CBSE Class 12 Accountancy Change in Profit Sharing Worksheet Set B

Question. Arun and Vijay are partners in a firm sharing profits and losses in the ratio of 5 : 1.
Balance Sheet (Extract)

Liabilities    Amount     Assets      Amount
                     (Rs)                         (Rs) 
                               Machinery    40,000

If value of machinery in the balance sheet is undervalued by 20%, then at what value will machinery be shown in new balance sheet:
(a) Rs 44,000
(b) Rs 48,000
(c) Rs 32,000
(d) Rs 50,000
Answer. D

Question. A, B and C were partners sharing profit or loss in the ratio of 7 : 3 : 2. From Jan. 1, 2019 they decided to share profit or loss in the ratio of 8 : 4 : 3. Due to change in the profit-loss sharing ratio, B’s gain or sacrifice will be:
(a) Gain 1/6
(b) Sacrifice 19/60
(c) Gain 2/6
(d) Sacrifice 3/6
Answer. B

Question. The formula for calculating the sacrificing ratio is:
(a) New share – Old share
(b) Old share – New share
(c) Gaining Ratio – Old Ratio
(d) Old Ratio – Gaining Ratio
Answer. B

Question. In case of change in profit sharing ratio, when revised values are not to be recorded in the books, then steps to be followed are:
(i) Calculation of the net effect of revaluation.
(ii) To find share of sacrifice/(gain) by partners.
(iii) Calculation of proportional amount of net effect of revaluation.
(iv) Pass a single adjustment entry.
(a) (ii)-(iii)-(iv)-(i)
(b) (iii)-(ii)-(iv)-(i)
(c) (iv)-(iii)-(ii)-(i)
(d) None of these
Answer. C

Question. ‘A’, ‘B’ and ‘C’ are partners sharing profits in the ratio of 2 : 2 : 1. At the time of Reconstitution of firm, they agreed to write-off goodwill which is shown in balance sheet as an intangible asset amounting to Rs 50,000. Jouranlise it.
(a) Goodwill A/c Dr. 50,000
To A’s Capital A/c 20,000
To B’s Capital A/c 20,000
To C’s Capital A/c 10,000
(b) A’s Capital A/c Dr. 20,000
B’s Capital A/c Dr. 20,000
To Goodwill A/c 40,000
(c) A’s Capital A/c Dr. 20,000
B’s Capital A/c Dr. 20,000
C’s Capital A/c Dr. 10,000
To Goodwill A/c 50,000
(d) A’s Capital A/c Dr. 10,000
B’s Capital A/c Dr. 20,000
To C’s Capital A/c 30,000
Answer. C

Question. Calculate net effect of revaluation when revised values are to be recorded in books.
(i) Stock is to be valued at 10% less (Book value Rs 3,00.000).
(ii) Provision for bad debts is no more required, (Shown in Balance Sheet for Rs 4,000).
(iii) An outstanding salary which is unrecorded of Rs 16,000.
(a) Rs 40.000 profit
(b) Rs 42,000 profit
(c) Rs 42,000 loss
(d) None of these
Answer. C

Question. ‘A’ and ‘B’ are partners in a firm. They share their profits and losses in the ratio of 3 : 2. They have decided that their new profits (losses) sharing ratio will be 1 : 1. At that time their goodwill is valued at Rs 30,000. Calculate amount of goodwill which will be given by B to A.
(a) Rs 2,500
(b) Rs 2,400
(c) Rs 2,800
(d) Rs 3,000
Answer. D

Question. ‘B’ and ‘C’ were partners sharing profits in the ratio of 3 : 2. They agreed to share their future profits in the ratio of 1 : 1. At that time their books showed the following balances:
Proit and Loss A/c (Cr) = Rs 60,000
General Reserve = Rs 40,000
Pass necessary entry at the time of change in profit sharing ratio.
(a) C’s Capital A/c Dr. 10,000
To B’s Capital A/c 10,000
(b) General Reserve A/c Dr. 40,000
To B’s Capital A/c 20,000
To C’s Capital A/c 20,000
(c) Profit and Loss A/c Dr. 60,000
General Reserve A/c Dr. 40,000
To B’s Capital A/c 1,00,000
(d) Profit and Loss A/c Dr. 60,000
General Reserve A/c Dr. 40,000
To B’s Capital A/c 60,000
To C’s Capital A/c 40,000
Answer. D

