CUET UG Accountancy Booster Test 2 Amount Due & Basic Adjustments -

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CUET UG Accountancy Booster Test 1 Amount Due & Basic Adjustments

⏱️ 30 Minutes

❓ 20 Questions

📌 Answers are locked once submitted — results and explanations appear at the end.

CUET UG Accountancy Booster Test 1 Amount Due & Basic Adjustments

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QUESTION 1 OF 20

Which of the following items is NOT added to the credit balance of a retiring partner's capital account to ascertain their final claim?

Answer Review

1 Which of the following items is NOT added to the credit balance of a retiring partner's capital account to ascertain their final claim?

A Share in the gain of revaluation.

B Share of accumulated profits.

C Debit balance of his current account.

D Interest on his capital up to retirement.

💡 Short Explanation

Debit balance reduces claim. It is not an addition. Treated as deduction item.

✅ Correct Answer Explanation

Debit balance of current account decreases the amount payable to the retiring partner. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Gain added to claim.
Option B → Accumulated profits added.
Option D → Interest credited to partner.

🎯 Strategy

Used

Addition vs Deduction Analysis

Application:

�� Identify deduction item.

Final Logic:

�� Debit balances reduce payable amount.

🧠 Memory Trick

"Debit Balance Means Deduction"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Amount Due to Partner – Page reference may vary by edition.

2 The formula to determine the base adjusted claim involves:
(Capital Account Credit Balance + Share of Reserves + Gain on Revaluation) − (X)
What represents (X) among the following?

A Salary due up to retirement.

B Retiring partner's share of goodwill.

C Interest on Capital.

D Debit balance of the current account.

💡 Short Explanation

Current account debit reduces amount. Deducted from final claim. Not treated as income.

✅ Correct Answer Explanation

Debit balances are liabilities of the partner to the firm. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Salary increases claim.
Option B → Goodwill generally added.
Option C → Interest on capital credited.

🎯 Strategy

Used

Formula Interpretation

Application:

�� Identify deduction variable.

Final Logic:

�� Current account debit is subtraction item.

🧠 Memory Trick

"Debit Side Cuts Claim"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Adjusted Claim – Page reference may vary by edition.

3 A, B, and C share profits in a 3:2:1 ratio. B retires. The firm's goodwill is valued at Rs. 60,000. A and C decide to share future profits in a 3:1 ratio. What is B's share of goodwill, and how is it funded?

A Rs. 20,000; funded by A and C debiting their capital accounts in the gaining ratio.

B Rs. 60,000; funded by the firm's cash account.

C Rs. 10,000; funded solely by A.

D Rs. 20,000; funded by debiting the Revaluation Account.

💡 Short Explanation

B's share equals 2/6. Goodwill multiplied accordingly. Gainers compensate retiring partner.

✅ Correct Answer Explanation

B's Share: 60000 × 2/6 = 20000 Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Entire goodwill not payable.
Option C → Amount incorrect.
Option D → Revaluation account not used.

🎯 Strategy

Used

Goodwill Share Calculation

Application:

�� Total Goodwill × Old Share.

Final Logic:

�� Retiring partner compensated by gainers.

🧠 Memory Trick

"Goodwill × Old Ratio"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Share of Goodwill – Page reference may vary by edition.

4 If the Balance Sheet shows a Profit and Loss Account debit balance on the date of a partner's retirement, what is its conceptual treatment?

A It is transferred completely to the new firm's Balance Sheet.

B It represents an accumulated loss and is debited to all partners' capital accounts in the old ratio.

C It is ignored as it belongs to the previous accounting year.

D It is deducted only from the retiring partner's share.

💡 Short Explanation

Debit balance means loss. Shared among old partners. Capital accounts debited.

✅ Correct Answer Explanation

Accumulated losses are borne by all partners in old ratio. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Loss must be adjusted.
Option C → Cannot be ignored.
Option D → Shared by all partners.

🎯 Strategy

Used

Conceptual Understanding

Application:

�� Interpret P&L debit balance.

