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Reconstitution of Partnership Firm: Retirement / Death of a Partner Class 12 MCQs Questions with Answers
I. State which of the following is correct:
Question 1.
At what rate is interest payable on the amount remaining unpaid to the executor of deceased partner, in absence of any agreement among partners, when (s)he opts for interest and not share of profit.
(a) 12% p.a.
(b) 8%p.a.
(c) 6%p.a.
(d) 7.5%p.a.
Answer
Answer: (c) 6%p.a.
Question 2.
Partnership will be dissolved if
(a) profit sharing ratio changed
(b) admission of a new partner
(c) retirement of a partner
(d) All of these
Answer
Answer: (d) All of these
Question 3.
Gaining Ratio:
(a) Old Ratio – New Ratio
(b) New Ratio – Old Ratio
(c) Old Ratio + Old Ratio
(d) All of these.
Answer
Answer: (b) New Ratio – Old Ratio
Question 4.
At the time retirement of a partner, ratio is calculated:
(a) old
(b) sacrifice
(c) gaining
(d) All of these.
Answer
Answer: (c) gaining
Question 5.
After the death of an existing partner, shares of remaining partner will
(a) increase
(b) decrease
(c) not change
(d) All of these.
Answer
Answer: (a) increase
Question 6.
At the time of retirement of an existing partner, goodwill already shown in the books is written off in ratio.
(a) old
(b) new
(c) sacrifice
(d) gaining
Answer
Answer: (a) old
Question 7.
Goodwill of the deceased partner will be debited in remaining partners’ capital Account in ratio.
(a) old
(b) new
(c) sacrifice
(d) gaining
Answer
Answer: (d) gaining
Question 8.
At the time of retirement of a partner, goodwill will be credited in partner’s capital Account.
(a) old
(b) gaining
(c) retiring
(d) All of these.
Answer
Answer: (c) retiring
Question 9.
At the time of retirement of a partner, account is prepared.
(a) revaluation A/c
(b) profit and loss A/c
(c) balance sheet
(d) All of these.
Answer
Answer: (a) revaluation A/c
Question 10.
The retiring/deceased partner must be compensated in the form of premium (goodwill) for the share of profit in favour of continued partners. .
(a) sacrificed
(b) gained
(c) obtained
(d) None of these.
Answer
Answer: (a) sacrificed
Question 11.
A, B and C are partners sharing profits in ratio 4 : 3 : 2. B retires, selling his share of profit to A and C for ₹ 7200 (₹. 4,000 paid by A and B 3,200 paid by C). The new profit sharing ratio of A and C would be:
(a) 17:10
(b) 15:12
(c) 19 : 8
(d) None of these
Answer
Answer: (a) 17:10
Question 12.
Profit or loss on revaluation of assets and liabilities at the time of retirement of a partner is shared by
(a) all partners in their old ratio
(b) remaining partners in old ratio
(c) remaining partners in gaining ratio
(d) retired partner only
Answer
Answer: (a) all partners in their old ratio
Question 13.
At the time of death of a partner account is prepared.
(a) Representative Account
(b) Deceased Partner’s Capital A/c
(c) Profit and Loss Account
(d) All of these.
Answer
Answer: (a) Representative Account
Question 14.
After retirement of a partner, share of remaining partner will
(a) increase
(b) decrease
(c) not change
(d) postpone.
Answer
Answer: (a) increase
Question 15.
Retirement of a partner is of partnership firm.
(a) dissolution
(b) winding up
(c) reconstitution
(d) None of these.
Answer
Answer: (c) reconstitution
Question 16.
If there is any baiance left unpaid to the retiring / deceased partner, then interest @ will be given in the absence any provision of partnership deed.
(a) 6 %
(b) 57 %
(c) 5.5 %
(d) 6.5 %
Answer
Answer: (a) 6 %
II. Fill in the blanks with correct word:
Question 17.
At the time of retirement of a partner _____ ratio will be calculated.
Answer
Answer: gaining
Question 18.
To calculate new ratio, at the time of retirement of a partner _____ ratio is added in old ratio.
Answer
Answer: gaining
Question 19.
If a firm wants that effect of revaluation must be shown in new firm then _____ accounts prepared.
Answer
Answer: revaluation
Question 20.
When any existing partner wants to leave the firm, it is called ________ of a partner.
Answer
Answer: retirement
Question 21.
When any partner dies, _______ account is opened for the transfer of profit or loss.
Answer
Answer: Profit and loss suspense
Question 22.
Goodwill accruing to outgoing partner is adjusted in the capital accounts in ______ ratio.
Answer
Answer: gaining ratio.
Question 23.
Goodwill already appearing in the books of old firm must be written off in______ ratio among all partners in the old firm.
Answer
Answer: Old
Question 24.
In the event of reconstitution if general reserve is to be continued, it will be adjusted in the _______ in gaining ratio.
Answer
Answer: Capital accounts.
Question 25.
After the death of a partner, partnership firm will _______.
Answer
Answer: continue.
Question 26.
After the death of a partner, partnership will ______.
Answer
Answer: dissolve.
III. State whether the following statements are true or false:
Question 27.
At the time of retirement of a partner revaluation account is prepared.
Answer
Answer: True
Question 28.
At the time of death of a partner, realisation account is prepared.
Answer
Answer: False
Question 29.
Revaluation account is prepared many times in the life of a firm.
