CBSE Class 12 Accountancy Retirement And Death Of Partner VBQs

OBJECTIVE QUESTIONS 

Question. On the death of a partner, his share in the profits of the firm till the date of his death is transferred to the:
(A) Debit of Profit & Loss Account
(B) Credit of Profit & Loss Account
(C) Debit of Profit & Loss Suspense Account
(D) Credit of Profit & Loss Suspense Account
Answer. Option (C) is correct.

Question. Amla, Bimla and Kavita were partners sharing profits and losses in the ratio of 4 : 3 : 1. Bimla retires and gives her share of profit to Amla for Rs 3,600 and to Kavita for Rs 3,000.The gaining ratio of Amla and Kavita will be :
(A) 4 : 5
(B) 2 : 1
(C) 6 : 5
(D) 4 : 1
Answer. Option (C) is correct.

Question. Gobind, Hari and Pratap are partners. On retirement of Gobind, the goodwill already appears in the Balance Sheet at Rs 24,000. The goodwill will be written-off :
(A) by debiting all partners’ capital accounts in their old profit sharing ratio.
(B) by debiting remaining partners’ capital accounts in their new profit sharing ratio.
(C) by debiting retiring partners’ capital accounts from his share of goodwill.
(D) None of the above. 
Answer. Option (A) is correct.

Question. Chaman, Raman and Suman are partners sharing profits in the ratio of 5 : 3 : 2. Raman retires. The new profit sharing ratio between Chaman and Suman will be 1 : 1. The goodwill of the firm is valued at Rs 1,00,000. Raman’s share of goodwill will be adjusted:
(A) by debiting Chaman’s Capital Account and Suman’s Capital Account with Rs 15,000 each
(B) by debiting Chaman’s Capital account and Suman’s Capital Account with Rs 21,429 and Rs 8,571 respectively
(C) by debiting only Suman’s Capital Account with Rs 30,000
(D) by debiting Raman’s Capital account with Rs 30,000 
Answer. Option (C) is correct

Question. A, B and C are partners sharing profit in the ratio of 2 : 2 : 1. C retired. The new profit sharing ratio between A and B will be :
(A) 2 : 1
(B) 1 : 1
(C) 3 : 1
(D) 4 : 1 A
Answer. Option (B) is correct.

Question. According to the Partnership Act, 1932, the interest payable to the deceased partner on the amount left by him will be :
(A) 6% p.a.
(B) 10% p.a.
(C) 12% p.a.
(D) 16% p.a. A
Answer. Option (A) is correct.

Question. Retirement or death of a partner will create a situation for the continuing partners, which is known as :
(A) Dissolution of partnership
(B) Dissolution of partnership firm
(C) Winding up of business
(D) None of these
Answer. Option (A) is correct.

Question. The old profit sharing ratio among Rajendra,Satish and Tejpal was 2 : 2 : 1. The new profit sharing ratio after Satish’s retirement is 3 : 2.
The gaining ratio is :
(A) 3 : 2
(B) 2 : 1
(C) 1 : 1
(D) 2 : 2 A
Answer. Option (C) is correct.

Question. Saurabh, Shirin and Somesh are partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1. Somesh retires and the new profit sharing ratio between Saurabh and Shirin is 3 : 2. The gaining ratio between Saurabh and Shirin will be :
(A) 3 : 2
(B) 3 : 1
(C) 1 : 1
(D) 2 : 1
Answer. Option (A) is correct.

Question. Pick the odd one out :
(A) Credit Balance of Capital A/c
(B) Credit Balance of Revaluation A/c
(C) Debit Balance of Statement of Profit & Loss
(D) Undistributed Reserve 
Answer. Option (C) is correct.

Question. In case of retirement, if full or part of the amount payable to the retiring partner still remains to be paid, and there is no agreement among the partners then retiring partner will get:
(i) Interest @ 6% p.a. on the balance amount.
(ii) Share of profit earned proportionate to his amount outstanding to total capital of the firm.
(iii) Interest @ 9% p.a. on the balance amount.
Which out of the following is correct ?
(A) (i)
(B) (ii)
(C) (iii)
(D) Have a choice to get either (i) or (ii)
Answer. Option (D) is correct.

Question. At the time of retirement of a partner ‘Loss on Revaluation’ is debited :
(A) only to the capital account of the retiring partner
(B) to the capital accounts of all the partners in their old profit sharing ratio
(C) to the capital accounts of the remaining partners in their new profit sharing ratio
(D) to the capital accounts of remaining partners in their old profit sharing ratio
Answer. Option (B) is correct.

