CBSE Class 12 Accountancy Change in Profit Sharing Worksheet Set A

Question. The excess amount which the firm can get on selling its assets over and above the saleable value of its assets is called:
(A) Surplus
(B) Super profits
(C) Reserve
(D) Goodwill
Answer. D

Question. Assets are revalued and liabilities are reassessed at the time of change in profit sharing ratio so that
(a) assets and liabilities are shown at their present values
(b) no partner is put to an advantage or disadvantage
(c) sacrificing partner is partly compensated
(d) assets and liabilities are shown at their market value.
Answer. B

Question. A,B and C are partners sharing profits in the ratio of 5:3:2. They decided to share future profits in the ratio of 2:3:5. Workmen compensation Reserve appearing in Balance Sheet on that date when no information as to workmen compensation claim is given will be
(a) distributed among partners in their capital ratio
(b) distributed among partners in their new profit sharing ratio
( c) distributed among partners in their old profit sharing ratio.
(d) carried forward to new Balance Sheet.
Answer. C

Question. A and B are partners sharing profits in the ratio of 3:2. They changed their profit sharing ratio to 2:3 w.e.f 1st April,2021. The Balance Sheet as on the date of change in profit sharing ratio showed credit balance in profit and loss a/c of Rs.1,00,000,which the partners decide to carry forward and not distribute. The balance of Rs.1,00,000 will be adjusted by
(a) crediting A’s capital a/c and debiting B’s capital a/c by Rs.1,00,000
(b) crediting A’s capital a/c and debiting B’s capital a/c by Rs.20,000
(d) debiting A’s capital a/c and debiting B’s capital a/c by Rs.1,00,000
(b) debiting A’s capital a/c and debiting B’s capital a/c by Rs.20,000
Answer. B

Question. Any change in the relationship of existing partners which results in an end of the existing agreement and enforces making of new· agreement is called:
(a) Revaluation of partnership
(b) Reconstitution of partnership
(c) Realisation of partnership
(d) None of the above
Answer. B 

Question. A and B are partners in a firm sharing profits in the ratio of 3 : 2. They decided to share fu-ture profits equally. Calculate A’s gain or sacrifice
(a) 2/10 (sacrifice)
(b) 5/10 (gain)
(c) 1/10 (Gain)
(d) 1/10 (sacrifice)
Answer. D

Question. When the balance sheet is prepared after Change in profit sharing ratio (after completing the Revaluation Account), values are shown in it.
(a) Historical value
(b) Realisable value
(c) Market value
(d) Revalued value
Answer. D

Question. If at the time of Change in profit sharing ratio, there is some unrecorded asset, it will be to Account.
(a) Debited, Revaluation
(b) Credited, Revaluation
(c) Debited, Goodwill
(d) Credited, Partners’ Capital
Answer. A

Question. Gaining partner will pay for his gained share in the firm’s future profits in favour of sacrificing partners. The Sacrificing partners gets to such compensation amount in:
(a) Gaining Ratio
(b) Sacrificing Ratio
(c) Capital Ratio
(d) Profit Sharing Ratio
Answer. B

Question. Sacrificing Ratio:
(a) New Ratio – Old Ratio
(b) Old Ratio – Gaining Ratio
(c) Old Ratio – New Ratio
(d) Gaining Ratio – Old Ratio
Answer. C

Question. Partner's capital account is credited when there is .
(a) Profit on revaluation
(b) transfer of general reserve
(c) transfer of accumulated profits
(d) All of the above
Answer. D

Question. As per Accounting Standard Goodwill is treated as an intangible asset.
(a) 25
(b) 26
(c) 27
(d) 27
Answer. B

Question. If goodwill is already appearing in the books of accounts at the time of change in profit sharing ratio, then it should be written off in .
(a) New Ratio
(b) Gaining Ratio
(c) Sacrificing Ratio
(d) Old Ratio
Answer. D

