# Important Questions for Chapter 4- Change in Profit - Sharing Ratio Among the Existing Partners

Important Questions with Answers for CBSE Class 12 Accountancy Chapter 4- Change in Profit – Sharing Ratio Among the Existing Partners which is outlined by expert Accountancy teachers from the latest version of CBSE (NCERT) books.

## CBSE Class 12 Accountancy Chapter – 4 Important Questions

QUESTION 1

A and B shared profits & loss in the ratio of 2:3. starting 1st April 2019, they agreed to distribute profits equally. The firm goodwill was valued at â‚¹ 30,000. The adjustment entry will be.

1) Dr. B and Cr. A with â‚¹6,000

2) Dr. A and Cr. B with â‚¹6,000

3) Dr. A and Cr. B with â‚¹6,00

4) Dr. B and Cr. A with â‚¹6,00

Answer: 1. Dr. B and Cr. A with â‚¹6,000

QUESTION 2

X, Y, and Z are partners sharing profits in the ration of 5:3:2. They decided to share future profits in the ratio of 2:3:5 starting 1st April 2019. They also decided to record the effect of the following revaluations without affecting the book values of assets and liabilities, by passing an adjusting entry:

 Book Values (â‚¹) Revised Values (â‚¹) Land and Building Plant and Machinery Trade Creditors Outstanding Rent 3,00,000 4,50,000 1,50,000 1,35,000 4,50,000 4,20,000 1,35,000 1,80,000

The necessary adjustment entry will be:

1) Dr. Z and Cr. X by â‚¹ 27,000

2) Dr. X and Cr. Z by â‚¹ 27,000

3) Dr. Y and Cr. X by â‚¹ 27,000

4) Dr. X and Cr. Y by â‚¹ 27,000

Answer: (1) Dr. Z and Cr. X by â‚¹ 27,000

QUESTION 3

Define Sacrificing ratio.

Answer: Sacrificing ratios is the ratio in which one or more partners of a company sacrifice their share of profit in favour of one or more partners of the firm.

QUESTION 4

How sacrificing the share of each partner is calculated.

Answer: The sacrificing share of each partner is calculated as follows:

Sacrificed Share= Old Share – New Share

QUESTION 5

Define Gaining ratio.

Answer: GainingÂ ratios is the ratio in which one or more partners gain a share of profit as a result of sacrificed share in profits by one or more partners of a company.

QUESTION 6

How gaining share of each partner is calculated.

Answer: The gaining share of each partner is calculated as follows:

Gaining Share= New Share – Old Share

 Important Topics in Accountancy:

QUESTION 7

Arjun and Rama distributed profits and losses in the ratio 3:2 starting 1st April 2019, they accepted to distribute profits evenly. Goodwill of the business was accounted for at â‚¹50,000. Prepare the journal for the accounting of goodwill:

(a) When the goodwill is adjusted through Partnersâ€™ Capital Account

 Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Â  Journal Date Particulars L.F Dr.(â‚¹) Cr. (â‚¹) 1st April 2019 Ramaâ€™s Capital A/c (â‚¹50,000 x 1/10) To Arjunâ€™s Capital A/c (Goodwill adjusted due to change in profit-sharing ratio) (WN) 5,000 5,000

Working Note:

Calculation of share of profit sacrificed/gained

Sacrificed Share/ Gaining Share= Old Share – New Share

Arjun= 3/5- 1/2 = 6-5/10 =1/10Â  i.e. sacrifice made

Rama= 2/5 – 1/2 = 4-5/10 = -1/10 (since, the sacrifice value is negative, it is considered as a gain)

QUESTION 8

X, Y, and Z are partners sharing profits in the ration of 5:3:2. They decided to share future profits in the ratio of 2:3:5. What will be the accounting treatment of the workmen compensation reserve appearing in the balance sheet on the date when no information is available for the same?

1) Distributed among the partners in their capital ratio

2) Distributed among the partners in their new profit-sharing ratio

3) Distributed among the partners in their old profit-sharing ratio

4) Carried forward to a new balance sheet

Answer: Distributed among the partners in their old profit-sharing ratio

QUESTION 9

X, Y, and Z are partners sharing profits in the ratio of 5:3:2. They decided to share the profits in the ratio of 2:3:5. Starting 1st April, 2019 they decided to adjust the following accumulated profits, losses and reserves without affecting their book values, by passing an adjustment entry.

 Book Values â‚¹ Profit and Loss Account General Reserve Advertising Suspense Account 15,000 60,000 30,000

The necessary adjustment entry will be:

1) Dr. Z’s Capital A/c and Cr. X’s Capital A/c with Rs.31,500.

2) Dr. Y’s Capital A/c and Cr. X’s Capital A/c with Rs. 13,500.

3) Dr. X’s Capital A/c and Cr. Z’s Capital A/c with Rs. 13,500.

4) Dr. Y’s Capital A/c and Cr. Z’s Capital A/c with Rs. 31,500.

Answer: (1)Â Dr. Z’s Capital A/c and Cr. X’s Capital A/c with Rs.31,500.

QUESTION 10

Mention the points when a firm reconstitute.

Answer: A firm reconstituted in the event of.

• Change in the profit- sharing ratio among the existing partners
• Admission of a partner or partners
• The retirement of a partner
• Death of a partner
• The amalgamation of two or more partnership firms.

QUESTION 11

State accounting treatment for transfer of Reserves and Accumulated profits

Reserve A/cÂ  Â Dr.

Profit and Loss A/c (Cr. Balance)Â  Â  Dr.

Workmen Compensation Reserve A/cÂ  Â  Dr. (Excess of reserve over liability)

Investments Fluctuation Reserve A/cÂ  Â  Dr. ( Excess of reserve over the difference

Between book value & Market value)

To all partners’ capital/current A/c (in old ratio)

QUESTION 12

State accounting treatment for transfer of Accumulated losses

All partnersâ€™ capital (current) A/cÂ  Â Dr. ( In old ratio)

To Profit and Loss A/c (Dr. Balance)Â  Â  Dr.

QUESTION 13

Define Investment Fluctuation Reserve

Answer: Investments are recorded in the book of a company at cost. However, in the market, it might change. It may be higher or lower than the book value. Investment fluctuation reserve is a reserve set aside out of profit to meet fall in the market value of the investment.

QUESTION 14

Explain the three types of the accounting treatment of Investment Fluctuation Reserve

Answer: The three types of the accounting treatment of Investment Fluctuation Reserve are.

• When the book value and market value of the investment are the same- The amount of investment fluctuation reserve is transferred to partnersâ€™ capital account in their old profit-sharing ratio.
• When the market value of investments is less than the book value- In this case, the treatment on investment fluctuation reserve depends on the amount of decrease.
• When there is an increase in the market value of investment- The amount of investment fluctuation reserve is distributed among partners and an increase in the value of the investment is credited to revaluation account.

QUESTION 15

Harish and Manish are partners sharing profits in the ratio of 4:1. They decided to distributed profits equally starting 1st April 2019. Their balance sheet as on 31st March 2019 shows a balance of advertisement suspense of â‚¹40,000. Pass the journal entry at the time of change in profit-sharing ratio.