Partnership Accounts Questions and Answers

Q: Business organization runs as a partnership is called :-

A business run as a partnership is called a firm.Under Section 4 of the Indian Partnership Act, 1932, persons who have entered into partnership are individually called partners and collectively a firm, and the name under which the business is carried on is the firm name.'Partnership' is the name of the relationship between the partners, not of the business organisation. A company is a separate legal person incorporated under the Companies Act. An industry is a group of firms producing similar goods, not one business.

Q: X and Y share profits and losses in the ratio of 2 : 1. They take Z as a partner and the new profit sharing ratio becomes 3 : 2 : 1. Z brings ₹ 4,500 as premium for goodwill. What will be the value of firm’s goodwill ?

The value of the firm's goodwill is ₹ 27,000.In the new ratio 3 : 2 : 1, Z's share is 1/6. The premium he brings is his share of the firm's goodwill.\[ \begin{aligned} \tfrac{1}{6} \times G &= 4{,}500 \\ G &= 4{,}500 \times 6 = 27{,}000 \end{aligned} \]₹ 4,500 is only Z's share, not the firm's goodwill. ₹ 18,000 treats Z's share as 1/4, and ₹ 24,000 does not correspond to Z's 1/6 share at all.

Q: Varsha and Monica are partners sharing profit and losses in the ratio of 3 : 2 having the capital of ₹ 80,000 and ₹ 50,000 respectively. They are entitled to 9% p.a. interest on capital before distributing the profit. During the year firm earned ₹ 7,800 after allowing interest on capital. Profit apportioned among Varsha and Monica is :

The shares are ₹ 4,680 and ₹ 3,120.The ₹ 7,800 is profit after interest on capital, so it is simply divided in the profit sharing ratio of 3 : 2:\[ \begin{aligned} \text{Varsha} &= 7800 \times \tfrac{3}{5} = 4680 \\ \text{Monica} &= 7800 \times \tfrac{2}{5} = 3120 \end{aligned} \]Options B and C also add up to ₹ 7,800 but are not in the ratio 3 : 2, and option D does not even add up to ₹ 7,800. The interest on capital has already been allowed and is not deducted again.

Q: X and Y are partners sharing profits in the ratio of 3 : 1. They admit Z as a partner who pays ₹ 4,000 as goodwill. The new profit ratio being 2 : 1 : 1 among X, Y and Z respectively. The amount of goodwill will be credited to ................. .

The goodwill is credited to X only.Goodwill brought in by a new partner goes to the old partners in their sacrificing ratio, the old share minus the new share:\[ \begin{aligned} X &= \tfrac{3}{4} - \tfrac{2}{4} = \tfrac{1}{4} \\ Y &= \tfrac{1}{4} - \tfrac{1}{4} = 0 \end{aligned} \]Y keeps the same quarter share, so only X sacrifices, and the whole ₹ 4,000 is credited to X.Splitting it 3,000 and 1,000 uses the old ratio instead of the sacrificing ratio, and 2,500 and 1,500 has no basis in either ratio. Y alone sacrificed nothing, so 'Y only' is wrong.

Q: X and Y shared profit in the ratio of 7 : 3. Z was admitted as a partner. X surrendered 1/7 of his share and Y 1/3 of his share in favour of Z. The new ratio will be ................

The new ratio is 3 : 1 : 1.\[ \begin{aligned} \text{X gives} &= \tfrac{7}{10} \times \tfrac{1}{7} = \tfrac{1}{10} \\ \text{Y gives} &= \tfrac{3}{10} \times \tfrac{1}{3} = \tfrac{1}{10} \end{aligned} \]\[ \begin{aligned} \text{X} &= \tfrac{7}{10} - \tfrac{1}{10} = \tfrac{6}{10} \\ \text{Y} &= \tfrac{3}{10} - \tfrac{1}{10} = \tfrac{2}{10} \\ \text{Z} &= \tfrac{1}{10} + \tfrac{1}{10} = \tfrac{2}{10} \end{aligned} \]So the ratio is 6 : 2 : 2, which simplifies to 3 : 1 : 1. The other ratios come from treating the fractions as fractions of the whole profit rather than of each partner's own share.

Business organization runs as a partnership is called :-

A.Company
B.Industry
C.Firm
D.Partnership

Exam Year(s)

RSMSSB - 2025, NHM Rajasthan Pharmacist - 2025, Rajasthan NHM Pharma Assistant - 2025,

Answer: C

A business run as a partnership is called a firm.

Under Section 4 of the Indian Partnership Act, 1932, persons who have entered into partnership are individually called partners and collectively a firm, and the name under which the business is carried on is the firm name.

'Partnership' is the name of the relationship between the partners, not of the business organisation. A company is a separate legal person incorporated under the Companies Act. An industry is a group of firms producing similar goods, not one business.

