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Admission of a Partner Test - 19

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Admission of a Partner Test - 19
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Weekly Quiz Competition
  • Question 1
    1 / -0
    The value of the reputation of a firm in respect of the profits expected in future over and above the normal profits is ________.
    Solution
    Goodwill is one of the special aspects of partnership accounts which requires adjustment at the time of reconstitution of a firm. It is an intangible asset. Goodwill is the value of the reputation of a firm in respect of the profits expected in future over and above the normal profits. Goodwill can be defined as "the present value of a firm's anticipated excess earnings".
  • Question 2
    1 / -0
    ____________ means withdrawal by a partner from the business of the firm which may be due to his bad health, old age or change in business interests.
    Solution
    Retirement of an existing partner is one of the mode of reconstitution of partnership firm. It means withdrawal by a partner from the business of the firm which may be due to his bad health, old age or change in business interests. In fact, a partner can retire any time if the partnership is at will.
  • Question 3
    1 / -0
    The _______ of actual profits over the normal profits is termed as super profits.
    Solution
    Under super profits method, goodwill is calculated by multiplying no. of years purchased with super profits. It is desirable to value, goodwill on the basis of excess profits and not the actual profits. The excess of actual profits over the normal profits is termed as super profits.
  • Question 4
    1 / -0
    Accumulated profits are transferred to capital account in ______ratio. 
    Solution
    When a new partner is being admited into the firm, then before his admission all the existing reserves or accumulated profits in the books of the firm should be transferred to Old Partners in capital/current accounts in the old profit sharing ratio, because these items belong to the old partners and not to the new partner.
  • Question 5
    1 / -0
    Accumulated Profits are transferred to ________________.
    Solution
    Accumulated profits are the balance of profits earned by the company since its inception ,after paying out dividends and making transfers to reserves.It is also called as retained earnings. Free reserves, on the other hand , include Securities Premium reserve , General Reserve , contingency reserves etc.
  • Question 6
    1 / -0
    Under average profits method, goodwill is valued at agreed number of ________ purchase of the average profits of the past few years.
    Solution
    Average profits method is based on the assumption that a new business does not earn any profits during the first few years of its operations. Under this method, the goodwill is valued at agreed number of years purchase of the average profits of past few years.
  • Question 7
    1 / -0
    Accumulated profits are distributed among the partners by transferring it to their _________account.
    Solution
    When a new partner is being admited into the firm, then before his admission all the existing reserves or accumulated profits in the books of the firm should be transferred to Old Partners in capital/current accounts in the old profit sharing ratio, because these items belong to the old partners and not to the new partner.
  • Question 8
    1 / -0
    Who is entitled to have share in accumulated profits?
    Solution
    When a new partner is being admited into the firm, then before his admission all the existing reserves or accumulated profits in the books of the firm should be transferred to Old Partners in capital/current accounts in the old profit sharing ratio, because these items belong to the old partners and not to the new partner.
  • Question 9
    1 / -0
    Normal Profit = ________________
    Solution
    Goodwill is calculated under super profits method by multiplying the no. of years purchased with super profits. The excess of actual profits over the normal profits is termed as super profits, 
    Normal Profit = Capital Employed X Normal Rate of Return/100
  • Question 10
    1 / -0
    what are accumulated profits ?
    Solution
    Accumulated Profits and Losses is the sum of an enterprise’s profits and losses left, after the dividend is paid. It can also be termed as either retained capital, retained earnings or earned surplus.
    Sometimes, an enterprise might have accrued profits but not yet transferred to capital accounts of the partners. These are usually in the form of general reserve, reserve fund and/or Profit and Loss account balance. 
    Therefore, C is the correct option.
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