CUET UG Accountancy Booster Test 1 Reconstitution Basics -

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CUET UG Accountancy Booster Test 1 Reconstitution Basics

⏱️ 30 Minutes

❓ 20 Questions

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

CUET UG Accountancy Booster Test 1 Reconstitution Basics

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QUESTION 1 OF 20

If an agreement exists between X and Y to share the profits of a business, but only X actively manages it on behalf of both, does this still satisfy the concept of a partnership?

Answer Review

1 If an agreement exists between X and Y to share the profits of a business, but only X actively manages it on behalf of both, does this still satisfy the concept of a partnership?

A No, because all partners must actively manage the business equally.

B No, because Y is not doing any administrative work.

C Yes, but only if Y brings in more capital than X.

D Yes, because it is an agreement to share profits of a business carried on by all or any of them acting for all.

💡 Short Explanation

Mutual agency is essential. All partners need not manage equally. One may act for all.

✅ Correct Answer Explanation

Partnership exists when business is carried on by all or any of them acting for all. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Equal management unnecessary.
Option B → Administrative work not compulsory.
Option C → Capital contribution irrelevant.

🎯 Strategy

Used

Definition Application

Application:

�� Apply legal definition to scenario.

Final Logic:

�� Mutual agency satisfies partnership requirement.

🧠 Memory Trick

"Any One Can Act for All"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Definition of Partnership – Page reference may vary by edition.

2 Assertion (A): If partners decide to change their profit-sharing ratio from 3:2 to 1:1, the firm itself is completely dissolved.
Reason (R): Any change in the existing agreement amounts to reconstitution, leading to a new agreement, not the dissolution of the firm's business.

A A is false but R is true.

B Both A and R are true.

C A is true but R is false.

D Both A and R are false.

💡 Short Explanation

Ratio change causes reconstitution. Business usually continues. Dissolution does not occur automatically.

✅ Correct Answer Explanation

Changing the profit-sharing ratio results in reconstitution, not dissolution. Hence, Assertion is false and Reason is true.

❓ Why Other Options Are Incorrect

Option B → Assertion false.
Option C → Reason true.
Option D → Reason not false.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

�� Distinguish reconstitution from dissolution.

Final Logic:

�� Agreement changes without ending business.

🧠 Memory Trick

"Ratio Change ≠ Dissolution"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Agreement and Profit Sharing – Page reference may vary by edition.

3 Hari and Haqque are partners sharing profits 3:2. They admit John for a 1/6 share. In terms of reconstitution, what effectively happens to the old 3:2 agreement?

A It continues alongside the new agreement without changes.

B It is temporarily suspended for one financial year.

C It comes to an end and a new agreement comes into being with a changed relationship.

D It is legally transferred directly to John.

💡 Short Explanation

Admission changes relationship. Old agreement ends. New agreement formed.

✅ Correct Answer Explanation

Admission of a new partner causes reconstitution and creates a new agreement. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Agreement changes.
Option B → No temporary suspension.
Option D → Agreements not transferred.

🎯 Strategy

Used

Conceptual Understanding

Application:

�� Identify effect of admission.

Final Logic:

�� Reconstitution replaces old agreement.

🧠 Memory Trick

"New Partner = New Agreement"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Meaning of Reconstitution – Page reference may vary by edition.

4 Which of the following events strictly lead to a change in the partnership agreement (reconstitution)?
I. Admission of a partner
II. Change in profit sharing ratio
III. Buying a new heavy machinery
IV. Retirement of a partner

A I, II, and III only

B I, II, and IV only

C II, III, and IV only

D I, III, and IV only

💡 Short Explanation

Admission changes agreement. Ratio change alters relationship. Retirement causes reconstitution.

✅ Correct Answer Explanation

Admission, change in ratio, and retirement affect partnership relationships and cause reconstitution. Buying machinery does not. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Machinery purchase irrelevant.
Option C → Admission omitted.
Option D → Ratio change omitted.

🎯 Strategy

Used

Statement Filtering

Application:

�� Identify events affecting agreement.

Final Logic:

�� Only relationship changes cause reconstitution.

🧠 Memory Trick

"Partners or Ratio Change = Reconstitution"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Change in Agreement – Page reference may vary by edition.

5 Even though reconstitution results in a changed relationship among the members and ends the old agreement, what happens to the firm's business operations?

A The firm continues its business as usual.

B The firm must change its legal name immediately.

C The firm must liquidate all assets before continuing.

D The firm ceases to exist in the eyes of the law.

💡 Short Explanation

Agreement changes only. Business continuity remains. Dissolution unnecessary.

✅ Correct Answer Explanation

Reconstitution changes relationships among partners, but business operations continue normally. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Name change unnecessary.
Option C → Asset liquidation not required.
Option D → Firm may continue.