Question. When Goodwill treatment is made at the time of change in profit sharing ratio. goodwill account is .
(a) Never be raised in the book
(B) Be raised in the book
(C) Be partially raised in the books
(D) Be raised as per the agreement of the partners.
Answer. A

Question. At the time of change in profit sharing ratio, amount remaining in Investment Fluctuation Reserve after meeting the fall in value of Investment is:
(a) Credited in Sacrificing Ratio
(b)Credited in New Profit Sh. Ratio
(c) Credited in Old Profit Sharing Ratio
(d) Credited in Gaining Ratio
Answer. C

Question. P, Q and R were partners in a firm in the ratio of 5:4:3. It is agreed that Q would retain his original share. If P & R future share will be the same than who will be sacrificed for whom.
(a) P to R
(b) R to P
(c) No Sacrifice
(d) None of the above
Answer. B

Question. Any change in the relationship of existing partners which results in an end of the existing agreement and enforces making of new agreement is called:
(a) Revaluation of partnership
(b) Reconstitution of partnership
(c) Realisation of partnership
(d) None of the above
Answer. B

Question. Accumulated Losses or deferred Revenue expenditure (Advertisement suspense) are transferred to partners' capital accounts at the time of reconstitution in:
(a) Old profit-sharing ratio
(b) Sacrificing Ratio
(c) Gaining ratio
(d) New profit-sharing ratio
Answer. A

Question. Revaluation Account is a:
(a) Real Account
(b) Nominal Account
(C) Personal Account
(D) None of the Above
Answer. B

Question. The Need of revaluation of assets and liabilities:
(a) Assets and Liabilities should appear at revised values
(b) Any profit and loss an account of change in values belong to old partners
(c) All unrecorded assets and liabilities get recorded
(d) All of the Above
Answer. D

Question. Revaluation account is debited, when .
(a) Value of liability is Increases
(b) Value of assets is Decreasing.
(c) Both (A) & (B)
(d) Either (A) or (B)
Answer. C

Question. Revaluation account is credited, when .
(a) Value of liability is increases
(b) Value of liability is not affected.
(c) Value of asset is increases
(d) None of the above
Answer. C

Question. X and Y shared profits and losses in the ratio of 3:2. With effect from 1st April 2020 they agreed to share profit equally. The Goodwill of the firm was valued at Rs. 60,000.
The adjustment entry will be
(a) Debit Y and credit X with Rs. 6,000
(b) Debit X and credit Y with Rs. 6000
(c) Debit X and credit Y with Rs. 600
(d) Debit bi and credit X with Rs. 600
Answer. A

Question. Amit and Bimal are partners in a firm sharing profits in the ratio of 3: 2. They decided to share future profits 2/3 and 1/3. Calculate Amit’s gain or sacrifice
(a) 1/15 (gain)
(b) 5/10 (gain)
(c) 1/10 (Gain)
(d) 1/15 (sacrifice)
Answer. A

Question. Avni and Bhawana were partners in a firm sharing profit or loss equally. With effect from 1st April 2020 they agreed to share profits in the ratio of 4 : 3. Due to change in profit sharing ratio, Avni’s gain or sacrifice will be :
(A) Gain 1/14
(B) Sacrifice 1/14
(C) Gain 4/7
(D) Sacrifice 3/7
Answer. A

Question. A and B were partners in a firm sharing profit or loss in the ratio of 3 : 1. With effect from Jan. 1, 2021 they agreed to share profit or loss in the ratio of 2 : 1. Due to change in profit-loss sharing ratio, B’s gain or sacrifice will be :
(A) Gain 1/12
(B) Sacrifice 1/12
(C) Gain 1/3
(D) Sacrifice 1/3
Answer. B

