Change in Profit Sharing Ratio of Partners Test

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Change in Profit Sharing Ratio of Partners Test - 1

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Weekly Quiz Competition

Question 1
1 / -0

Vinod and Pandey are partners sharing profits in the ratio of 7:3 respectively. On 1.4.2015 they have decided to change their profit sharing ratio to 6:4. Calculate sacrifice/gain of Vinod.

A
Vinod’s Gain 1/10

B
Vinod’s Sacrifice 1/10

C
Vinod’s Sacrifice 2/10

D
Vinod’s Gain 2/10

Solution

Calculation of sacrifice or gain:

Formula = Old Share – New Share

Vinod = 7/10 – 6/10 = 1/10 Sacrifice

Pandey = 3/10 – 4/10 = -1/10 Gain
Question 2
1 / -0

AK, BK and CK are sharing profits in the ratio of 2:1:1. They have decided to share future profits in the ratio of 3:2:1. Find out the gainer partner.

A
AK is the gainer partner

B
BK is the gainer partner

C
CK is the gainer partner

D
Both AK is the gainer partner and CK is the gainer partner

Solution

Calculation of gain or sacrifice:

Formula : Old Share – New Share

AK = 2/4 – 3/6 = No Sacrifice/ No Gain

BK = 1/4 – 2/6 = 1/12 Gain

CK = 1/4 - 1/6 = 1/12 Sacrifice
Question 3
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Geeta and Sita are partners in a firm sharing-profits in the ratio of 3 : 2. They decide to share future profits equally. For this purpose the goodwill of the firm has been valued at Rs. 50,000. Record necessary adjustment entry for the same.

A
Dr. Geeta and Cr. Sita by Rs. 5,000

B
Dr. Sita and Cr. Geeta by Rs. 5,000

C
Dr. Sita and Cr. Geeta by Rs. 4,500

D
Dr. Sita and Cr. Geeta by Rs. 4,000

Solution

Adjutment of goodwill amount at the time of change in profit sharing ratio:

Old Ratio = 3:2 and New Ratio 1:1

Geeta’s Sacrifice = 3/5 – 1/2 = 1/10

Sita’s Gain = 2/5 – 1/2 = 1/10

Share in goodwill = 50,000 × 1/10 = 5,000
Question 4
1 / -0

P, Q and R are partners sharing profits and losses in the ratio of 5:3:2 decide to share future profits and losses equally with effect from 1st April 2012. The goodwill of the firm has been valued at ` 180000.Which is the entry to be passed among the following when no goodwill appears in the book

A
Q’s Capital A/c Dr. 8000
R’s Capital A/c Dr. 22000
To P’s Capital A/c 30000

B
Q’s Capital A/c Dr. 6000
P’s Capital A/c Dr. 24000
To R’s Capital A/c 30000

C
Q’s Capital A/c Dr. 6000
R’s Capital A/c Dr. 24000
To P’s Capital A/c 30000

D
Q’s Capital A/c Dr. 24000
R’s Capital A/c Dr. 6000
To P’s Capital A/c 30000

Solution

Adjustment of goodwill in gain and sacrificing ratio:

Formula : Old Share – New Share

P = 5/10 – 1/3 = 5/30 Sacrifice

Q = 3/10 – 1/3 = 1/30 Gain

R = 2/10 - 1/3 = 4/30 Gain
Question 5
1 / -0

What is the meaning of change in the profit sharing ratio:

A
In which all partner including the retired partner share future profit and loss

B
In which all partner including the deceased partner executor partner share future profit and loss

C
In which all partner including the new partner share future profit and loss

D
Purchase of shares of profit by one partner form another partner

Solution

Sometimes, the partners of a firm may agree to change their existing profit sharing ratio. As a result of this, some partners will gain in future profits while others will lose. In such a situation, the partner who gains by change in profit sharing ratio must compensate the partner who has made the sacrifice. In simple words, it is also known as purchase of shares of profit by one partner form another partner.
Question 6
1 / -0

VK, MK and JK are partners sharing profits equally. Now they have decided to share future profits in their capital ratio i.e. 5:3:2. Idenfity who two partners are sacrificing.

A
Only VK is sacrificing

B
VK and JK

C
MK and JK

D
VK and MK

Solution

Calculation of sacrificing share:

Formula = Old ratio – New ratio

VK = 1/3 – 5/10 = 5/30 Gain

Mk = 1/3 – 3/10 = 1/30 Sacrifice

JK = 1/3 – 2/10 = 4/30 Sacrifice
Question 7
1 / -0

P, Q and R are partners sharing profits equally. They decided that in future R will get 1/5 share in profits and remaining profit will be shared by P and Q equally. On the day of change, firm’s goodwill is valued at ` 60,000. Identify the gain or sacrifice of the partners.

