This is the first PA-1 practice paper for Class 12 Accountancy, covering Chapter 1, 2 and 3: Accounting for Partnership Firms – Fundamentals, Goodwill and Change in Profit-Sharing Ratio, and Admission of a Partner. Every question is original and every worked answer has been independently re-checked for accuracy.
Periodic Assessment pattern — school pattern se thoda alag ho sakta hai. Each question carries its chapter tag [Ch 1], [Ch 2] or [Ch 3]. If your school’s PA-1 covers fewer chapters, simply skip the questions tagged with chapters you have not reached yet.
General Instructions
- Maximum Marks: 25
- Time Allowed: 40 minutes
- Chapter coverage: Ch 1 (Accounting for Partnership Firms: Fundamentals), Ch 2 (Goodwill and Change in Profit-Sharing Ratio), Ch 3 (Admission of a Partner)
- Section A has 5 questions of 1 mark each (MCQ). Section B has 4 questions of 2 marks each. Section C has 3 questions of 3 marks each. Section D has 1 case-based question of 3 marks.
- All workings should be shown clearly wherever required.
Section A — 1 Mark Each (MCQ)
- [Ch 1] In the absence of a partnership deed, interest on a partner’s loan to the firm is allowed at:
(a) 5% per annum (b) 6% per annum (c) 8% per annum (d) No interest is allowed - [Ch 1] In the absence of a partnership deed, partners share profits and losses:
(a) In their capital ratio (b) Equally (c) In the ratio of time devoted to the firm (d) In the ratio of sales made - [Ch 2] The sacrificing ratio is used to determine:
(a) The new profit-sharing ratio (b) The share of goodwill to be compensated to the sacrificing partners (c) The gaining ratio (d) The capital ratio - [Ch 2] Goodwill of a firm is classified as a/an:
(a) Fictitious asset (b) Current asset (c) Intangible asset (d) Fixed tangible asset - [Ch 3] On admission of a new partner, the balance of General Reserve appearing in the old Balance Sheet is transferred to:
(a) The new partner’s Capital Account (b) All old partners’ Capital Accounts in the old profit-sharing ratio (c) Revaluation Account (d) All partners’ Capital Accounts in the new ratio
Section B — 2 Marks Each
- [Ch 1] State two points of difference between the Fixed Capital Method and the Fluctuating Capital Method of maintaining partners’ capital accounts.
- [Ch 1] A and B are partners without a partnership deed. A gave a loan of ₹50,000 to the firm on 1 April 2025. Calculate the interest on this loan payable by the firm for the year ended 31 March 2026.
- [Ch 2] State any two factors that affect the value of goodwill of a firm.
- [Ch 3] X and Y are partners sharing profits in the ratio 3:2. They admit Z, giving him a 1/5 share of profits, which he acquires equally from X and Y. Calculate the new profit-sharing ratio of X, Y and Z.
Section C — 3 Marks Each
- [Ch 1] A and B are partners sharing profits and losses equally. Their capitals are A ₹2,00,000 and B ₹1,00,000. Interest on capital is allowed at 6% per annum. The net profit for the year, before allowing interest on capital, is ₹90,000. Prepare the Profit and Loss Appropriation Account for the year.
- [Ch 2] The profits of a firm for the last three years were: Year 1 ₹40,000; Year 2 ₹50,000; Year 3 ₹60,000. Goodwill is to be valued at 2 years’ purchase of the average profit of the last three years. Calculate the value of goodwill.
- [Ch 3] A and B share profits in the ratio 3:2. On admission of a new partner, the following revaluations are agreed: Building appreciated by ₹20,000; Stock reduced by ₹5,000; Provision for doubtful debts increased by ₹3,000. Pass the necessary journal entries to record the revaluation and show how the net gain or loss on revaluation is shared between A and B.
Section D — Case/Application (3 Marks)
- [Ch 3] R and S are partners sharing profits in the ratio 2:1. They admit T for a 1/4 share in future profits. T brings in ₹40,000 as capital and ₹9,000 in cash as his share of goodwill, which is credited to R and S in their sacrificing ratio (T acquires his share proportionately from both partners, so the sacrificing ratio equals the old ratio).
(a) Calculate the sacrificing ratio of R and S. (1 mark)
(b) Pass the journal entries for the amount brought in by T, including the treatment of goodwill. (1 mark)
(c) State the new profit-sharing ratio of R, S and T. (1 mark)
Show the Full Answer Key
Section A
- 1. [Ch 1] (b) 6% per annum — this is the default rate fixed under the Indian Partnership Act, 1932, applied only when there is no partnership deed or the deed is silent on this point.
- 2. [Ch 1] (b) Equally — in the absence of a deed, the Act presumes equal sharing regardless of capital contributed.
- 3. [Ch 2] (b) The share of goodwill to be compensated to the sacrificing partners — sacrificing ratio tells us how much profit share each old partner has given up, which decides how the incoming partner’s goodwill contribution is divided among them.
- 4. [Ch 2] (c) Intangible asset — goodwill cannot be touched or seen but has real, verifiable value; it is not fictitious because it does represent a real earning advantage.