Final Logic:

�� Old losses belong to old partners.

🧠 Memory Trick

"Debit Balance = Shared Loss"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Accumulated Losses – Page reference may vary by edition.

5 Which of the following scenarios results in a gain on the Revaluation Account?
I. Increase in the value of an asset
II. Decrease in the amount of a liability
III. Discovery of an unrecorded liability

A I and III only

B II and III only

C I and II only

D I, II, and III

💡 Short Explanation

Asset increase creates gain. Liability decrease also gain. Unrecorded liability creates loss.

✅ Correct Answer Explanation

Gain arises when firm value increases. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Unrecorded liability is loss.
Option B → Asset increase omitted.
Option D → Statement III incorrect.

🎯 Strategy

Used

Statement Evaluation

Application:

�� Identify gain-producing events.

Final Logic:

�� Gains increase net worth.

🧠 Memory Trick

"Assets Up, Liabilities Down"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Revaluation Gain – Page reference may vary by edition.

6 Arrange the accounting entries required to identify and transfer a net loss on revaluation:
1. Debit all Partners' Capital Accounts in their old profit-sharing ratio.
2. Credit the Revaluation Account to close it.
3. Calculate the net debit balance deficit of the Revaluation Account.

A 1, 2, 3

B 2, 3, 1

C 1, 3, 2

D 3, 2, 1

💡 Short Explanation

Loss identified first. Revaluation closed next. Capitals debited finally.

✅ Correct Answer Explanation

Correct order: Calculate deficit Close revaluation Debit capital accounts Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Loss must be calculated first.
Option B → Capital debit missing order.
Option C → Sequence incorrect.

🎯 Strategy

Used

Sequential Accounting Logic

Application:

�� Arrange loss transfer process.

Final Logic:

�� Calculation precedes adjustment.

🧠 Memory Trick

"Find Loss → Close → Debit Capitals"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Loss on Revaluation – Page reference may vary by edition.

7 Total profit for the previous year ending March 31 was Rs. 1,00,000. Partner A, with a 1/5 share, retires on September 30. What is A's share of profit for the intervening period based on the previous year's profit?

A Rs. 5,000

B Rs. 10,000

C Rs. 20,000

D Rs. 2,500

💡 Short Explanation

Six months' profit considered. Partner entitled proportionally. Share calculated accordingly.

✅ Correct Answer Explanation

Profit for 6 months: 100000 × 6/12 × 1/5 = 5000 Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Double the correct amount.
Option C → Ignores time factor.
Option D → Incorrect share.

🎯 Strategy

Used

Intervening Profit Calculation

Application:

�� Annual Profit × Time × Ratio.

Final Logic:

�� Profit till retirement payable.

🧠 Memory Trick

"Profit × Time × Share"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Profit Till Retirement – Page reference may vary by edition.

8 Assertion (A): Interest on capital is credited to a deceased partner's account up to the exact date of their death.
Reason (R): The partner's capital ceases to accumulate partner interest after death, transitioning to a different interest framework under Section 37 if unpaid.

A A is true, but R is false.

B Both A and R are true and R is the correct explanation of A.

C Both A and R are false.

D A is false, but R is true.

💡 Short Explanation

Interest allowed till death date. Capital relationship changes afterward. Section 37 may apply later.

✅ Correct Answer Explanation

Interest on capital applies only while partnership exists. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Reason also true.
Option C → Both statements correct.
Option D → Assertion true.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

�� Relate death date with interest treatment.

Final Logic:

�� Partnership rights end after death.

🧠 Memory Trick

"Interest Till Death"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Interest on Capital – Page reference may vary by edition.