Question. ‘A’, ‘B’ and ‘D’ are partners in a firm sharing profits (losses) in the ratio of 3 : 2 : 1. They change their ratio into 2 : 1 : 2 for future profits. At that time their balance sheet shows the following balances.
Investment Fluctuation Reserve = Rs 6,000
Investment = Rs 25,000
Now, the market value of investments’ is Rs 22,000. Distribute Investment Fluctuation Reserve among partners.
(a) Investment Fluctuation Reserve A/c Dr. 6,000
To A’s Capital A/c 3,000
To B’s Capital A/c 2,000
To D’s Capital A/c 1,000
(b) Investment Fluctuation Reserve A/c Dr. 6,000
To A’s Capital A/c 6,000
(c) A’s Capital A/c Dr. 6,000
To B’s Capital A/c 3,000
To C’s Capital A/c 3,000
(d) Investment Fluctuation Reserve A/c Dr. 6,000
To Investment A/c 3,000
To A’s Capital A/c 1,500
To B’s Capital A/c 1,000
To D’s Capital A/c 500
Answer. D

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

Question. Who is a Sacrificing Partner:
(a) Whose share has decrease as a result of change
(b) Whose share has increase as well as decrease as a result of change
(c) Whose share has does not get affected as a result of change
(d) whose share has increase as a result of change
Answer. A

Question. An account prepared to carry out the scheme of Revaluation of Assets and Reassessment of Liabilities:
(a) Devaluation account
(b) Memorandum of revaluation
(c) Memorandum of valuation
(d) Revaluation account
Answer. D

Question. Revaluation of assets on the reconstitution of partnership is necessary because their present value may be different from their:
(a) Market value
(b) Net value
(c) Place value
(d) Book value
Answer. D

Question. A, B & C were partners in the ratio of 3 : 2 : 1. As on 1st April they decided to share equally in future. What will be the sacrificing or the gaining ratio.
(a) Sacrifice A 1/6; B’s Sacrifice Nil; C’s Gain 1/6
(b) Gain A 1/6; B’s Sacrifice Nil; C’s Sacrifice 1/6
(c) Sacrifice A 1/3; B’s Sacrifice 1/3; C’s Gain 1/6
(d) Sacrifice A 1/6; B’s Sacrifice 1/3; C’s Gain 1/3
Answer. A

Question. A, B & C were partners in the ratio of 3 : 2 : 1. As on 1st April they decided to alter their ratio. For this purpose A decided to give 1/4th share to B, and B decided to give 1/2 share to A & C equally. What will be the new ratio.
(a) 1 : 1 : 1
(b) 6 : 1 : 5
(c) 6 : 5 : 1
(d) 5 : 1 : 6
Answer. C

Question. A, B & C were partners in the ratio of 3 : 2 : 1. As on 1st April they decided to alter their ratio. For this purpose A decided to give 1/4th of his share to B, and B decided to give 1/2 of his share to A & C equally. What will be the Sacrifice/Gain of A.
(a) 3/24 Sacrifice
(b) 1/24 Sacrifice
(c) 2/24 Gain
(d) 1/24 Gain
Answer. B

Question. A and B are partners in a firm sharing profits in the ratio of 4 : 1. They decided to share future profits in the ratio of 3 : 2 w.e.f. 1st April, 2021. On that day, Profit and Loss Account showed a debit balance of Rs 50,000. What will be the Sacrifice/Gain of B.
(a) Gain of 1/5
(b) Sacrifice of 3/20
(c) Profit and loss will be Credited to Partner’s Capital Account in old ratio.
(d) Profit and loss will be Debited to Partner’s Capital Account in old ratio.
Answer. A