🎯 Strategy

Used

Conceptual Distinction

Application:

�� Differentiate business continuity from dissolution.

Final Logic:

�� Reconstitution does not stop business.

🧠 Memory Trick

"Partners Change, Business Continues"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Continuity of Business – Page reference may vary by edition.

6 Match the firm reconstitution event with the resulting change in relationship:

List 1	List 2
1. Admission	a. Remaining partners continue sharing future profits after a partner passes away
2. Retirement	b. A partner withdraws due to old age or illness, leaving fewer partners
3. Change in Ratio	c. New partner supplements resources, acquiring a share from old partners
4. Death	d. Existing partners alter shares due to changed roles without adding/removing members

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

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

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

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

💡 Short Explanation

Admission adds partner. Retirement removes partner. Ratio change alters shares.

✅ Correct Answer Explanation

Correct matching: Admission → New partner acquires share Retirement → Partner withdraws Change in Ratio → Shares altered Death → Remaining partners continue Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Admission mismatched.
Option B → Retirement incorrectly paired.
Option D → Entire sequence incorrect.

🎯 Strategy

Used

Matching Logic

Application:

�� Link events with consequences.

Final Logic:

�� Only Option C fully correct.

🧠 Memory Trick

"Admission Adds, Retirement Leaves"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Change in Relationships – Page reference may vary by edition.

7 Anil and Vishal share profits in 3:2. They admit Sumit for 1/5 share. If Sumit acquires his share from old partners in their old ratio, what is Anil's new calculated share?

A 8/25

B 3/5

C 4/5

D 12/25

💡 Short Explanation

Incoming share distributed in old ratio. Anil sacrifices proportionately. New share calculated.

✅ Correct Answer Explanation

Anil's Old Share: 3/5 Sumit's Share from Anil: (1/5) × (3/5) = 3/25 New Share: (3/5) - (3/25) = 12/25 (3/5) - (3/25) = 12/25 Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Incorrect subtraction.
Option B → Old share only.
Option C → Exceeds possible share.

🎯 Strategy

Used

Ratio Adjustment

Application:

�� Deduct sacrificed share.

Final Logic:

�� Anil's revised share equals (12/25).

🧠 Memory Trick

"Old Share Minus Sacrifice"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Admission of Partner – Page reference may vary by edition.

8 Ram, Mohan, and Sohan share in 3:2:1. Sohan brings additional capital, and they change the ratio to equal shares (1:1:1). What is the fractional gain calculated for Sohan?

A 1/2

B 1/6

C 1/3

D 1/4

💡 Short Explanation

Sohan's old share smaller. Equal ratio increases share. Gain calculated by difference.

✅ Correct Answer Explanation

Sohan's Old Share: 1/6 New Share: 1/3 Gain: (1/3) - (1/6) = 1/6 (1/3) - (1/6) = 1/6 Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Excessive gain.
Option C → New share only.
Option D → Incorrect subtraction.

🎯 Strategy

Used

Gain Calculation

Application:

�� Compare old and new shares.

Final Logic:

�� Sohan gains (1/6).

🧠 Memory Trick

"Gain = New Share – Old Share"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Change in Ratio – Page reference may vary by edition.

9 If a partnership is strictly "at will," under what timeline can an existing partner legally choose to retire?

A Only at the end of the financial year.

B Only if the firm is currently making a loss.

C At any time.

D Only with the explicit permission of the local court.

💡 Short Explanation

Partnership at will flexible. No fixed retirement date. Partner may retire anytime.

✅ Correct Answer Explanation

In a partnership at will, a partner can retire at any time after giving notice. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → No year-end restriction.
Option B → Profit/loss irrelevant.
Option D → Court permission unnecessary.

🎯 Strategy

Used

Legal Provision Recall

Application:

�� Apply partnership-at-will concept.

Final Logic:

�� Flexible retirement permitted.

🧠 Memory Trick

"At Will = Anytime"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Retirement of Partner – Page reference may vary by edition.

10 X, Y, and Z share profits 3:2:1. X dies. Y and Z decide to carry on the business equally. What is the immediate accounting implication for the firm's structure?

A The firm is permanently closed.

B The firm must pay Z a premium out of pocket.

C The firm automatically becomes a sole proprietorship.

D The firm stands reconstituted due to death and a new profit-sharing ratio is established.

💡 Short Explanation

Death changes partnership structure. Remaining partners continue. New ratio established.

✅ Correct Answer Explanation

Death of a partner leads to reconstitution when remaining partners continue business. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Business may continue.
Option B → Premium unnecessary.
Option C → Two partners remain.

🎯 Strategy

Used

Conceptual Understanding

Application:

�� Identify consequence of death.

Final Logic:

�� New agreement required after death.

🧠 Memory Trick

"Death Changes Ratio"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Death of Partner – Page reference may vary by edition.

