CUET UG Accountancy Booster Test 3 Profit Sharing & Gaining Ratio -

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CUET UG Accountancy Booster Test 2 Profit Sharing & Gaining Ratio

⏱️ 30 Minutes

❓ 20 Questions

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

CUET UG Accountancy Booster Test 2 Profit Sharing & Gaining Ratio

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QUESTION 1 OF 20

What fundamentally implies that a continuing partner has gained a share of profit upon reconstitution?

Answer Review

1 What fundamentally implies that a continuing partner has gained a share of profit upon reconstitution?

A Their capital account balance increases.

B They receive cash from the retiring partner.

C Their fractional proportion of future profits is mathematically higher than their old proportion.

D They assume all liabilities of the old firm.

💡 Short Explanation

Gain relates to profit share increase. New share exceeds old share. Mathematical comparison determines gain.

✅ Correct Answer Explanation

A partner gains only when their future profit-sharing proportion becomes greater than before. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Capital increase does not define gain.
Option B → Cash receipt unrelated.
Option D → Liabilities do not determine gain.

🎯 Strategy

Used

Conceptual Understanding

Application:

�� Compare old and new shares.

Final Logic:

�� Gain means higher future share.

🧠 Memory Trick

"New Share Greater = Gain"

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

2 Evaluate the following statements regarding the foundation of profit sharing changes:
1. The base for normal calculations defaults strictly to the old profit sharing agreement unless explicitly altered.
2. On the retirement of a partner, the existing partnership deed comes to an end and a new deed needs to be framed.

A Both statements 1 and 2 are true.

B Only statement 1 is true.

C Only statement 2 is true.

D Both statements 1 and 2 are false.

💡 Short Explanation

Old ratio remains default basis. Retirement causes reconstitution. New agreement becomes necessary.

✅ Correct Answer Explanation

Retirement ends the old partnership agreement and requires a new arrangement among continuing partners. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Statement 2 also true.
Option C → Statement 1 also true.
Option D → Both statements valid.

🎯 Strategy

Used

Statement Verification

Application:

�� Check legal and accounting concepts.

Final Logic:

�� Both statements correct.

🧠 Memory Trick

"Retirement = Reconstitution"

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

3 Assertion (A): Continuing partners will always experience a mathematical gain upon the retirement of a partner.
Reason (R): The retired partner's share is compulsorily distributed among all remaining partners in equal proportions.

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

B Both (A) and (R) are true but (R) is not the correct explanation.

C (A) is true but (R) is false.

D Both (A) and (R) are false.

💡 Short Explanation

Partners may sacrifice also. Share distribution need not be equal. Both statements incorrect.

✅ Correct Answer Explanation

A continuing partner may gain, sacrifice, or remain unchanged depending on the new ratio. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Assertion false.
Option B → Both not true.
Option C → Assertion also false.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

�� Verify assumptions carefully.

Final Logic:

�� Retirement does not guarantee equal gain.

🧠 Memory Trick

"Not Every Partner Gains"

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

4 To logically resolve complex new ratio scenarios where partial surrenders happen, arrange the steps:
1. Extract the old fractional shares of all partners.
2. Identify the specific surrender proportions declared by the retiring partner.
3. Calculate the individual fractional acquisitions for the gaining partners.
4. Add these acquisitions to the old shares to compute final new shares.

A 2, 1, 4, 3

B 1, 2, 3, 4

C 1, 3, 2, 4

D 4, 3, 2, 1

💡 Short Explanation

Old shares identified first. Surrender proportions analyzed next. Final shares computed afterward.

✅ Correct Answer Explanation

Correct sequence: Identify old shares Determine surrender Compute acquisitions Calculate new shares Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Old shares should come first.
Option C → Acquisitions require surrender details first.
Option D → Reverse order incorrect.

🎯 Strategy

Used

Sequential Ratio Logic

Application:

�� Arrange ratio calculation steps.

Final Logic:

�� Proper order ensures accurate new ratio.