A
Q Debit Rs.4,000 and P Credit Rs.4,000

B
Q and R debit with 4,000 each and P Credit with 8,000

C
P Debit Rs.4,000 and Q Credit Rs.4,000

D
P Debit with 8,000 Q and R credit with 4,000 each

Solution

Change in Ratio:

Old Ratio = 1:1:1

New Ratio = 1:2:2

Sacrifice or Gain of partners:

P = 1/3 – 1/5 = 2/15

Q = 1/3 – 2/5 = 1/15 Gain

R = 1/3 – 2/5 = 1/15 Gain
Question 8
1 / -0

______ is a kind of reserve created for payment of compensation in case of accident.

A
Work compensation Reserve

B
Workmen’s compensation Reserve

C
Profit and loss compensation Reserve

D
Investment compensation Reserve

Solution

Sometimes a business firm create a compensation reserve, so that in case of any accident, firm can pay the compensation amount, this reserve is known as workmen compensation reserve. It is created out of the profits. Free reserve will be distributed by the partners in their old profit sharing ratio.
Question 9
1 / -0

In case of change in profit sharing ratio among the existing partners who will compensate the existing partners:

A
All Partner’s shall compensate

B
Sacrificing partner shall compensate

C
Gaining partner shall compensate

D
Only one partner

Solution

Whenever there is change in the existing profit sharing ratio, a gainer partner will compensate the sacrificing partner, for this purpose these steps should be followed by the partners:

1.Find out the Gainer due to change in existing profit sharing ratio

2.Find out the Sacrificing partner

3.Now, Debit the gainer partner and credit the sacrificing partner
Question 10
1 / -0

X, Y and Z are partners sharing profits in the ratio of 4:3:2. They admit a new partner M in the partnership firm for 1/3rd share in future profit. What will be the new ratio of all the partners?

A
8 : 6 : 4 : 2

B
8 : 6 : 5 : 3

C
8 : 6 : 4 : 9

D
8 : 6 : 2 : 1

Solution

Calculation of new ratio:

Let the profit be = 1

Remaining profit after M’s share = 1 – 1/3 = 2/3

Now divide this remaining profit in X, Y and Z to find out the new ratio

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Change in Profit Sharing Ratio of Partners Test - 1

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Change in Profit Sharing Ratio of Partners Test - 1

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SHARING IS CARING

Question 1

Vinod’s Gain 1/10

Vinod’s Sacrifice 1/10

Vinod’s Sacrifice 2/10

Vinod’s Gain 2/10

Solution

Question 2

AK is the gainer partner

BK is the gainer partner

CK is the gainer partner

Both AK is the gainer partner and CK is the gainer partner

Solution

Question 3

Dr. Geeta and Cr. Sita by Rs. 5,000

Dr. Sita and Cr. Geeta by Rs. 5,000

Dr. Sita and Cr. Geeta by Rs. 4,500

Dr. Sita and Cr. Geeta by Rs. 4,000

Solution

Question 4

Q’s Capital A/c Dr. 8000 R’s Capital A/c Dr. 22000 To P’s Capital A/c 30000

Q’s Capital A/c Dr. 6000 P’s Capital A/c Dr. 24000 To R’s Capital A/c 30000

Q’s Capital A/c Dr. 6000 R’s Capital A/c Dr. 24000 To P’s Capital A/c 30000

Q’s Capital A/c Dr. 24000 R’s Capital A/c Dr. 6000 To P’s Capital A/c 30000

Solution

Question 5

In which all partner including the retired partner share future profit and loss

In which all partner including the deceased partner executor partner share future profit and loss

In which all partner including the new partner share future profit and loss

Purchase of shares of profit by one partner form another partner

Solution

Question 6

Only VK is sacrificing

VK and JK

MK and JK

VK and MK

Solution

Question 7

Q Debit Rs.4,000 and P Credit Rs.4,000

Q and R debit with 4,000 each and P Credit with 8,000

P Debit Rs.4,000 and Q Credit Rs.4,000

P Debit with 8,000 Q and R credit with 4,000 each

Solution

Question 8

Work compensation Reserve

Workmen’s compensation Reserve

Profit and loss compensation Reserve

Investment compensation Reserve

Solution

Question 9

All Partner’s shall compensate

Sacrificing partner shall compensate

Gaining partner shall compensate

Only one partner

Solution

Question 10

8 : 6 : 4 : 2

8 : 6 : 5 : 3

8 : 6 : 4 : 9

8 : 6 : 2 : 1

Solution

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Q’s Capital A/c Dr. 8000
R’s Capital A/c Dr. 22000
To P’s Capital A/c 30000

Q’s Capital A/c Dr. 6000
P’s Capital A/c Dr. 24000
To R’s Capital A/c 30000

Q’s Capital A/c Dr. 6000
R’s Capital A/c Dr. 24000
To P’s Capital A/c 30000

Q’s Capital A/c Dr. 24000
R’s Capital A/c Dr. 6000
To P’s Capital A/c 30000