Question. On the retirement of Hari from the firm of ‘Hari,Ram and Sharma’ the Balance Sheet showed a debit balance Rs 12,000 in the Profit and Loss Account. For calculating the amount payable to Hari this balance will be transferred :
(A) to the credit of the capital accounts of Hari,Ram and Sharma equally.
(B) to the debit of the capital accounts of Hari,Ram and Sharma equally.
(C) to the debit of the capital accounts of Ram and Sharma equally.
(D) to the credit of the Capital Accounts of Ram and Sharma equally.
Answer. Option (B) is correct.

Question. At the time of retirement of a partner, profit on revaluation will be credited to the capital accounts of :
(A) Retiring partner
(B) All partners in their old profit sharing ratio
(C) The remaining partners in their old profit sharing ratio
(D) The remaining partners in their new profit sharing ratio
Answer. Option (B) is correct.

Question. A, B and C are partners. C expired on 18th December, 2019 and as per agreement surviving partners A and B directed the accountant to prepare financial statement as on 18th December, 2019 and accordingly the share of profits of C (decreased partner) was calculated as Rs 12,00,000. Which account will be debited to transfer C’s share of profit :
(A) Profit and Loss Suspense Account
(B) Profit and Loss Appropriation Account
(C) Profit and Loss Account
(D) None of the above 
Answer. Option (B) is correct.

Assertion and Reason Based MCQs

Question. Assertion (A): A partnership may come to an end with the death of a partner but the firm may continue its business with new partnership agreement.
Reason (R): Death of a partner leads to the restructuring of the firm and not to the dissolution of the partnership firm. 
Answer. Option (A) is correct.

Question. Assertion (A): When a partner retires, all the unrecorded assets and liabilities, the increase or decrease in the value of assets and liabilities are adjusted through the revaluation account.
Reason (R): A Revaluation Account is prepared in order to ascertain net gain (loss) on revaluation of assets or reassessment of liabilities and bringing unrecorded items into firm’s books and the same is transferred to the capital account of all partners including retiring/deceased partner in their old profit sharing ratio.
Answer. Option (A) is correct.

Question. Assertion (A): When goodwill is not appearing in the books, retiring or deceased partner’s capital account is to be credited with his share of goodwill and gaining partners’ capital accounts are to be debited in gaining ratio.
Reason (R): Goodwill needs to be compensated by the gaining partners in the gaining ratio. 
Answer. Option (A) is correct.

Question. Assertion (A): On retirement, the old partnership agreement comes to an end and a new partnership agreement comes into existence between the remaining partners.
Reason (R): Retirement of the partnership leads to the reconstitution of the firm. 
Answer. Option (A) is correct.

Question. Assertion (A): Ram, Rahim and Ron share profits in the ratio 2:3:5. Ram decides to retire.The new profit sharing ratio is 3:5. If the profit earned was Rs 1,50,000 before retirement.Rahim’s share is Rs 45,000.
Reason (R): In case of retirement of a partner,profits are shared in new profit sharing ratio among existing partners. 
Answer. Option (C) is correct.

Question. Assertion (A): Retirement of partner is legal when done at will and with the consent of the other partners.
Reason (R): According to Section 32 (1) of the Indian Partnership Act, 1932, “a partner may retire from the firm with the consent of all the partners or at his will, by giving written notice to all the other partners of his intention to retire.” 
Answer. Option (A) is correct.

Question. Assertion (A): Nisha, Okra and Piya are partners. Nisha retires and her capital account after making adjustments for reserves and profit on revaluation exists at Rs90,000. Okra and Piya have agreed to pay her Rs1,30,000 in full settlement of his claim. It implies that Rs40,000 (Rs1,40,000 – Rs90,000) is Nisha’s share of goodwill of the firm. This will be treated by debiting Rs40,000 in Okra’s and Piya’s Capital Accounts in their gaining ratio and crediting Nisha’s Capital A/c.
Reason (R): If the firm has agreed to settle the account of retiring partner by paying him/ her a lump-sum amount, then amount paid to him/her in excess of his adjusted capital shall be treated as his/her share of goodwill. 
Answer. Option (A) is correct.

Case-based MCQs

I. Analyse the case given below and answer the questions that follow :

Alia, Karan and Shilpa were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Goodwill appeared in their books at the value of Rs60,000. Karan decided to retire from the firm. On the date of his retirement, goodwill of the firm was valued at Rs2,40,000. The new profit sharing ratio decided among Alia and Shilpa was 2 : 3.

