquire ₹45,000 and N will acquire nothing because M sacrifices out of his share in favour of P. Whereas N does not sacrifice anything.

Teacher's Note:
1. Goodwill premium goes only to the partner(s) who sacrifice, in the sacrificing ratio.

Question 14. A firm's balance sheet had a workmen compensation fund of ₹20,000. Ram, a new partner is admitted. The liability against workmen compensation fund was determined to be ₹15,000. What amount out of workmen compensation fund is distributed among old partners?
Answer:
₹5,000.

Teacher's Note:
1. Only the excess of the fund over the actual liability (20,000 − 15,000) is distributed to old partners.

Question 15. The capitals of Ram and Shyam are ₹60,000 and ₹30,000. For enhancing the capital base of firm to ₹1,50,000, they decide to admit Gagan. Gagan is to bring a sum of ₹80,000. Find out the amount of hidden goodwill. [HOTS]
Answer:
The total capital of the firm is ₹90,000. To increase the capital base to ₹1,50,000, Gagan is to bring in ₹60,000 (1,50,000 − 90,000). But he brings in ₹80,000. Therefore, the excess, i.e., ₹20,000 is the premium for goodwill.

Teacher's Note:
1. Any amount brought in beyond the required capital is treated as premium for goodwill.

Teacher's Note:
1. When the claim exceeds the reserve, the whole reserve is used and the shortfall is a revaluation loss borne by old partners in the old ratio.

Question 17. Kiya and Leela are partners sharing profits in the ratio of 3 : 2. Kiran was admitted as a new partner with 1/5th share in the profits and brought in ₹24,000 as her share of goodwill premium that was credited to the capital accounts of Kiya and Leela respectively with ₹18,000 and ₹6,000. Calculate the new profit sharing ratio of Kiya, Leela and Kiran. [CBSE 2019]
Answer:
New Ratio 9 : 7 : 4
Hint: Sacrificing ratio of Kiya and Leela = 18,000 : 6,000 = 3 : 1, i.e., Kiya gives 1/5 × 3/4 = 3/20 and Leela gives 1/5 × 1/4 = 1/20.
Kiya = 3/5 − 3/20 = 9/20; Leela = 2/5 − 1/20 = 7/20; Kiran = 4/20.

Teacher's Note:
1. Premium is credited in the sacrificing ratio, so the premium amounts themselves tell you the sacrificing ratio.

Question 18. A and B are partners sharing profits in the ratio of 5 : 4. They admit C for a 1/3rd share which he acquires in equal proportion from both. Find the new profit-sharing ratio. [CBSE (AI) 2011]
Answer:
Each gives 1/3 × 1/2 = 1/6. A = 5/9 − 1/6 = 7/18; B = 4/9 − 1/6 = 5/18; C = 6/18.
New Ratio of A, B and C = 7 : 5 : 6

Teacher's Note:
1. “Equal proportion” means each old partner gives half of C’s share, not that they keep equal shares.

Short Answer Questions (2 Marks)

Question 19. A and B are partners sharing profit in the ratio of 3 : 2. C and D join the firm. A sacrifices 1/2 of his share in favour of C and B sacrifices 1/4th of his share in favour of D. Compute new ratio of A, B, C and D.
Answer:
Old ratio between A and B = 3:2
A's sacrifice in favour of C = \(\frac{3}{5} \times \frac{1}{2} = \frac{3}{10}\), B's sacrifice in favour of D = \(\frac{2}{5} \times \frac{1}{4} = \frac{2}{20}\)
New share = Old share − Sacrifice
A's new share = \(\frac{3}{5} - \frac{3}{10} = \frac{6-3}{10} = \frac{3}{10}\), B's new share = \(\frac{2}{5} - \frac{2}{20} = \frac{8-2}{20} = \frac{6}{20}\)
C's new share = \(\frac{3}{10}\), D's new share = \(\frac{2}{20}\)
New ratio = \(\frac{3}{10} : \frac{6}{20} : \frac{3}{10} : \frac{2}{20} = \frac{6:6:6:2}{20}\) = 6 : 6 : 6 : 2
= 3 : 3 : 3 : 1

Teacher's Note:
1. The new partners' shares are exactly what the old partners give up; always simplify the final ratio.

Teacher's Note:
1. Reserves are credited and accumulated losses debited to old partners, both in the old ratio.