🧠 Memory Trick

"Old → Surrender → Gain → New"

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

5 Match the unique scenarios with their correct outcomes:

List 1	List 2
1. Hidden Goodwill	a. Excess payout over adjusted due capital
2. Gaining Ratio Default	b. Remaining partners share in old relative ratio
3. Sacrifice by a continuing partner	c. Continuing partner's capital account is credited
4. New Ratio Default	d. Same as the old ratio among remaining partners

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

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

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

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

💡 Short Explanation

Hidden goodwill means excess payment. Sacrifice requires compensation credit. Default ratio follows old ratio.

✅ Correct Answer Explanation

Correct matching: Hidden Goodwill → Excess payout Gaining Ratio Default → Old ratio Sacrifice → Capital credited New Ratio Default → Remaining partners continue old relative ratio Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Incorrect sacrifice mapping.
Option C → Hidden goodwill mismatch.
Option D → Multiple incorrect pairings.

🎯 Strategy

Used

Matching Logic

Application:

�� Match concepts with outcomes.

Final Logic:

�� Option A fully correct.

🧠 Memory Trick

"Excess = Hidden Goodwill"

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

6 Deepa, Neeru, and Shilpa were sharing profits in 5:3:2. Neeru retires. The new profit sharing ratio between Deepa and Shilpa is explicitly decided as 2:3. What is Deepa's gaining or sacrificing share?

A Gain of 1/10

B Gain of 2/10

C Sacrifice of 1/10

D Sacrifice of 2/10

💡 Short Explanation

Deepa's new share decreases. Difference becomes sacrifice. Negative change indicates sacrifice.

✅ Correct Answer Explanation

Deepa's Old Share: 5/10 New Share: 2/5 = 4/10 Sacrifice: 4/10 − 5/10 = −1/10 Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Result not positive.
Option B → Wrong amount.
Option D → Incorrect sacrifice calculation.

🎯 Strategy

Used

Gain/Sacrifice Calculation

Application:

�� New Share − Old Share.

Final Logic:

�� Negative result means sacrifice.

🧠 Memory Trick

"Negative Difference = Sacrifice"

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

7 Continuing the above scenario (Deepa sacrifices 1/10, Neeru retires with 3/10, Shilpa gains 4/10). If the firm's total goodwill is valued at Rs. 1,20,000, what amounts will Shilpa have to compensate to the others?

A Neeru Rs. 12,000 and Deepa Rs. 36,000

B Neeru Rs. 36,000 and Deepa Rs. 12,000

C Neeru Rs. 48,000 and Deepa Rs. 0

D Neeru Rs. 24,000 and Deepa Rs. 24,000

💡 Short Explanation

Retiring partner receives goodwill share. Sacrificing partner compensated separately. Gaining partner bears total burden.

✅ Correct Answer Explanation

Neeru's Share: 120000 × 3/10 = 36000 Deepa's Sacrifice: 120000 × 1/10 = 12000 Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Amounts reversed.
Option C → Deepa ignored.
Option D → Incorrect equal allocation.

🎯 Strategy

Used

Goodwill Compensation Calculation

Application:

�� Goodwill × Share/Sacrifice.

Final Logic:

�� Gaining partner compensates both.

🧠 Memory Trick

"Gainer Pays Others"

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

8 Which formula best determines the value of a retiring partner's "Hidden Goodwill"?

A (Total New Capital - Total Old Capital) × Retiring Share

B Total Adjusted Assets - Total External Liabilities

C New Ratio Proportion - Old Ratio Proportion

D Total agreed lump sum payout - Adjusted Capital Balance of retiring partner

💡 Short Explanation

Excess payment indicates goodwill. Hidden goodwill inferred indirectly. Difference formula applied.

✅ Correct Answer Explanation

Hidden goodwill equals excess settlement above adjusted capital balance. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Not hidden goodwill formula.
Option B → Net assets formula.
Option C → Gain calculation only.

🎯 Strategy

Used

Formula Recognition

Application:

�� Identify hidden goodwill method.