Question. Any change in the relationship of existing partners which results in an end of existing agreement is called as
(a) Reconstitution of the Partnership Firm.
(b) Dissolution of the Partnership Frim.
(c) Reconstitution of the Partnership.
(d) None of the above.
Answer. C

Question. A, B & C are partners sharing profits and losses in the ratio of 3 : 2 : 1. They decided to share equally in future.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 ratio.
(b) Distributed to the partners in new ratio.
(c) Distributed to the partners in sacrificing ratio.
(d) Will not be distributed.
Answer. A

Question. Ram, Mohan & Geeta are partners sharing profits and losses in the ratio of 3 : 2 : 1. From 1st April, 2021 they decided to share profits equally. As a result of the change in profit sharing ratio the partner who will not have any effect on his ratio will be:
(a) Ram
(b) Mohan
(c) Geeta
(d) None of the above
Answer. B

Question. A & B shared profits and losses in the ratio of 3 : 2. With effect from 1st April, 2021, they decided to share profits equally. Goodwill of the firm was Valued at Rs 20,000. What will be the share of B in the Goodwill.
(a) Sacrifice of A 1/10.
(b) Sacrifice of B 1/10.
(c) Gain of A 1/10 with share as Rs 2,000.
(d) Gain of B 1/10 with share as Rs 2,000.
Answer. D

Question. A, B & C are partners sharing profits and losses in the ratio of 3 : 2 : 1. They decided to share equally in future.With the Fixed Capitals of Rs 1,00,000 each. At the time of this change the reserves appearing in the balance sheet will be :
(a) Credited in Old Ratio in Capital Account.
(b) Debited in New Ratio in Capital Account.
(c) Credited in Old Ratio in Current Account.
(d) Debited in New Ratio in Current Account.
Answer. C

Question. Assertion : As a result in Change in Profit sharing ratio it results in Dissolution of the Partnership Firm.
Reason : As the old agreement comes to end as a result of any change in the partnership deed it ends up the old agreement and the new agreement is formed so it becomes the part of Reconstitution of the Partnership Firm ie
Dissolution of the Partnership.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer. D

Question. Assertion : As a result in Change in profit sharing ratio it results in Dissolution of the Partnership.
Reason : As the old agreement comes to end as a result of any change in the partnership deed it ends up the old agreement and the new agreement is formed so it becomes the part of reconstitution of the partnership firm ie Dissolution of the Partnership.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer. A

Question. Assertion : In Case of Change in profit sharing ratio the old balances of reserves need not be transferred to capital account in old profit sharing ratio.
Reason : If the partners decide not to distribute the reserves the adjusting entry can be passed in sacrificing and gaining ratio to adjust the profit.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer. A

Question. Assertion : In Case of Change in profit sharing ratio the old balances of reserves should be transferred to capital account in old profit sharing ratio.
Reason : It is compulsory to distribute the reserves appearing in the old balance sheet as they were created, in the old firm and know the new firm is created.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer. C

Question. Assertion : Purchased goodwill which is appearing on the assets side of the balance sheet at the time of change in profit sharing ratio need to be written off in old ratio at the time of Reconstitution.
Reason : As per AS-26, Goodwill existing in the Books of Account is written off by Debiting it ot the Partner’s Capital
Account or Current account.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer. A

Question. Assertion : Purchased goodwill which is appearing on the Assets side of the Balance sheet at the time of change in profit sharing ratio need to be written off in sacrificing ratio at the time of Reconstitution.
Reason : As per AS-26, Goodwill existing in the Books of Account is written off by debiting it ot the Partner’s Capital Account or Current account.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer. D

Question. Assertion : When the Workmen Compensation Reserve is shown on the Liabilities side of Balance sheet and there is no claim on account of Workmen Compensation, this reserve is distributed in old ratio.
Reason : As this reserve becomes the part of free reserve so it is transferred to the Partners Capital Accounts in their old profit sharing ratio.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer. A

