CHANGE IN PSR VOL.1

1. Which of the following is responsible for the Reconstitution of Partnership?

• Retirement of an existing partner

• Change in existing profit sharing ratio

• Death of a partner

• All of these

Sacrificing Ratio = ? (a)  

A and B were partners in a firm sharing profit or loss equally. With effect from 1st April 2019 they agreed to share profits in the ratio of 4 : 3. Due to change in profit sharing ratio, A’s gain or sacrifice will be :

• gain 1/14

• sacrifice 1/14

• gain 4/7

• sacrifice 3/7

A and B were partners in a firm sharing profits and losses in the ratio of 2 : 1. With effect from 1st January 2019 they agreed to share profits and losses equally. Individual partner’s gain or sacrifice due to change in the ratio will be :

• gain by A 1/6; Sacrifice by B 1/6

• gain by B 1/6; Sacrifice by A 1/6

• gain by A 1/2; Sacrifice by B 1/2

• gain by B 1/2; Sacrifice by A 1/2

Capital employed by a partnership firm is ₹5,00,000. Its average profit is ₹60,000. The normal rate of return in similar type of business is 10%. What is the amount of super profits?

• ₹50,000

• ₹10,000

• ₹6,000

• ₹56,000

The profits earned by a business over the last 5 years are as follows : ₹12,000; ₹13,000; ₹14,000; ₹18,000 and ₹2,000 (loss). Based on 2 years purchase of the last 5 years profits, value of Goodwill will be :

• ₹23,600

• ₹22,000

• ₹1,10,000

• ₹1,18,000

P, Q and R were partners in a firm sharing profis in 5 : 3 : 2 ratio. They decided to share the future profits in 2 : 3 : 5. For this purpose the goodwill of the firm was valued at ₹1,20,000. In adjustment entry for the treatment of goodwill due to change in the profit sharing ratio :

• Cr. P by ₹24,000; Dr. R by ₹24,000

• Cr. P by ₹60,000; Dr. R by ₹60,000

• Cr. P by ₹36,000; Dr. R by ₹36,000

• Dr. P by ₹36,000; Cr. R by ₹36,000

Journal entry for Increase in value of assets

• Assets A/c .... Dr

  To Revaluation A/c

• Revaluation A/c....DR

  To Assets A/c

• Cash A/c.... Dr

  To Assets A/c

• Assets A/c ...Dr

  To Cash A/c

Accounting Standard ____ requires goodwill should be recorded in the books of accounts only when some money or money’s worth is paid for it.

• 23

• 24

• 25

• 26

Any change in the relationship of existing partners which results in an end of the existing agreement and enforces making of a new agreement is called

• Revaluation of partnership.

• Reconstitution of partnership.

• Realization of partnership.

• None of the above.