Final Logic:

�� Excess settlement reveals goodwill.

🧠 Memory Trick

"Extra Payment = Hidden Goodwill"

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

9 The core conceptual definition of the gaining ratio is inextricably linked to:

A Determining the new fixed capital limits of the firm.

B The legal dissolution of the partnership firm.

C The proportion in which remaining partners must compensate the outgoing partner for goodwill.

D The method of depreciating unrecorded assets.

💡 Short Explanation

Gainers compensate outgoing partner. Compensation depends on gain. Ratio determines burden sharing.

✅ Correct Answer Explanation

Gaining ratio helps determine goodwill compensation among continuing partners. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Capital unrelated.
Option B → Dissolution unrelated.
Option D → Asset depreciation unrelated.

🎯 Strategy

Used

Conceptual Understanding

Application:

�� Identify practical use of gaining ratio.

Final Logic:

�� Gainers bear goodwill adjustment.

🧠 Memory Trick

"Gaining Ratio = Goodwill Sharing"

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

10 When is the gaining ratio explicitly mandated to be calculated rather than simply inferred?

A When partners decide to dissolve the firm entirely.

B When the new profit sharing ratio of continuing partners is specifically altered from their old proportions.

C When a partner dies rather than retires.

D When the firm has no accumulated profits or losses to distribute.

💡 Short Explanation

Ratio changes require computation. Old proportion no longer applicable. Gain must be calculated separately.

✅ Correct Answer Explanation

Whenever the new ratio changes from the old relative ratio, gaining ratio must be computed. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Dissolution not relevant.
Option C → Death alone not sufficient.
Option D → Profits/losses unrelated.

🎯 Strategy

Used

Rule Identification

Application:

�� Determine when explicit calculation needed.

Final Logic:

�� Changed ratios require gaining ratio computation.

🧠 Memory Trick

"Changed Ratio = Calculate Gain"

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

11 Evaluate the statements on goodwill and ratios:
Statement 1: If the new ratio is the same relative ratio as the old ratio, no separate computation for the gaining ratio is needed to adjust goodwill.
Statement 2: Existing goodwill appearing in the balance sheet is written off by debiting gaining partners in their gaining ratio.

A Both statements are true.

B Both statements are false.

C Statement 1 is false, but Statement 2 is true.

D Statement 1 is true, but Statement 2 is false.

💡 Short Explanation

Same ratio needs no fresh gain calculation. Existing goodwill written off in old ratio. Statement 2 incorrect.

✅ Correct Answer Explanation

Existing goodwill appearing in the books is written off among all old partners in their old ratio, not in gaining ratio. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Statement 2 false.
Option B → Statement 1 true.
Option C → Statement 1 not false.

🎯 Strategy

Used

Statement Verification

Application:

�� Check goodwill treatment carefully.

Final Logic:

�� Only Statement 1 correct.

🧠 Memory Trick

"Old Goodwill = Old Ratio"

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

12 Assertion (A): When a continuing partner sacrifices a portion of their share upon reconstitution, their capital account must be credited.
Reason (R): The sacrificing continuing partner is giving up a portion of their future profit share and must be proportionately compensated for the firm's goodwill.

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

B Both (A) and (R) are true but (R) is not the correct explanation.

C (A) is true but (R) is false.

D Both (A) and (R) are false.

💡 Short Explanation

Sacrificing partner loses future share. Compensation therefore necessary. Capital account credited accordingly.

✅ Correct Answer Explanation

A sacrificing partner gives up future profit entitlement and must be compensated through goodwill adjustment. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Reason directly explains.
Option C → Reason true.
Option D → Both statements true.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

�� Connect sacrifice with compensation.

Final Logic:

�� Sacrifice requires goodwill credit.