9 Match the revaluation or adjustment scenario with its specific journal entry impact:

List 1	List 2
1. Decrease in Asset Value	a. Debited to Revaluation A/c
2. Accumulated Loss transferred	b. Debited to Partners' Capital A/cs
3. General Reserve distributed	c. Credited to Partners' Capital A/cs
4. Decrease in Liability Amount	d. Credited to Revaluation A/c

A 1-a, 2-b, 3-c, 4-d

B 1-c, 2-a, 3-d, 4-b

C 1-d, 2-c, 3-b, 4-a

D 1-b, 2-d, 3-a, 4-c

💡 Short Explanation

Asset decrease causes loss. Reserve distribution credited. Liability decrease creates gain.

✅ Correct Answer Explanation

Correct matching: Asset decrease → Revaluation debit Loss transferred → Capital debit Reserve → Capital credit Liability decrease → Revaluation credit Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Incorrect reserve treatment.
Option B → Wrong asset treatment.
Option C → Multiple mismatches.

🎯 Strategy

Used

Matching Logic

Application:

�� Match accounting effects properly.

Final Logic:

�� Only Option D fully correct.

🧠 Memory Trick

"Loss Debit, Gain Credit"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Adjustment Entries – Page reference may vary by edition.

10 Why is interest on drawings up to the date of retirement deducted from a partner's capital claim?

A It is treated as an unrecorded liability of the firm.

B It represents compensation to the gaining partners.

C It is a charge on the partner's mid-year withdrawals, representing an obligation owed to the firm.

D It acts as a penalty for retiring before the financial year ends.

💡 Short Explanation

Drawings use firm funds. Interest charged on withdrawals. Amount owed to firm.

✅ Correct Answer Explanation

Interest on drawings reduces partner's final claim. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Firm liability not involved.
Option B → Not compensation.
Option D → No retirement penalty.

🎯 Strategy

Used

Conceptual Understanding

Application:

�� Interpret nature of interest on drawings.

Final Logic:

�� Drawings create liability toward firm.

🧠 Memory Trick

"Withdrawals Cost Interest"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Interest on Drawings – Page reference may vary by edition.

11 Is the amount of personal drawings made up to the date of death treated similarly to the interest on those drawings in the final settlement?

A No, drawings are ignored while interest is deducted.

B Yes, both represent amounts to be deducted from the deceased partner's share.

C No, drawings are added, but interest is deducted.

D Yes, both are transferred to the gaining partners' accounts.

💡 Short Explanation

Drawings reduce partner claim. Interest on drawings also deducted. Both decrease settlement amount.

✅ Correct Answer Explanation

Both drawings and interest on drawings are liabilities owed by the partner to the firm. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Drawings are not ignored.
Option C → Drawings are not added.
Option D → Not transferred to gaining partners.

🎯 Strategy

Used

Conceptual Adjustment Analysis

Application:

�� Identify deduction items.

Final Logic:

�� Both reduce final payable amount.

🧠 Memory Trick

"Drawings and Interest Both Reduce"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Drawings Adjustment – Page reference may vary by edition.

12 Conceptually, the debit balance of a retiring partner's current account represents:

A An amount to be deducted from their final sum due.

B An asset that the retiring partner takes home.

C An accumulated profit that is added to their claim.

D The partner's share in the unrecorded goodwill.

💡 Short Explanation

Debit balance means partner owes. Final claim decreases. Treated as deduction item.

✅ Correct Answer Explanation

A debit balance indicates liability of the partner toward the firm. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Not an asset.
Option C → Accumulated profit opposite effect.
Option D → Goodwill unrelated.

🎯 Strategy

Used

Account Interpretation

Application:

�� Understand debit balance meaning.

Final Logic:

�� Debit balances reduce payable claim.

🧠 Memory Trick

"Debit Means Deduct"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Current Account Debit – Page reference may vary by edition.

13 The correct journal entry for transferring a Profit & Loss Account debit balance requires:

A Crediting Revaluation A/c.

B Crediting All Partners' Capital A/cs.

C Debiting only the Retiring Partner's Capital A/c.

D Debiting All Partners' Capital A/cs (Individually).

💡 Short Explanation

Debit balance means loss. Loss shared among partners. Capital accounts debited individually.

