This MCQ Test on the treatment of goodwill on admission of a new partner has 15 practice questions. it covers all the cases of goodwill treatment. When new partner brings his share of goodwill, when he brings his goodwill share partially and when new partner does not bring his share of goodwill. The test covers conceptual questions for all above aspects. This MCQ test suits well for conceptual clarity for your board exams
CBSE class 12 accountancy MCQ questions
The below MCQ test is designed as per the latest syllabus prescribed by CBSE board. With the rise in weightage of MCQ questions, the practice of MCQ questions becomes very important. The quiz is equally useful for students of CUET exams.
How to attempt the quiz
One by one go through the below questions and select the right option. Do all the questions and in the end press submit. Instantly you will get your score and the explanation against each question. Go through your mistakes and reattempt the quiz any number of times as needed.
MCQ Quiz - Practice Questions
MCQ Quiz
Question 1
As per AS-26, goodwill is recorded in books only when it is purchased goodwill.
A
Correct Answer: True
AS-26 states that goodwill is recognized in books only when consideration in money or money's worth is paid for it (purchased goodwill).
Question 2
Self-generated goodwill on admission of partner is adjusted through:
B
Correct Answer: Partners Capital/Current Accounts
Self-generated goodwill is not recorded in books but adjusted through Partners Capital/Current Accounts as per AS-26.
Question 3
When goodwill premium is paid privately by new partner to old partners, the entry passed in books is:
C
Correct Answer: No entry is passed
When premium is paid privately (outside books), no journal entry is passed as transaction is not through firm's books.
Question 4
Premium for goodwill brought by new partner is distributed among:
C
Correct Answer: Sacrificing partners in sacrificing ratio
Premium is compensation for sacrifice, so credited only to sacrificing partners in their sacrificing ratio.
Question 5
If a partner gifts his share to new partner, new partner will:
B
Correct Answer: Not pay goodwill for gifted portion
Gifts are free from consideration. New partner pays goodwill only for share acquired through sacrifice, not for gifted share.
Question 6
When new partner brings goodwill in cash and it is retained in business, the entry includes:
C
Correct Answer: Both a and distribution entry
First debit Cash and Credit Premium for Goodwill A/c, then debit Premium for Goodwill A/c and Credit sacrificing partners Capital/Current A/c in sacrificing ratio. No withdrawal entry as retained.
Question 7
When sacrificing partners withdraw goodwill fully, the entry passed is:
A
Correct Answer: Debit Capital, Credit Bank
For withdrawal, debit Partners Capital Accounts and credit Bank/Cash for amount withdrawn by sacrificing partners. This is the normal drawings entry
Question 8
Goodwill brought in kind means new partner brings:
B
Correct Answer: Assets like machinery, stock, etc.
Goodwill in kind means new partner brings assets (machinery, stock, etc.) instead of cash for his goodwill share.
Question 9
When new partner brings partial goodwill (say 60%), the remaining 40% is:
C
Correct Answer: Debited to his Current Account
When new partner brings partial goodwill, deficiency is debited to his Current Account and credited to sacrificing partners.
Question 10
When new partner does not bring goodwill at all, the entry is:
B
Correct Answer: Debit his Current Account, Credit sacrificing partners
When new partner cannot bring goodwill, his Current Account is debited and sacrificing partners Capital/Current credited in sacrificing ratio.
Question 11
Hidden goodwill is calculated when:
B
Correct Answer: Goodwill is inferred from capital brought by new partner
Hidden/Inferred goodwill is calculated from new partner's capital and share when firm's goodwill value is not explicitly stated.
Question 12
Formula for hidden goodwill is: Total capital of firm based on new partner's capital minus:
B
Correct Answer: Total capital of all partners after admission
Hidden Goodwill = (New partner's capital × Reciprocal of his share) - Total capital of all partners (including new partner) after adjustments.
Question 13
Existing goodwill in books at admission represents:
B
Correct Answer: Purchased goodwill
Goodwill existing in Balance Sheet is Purchased Goodwill as only purchased goodwill can be recorded in books per AS-26.
Question 14
Existing goodwill in books is written off by debiting:
B
Correct Answer: Old partners Capital A/c in old ratio
Existing goodwill is written off by debiting Old Partners Capital/Current Accounts in their old profit-sharing ratio.
Question 15
When an existing partner gains on admission, he will:
B
Correct Answer: Pay compensation to sacrificing partners
A gaining partner must compensate sacrificing partners proportionately for the profit share he gains.