Question. Assertion : A & B are partners sharing profits in the ratio of 4 : 1. They decided to share equally in future on that day their balance sheet shows the Advertisement Suspense of Rs 50,000 and B asked no to write off the Advertisement Suspense balance as this is the Deferred Revenue Expenditure.
Reason : Deferred Revenue Expenditure does not bring any asset into existence but its benefits is expected to last in more that one accounting period. They are to be written off over the period during which its benefits is likely to accrue. At the time of change in profit sharing ratio, they should be written off in their old profit sharing ratio.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer. D

Question. Assertion : At the time of Change in profit sharing ratio if there is any gain on revaluation of any asset should be Credited to the Partners Capital Account.
Reason : Any gain on revaluation of any asset or re assessment of liability will be Credited to the Revaluation Account and not to the Partner’s Capital Account.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer. D

Question. Assertion : The partners whose profit shares have decreased as a result of change in profit sharing ratio are known as Sacrificing Partners.
Reason : Sacrificing partners are those who loses some share as the result of change in profit sharing ratio.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer. A

Question. Shivam, Paresh and Hariom are partners in a firm manufacturing furniture. They have been sharing profits and losses in the ratio of 5 : 3 : 2. From 1st April, 2018 they decided to share future profits and losses in the ratio of 2 : 5 : 3. Their balance sheet showed a debit balance of Rs 4,000 in Profit and loss Account; balance of Rs 36,000 in General reserve and a balance of Rs 12,000 in Workmen’s Compensation Reserve.
It was agreed that the goodwill of the firm be valued at Rs 76,000. The stock (book value of Rs 40,000) was to depreciated by 8%. Creditors amounting to Rs 900 were not likely to be claimed. Claim on Account of Workmen’s Compensation amounted to Rs 20,000. Investments (book value Rs 38,000) were revalued at Rs 40,000.

Based on above information you are required to answer the following questions:

Question. Loss on revaluation will be:
(a) Rs 9,300
(b) Rs 7,300
(c) Rs 6,300
(d) Rs 8,300
Answer. D

Question. Shivam sacrificing ratio will be:
(a) 4/5
(b) 3/10
(c) 2/10
(d) 1/10
Answer. B

Question. Paresh and Hariom will compensate Shivam for adjustment for goodwill on account of change in profit sharing ratio by:
(a) Rs 22,800
(b) Rs 12,800
(c) Rs 13,900
(d) Rs 23,900
Answer. A

Question. Decrease in value of stock by 3200 will be:
(a) Debited to Revaluation Account
(b) Credited to Revaluation Account
(c) Debited to Goodwill Account
(d) Credited to Partner’s Capital Account
Answer. A

 Linda, Mirinda and Nile were partners in a firm sharing profits in the ratio of 2:3:5. From 1st April, 2019 they decided to share the profits in the ratio of 1 : 2 : 2. On this date, the Balance Sheet showed a credit balance of Rs 1,17,000 in general reserve and a debit balance of Rs 35,000 in Profit and loss Account. The goodwill of the firm was valued at Rs 5,00,000. The revaluation of assets and reassessment of liabilities resulted into gain of Rs 30,000.
Based on above information you are required to answer the following questions:

Question. Sacrificing Ratio of Linda is:
(a) 2/10
(b) 1/10
(c) Nil
(d) None of these
Answer. C

Question. General Reserve appearing in the balance sheet 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) None of the above
Answer. A

Question. Gain on Revaluation will be:
(a) Rs 35,000
(b) Rs 30,000
(c) Rs 50,000
(d) Rs 45,000
Answer. B