Question. A, B and C were partners in a firm sharing profits in the ratio of 3:4:1. They decided to share profits equally w.e.f from 1 .4.2019. On that date the profit and loss account showed a credit balance of 96,000. Instead of closing the profit and loss account, it was decided to record an adjustment entry reflecting the change in profit sharing ratio. In the journal entry:
(a) Dr. A by 4,000; Dr. B by 16,000; Cr C by 20,000
(b) Cr. A by 4,000; Cr. B by 16,000; Dr C by 20,000
(c) Cr. A by 16,000; Cr. B by 4,000; Dr C by 20,000
(d) Dr. A by 16,000; Dr. B by 4,000; Cr C by 20,000
Answer. B

Question. P, Q and R were partners in a firm sharing profits in 5 : 3 : 2 ratio. They decided to share the future profits in 2 : 3 : 5. For this purpose the goodwill of the firm was valued at ₹1,20,000. In adjustment entry for the treatment of goodwill due to change in the profit sharing ratio :
(a) Cr. P by ₹24,000; Dr. R by ₹24,000
(b) Cr. P by ₹60,000; Dr. R by ₹60,000
(c) Cr. P by ₹36,000; Dr. R by ₹36,000
(D) Dr. P by ₹36,000; Cr. R by ₹36,000
Answer. C

Question. X, Y and Z are partners sharing profits and losses in the ratio 5 : 3 : 2. They decide to share the future profits in the ratio 3 : 2 : 1. Workmen compensation reserve appearing in the balance sheet on the date if no information is available for the same will be :
(a) Distributed to the partners in old profit sharing ratio
(b) Distributed to the partners in new profit sharing ratio
(c) Distributed to the partners in capital ratio
(d) Carried forward to new balance sheet without any adjustment
Answer. A

Directions : Each of the following questions consists of two statements, one is Assertion (A) and the other is Reason (R). Give answer:

(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 but Reason(R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is true but Reason (R) is false
(d) Assertion (A) is false but Reason(R) is true

Question. Assertion (A): Change in profit sharing ratio of the existing partner results in the reconstitution of the Partnership firm.
Reason (R): Change in profit sharing ratio does not change the relationship among existing partners.
Answer. C

Question. Assertion (A): Change in profit sharing ratio among partners increase the combined shares of Partners
Reason (R): Partners whose profit shares have decreased as a result of change in profit sharing ratio are known as sacrificing partners.
Answer. D

Question. Assertion (A): Partners whose profit shares have increased as a result of change in profit sharing ratio are known as gaining partners.
Reason (R): Old profit share of a partner if deducted from his new profit share is gained profit share.
Answer. B

Question. Assertion (A): It is necessary to adjust goodwill at the time of Change in profit sharing ratio .
Reason (R): At the time of Change in profit sharing ratio , gaining partner compensate for sacrificing a partner by paying him goodwill.
Answer. A

Short Answer Questions

Read the passage below and answer the questions given:

1.Mohan and Sohan, two college friends started a restaurant business in partnership sharing profit and loss in the ratio of 3:2 in the year 2019. Mohan also had a family business of gar-ments, which he took over after his father’s death. As a result, he devoted less time to the res-taurant. Sohan, being his best friend understood this and supported him fully.
However, in the year 2020, due to Covid-19, the restaurant business slowed down Sohan ap-proached Mohan and suggested that they share profits equally.
Mohan readily agreed to it.
The Goodwill of the firm was valued at Rs. 30,000. Also, there is a Workmen Compensation Reserve and General Reserve of Rs. 90,000 and Rs.12,000 respectively.

Question. What single adjusting entry will be passed for goodwill adjustment?
Answer. Debit Sohan and Credit Mohan by Rs 3.000

Question. What journal entry will be passed in case there is a claim on Workmen Compensation Re-serve of Rs. 45,000 ?
Answer. Workmen Compensation Reserve A/c Dr. 90,000
To claim on Workmen Compensation Reserve A/c 45,000
To Mohan’s capital A/c 27,000
To Sohan’s capital A/c 18,000

Question. What journal entry will be used for General Reserve?
Answer. General reserve A/c Dr. 12,000
To Mohan’s capital A/C 7,200
To Sohan’s capital A/C 4,800

2. Bhavna and Rajiv were partners in a partnership firm carrying on a restaurant in Kolkata. Bhavna noticed that a lot of food is left at the end of the day. To avoid wastage, she suggested that it can be distributed to the needy. Rajiv wanted that it should be mixed with the food being served in the next day. Rajiv then give a proposal that if his share in the profit in-creased, he will not mind free distribution of leftover food. Bhavna happily agreed. So, they decided to change their profit-sharing ratio 1:2 with immediate effect. On that day revalua-tion of assets and reassessment of liabilities was carried out that resulted into again of Ra. 18,000. On that date the good will of the firm wasvaluedatRs.1,20,000.

