Admission of a Partner Test

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Admission of a Partner Test - 1

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Weekly Quiz Competition

Question 1
1 / -0

When a new partner is admitted he acquires his share of profits from the old partners , this will ____ the old partner’s shares in profits:

A
Increase

B
Remain same

C
Reduce

D
No change

Solution

Old partners will sacrifice some share in favor of a new partner. In simple words, when a new partner is admitted he acquires his share of profits , this will reduce the old partner’s shares in profits.
Question 2
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__________ means good name, good reputation earned by a firm through the hard work and honesty of its owners

A
Low Average profit

B
Revaluation Profit

C
Goodwill

D
Negative Super Profit

Solution

Goodwill means good name, good reputation earned by a firm through the hard work and honesty of its owners.
Question 3
1 / -0

A and B are partners sharing profits in the ratio of 3:2. They admitted C as a new partner for 1/5 share in the future profits of the firm. Calculate new profit sharing ratio of A, B and C

A
10:7:4

B
12:10:4

C
12:8:5

D
14:10:6

Solution

Calculation of new ratio of partners:

Old Ratio = 3:2

C is admitted for 1/5th share

Remaining share : 1 – 1/5 = 4/5

A’s new share = 3/5 × 4/5 = 12/25

B’s new share = 2/5 × 4/5 = 8/25

C’s Share 1/5 OR 5/25

New Ratio 12 : 8: 5
Question 4
1 / -0

Which of the following is not an example of Reconstitution of partnership firm?

A
Change in Existing profit sharing ratio

B
Admission of a new partner

C
Retirement/Death of a partner

D
Purchase of Assets for the business

Solution

Reconstitution on a partnership means change in the number of partners through Admission, Retirement or Death of the partners or change in the ratio of partners. Puchase of Assets will not change the constitution of the partnership.
Question 5
1 / -0

Out of the following, which is the main right of a partner?

A
Right to Share the Profits of the firm.

B
Right to share the old profits of the firm

C
Right to Say no for Goodwill

D
Right to Stop other partners for drawings

Solution

When a new partner is admitted into a partnership business. He gets following rights:.Right to share future profits of the firm

New partner is not entitled to the profits and other incomes earned by a partnership business before his admission
Question 6
1 / -0

Why new profit ratio is determined even for old partners?

A
Ratio keeps on changing in every six month

B
Change in the agreement among all partners

C
Due to change in external environment

D
No change in agreement

Solution

When a new partner is admitted the old partners sacrifice their share of profits and hence there will be a change in their old ratios. So new profit sharing ratio should be calculated for all the old partners.
Question 7
1 / -0

If new partner is unable to bring in his share of goodwill , How will you deal

A
New Partner’s A/c Dr
To Gainer Partner’s Capital A/c

B
New Partner’s Capital A/C OR Current A/C Dr.
To Sacrificing Partner’s Capital / current A/c

C
New Partner’s A/c Dr.
To Old Partner’s Capital A/c

D
New Partner’s A/c Dr.
To All Partner’s Capital A/c

Solution

New partner’s CAPTIAL A/C SHOULD BE DEBITED OR(current account should be debited IN CASE OF FIXED CAPITAL METHOD) if he is unable to bring his share of premium for goodwill in cash.
Question 8
1 / -0

Sacrifice ratio is used only for

A
Distribution of Premium for goodwill

B
Distribution of Reserve

C
Revaluation of loss

D
Revaluation profit

Solution

At the time of admission of a new partner, the main use of sacrificing ratio is to adjust the premium for goodwill brought by a new partner.
Question 9
1 / -0

Is admission of a new partner a reconstitution of partnership firm:

A
It is dissolution of firm

B
No

C
It is called merger

D
Yes

Solution

Admission of a new partner will reconstitute the partnership firm. It means it is the end of old partnership and beginning of a new partnership among the partners. It does not mean the end of the firm.
Question 10
1 / -0

Goodwill Given in the old Balance Sheet will be:

A
Written off to the old partners

B
Written off by the Sacrificing partners

C
Credited to old Partners Capital accounts

D
Distributed by Gainer partners

Solution

Goodwill existing in the old balance sheet of a partnership firm before admitting a new partner will be written off to the capital accounts of the old partners in their old profit sharing ratio.

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Re-Attempt Weekly Quiz Competition

Admission of a Partner Test - 1

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Admission of a Partner Test - 1

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SHARING IS CARING

Question 1

Increase

Remain same

Reduce

No change

Solution

Question 2

Low Average profit

Revaluation Profit

Goodwill

Negative Super Profit

Solution

Question 3

10:7:4

12:10:4

12:8:5

14:10:6

Solution

Question 4

Change in Existing profit sharing ratio

Admission of a new partner

Retirement/Death of a partner

Purchase of Assets for the business

Solution

Question 5

Right to Share the Profits of the firm.

Right to share the old profits of the firm

Right to Say no for Goodwill

Right to Stop other partners for drawings

Solution

Question 6

Ratio keeps on changing in every six month

Change in the agreement among all partners

Due to change in external environment

No change in agreement

Solution

Question 7

New Partner’s A/c Dr To Gainer Partner’s Capital A/c

New Partner’s Capital A/C OR Current A/C Dr. To Sacrificing Partner’s Capital / current A/c

New Partner’s A/c Dr. To Old Partner’s Capital A/c

New Partner’s A/c Dr. To All Partner’s Capital A/c

Solution

Question 8

Distribution of Premium for goodwill

Distribution of Reserve

Revaluation of loss

Revaluation profit

Solution

Question 9

It is dissolution of firm

No

It is called merger

Yes

Solution

Question 10

Written off to the old partners

Written off by the Sacrificing partners

Credited to old Partners Capital accounts

Distributed by Gainer partners

Solution

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New Partner’s A/c Dr
To Gainer Partner’s Capital A/c

New Partner’s Capital A/C OR Current A/C Dr.
To Sacrificing Partner’s Capital / current A/c

New Partner’s A/c Dr.
To Old Partner’s Capital A/c

New Partner’s A/c Dr.
To All Partner’s Capital A/c