🧠 Memory Trick

"Sacrifice Means Compensation"

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

13 If a retiring partner surrenders a specific fraction 'x' of their share to a continuing partner, the acquired share for that continuing partner is formulated as:

A Firm's Total Profit × 'x'

B Retiring partner's share multiplied by 'x'

C Continuing partner's old share multiplied by 'x'

D Retiring partner's share divided by 'x'

💡 Short Explanation

Continuing partner acquires surrendered portion. Portion based on retiring share. Fraction multiplication applied.

✅ Correct Answer Explanation

Acquired share is calculated from the retiring partner's share using the agreed acquisition fraction. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Total profit irrelevant.
Option C → Old share not acquisition basis.
Option D → Division incorrect.

🎯 Strategy

Used

Formula Recognition

Application:

�� Apply share acquisition logic.

Final Logic:

�� Retiring share × acquisition fraction.

🧠 Memory Trick

"Acquired Share Comes from Retiring Share"

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

14 Arrange the steps to process the capital adjustment when one continuing partner sacrifices and the other gains:
1. Determine the firm's total goodwill.
2. Calculate the retiring partner's share and the sacrificing partner's share of goodwill.
3. Combine both compensation amounts.
4. Debit the sole gaining partner's capital account for the combined total.

A 2, 1, 3, 4

B 1, 3, 2, 4

C 4, 3, 2, 1

D 1, 2, 3, 4

💡 Short Explanation

Goodwill valued first. Individual shares computed next. Combined burden debited finally.

✅ Correct Answer Explanation

Correct order: Determine goodwill Compute shares Combine amounts Debit gaining partner Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Goodwill value required first.
Option B → Combination impossible before calculation.
Option C → Reverse order incorrect.

🎯 Strategy

Used

Sequential Adjustment Logic

Application:

�� Arrange goodwill adjustment process.

Final Logic:

�� Computation precedes accounting entry.

🧠 Memory Trick

"Value → Calculate → Combine → Debit"

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

15 Match the scenarios with the resulting actions or rules:

List 1	List 2
1. No info on acquisition ratio	a. Old relative ratio continues
2. Specific new ratio provided	b. Explicitly calculate gaining ratio (New − Old)
3. Lump sum settlement exceeds capital	c. Identify hidden goodwill
4. Unrecorded asset discovered	d. Credit Revaluation Account

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

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

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

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

💡 Short Explanation

No ratio info means old ratio continues. Excess settlement implies hidden goodwill. Unrecorded asset creates gain.

✅ Correct Answer Explanation

Correct matching: No acquisition ratio → Old ratio continues Specific new ratio → Calculate gaining ratio Excess settlement → Hidden goodwill Unrecorded asset → Credit Revaluation Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Hidden goodwill mismatch.
Option B → Ratio treatment incorrect.
Option D → Multiple mismatches.

🎯 Strategy

Used

Matching Logic

Application:

�� Match rule with scenario.

Final Logic:

�� Option C fully correct.

🧠 Memory Trick

"Excess Payment = Hidden Goodwill"

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

16 P, Q, and R share profits in 3:2:1. R retires. The balance in R's capital account after adjusting reserves and revaluation is Rs. 60,000. P and Q agree to pay him Rs. 75,000 in full settlement. What is the total goodwill of the entire firm implied by this payout?

A Rs. 90,000

B Rs. 15,000

C Rs. 75,000

D Rs. 1,20,000

💡 Short Explanation

Excess payment equals hidden goodwill share. R's share identified first. Total goodwill calculated afterward.

✅ Correct Answer Explanation

Hidden Goodwill Share: 75000 − 60000 = 15000 R's share = 1/6 Total Goodwill: 15000 × 6 = 90000 Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Hidden goodwill share only.
Option C → Settlement amount only.
Option D → Incorrect multiplication.

🎯 Strategy

Used

Hidden Goodwill Computation

Application:

�� Hidden Share ÷ Retiring Ratio.

Final Logic:

�� Total goodwill = Rs. 90,000.

🧠 Memory Trick

"Hidden Share ÷ Ratio"

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

17 Using the data from the previous question (R's hidden goodwill share is Rs. 15,000, firm goodwill is Rs. 90,000). Assuming P and Q do not change their relative profit sharing ratio, by what amount will P's capital account be debited to compensate R?