Based on the above in formation, you are required to answer the following questions:

Question. Sacrifice/Gain of Bhavna and Rajiv will be
Answer. Bhavna sacrifice1/6,Rajiv Gain1/6

Question. At thetimeofchangeinProfitSharingratio,gaining partnercapitalaccountis
……………………andsacrificingpartneris ........................ foradjustmentofGoodwill.
Answer. Debited, Credited

3. Karthik and Amit were partners in a firm carrying on a tiffin service in Delhi. Karthik no-ticed that a lot of food is left at the end of the day. To avoid wastage he suggested that it can be distributed to the needy, Amit wanted that it should be mixed with the food being served the next day.
Amit then gave a proposal that if his share in the profit increased, he will not mind free distri-bution of left over food. Karthik happily agreed. So, they decided to change their profit shar-ing ratio 1:2 with immediate effect. On that date, revaluation of assets and reassessment of liabilities was carried out that resulted into a gain of Rs.36,000 On that date the goodwill of the firm was valued at Rs.2,40,000

Question. Sacrifice/gain of Karthik and Amit will be
Answer. Karthik sacrifice 1/6, Amit gains 1/6

Question. At the time of change in profit sharing ratio, gaining partner’s capital a/c is-------- and sac-rificing partner’s capital a/c is ----------------- for adjustment of goodwill
Answer. debited, credited

Question. Pass the journal entry for adjustment of goodwill
Answer. Amit’s capital A/c Dr 40,000
To Karthik’s capital A/c 40,000

Question. What adjustments are required at the time of reconstitution of a partnership firm ?
Answer. Following adjustments are required at the time of reconstitution of a partnership firm:
(i) Determination of sacrificing ratio
(ii) Accounting for Goodwill
(iii) Accounting treatment of reserves and accumulated profits
(iv) Accounting for revaluation of assets and liabilities
(v) Adjustment of capitals

Question. Any changes in the relations of partnership will result in the reconstitution of the partnership firm. Why are reserves and surplus distributed among the partners into existing profit-sharing ratio.
Answer. Reserves and accumulated profits are credited to the capital accounts of all partners in their old profit sharing ratio because they have been set apart out of the profits earned in the period before change. If they are not adjusted , they will get adjusted later in the new profit sharing ratio which will result in loss to the sacrificing partner and gain to the gaining partner.

Question. A and B are partners sharing profits and losses in the ratio of 3:1. It was decided that with effect from 1st April,2021 the profit sharing ratio will be 5:3. Goodwill is to be valued at 2year’s purchase of average of 3years profits. The profits for the years ending 31st March 2019,2020 and 2021 were Rs.36,000 , Rs.32,000 and Rs.40,000 respectively.
Pass the necessary journal entry for the treatment of goodwill.
Answer. B’s capital A/c Dr 9000
To A’s capital A/ 9000

 

 

1 X, Y and Z are partners sharing profits and losses in the ratio 2:2:1. From 1st April, 2015 they decide to share profits & losses equally. Calculate the sacrificing ratio.

(Ans : X and Y sacrifices 1/15 each, Z gains 2/15)

 

2 A, B and C are partners sharing profits equally. They decided that in future C will get 1/5th share in profits and remaining profit will be shared by A and B equally. On the day of change, firm’s goodwill is valued at Rs.60,000. Give journal entries arising on account of change in profit sharing ratio.