Question 21. Nirupama and Anupama were partners in a firm sharing profits and losses in the ratio of 3 : 5. They admitted Kumar as a new partner for 1/4 th share in the profits. The new profit sharing ratio will be 3 : 3 : 2. Kumar brought ₹2,00,000 as his capital and the necessary amount of premium for his share of goodwill. The goodwill of the firm was valued at ₹1,20,000. Pass necessary journal entries for the above transactions in the firm’s books. [CBSE 2019]
Answer:
Kumar’s share of goodwill = 1,20,000 × 1/4 = ₹30,000. Sacrifice: Nirupama = 3/8 − 3/8 = Nil; Anupama = 5/8 − 3/8 = 2/8.
Dr. Premium for Goodwill A/c and Cr. Anupama’s Capital A/c by ₹30,000 (Bank A/c is debited with ₹2,30,000 and credited to Kumar’s Capital A/c ₹2,00,000 and Premium for Goodwill A/c ₹30,000).

Teacher's Note:
1. Only Anupama sacrifices, so the whole premium is credited to her even though Nirupama is also an old partner.

Question 22. A, B, C and D were partners in a firm sharing profits and losses equally. E was admitted as a new partner for 1/3 rd share in the profits of the firm which he acquires equally from C and D. On E’s admission the goodwill of the firm was valued at ₹3,00,000. Calculate the new profit sharing ratio on E’s admission. Also pass necessary journal entry on E’s admission, assuming that he failed to bring his share of goodwill in cash. [CBSE 2019]
Answer:
C and D each give 1/6: A = 1/4, B = 1/4, C = 1/4 − 1/6 = 1/12, D = 1/12, E = 1/3.
New Ratio — 3 : 3 : 1 : 1 : 4
Journal entry: Dr. E’s Current A/c ₹1,00,000; Cr. C’s Capital A/c ₹50,000 and D’s Capital A/c ₹50,000 (E’s share of goodwill = 3,00,000 × 1/3, credited to the sacrificing partners C and D equally).

Teacher's Note:
1. A and B do not sacrifice, so they get no part of E’s goodwill.

Question 23. Mamta and Seema are partners in a firm, sharing profits in the ratio of 3 : 2. They admit Rakhi as a partner with 1/4th share in the profits of the firm. Rakhi brings ₹8,00,000 as her share of capital. The value of the total assets of the firm was ₹16,00,000 and outside liabilities were valued at ₹2,00,000 on that date. Give the necessary journal entry to record goodwill at the time of Rakhi’s admission. Also show your workings. [CBSE (F) 2013]
Answer:
Total capital of new firm = 8,00,000 × 4 = ₹32,00,000; Net worth = (16,00,000 − 2,00,000) + 8,00,000 = ₹22,00,000; Goodwill = ₹10,00,000
Rakhi’s share of goodwill ₹2,50,000: Dr. Rakhi’s Current A/c ₹2,50,000; Cr. Mamta’s Capital A/c ₹1,50,000 and Seema’s Capital A/c ₹1,00,000.

Teacher's Note:
1. Add the new partner’s capital to the old net assets before comparing with the capitalised value.

Short Answer Questions (3 Marks)

Teacher's Note:
1. The unpaid part of the premium (1,800 − 1,000) is debited to the new partner's current account; existing goodwill is written off in the old ratio.

Teacher's Note:
1. Goodwill of the firm = 24,000 × 5 = ₹1,20,000; Ashok's sacrifice 3/10 of it = ₹36,000 = 24,000 from Chander + 12,000 from Ravi.

Teacher's Note:
1. Investments: Simean takes half at book value (20,000); the other half (book 20,000) is revalued at 25,000, giving a gain of 5,000.

Question 27. Ashok and Ramu are partners respectively sharing profits in the ratio of 3 : 2. Their capitals on 1st January, 2017 were ₹80,000 and ₹60,000 respectively. They admitted Vijay into the partnership on that date giving him a 1/5th share in the future profits, which he acquired equally from Ashok and Ramu. Vijay is to bring in ₹60,000 as his share of capital. Find the new profit sharing ratio and value the goodwill of the firm. Record necessary journal entries on Vijay’s admission from the above mentioned transactions. [CBSE (F) 2006]
Answer:
New ratio: Ashok = 3/5 − 1/10 = 5/10, Ramu = 2/5 − 1/10 = 3/10, Vijay = 2/10 ⇒ 5 : 3 : 2
Total capital = 60,000 × 5 = ₹3,00,000; existing capitals = 80,000 + 60,000 + 60,000 = ₹2,00,000
Hidden Goodwill ₹1,00,000, Dr. Vijay’s Current Account ₹20,000, Cr. Ashok’s Capital Account ₹10,000 and Ramu’s Capital Account ₹10,000

Teacher's Note:
1. Hidden goodwill = capital implied by the new partner’s contribution minus total capital of all partners (including the new partner’s capital).