- 5. [Ch 3] (b) All old partners’ Capital Accounts in the old profit-sharing ratio — accumulated reserves belong to the period before the new partner joined, so only the old partners are entitled to them.
Section B
6. [Ch 1] Any two of: (i) Under the Fixed Capital Method, capital accounts remain unchanged year to year, and interest, salary, drawings and profit-share are recorded in a separate Current Account; under the Fluctuating Capital Method, all such items are recorded directly in the Capital Account itself, so its balance changes every year. (ii) The Fixed Capital Method always shows a credit balance in the Capital Account and can show a debit or credit balance in the Current Account; the Fluctuating Capital Method can show a debit balance in the Capital Account itself if drawings and losses exceed credits.
7. [Ch 1] Interest on partner’s loan (in the absence of a deed) = 6% per annum, allowed even if the firm has incurred a loss, and charged to the Profit and Loss Account (not the Appropriation Account) since it is a charge against profit, not an appropriation.
Interest = ₹50,000 × 6% × 1 year = ₹3,000.
8. [Ch 2] Any two of: (i) Location of the business — a firm in a prime, easily accessible location commands more goodwill. (ii) Efficiency of management — efficient management leads to higher profitability and customer trust, raising goodwill. (Other valid factors: nature of business, quality of products, market situation, capital required, risk involved.)
9. [Ch 3] Z’s share = 1/5. Remaining share = 1 − 1/5 = 4/5, sacrificed equally by X and Y, so each sacrifices 1/2 × 1/5 = 1/10.
New share of X = 3/5 − 1/10 = 6/10 − 1/10 = 5/10.
New share of Y = 2/5 − 1/10 = 4/10 − 1/10 = 3/10.
New share of Z = 1/5 = 2/10.
New profit-sharing ratio of X : Y : Z = 5 : 3 : 2 (5/10 + 3/10 + 2/10 = 10/10, confirmed correct).
Section C
10. [Ch 1] Interest on capital: A = ₹2,00,000 × 6% = ₹12,000; B = ₹1,00,000 × 6% = ₹6,000. Total interest = ₹18,000.
Profit remaining after interest = ₹90,000 − ₹18,000 = ₹72,000, shared equally: ₹36,000 each.
Profit and Loss Appropriation Account for the year ended 31 March 2026
Dr. side: To Interest on Capital — A ₹12,000, B ₹6,000 (total ₹18,000); To Profit transferred to Capital Accounts — A ₹36,000, B ₹36,000 (total ₹72,000). Total Dr. side = ₹90,000.
Cr. side: By Profit and Loss Account (Net Profit b/d) = ₹90,000.
Both sides tally at ₹90,000, confirming the account balances correctly.
11. [Ch 2] Average profit = (₹40,000 + ₹50,000 + ₹60,000) ÷ 3 = ₹1,50,000 ÷ 3 = ₹50,000.
Goodwill = Average profit × number of years’ purchase = ₹50,000 × 2 = ₹1,00,000.
12. [Ch 3] Journal entries:
(i) Building A/c Dr. ₹20,000; To Revaluation A/c ₹20,000 (appreciation recorded)
(ii) Revaluation A/c Dr. ₹5,000; To Stock A/c ₹5,000 (fall in stock value)
(iii) Revaluation A/c Dr. ₹3,000; To Provision for Doubtful Debts A/c ₹3,000 (increase in provision)
Net result on Revaluation Account: Gain of ₹20,000 against losses of ₹5,000 + ₹3,000 = ₹8,000, giving a net gain of ₹20,000 − ₹8,000 = ₹12,000.
(iv) Revaluation A/c Dr. ₹12,000; To A’s Capital A/c ₹7,200; To B’s Capital A/c ₹4,800 (net gain transferred in old ratio 3:2 — A: ₹12,000 × 3/5 = ₹7,200; B: ₹12,000 × 2/5 = ₹4,800; total ₹12,000, confirmed correct).
Section D
13. [Ch 3]
(a) Since T acquires his 1/4 share proportionately from R and S, the sacrificing ratio is the same as the old profit-sharing ratio: R : S = 2 : 1.
(b) Journal entries:
Bank A/c Dr. ₹49,000; To T’s Capital A/c ₹40,000; To Premium for Goodwill A/c ₹9,000 (total cash of ₹40,000 capital + ₹9,000 goodwill received)
Premium for Goodwill A/c Dr. ₹9,000; To R’s Capital A/c ₹6,000; To S’s Capital A/c ₹3,000 (goodwill distributed in sacrificing ratio 2:1 — R: ₹9,000 × 2/3 = ₹6,000; S: ₹9,000 × 1/3 = ₹3,000; total ₹9,000, confirmed correct).
(c) New ratio: remaining 3/4 share stays with R and S in their old ratio 2:1 — R = 3/4 × 2/3 = 1/2; S = 3/4 × 1/3 = 1/4; T = 1/4.
New profit-sharing ratio of R : S : T = 2 : 1 : 1 (1/2 + 1/4 + 1/4 = 1, confirmed correct).
Kaizen tip: don’t just read this answer key — cover it, attempt every question on paper first, and only then check your working line by line. That is what actually builds exam-day speed.
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