(Ans : Debit A’s Capital a/c and B’s Capital a/c with Rs.4,000 each and Credit C’s Capital a/c withv Rs.8,000)

 

3 A, B and C are partners sharing profits in the ratio of 2:2:1. On 1.4.2015 they decided to share the profits in the ratio of 2:1:1. On that date following balances were appearing in the Balance Sheet:

Profit & Loss (Cr.)                         Rs.15,000

General Reserve                           Rs.30,000

Deferred Revenue Expenditure       Rs.20,000

Pass necessary journal entries.

(Ans : Dr. Profit & Loss A/c and General Reserve with Rs.15,000 and Rs.30,000 respectively; Cr. A’s Capital A/c, B’s Capital A/c and C’s Capital A/c with Rs.18,000, Rs.18,000 and Rs.9,000 respectively)

 

4 A, B and C were partners sharing profits and losses in the ratio of 3:2:1. On 1.1.2016, they decided that in future they will share profits in the ratio of 2:2:3. Calculate sacrificing ratio and gaining ratio.

(Ans : A and B are sacrificing in 9/42 and 2/42 respectively; C is gaining 11/42)

 

5 P, Q and R were partners sharing profits and losses in the ratio of 1:2:2. On 1st April, 2015 it was decided that P will get ¼ of the total profit and remaining share will be taken by Q and R equally. Calculate sacrificing and gaining ratios.

(Ans : Q and R are sacrificing in 1/40 each, however P is gaining 2/40)

 

6 X, Y and Z were partners sharing profits and losses in the ratio of 4:3:2. Goodwill does not appear in the books but it is worth Rs.36,000. The partners decided to share future profits in equal proportions. Give a journal entry to record the above change. Also indicate the individual partners’ gain or loss due to change in ratio. Show your workings clearly.

(Ans : Debit Z by Rs.4,000 and Credit X by Rs.4,000)

 

7 A, B and C are partners in a firm sharing profits and losses in the ratio of 3:2:1. In future they decided to share profits in the ratio of 6:5:2. For this purpose, the goodwill of the firm was valued at Rs.78,000. Pass necessary journal entry for the treatment of goodwill due to change in profit sharing ratio. Also show your workings clearly.

(Ans : Dr. B’s Capital A/c with Rs.4,000 and Cr. A ‘s Capital A/c and C’s Capital A/c with Rs.3,000

and Rs.1,000 respectively)

 

8 A, B and C are partners sharing profits and losses in the ratio 5:4:1. On 1st January 2015, they decided to share profits and losses equally in future profits. The goodwill of the firm is valued at Rs.90,000. Give necessary journal entry.

(Ans : Dr. C by Rs.21,000 and Cr. A and B by Rs.15,000 and Rs.6,000 respectively)

 

9 Chandra and Anita were partners in a firm sharing profits in the ratio 2:1. They decide that with effect from January, 2016 they would share profits in the ratio of 3:2. But, this decision was taken after the profits of the year 2016 amounting to Rs.30,000 has been distributed in the old ratio. Goodwill was to be valued at the aggregate of two years’ profits preceding the date decision became effective. The profits for 2014 and 2015 were Rs.20,000 and Rs.25,000 respectively. It was decided that no goodwill would be raised and the necessary adjustments be made through capital accounts which on March 31st 2016 stood at Rs.50,000 for Chandra and Rs.30,000 for Anita. Record the necessary journal entries.

 

(Ans. Adjustment of Profit : Dr. Chandra’s Capital A/c and Cr. Anita’s Capital A/c with Rs.2,000 each. Adjustment of Goodwill : Dr. Anita’s Capital A/c and Credit Chandra’s Capital A/c with Rs.3,000 each)

 

10 P, Q and R sharing profits and losses in the ratio of 5:3:2 decided to share profits and losses equally with effect from 1st April, 2018. Goodwill of the firm is valued at Rs.90,000. Pass journal entries under each of the following cases :

Case 1When goodwill does not appear in the books.

Case 2 When goodwill appears in the books at Rs.60,000.