11 Identify the correct sequence of logical/structural steps for legally admitting a partner:
1. Existing partners unanimously agree to the admission.
2. New partner brings capital and/or goodwill.
3. Old agreement ends, new agreement begins.
4. Calculation of the new profit sharing ratio.

A 1, 3, 2, 4

B 4, 3, 2, 1

C 2, 1, 4, 3

D 3, 2, 1, 4

💡 Short Explanation

Consent comes first. Agreement changes next. Capital introduced later.

✅ Correct Answer Explanation

Correct sequence: Consent of partners Old agreement ends Capital/goodwill brought New ratio calculated Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Ratio cannot start process.
Option C → Consent must precede admission.
Option D → Agreement change not first.

🎯 Strategy

Used

Sequential Logic

Application:

�� Arrange admission procedure logically.

Final Logic:

�� Consent begins reconstitution.

🧠 Memory Trick

"Consent → Agreement → Capital → Ratio"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Consent of Partners – Page reference may vary by edition.

12 Under the provisions of the Partnership Act 1932, can a new partner be admitted if one out of four existing partners explicitly disagrees, assuming the deed is silent?

A Yes, if the new partner promises to bring double the capital.

B No, unless it is otherwise provided in the partnership deed, consent must be unanimous.

C Yes, because a 3/4th majority is legally sufficient.

D No, the Act strictly prohibits admission after initial formation.

💡 Short Explanation

Admission needs unanimous consent. Deed may provide otherwise. One objection blocks admission.

✅ Correct Answer Explanation

Under the Partnership Act 1932, unanimous consent is required unless deed states otherwise. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Capital promise irrelevant.
Option C → Majority insufficient.
Option D → Admission allowed with consent.

🎯 Strategy

Used

Legal Rule Application

Application:

�� Apply statutory provision.

Final Logic:

�� Every partner must agree.

🧠 Memory Trick

"All Must Agree"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Partnership Act Rules – Page reference may vary by edition.

13 Assertion (A): A firm may admit a new partner solely because they need managerial help for the expansion of its business.
Reason (R): Expansion of business typically requires supplementary resources, which can be capital, managerial help, or both.

A A is true, R is false.

B A is false, R is true.

C Both A and R are false.

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

💡 Short Explanation

Expansion needs resources. Managerial support important. Reason explains admission need.

✅ Correct Answer Explanation

A firm may admit a new partner for managerial expertise or additional resources. Hence, both Assertion and Reason are true.

❓ Why Other Options Are Incorrect

Option A → Reason true.
Option B → Assertion true.
Option C → Both statements correct.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

�� Relate business expansion with admission.

Final Logic:

�� Expansion needs additional support.

🧠 Memory Trick

"Growth Needs Resources"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Need for New Partner – Page reference may vary by edition.

14 Is the incoming partner strictly mandated to bring their agreed capital only in the form of hard currency (cash)?

A Yes, the Partnership Act 1932 strictly restricts kind contributions.

B No, the partner can bring an agreed amount of capital either in cash or in kind.

C Yes, otherwise the premium for goodwill cannot be mathematically calculated.

D No, capital is not a mandatory requirement for admission at all.

💡 Short Explanation

Capital may be cash. Assets can also be contributed. Flexible contribution allowed.

✅ Correct Answer Explanation

A new partner may contribute agreed capital either in cash or in kind. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Kind contribution allowed.
Option C → Goodwill unrelated.
Option D → Capital contribution generally required.

🎯 Strategy

Used

Legal Understanding

Application:

�� Identify acceptable forms of capital.

Final Logic:

�� Partnership permits flexible contribution.

🧠 Memory Trick

"Cash or Assets Both Allowed"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Capital Requirement – Page reference may vary by edition.

📄 Passage

When a new partner is admitted he acquires his share in profits from the old partners. In other words, on the admission of a new partner, the old partners sacrifice a share of their profit in favour of the new partner. But, what will be the share of new partner and how he will acquire it from the existing partners is decided mutually among the old partners and the new partner. However, if nothing is specified as to how does the new partner acquire his share... it may be assumed that he gets it from them in their profit sharing ratio.

Based on the passage and sources, how does the act of acquiring a share in the firm impact the old partners?

A They sacrifice a portion of their profit share in favour of the new partner.

B Their asset base strictly doubles in value immediately.

C They are required to contribute more capital to balance the ratio.

D They lose all their voting rights in the firm.

💡 Short Explanation

New partner needs profit share. Old partners sacrifice part. Compensation may arise.

✅ Correct Answer Explanation

Admission of a new partner reduces the old partners' profit share proportionately. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Assets do not double.
Option C → Additional capital unnecessary.
Option D → Voting rights remain.

🎯 Strategy

Used

Passage Interpretation

Application:

�� Identify effect on old partners.

Final Logic:

�� Profit sacrifice occurs.