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X and Y share profits and losses in the ratio of 2 : 1. They take Z as a partner and the new profit sharing ratio becomes 3 : 2 : 1. Z brings ₹ 4,500 as premium for goodwill. What will be the value of firm’s goodwill ?

A.₹ 4,500
B.₹ 18,000
C.₹ 27,000
D.₹ 24,000

Exam Year(s)

MH SET - 2019, SET Exam - 2019,

Answer: C

The value of the firm's goodwill is ₹ 27,000.

In the new ratio 3 : 2 : 1, Z's share is 1/6. The premium he brings is his share of the firm's goodwill.

\[ \begin{aligned} \tfrac{1}{6} \times G &= 4{,}500 \\ G &= 4{,}500 \times 6 = 27{,}000 \end{aligned} \]

₹ 4,500 is only Z's share, not the firm's goodwill. ₹ 18,000 treats Z's share as 1/4, and ₹ 24,000 does not correspond to Z's 1/6 share at all.

Discuss in Forum

Varsha and Monica are partners sharing profit and losses in the ratio of 3 : 2 having the capital of ₹ 80,000 and ₹ 50,000 respectively. They are entitled to 9% p.a. interest on capital before distributing the profit. During the year firm earned ₹ 7,800 after allowing interest on capital. Profit apportioned among Varsha and Monica is :

A.₹ 4,680 and ₹ 3,120
B.₹ 5,000 and ₹ 2,800
C.₹ 4,800 and ₹ 3,000
D.₹ 4,680 and ₹ 2,800

Exam Year(s)

MH SET - 2020, SET Exam - 2020,

Answer: A

The shares are ₹ 4,680 and ₹ 3,120.

The ₹ 7,800 is profit after interest on capital, so it is simply divided in the profit sharing ratio of 3 : 2:

\[ \begin{aligned} \text{Varsha} &= 7800 \times \tfrac{3}{5} = 4680 \\ \text{Monica} &= 7800 \times \tfrac{2}{5} = 3120 \end{aligned} \]

Options B and C also add up to ₹ 7,800 but are not in the ratio 3 : 2, and option D does not even add up to ₹ 7,800. The interest on capital has already been allowed and is not deducted again.

Discuss in Forum

X and Y are partners sharing profits in the ratio of 3 : 1. They admit Z as a partner who pays ₹ 4,000 as goodwill. The new profit ratio being 2 : 1 : 1 among X, Y and Z respectively. The amount of goodwill will be credited to ................. .

A.X and Y as ₹ 3,000 and ₹ 1,000 respectively
B.X only
C.Y only
D.X and Y as ₹ 2,500 and ₹ 1,500 respectively

Exam Year(s)

MH SET - 2024, SET Exam - 2024,

Answer: B

The goodwill is credited to X only.

Goodwill brought in by a new partner goes to the old partners in their sacrificing ratio, the old share minus the new share:

\[ \begin{aligned} X &= \tfrac{3}{4} - \tfrac{2}{4} = \tfrac{1}{4} \\ Y &= \tfrac{1}{4} - \tfrac{1}{4} = 0 \end{aligned} \]

Y keeps the same quarter share, so only X sacrifices, and the whole ₹ 4,000 is credited to X.

Splitting it 3,000 and 1,000 uses the old ratio instead of the sacrificing ratio, and 2,500 and 1,500 has no basis in either ratio. Y alone sacrificed nothing, so 'Y only' is wrong.

Discuss in Forum

X and Y shared profit in the ratio of 7 : 3. Z was admitted as a partner. X surrendered 1/7 of his share and Y 1/3 of his share in favour of Z. The new ratio will be ................

A.3 : 1 : 1
B.6 : 1 : 6
C.14 : 6 : 9
D.1 : 1 : 4

Exam Year(s)

MH SET - 2025, SET Exam - 2025,

Answer: A

The new ratio is 3 : 1 : 1.

\[ \begin{aligned} \text{X gives} &= \tfrac{7}{10} \times \tfrac{1}{7} = \tfrac{1}{10} \\ \text{Y gives} &= \tfrac{3}{10} \times \tfrac{1}{3} = \tfrac{1}{10} \end{aligned} \]

\[ \begin{aligned} \text{X} &= \tfrac{7}{10} - \tfrac{1}{10} = \tfrac{6}{10} \\ \text{Y} &= \tfrac{3}{10} - \tfrac{1}{10} = \tfrac{2}{10} \\ \text{Z} &= \tfrac{1}{10} + \tfrac{1}{10} = \tfrac{2}{10} \end{aligned} \]

So the ratio is 6 : 2 : 2, which simplifies to 3 : 1 : 1. The other ratios come from treating the fractions as fractions of the whole profit rather than of each partner's own share.

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Partnership Accounts Questions and Answers

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