Question 28. Pankaj and Naresh were partners in a firm sharing profits in the ratio of 3 : 2. Their fixed capitals were ₹5,00,000 and ₹3,00,000 respectively. On 1.1.2017, Saurabh was admitted as a new partner for 1/5th share in the profits. Saurabh acquired his share of profit from Pankaj. Saurabh brought ₹3,00,000 as his capital which was to be kept fixed like the capitals of Pankaj and Naresh. Calculate the goodwill of the firm on Saurabh’s admission and the new profit sharing ratio of Pankaj, Naresh and Saurabh. Also, pass necessary journal entry for the treatment of goodwill. [CBSE (F) 2017]
Answer:
Total capital = 3,00,000 × 5 = ₹15,00,000; existing = 5,00,000 + 3,00,000 + 3,00,000 = ₹11,00,000
Hidden Goodwill ₹4,00,000; New ratio: Pankaj = 3/5 − 1/5 = 2/5, Naresh = 2/5, Saurabh = 1/5 ⇒ 2 : 2 : 1
Dr. Saurabh’s Current A/c ₹80,000 and Cr. Pankaj’s Current A/c ₹80,000

Teacher's Note:
1. With fixed capitals, goodwill adjustments go through current accounts, never the capital accounts.

Question 29. Hemant and Nishant were partners in a firm sharing profits in the ratio of 3 : 2. Their capitals were ₹1,60,000 and ₹1,00,000 respectively. They admitted Somesh on 1st April, 2013 as a new partner for 1/5th share in the future profits. Somesh brought ₹1,20,000 as his capital. Calculate the value of goodwill of the firm and record necessary journal entries for the above transactions on Somesh’s admission. [CBSE (AI) 2014]
Answer:
Total capital = 1,20,000 × 5 = ₹6,00,000; existing = 1,60,000 + 1,00,000 + 1,20,000 = ₹3,80,000
Hidden Goodwill ₹2,20,000, Dr. Somesh’s Current A/c ₹44,000, Cr. Hemant’s Capital A/c ₹26,400 and Nishant’s Capital A/c ₹17,600 (and Bank A/c Dr. ₹1,20,000 to Somesh’s Capital A/c for capital brought in).

Teacher's Note:
1. When no new ratio is given, the old partners sacrifice in their old ratio (3 : 2).

Long Answer Questions (5 Marks)

Teacher's Note:
1. Only L sacrifices (3/6 − 2/6 = 1/6), so O’s whole premium of ₹30,000 goes to L; M gains, so he gets nothing.

Teacher's Note:
1. Karuna’s capital = old partners’ adjusted capitals (9,72,000) × 1/4, because they hold 4/5 of the new firm.

Teacher's Note:
1. The 5% provision is on bills receivable plus debtors including the unrecorded ₹5,000: 5% of 1,25,000 = ₹6,250.

Teacher's Note:
1. Bad debts written off are first charged to the existing provision; only the shortfall or excess goes to Revaluation Account.

Teacher's Note:
1. Paying off the surplus capitals (₹62,000 to Atal, ₹37,200 to Madan) exceeds the cash available, so the Balance Sheet shows a bank overdraft of ₹47,000.

Teacher's Note:
1. The workmen claim of ₹2,000 is met from the reserve of ₹12,000; only the balance ₹10,000 is credited to Madan and Mohan.

Teacher's Note:
1. Sacrificing ratio is 9 : 1 (A: 3/5 − 3/8 = 9/40, B: 2/5 − 3/8 = 1/40), so A gets ₹6,300 and B ₹700 of the premium.

Teacher's Note:
1. Here Mishra’s capital is 1/4th of the old partners’ total capital (1,60,500), not 1/4th of the whole firm’s capital - read the term carefully.

Teacher's Note:
1. Raman gives 2/3 × 2/5 = 4/15 and Rohit 1/3 × 1/5 = 1/15, so Saloni gets 5/15 = 1/3 and premium is shared 4 : 1.