 

11 Rita and Nita are partners sharing profits and losses in the ratio of 4:1. They decided to share profits in the ratio 3:2 w.e.f 1st April, 2017. However, the decision to change the profit sharing ratio was taken after crediting share of profit for the year ended 31st March, 2018 to respective Capital Accounts, which was Rs. 1,00,000. Goodwill of the firm as at 1st April, 2017 was valued at Rs.75,000. Capital Accounts credit balances as at 31st March, 2018 were Rita Rs.5,00,000 and Nita Rs.6,00,000. Pass necessary journal entries and prepare Capital Accounts.

(Ans : Capital Account balance Rita Rs.4,95,000 and Nita Rs.6,05,000)

 

12 A, B and C are partners sharing profits equally. On 1.1.2015 they decided to share their future profits in the ratio of 1:2:2. On the same date the firm has a balance of Rs.30,000 as General Reserve and Rs.18,000 in Profit and Loss A/c (Dr.). Journalise.

(Ans : Dr. General Reserve Rs.30,000 and Cr. Capital A/cs of A, B and C with Rs.10,000 each. Dr. Capital A/cs of A, B and C with Rs.6,000 each and Cr. Profit & Loss A/c with Rs.18,000)

 

13 A, B and C are partners sharing profits and losses in the ratio 2:3:4. They decided to share future profits and losses in the ratio of 4:3:2. They also decided to record the effect of the following without affecting their book values:

General Reserve                       Rs.40,000

Profit & Loss A/c                       Rs.20,000

Advertisement Suspense A/c     Rs.15,000

You are required to give the necessary single journal entry.

(Ans : Debit A’s Capital A/c Rs.10,000; Credit C’s Capital A/c Rs.10,000)

 

14 A, B and C are partners in a firm sharing Profits in the ratio of 3:3:2. They decided to share profits equally w.e.f 1st April, 2018. On that date, Profit & Loss A/c showed credit balance of Rs.72,000. Instead of closing the Profit & Loss A/c, it was decided to record an adjustment entry reflecting the change in the profit sharing ratio. Pass journal entry to give effect to the same.

(Ans : Dr. C’s Capital A/c with Rs.6,000 and Cr. Capitals of A and B with Rs.3,000 each)

 

15 P, Q and R are sharing profits and losses in the ratio of 5:3:2. They decided to share profits and losses in the ratio of 2:3:5 with effect from 1st April, 2018. They also decide to record the effect of the following without effecting their book values, by passing an adjustment entry.

(Ans : Debit R’s Capital A/c Rs 45,000 and P’s Capital A/c with Rs.45,000)

 

16 X, Y and Z are partners sharing profits and losses in the ratio of 2:2:1 respectively. With effect from 1.4.2016 they decided to share future profits equally. For this purpose the assets and liabilities were revalued as under:

Prepare Revaluation A/c and give necessary journal entries for recording the above changes in assets and liabilities.

(Ans : Revaluation Profit A Rs.30,000; B Rs.30,000 and C Rs.15,000)

 

17 P, Q and R are partners sharing profits and losses in the ratio of 5:3:2 respectively. With effect from 1.4.2015 they decided to share future profits equally. For this purpose the assets and liabilities were revalued as under.

Give necessary adjusting entries because of the above changes assuming that the assets and liabilities will continue to appear in their old values in the revised books.

(Ans : Debit Capitals of Q and R with Rs.100 and Rs.400 respectively and Credit P’s Capital A/c with Rs.500)

On 1st April, 2015 the partners decided to share future profits in the ratio 5:3:2 and the following revaluations were made :-

(i)Building was to be appreciated by 20%

(ii)10% of debtors were bad

(iii)A provision for discount on creditors was to be made @2%

Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of the re-constituted firm.

(Ans: Revaluation Profit Rs.10,600; Capital A/Cs of X Rs.53,975, Y Rs.33,975 and Z Rs.22,650 Balance Sheet Total Rs.1,80,000)