A Rs. 15,000

B Rs. 6,000

C Rs. 7,500

D Rs. 9,000

💡 Short Explanation

Old ratio continues between P and Q. Gaining ratio becomes 3:2. P bears larger share.

✅ Correct Answer Explanation

R's Hidden Goodwill Share = Rs. 15,000 P and Q gain in ratio 3:2. P's Share: 15000 × 3/5 = 9000 Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Entire amount not borne by P.
Option B → Incorrect ratio application.
Option C → Equal division incorrect.

🎯 Strategy

Used

Gaining Ratio Allocation

Application:

�� Goodwill × Partner Gain Ratio.

Final Logic:

�� P compensates Rs. 9,000.

🧠 Memory Trick

"Goodwill Shared by Gainers"

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

18 When calculating adjustments for revaluation of assets on the event of retirement, the net profit or loss generated from the Revaluation Account is shared among:

A All partners, including the retiring partner, in their old profit sharing ratio.

B Only the continuing partners in their gaining ratio.

C Only the continuing partners in their new profit sharing ratio.

D All partners equally, regardless of old ratios.

💡 Short Explanation

Revaluation relates to old period. Retiring partner also entitled. Shared in old ratio.

✅ Correct Answer Explanation

Revaluation profit/loss belongs to all old partners because it arose before retirement. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Retiring partner wrongly excluded.
Option C → New ratio not applicable.
Option D → Equal distribution unnecessary.

🎯 Strategy

Used

Conceptual Understanding

Application:

�� Identify correct sharing basis.

Final Logic:

�� Old ratio applies to old gains/losses.

🧠 Memory Trick

"Old Profit → Old Ratio"

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

📄 Passage

If the firm has agreed to settle the retiring partner's account by paying him a lump sum amount, then the amount paid to him in excess of what is due to him... shall be treated as his share of goodwill. For example, P, Q and R are partners sharing in 3:2:1. R retires, and the balance in his capital account after all adjustments is Rs. 60,000. P and Q agreed to pay him Rs. 75,000 in full settlement.

In the scenario provided in the passage, the Rs. 15,000 difference represents:

A R's share in the revaluation profit.

B R's share of the firm's hidden goodwill.

C The firm's total hidden goodwill.

D A penalty paid by P and Q.

💡 Short Explanation

Excess payment identified separately. Represents goodwill entitlement. Hidden goodwill inferred.

✅ Correct Answer Explanation

The additional Rs. 15,000 above adjusted capital is R's share of hidden goodwill. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Revaluation unrelated.
Option C → Entire firm goodwill larger.
Option D → No penalty involved.

🎯 Strategy

Used

Passage Interpretation

Application:

�� Identify nature of excess payment.

Final Logic:

�� Excess settlement equals hidden goodwill share.

🧠 Memory Trick

"Extra Payment = Hidden Goodwill"

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

📄 Passage

According to the principles discussed in the passage, which accounts are debited for this Rs. 15,000 excess, assuming no change in the relative ratio of the remaining partners?

A Revaluation Account and Goodwill Account.

B R's Capital Account only.

C P and Q's Capital Accounts in their gaining ratio of 3:2.

D General Reserve Account.

💡 Short Explanation

Continuing partners gain future share. Compensation burden shared accordingly. Gaining ratio applied.

✅ Correct Answer Explanation

P and Q compensate R in their gaining ratio 3:2. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Revaluation unrelated.
Option B → Retiring partner not debited.
Option D → Reserve not used.

🎯 Strategy

Used

Goodwill Adjustment Logic

Application:

�� Apply gaining ratio principle.

Final Logic:

�� Gainers bear hidden goodwill adjustment.

🧠 Memory Trick

"Gainers Pay Goodwill"

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

CUET UG Accountancy Booster Test 2 Profit Sharing & Gaining Ratio

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