Question. What is Alia’s gain or sacrifice on retirement of Karan?
(A) 1/10 Gain
(B) 1/10 Sacrifice
(C) 4/10 Gain
(D) 4/10 Sacrifice
Answer. Option (B) is correct.

 
Question. What amount of goodwill will be credited to Karan’s Capital Account?
(A) Rs 96,000
(B) Rs 72,000
(C) Rs 24,000
(D) Rs 18,000
Answer. Option (B) is correct.

Question. How much will be transferred to Karan’s Capital Account for the existing goodwill?
(A) Rs 18,000
(B) Rs 30,000
(C) Rs 12,000
(D) Rs 72,000
Answer. Option (A) is correct.

Question. What is Shilpa’s gain or sacrifice?
(A) 1/10 Gain
(B) 1/10 Sacrifice
(C) 4/10 Gain
(D) 4/10 Sacrifice
Answer. Option (C) is correct

II. Read the following information and answer the given questions:

Rohit, Karan and Karim are partners sharing profits and losses in the ratio of 14 : 5 : 6 respectively. Karan retires and surrenders 5/25th share in favour of Rohit. The goodwill of the firm is valued at 2 years’ purchase of super profit based on average profits of last three years. The profits for the last three years are Rs50,000, Rs55,000 and Rs60,000, respectively. The normal profits for the similar firm are Rs30,000. Goodwill already appears in the books of the firm at Rs 75,000.

Question. Who is the gaining partner?
(A) Rohit
(B) Karim
(C) Both (A) and (B)
(D) Neither (A) nor (B)
Answer. Option (A) is correct.

Question. What amount will be brought in by Rohit as goodwill for Karan?
(A) Rs50,000
(B) Rs10,000
(C) Rs30,000
(D) Rs75,000
Answer. Option (B) is correct.

Question. What is the value of new goodwill determined?
(A) Rs50,000
(B) Rs10,000
(C) Rs30,000
(D) Rs75,000
Answer. Option (A) is correct.

Question. What value of existing goodwill will be transferred to Karan’s Capital Account?
(A) Rs 42,000
(B) Rs 15,000
(C) Rs 18,000
(D) Rs 75,000
Answer. Option (B) is correct.

III. Read the following information and answer the given questions:

Parth, Angad and Leesha are partners in a firm sharing profits and losses in the ratio of 3 : 2 : 1 respectively. Angad retires and his claim, including his capital and entitlements from the firm including his share of Goodwill of the firm, is Rs 50,000.
After this amount was determined, it was found that there was an unrecorded piece of furniture valued at Rs 12,000 which had to be recorded. Upon recording this piece of furniture, the revised amount due to Angad was determined and settled by giving him this piece of furniture and the balance in cash.

Question. To which account will the unrecorded piece of furniture will be adjusted in?
(A) Angad’s Capital Account
(B) Profit and Loss Adjustment Account
(C) Revaluation Account
(D) Profit and Loss Appropriation A/c
Answer. Option (C) is correct.

Question. What is the profit on revaluation?
(A) Rs 62,000
(B) Rs 50,000
(C) Rs 12,000
(D) Rs 38,000
Answer. Option (C) is correct.

Question. What will be the final amount of the claim to be paid to Angad?
(A) Rs50,000
(B) Rs54,000
(C) Rs46,000
(D) Rs42,000
Answer. Option (B) is correct.

Question. What will be the share of Angad in profit on revaluation?
(A) Rs 6,000
(B) Rs 4,000
(C) Rs 2,000
(D) Rs 12,000
Answer. Option (B) is correct.

 

Very Short Answer Type Questions

Question. P, Q and R were partners in a firm. On 31st March, 2018, R retired. The amount payable to R Rs 2,17,000 was transferred to his loan account. R agreed to receive interest on this amount as per the provisions of Partnership Act, 1932. State the rate at which interest will be paid to R.
Answer. 6% p.a. 

Question. Dinkar, Navita and Vani were partners sharing profits and losses in the ratio of 3 : 2 : 1. Navita died on 30th June, 2017. Her share of profit for the intervening period was based on the sales during that period, which were Rs 6,00,000. The rate of profit during the past four years had been 10% on sales. The firm closes its books on31st March every year. Calculate Navita’s share of profit.
Answer. Profits of the firm till Navita’s death
= 10% of Rs 6,00,000 = Rs 60,000
Navita’s share = 2/6 × Rs 60,000 = Rs 20,000