🧠 Memory Trick

"New Share Comes from Old Share"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Share in Assets – Page reference may vary by edition.

📄 Passage

According to the passage, who decides the new partner's specific share and exactly how it will be acquired?

A The Registrar of Companies.

B Only the old partners via a secret ballot.

C It is decided mutually among the old partners and the new partner.

D The Partnership Act mandates a strict equal division.

💡 Short Explanation

Mutual agreement required. All relevant partners involved. Flexible arrangement possible.

✅ Correct Answer Explanation

The new partner's share is decided mutually among old partners and the incoming partner. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Registrar not involved.
Option B → New partner also participates.
Option D → Equal division not compulsory.

🎯 Strategy

Used

Passage-Based Recall

Application:

�� Identify decision-making authority.

Final Logic:

�� Mutual consent determines share.

🧠 Memory Trick

"Share Decided Mutually"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Share in Profits – Page reference may vary by edition.

17 If C is admitted for a 1/4 share and brings Rs. 20,000 as capital, and partners agree total capitals should be proportionate to profit shares, what is the inferred formula-based total capital of the firm?

A Rs. 40,000

B Rs. 80,000

C Rs. 1,00,000

D Rs. 60,000

💡 Short Explanation

Capital proportional to share. 1/4 share corresponds to Rs. 20,000. Total capital inferred proportionately.

✅ Correct Answer Explanation

If (1/4) share equals Rs. 20,000: 20000 × 4 = 80000 20000 × 4 = 80000 Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Half required value.
Option C → Excessively high.
Option D → Incorrect multiplication.

🎯 Strategy

Used

Proportion Method

Application:

�� Convert fractional share to total.

Final Logic:

�� Total capital equals Rs. 80,000.

🧠 Memory Trick

"Share Fraction Determines Total"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Capital Contribution – Page reference may vary by edition.

18 If an established firm does not earn super profits (it only earns normal profits or incurs losses), does it possess goodwill according to the sources?

A Yes, all established firms have inherent goodwill.

B Yes, but only a fixed threshold amount of Rs. 10,000.

C No, goodwill only exists if the firm has registered patents.

D No, goodwill exists only when the firm earns super profits.

💡 Short Explanation

Goodwill linked with excess earnings. Super profits essential. Normal profits insufficient.

✅ Correct Answer Explanation

Goodwill exists only when a firm earns super profits over normal returns. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Not automatic.
Option B → No fixed threshold.
Option C → Patents not compulsory.

🎯 Strategy

Used

Conceptual Understanding

Application:

�� Relate goodwill with profitability.

Final Logic:

�� Super profits create goodwill.

🧠 Memory Trick

"No Super Profit, No Goodwill"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Goodwill Contribution – Page reference may vary by edition.

19 Amar and Bahadur share profits in 3:2. Mary is admitted for 1/4 share. The new ratio between Amar and Bahadur will be 2:1. What is Amar's newly calculated share of the firm's total profit?

A 3/12

B 1/4

C 6/12 (or 2/4)

D 4/12

💡 Short Explanation

Mary receives 1/4 share. Remaining share divided 2:1. Amar gets larger portion.

✅ Correct Answer Explanation

Remaining Share: 1 - (1/4) = 3/4 Amar's Share: (2/3) × (3/4) = 2/4 = 6/12 (2/3) × (3/4) = 2/4 Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Too small.
Option B → Mary's share.
Option D → Incorrect allocation.

🎯 Strategy

Used

Remaining Share Method

Application:

�� Divide remaining profits proportionately.

Final Logic:

�� Amar receives (2/4).

🧠 Memory Trick

"Remaining Share × New Ratio"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Sacrifice of Old Partners – Page reference may vary by edition.

20 Which of the following statements are true about the premium for goodwill brought by a new partner?
I. It is shared by existing partners in their sacrificing ratio.
II. It compensates the old partners for the loss of their share in super profits.
III. It is always distributed equally among all partners, including the new one.

A I and II only

B I and III only

C II and III only

D I, II, and III

💡 Short Explanation

Premium compensates sacrifice. Distribution follows sacrificing ratio. New partner does not share.

✅ Correct Answer Explanation

Statements I and II are true. Statement III is false because the incoming partner does not receive goodwill premium. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Statement III false.
Option C → Statement I true.
Option D → Statement III incorrect.

🎯 Strategy

Used

Statement Verification

Application:

�� Evaluate goodwill treatment.

Final Logic:

�� Sacrificing partners receive compensation.

🧠 Memory Trick

"Goodwill Rewards Sacrifice"

📚 Class XII – Accountancy Part 1 – Chapter: Reconstitution of a Partnership Firm – Admission of a Partner – Topic: Premium for Goodwill – Page reference may vary by edition.

CUET UG Accountancy Booster Test 1 Reconstitution Basics

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