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Admission of a Partner Test - 16

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Admission of a Partner Test - 16
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Weekly Quiz Competition
  • Question 1
    1 / -0
    ________ is the difference between actual profit and normal profit.
    Solution
    The actual benefit of buyer do-not lie in total profits but is lies in the amount which is earned in excess of normal returns on capital employed. Hence, it is advisable that Goodwill to be valued on the basis of excess profits and not normal profit.
    Therefore, the Excess of Actual Profits over Normal Profit are termed as Super Profit.
  • Question 2
    1 / -0
    Average profit method is based on the assumption that _____________.
    Solution
    The average profit method of Goodwill is calculated by multiplying the past average profits by the number of years during which the anticipated profits are expected to accrue. For this, only the normal operational profits are considered which are expected to accrue even in the future based on the same situation and circumstances. Any other non-recurring and extraordinary items are not considered in this calculation of goodwill.
  • Question 3
    1 / -0
    If normal profit is $$Rs.50000$$, average profit is $$Rs.75000$$ than calculate Goodwill for $$2$$ years of purchase under super profit method_______.
    Solution
    Goodwill = Super Profit x no. of years of purchase.
    Super Profit = Avg profit  -  Normal profit.
                       = $$Rs.75000$$ - $$Rs.50000$$ = $$Rs.25000$$.
    Goodwill = $$Rs.25000$$ x $$2$$ = $$Rs.50000$$
  • Question 4
    1 / -0
    Under which of the following method Goodwill account is raised in the books of accounts.
    Solution
    Goodwill is a fictitious asset which is generated in the business in due course of time. There are various factors which creates goodwill in the business like, sustainable growth of business, market repo of the organization, customer satisfaction, credit worthiness of the business etc. 

    As the time passes, the assets of the business get appreciated sometimes. A revaluation needs to be done for all such assets. Goodwill account is created in the books of account due to revaluation. 
  • Question 5
    1 / -0
    Which of the following method is followed when incoming partner brings his share of Goodwill in cash___________.
    Solution
    Incoming partner who acquires his share in the profits of the firm from the existing partners brings in some additional amount to compensate them for loss of their share in super profits. It is termed as his share of goodwill (also called premium).
  • Question 6
    1 / -0
    Debit Balance in Revaluation Account is __________.
    Solution
    Revaluation Account is Nominal In nature. Debit Balance of such nature is considered as Loss on Revaluation and Credit Balance as Profit on revaluation.
  • Question 7
    1 / -0
    Which of the following are the modes of Reconstitution for a firm?
    Solution
    Any change in existing agreements amounts to reconstitution of  partnership firm by way of admission of a partner retirement or death of a partner where the form undergoes change in profit sharing ratio revaluation of assets liabilities and Goodwill together with capital composition such process is called Reconstitution of Partnership Firm.
  • Question 8
    1 / -0
    Suppose partner A dies after 3 month from the date of B/s admission ,his share in profits was 1/4.
    it was decided to calculate his share of profits till death on last years profit Rs. 10000.
    calculate profit share of deceased partner share of profit till the date of death.
    Solution
    share of profit = 10000(last year profit ) x 3/12 (3months) x 1/4 (share ) = 625
  • Question 9
    1 / -0
    When a new partner is admitted or old partner retires or dies the, firm undergoes _______.
    Solution
    Any change in the existing partnership agreement amounts to the reconstitution of the partnership firm. It happens in the event of the admission of a partner, retirement, or death of a partner where the profit-sharing ratio changes, revaluation of assets and liabilities is done, and goodwill is valued & distributed.
  • Question 10
    1 / -0
    If Partnership deed is absent than the amount due to Retiring partner is settled as under ______________ .
    Solution
    As per Indian Partnership Act 1932 , section 37 if partnership deed is absent than the settlement of retiring partner will be by immediate payment of its transferred to his loan account subject to an interest of 6 % p.a. up to the date of payment.
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