✅ Correct Answer Explanation

Accumulated losses are transferred by debiting all partners' capital accounts in old ratio. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Revaluation unrelated.
Option B → Capital accounts not credited.
Option C → Loss not borne by one partner only.

🎯 Strategy

Used

Journal Entry Recall

Application:

�� Apply loss transfer entry.

Final Logic:

�� Loss decreases partners' capitals.

🧠 Memory Trick

"Loss Debits Capitals"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Accumulated Loss Adjustment – Page reference may vary by edition.

14 A firm's loss for the previous year ending March 31 was Rs. 48,000. A partner with a 1/4 share retires on July 1. What is the partner's share of loss for the intervening period based on the previous year?

A Rs. 12,000

B Rs. 6,000

C Rs. 3,000

D Rs. 4,000

💡 Short Explanation

Three months' loss considered. Partner's share applied. Loss proportionately calculated.

✅ Correct Answer Explanation

Calculation: 48000 × 3/12 × 1/4 = 3000 Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Full-year share only.
Option B → Time factor incorrect.
Option D → Wrong calculation.

🎯 Strategy

Used

Intervening Loss Calculation

Application:

�� Annual Loss × Time × Ratio.

Final Logic:

�� Retiring partner bears proportional loss.

🧠 Memory Trick

"Loss × Time × Share"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Loss Till Retirement – Page reference may vary by edition.

15 Assertion (A): Existing goodwill of Rs. 60,000 in the Balance Sheet must be written off entirely.
Reason (R): Accounting practice dictates that existing goodwill should not appear in the reconstituted firm's books and is cleared by debiting all partners in their old ratio.

A A is true, but R is false.

B Both A and R are true and R is the correct explanation of A.

C Both A and R are false.

D A is false, but R is true.

💡 Short Explanation

Existing goodwill removed fully. Old partners bear write-off. Reason correctly explains assertion.

✅ Correct Answer Explanation

Goodwill appearing in books is generally written off among old partners. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Reason also true.
Option C → Both statements correct.
Option D → Assertion true.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

�� Connect write-off with accounting practice.

Final Logic:

�� Old goodwill removed before reconstitution.

🧠 Memory Trick

"Old Goodwill Must Go"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Goodwill Written Off – Page reference may vary by edition.

16 Arrange the steps for calculating and adjusting a retiring partner's share of goodwill when total goodwill is valued at Rs. 90,000:
1. Find the retiring partner's absolute share (e.g., 1/3 = Rs. 30,000).
2. Calculate the gaining ratio of the continuing partners.
3. Debit the gaining partners' capital accounts and credit the retiring partner.

A 1, 2, 3

B 2, 1, 3

C 3, 2, 1

D 1, 3, 2

💡 Short Explanation

Retiring share determined first. Gaining ratio calculated next. Adjustment entry passed finally.

✅ Correct Answer Explanation

Correct order: Calculate retiring share Find gaining ratio Pass adjustment entry Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Retiring share needed first.
Option C → Entry cannot precede calculation.
Option D → Ratio needed before entry.

🎯 Strategy

Used

Sequential Accounting Logic

Application:

�� Arrange goodwill adjustment process.

Final Logic:

�� Calculation precedes journal entry.

🧠 Memory Trick

"Find Share → Find Gain → Adjust"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Net Goodwill Effect – Page reference may vary by edition.

17 The total capital of a new firm is fixed at Rs. 1,80,000 in a new ratio of 1:1. The existing adjusted capitals of the two continuing partners are Rs. 60,000 and Rs. 50,000 respectively. How much cash must they bring in?

A Rs. 60,000 and Rs. 50,000 respectively.

B Rs. 90,000 each.

C Rs. 30,000 and Rs. 40,000 respectively.

D Rs. 10,000 and Rs. 20,000 respectively.

💡 Short Explanation

Total capital divided equally. Required capital is Rs. 90,000 each. Deficiency brought in cash.