Read the following hypothetical text adn answer the given questions :
Kia, Gia and Sia were partners in a firm sharing profits and losses equally. The firm was engaged in the storage and distribution of cannel juice and its godown were located at three different places in the city. Each godown was being managed individually by Kia, Gia and Sia. Because of increase in business activities at the godown managed by Gia, she had to devote more time. Gia demanded that his share in the profits of the firm be increased, to which Kia and Sia agreed. The new profit sharing ratio was agreed to be 1 : 2 : 1.
For this purpose, the goodwill of the firm was valued at two years purchase of the average profits of last five years.
The profits of the last five years were as follows :
Year            Profit (Rs)
I                 4,00,000
II                4,80,000
III               7,33,000
IV               (Loss) 33,000
V                 2,20,000
Based on the above information you are required to answer the following questions :

Question. Average profit of the firm will be :
(a) Rs 18,00,000
(b) Rs 7,20,000
(c) Rs 3,60,000
(d) Rs 9,33,000
Answer. C

Question. Goodwill of the firm :
(a) Rs 3,60,000
(b) Rs 7,20,000
(c) Rs 1,80,000
(d) Rs 7,00,000
Answer. B

Question. Sacrifice/Gain of Kia, Gia and Sia will be :
(a) Kia and Sia sacrifice = 1/12, Gia gains = 2/12
(b) Kia and Sia gains = 1/12, Gia sacrifice = 2/12
(c) Kia sacrifice = 2/12, Sia gains = 1/12, Gia gains = 1/12
(d) Kia gains = 2/12, Sia sacrifice = 1/12, Gia sacrifice = 1/12
Answer. A

Question. What will be the journal entry for treatment of goodwill on change in profit sharing ?
(a) Kia’s Capital A/c Dr. 1,00,000
To Gia’s Capital A/c 50,000
To Sia’s Capital A/c 50,000
(b) Sia’s Capital A/c Dr. 60,000
Kia’s Capital A/c Dr. 40,000
To Gia’s Capital A/c 1,00,000
(c) Gia’s Capital A/c Dr. 1,20,000
To Kia’s Capital A/c 60,000
To Sia’s Capital A/c 60,000
(d) Gia’s Capital A/c Dr. 60,000
Sia’s Capital A/c Dr. 60,000
To Kia’s Capital A/c 1,20,000
Answer. C

Read the following hypothetical text and answer the given questions :

Bhavya and Naman were partners in a firm carrying on a tiffin service in Hyderabad. Bhavya noticed that a lot of food in left at the end of the day. To avoid wastage, she suggested that it can be distributed to the needy; Naman wanted that it should be mixed with the food being served the next day. Naman then give a proposal that if his share in the profit increased, he will not mind free distribution of left over food. Bhavya happily agreed. So, they decided to change their profit sharing 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 18,000. On that date the goodwill of the firm was valued at Rs 1,20,000.

Based on the above information you are required to answer the following questions :

Question. Sacrificing share equals to :
(a) Old Share – New Share
(b) New Share – Old Share
(c) Old Share + New Share
(d) Old Share
Answer. A

Question. Sacrifice/Gain of Bhavya and Naman will be :
(a) Bhavya sacrifice 1/6, Naman gains 1/6
(b) Bhavya gains 1/6, Naman sacrifice 1/6
(c) Only Bhavya gains 1/6
(d) Only Naman sacrifice 1/6
Answer. A

Question. At the time of change in profit sharing ratio, gaining partner capital account is _______ and sacrificing partner is _______ for adjustment of goodwill.
(a) credited, debited
(b) debited, credited
(c) increased, decreased
(d) decreased, credited
Answer. B

Question. Pass the journal entry for adjustment of goodwill.
(a) Naman’s Capital A/c Dr. 1,20,000
To Bhavya’s Capital A/c 1,20,000
(b) Bhavya’s Capital A/c Dr. 60,000
To Naman’s Capital A/c 60,000
(c) Naman’s Capital A/c Dr. 20,000
To Bhavya’s Capital A/c 20,000
(d) Bhavya’s Capital A/c Dr. 1,00,000
To Naman’s Capital A/c 1,00,000
Answer. C

Please click on below link to download CBSE Class 12 Accountancy Change in Profit Sharing Worksheet Set B