Answer
Answer: True
Question 30.
Retirement or death of a partner will reconstitute the firm.
Answer
Answer:True
Question 31.
If any partner retires from the firm then gaining ratio is calculated.
Answer
Answer: True
Question 32.
In the event of death of a partner, sacrifice ratio is calculated.
Answer
Answer: False
Question 33.
Revaluation account is a real account.
Answer
Answer: True
Question 34.
According to Section 37 of Partnership Act, 1932, interest @ 6% is payable on retiring partner’s loan .
Answer
Answer: True
Question 35.
Accumulated losses are shared in old ratio.
Answer
Answer: True
Question 36.
If any partner retires/ dies before the closing of the books then estimated profit is entered through Profit & Loss account.
Answer
Answer: False
Question 37.
After death of a partner, firms business will be closed.
Answer
Answer: False
Question 38.
Firm may continue business after retiring a partner.
Answer
Answer:True
Question 39.
After death of a partner, share of remaining partners will decrease.
Answer
Answer: False
Question 40.
There may be hidden good will in a partnership firm.
Answer
Answer: True
Question 41.
At the time of retirement of a partner, it is necessary to prepare revaluation account.
Answer
Answer: True
IV. One word Questions:
Question 42.
What is meant by ‘Gaining Ratio’ on retirement of a partner?
Answer
Answer: The ratio in which retiring Partner’s Share is distributed between remaining Partner is called gaining ratio.
Question 43.
P, Q and R were partners in a firm. On 31st March, 2018 R retired. The amount payable to R ₹ 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. (CBSE Delhi 2019)
Answer
Answer: Rate of interest will be 6% p.a.
Question 44.
Aman, Bimal and Deepak are partners sharing profits in the ratio of 2 : 3 : 5. The goodwill of the firm has been valued at ₹ 37,500. Aman retired. Bimal and Deepak decided to share profits equally in future. Calculate gain/sacrifice of Bimal and Deepak on Aman’s retirement and also pass necessary journal entry for the treatment of goodwill. (CBSE Outside Delhi 2019)
Answer
Answer:Old Ratio = 2:3:5
New Ratio =1:1 (on Aman’s Retirement)
Bimal’s Gain = 1/2 – 3/10 = 2/10 Deepak’s Gain = 1/2 – 5/10 = nil Firm’s Goodwill = 37,500 . Aman’s share = 2/10 x 37,500 = 7,500
Question 45.
Riyansh, Garv and Kavleen were partners in a firm sharing profit and loss in the ratio of 8 : 7 : 5. On 2nd November 2018, Kavleen died. Kalveen’s share of profits till the date of her death was calculated at ₹ 9,375. Pass the necessary journal entry.
Answer
Answer:
Question 46.
At the time of retirement how is the new profit sharing ratio among the remaining partners calculated?
(CBSE Compt. 2019)
Answer
Answer: The new share of each of the remaining partner is calculated as his/her own share in the firm plus the share acquired from the retiring partner.
Question 47.
In which ratio do the remaining partners acquire the share of profit of the retiring partner? (CBSE Compt. 2017)
Answer
Answer: Gaining ratio.
Question 48.
At the time of retirement of a partner, state the condition when there is no need to compute gaining ratio. (CBSE 2013 Compartment OD)
Answer
Answer: When the remaining partners share profits in old ratio.
Question 49.
On the retirement of a partner, how is the profit sharing ratio of the remaining partners decided? (CBSE 2013 Compartment OD)
Answer
Answer: On the basis of old profit sharing ratio.
Question 50.
Why is gaining ratio of the remaining partners calculated at the time of retirement/death of a partner?
Answer
Answer: Gaining ratio of the remaining partners is calculated to determine amount of goodwill payable by them to
retired/deceased partner.
Question 51.
State the ratio in which share of goodwill of the retiring partner is debited to Capital Accounts of the remaining partners.
Answer
Answer: In their gaining ratio.
Question 52.
Abha and Beena were partners sharing profits and losses in the ratio of 3 : 2 on April 1st 2013, they decided to admit Chanda for l/5th share in the profits. They had a reserve of ₹ 25,000 which they wanted to show in their new balance sheet. Chanda agreed and the necessary adjustments were made in the books. On October 1st 2013, Abha met with an accident and died. Beena and Chanda decided to admit Abha’s daughter Fiza in their partnership, who agreed to bring ₹ 2,00,000 as capital. Calculate Abha’s share in the reserve on the date of her death. (CBSE Sample Paper 2015)
Answer
Answer: ₹ 12,000
Question 53.
X, Y and Z were partners sharing profits and losses in the ratio of 3:2:2. Z retired and the amount due to him was ₹ 85,000. He was paid ₹ 5,000 immediately. The balance was payable in three equal annual instalments carrying interest @ 6% p.a. Pass necessary journal entry for recording the same on the date of Z’s retirement.
(Compt. Delhi 2017)
Answer
Answer:
Question 54.
Ram, Mohan and Sohan were partners in a firm sharing profits in the ratio of 4 : 3 : 1. Mohan retired. His share was taken over equally by Ram and Sohan. In which ratio will the profit and loss on revaluation of assets and liabilities on the retirement of Mohan be transferred to capital accounts of the partners?
(CBSE 2010 Compartment Delhi)
Answer
Answer: In old profit sharing ratio.
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