✅ Correct Answer Explanation

Required Capital per Partner: 180000 ÷ 2 = 90000 Cash Needed: 90000 − 60000 = 30000 90000 − 50000 = 40000 Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Existing capital amounts only.
Option B → Total required capital, not deficiency.
Option D → Incorrect difference.

🎯 Strategy

Used

Capital Deficiency Calculation

Application:

�� Required Capital − Existing Capital.

Final Logic:

�� Partners bring deficit amount.

🧠 Memory Trick

"Need − Existing = Cash Bring In"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Final Capital Balance – Page reference may vary by edition.

18 If the final adjusted claim payable to a retiring partner is transferred entirely to their Loan Account, it mathematically implies:

A The firm intends to pay 10% interest automatically.

B The partner has forfeited their cash rights.

C The firm had an unrecorded asset equal to the claim.

D The firm is not in a position to make the payment immediately in cash.

💡 Short Explanation

Immediate cash unavailable. Outstanding amount becomes loan. Liability payable later.

✅ Correct Answer Explanation

Transfer to loan account indicates deferred payment. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Interest depends on agreement.
Option B → Rights not forfeited.
Option C → Asset unrelated.

🎯 Strategy

Used

Loan Conversion Understanding

Application:

�� Interpret meaning of loan transfer.

Final Logic:

�� Deferred payment creates liability.

🧠 Memory Trick

"Loan Means Payment Later"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Adjusted Claim – Page reference may vary by edition.

19 Category: Final Settlement Base (Passage for Q19) "If the firm has agreed to settle the retiring or deceased partner's account by paying him a lump sum amount, then the amount paid to him in excess of what is due to him, based on the balance in his capital account after making necessary adjustments in respect of accumulated profits and losses and revaluation of assets and liabilities, etc., shall be treated as his share of goodwill (known as hidden goodwill)."
According to the passage, the excess amount paid over the adjusted capital balance is called:

A Revaluation Premium.

B Hidden Goodwill.

C Outstanding Salary.

D Accumulated Reserve.

💡 Short Explanation

Excess payment identified separately. Represents implied goodwill. Known as hidden goodwill.

✅ Correct Answer Explanation

Excess settlement amount above adjusted capital is treated as hidden goodwill. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Not recognized term.
Option C → Salary unrelated.
Option D → Reserve unrelated.

🎯 Strategy

Used

Passage Interpretation

Application:

�� Identify meaning of excess payment.

Final Logic:

�� Extra payment implies goodwill value.

🧠 Memory Trick

"Extra Payment = Hidden Goodwill"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Hidden Goodwill – Page reference may vary by edition.

20 Category: Final Settlement Base (Passage for Q20) "If the firm has agreed to settle the retiring or deceased partner's account by paying him a lump sum amount, then the amount paid to him in excess of what is due to him, based on the balance in his capital account after making necessary adjustments in respect of accumulated profits and losses and revaluation of assets and liabilities, etc., shall be treated as his share of goodwill (known as hidden goodwill)."
According to the text, what specific adjustments must be made before the lump sum is compared to the capital balance to find hidden goodwill?

A Adjustments for accumulated profits/losses and revaluation of assets and liabilities.

B Adjustments for next year's projected sales only.

C Adjustments for Bank Overdraft limits.

D Adjustments for executor commission.

💡 Short Explanation

Capital balance adjusted first. Revaluation effects included. Profits and losses considered.

✅ Correct Answer Explanation

Adjusted capital must include reserves, losses, and revaluation changes before comparison. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Future sales irrelevant.
Option C → Bank limits unrelated.
Option D → Executor commission unrelated.

🎯 Strategy

Used

Passage-Based Understanding

Application:

�� Identify required adjustments.

Final Logic:

�� Hidden goodwill based on adjusted capital.

🧠 Memory Trick

"Adjust Capital Before Comparison"

📚 Class XII – Accountancy Part 1 – Chapter: Retirement/Death of a Partner – Topic: Basis of Settlement – Page reference may vary by edition.

CUET UG Accountancy Booster Test 1 Amount Due & Basic Adjustments

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