This MCQ Test on the accounting for reserves and accumulated profits and accumulated lossesl on admission of a new partner has 15 practice questions. it covers the accounting treatment for all types of reserves on admission like workmen compnesation reserve, investment fluctuation reserve, general reserve, balance in profit and loss A/c , etc. It covers both the methods of accounting for reserves where reserves continue to appear in the new balance sheet and when reserves does not appear in the nee balance sheet. 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
Employees Provident Fund on admission is:
B
Correct Answer: Not distributed, remains as liability
Employees Provident Fund is a statutory liability to employees, not partners profit, so not distributed and continues as liability.
Question 2
Deferred Revenue Expenditure (like Advertisement Suspense) on admission is:
C
Correct Answer: Debited to old partners Capital A/c in old ratio
Deferred Revenue Expenditure is accumulated loss, so debited to old partners Capital A/c in old ratio to write it off.
Question 3
When reserves are to continue at book values in the balance sheet, the adjustment entry format is:
D
Correct Answer: Dr. Gaining Partner, Cr. Sacrificing Partner
Single adjustment entry: Dr. Gaining partner Capital/Current for his share, Cr. Sacrificing partners in sacrificing ratio without touching reserve.
Question 4
When reserves continue to appear in new balance sheet, Net effect of reserves, accumulated profits and losses is calculated as:
A
Correct Answer: Total Reserves + Accumulated Profits - accumulated Losses
Net accumulated profit = Total accumulated profits + reserves minus total accumulated losses to find net adjustment amount.
Question 5
When capitals are fixed, adjustment of reserves is done through:
D
Correct Answer: Partner Current Accounts
When capitals are fixed, all adjustments including reserves distribution are made through Partners Current Accounts.
Question 6
At the time of admission of a new partner, Contingency Reserve is treated similar to:
C
Correct Answer: General Reserve (accumulated profit)
Contingency Reserve is accumulated profit, treated like General Reserve, distributed to old partners in old ratio.
Question 7
Reserve Fund differs from General Reserve in:
A
Correct Answer: Only name, treatment is same
Both Reserve Fund and General Reserve are accumulated profits, treated identically on admission - distributed to old partners.
Question 8
When new partner compensates old partners for reserves through adjustment entry:
D
Correct Answer: Reserve continues at book value in new Balance Sheet
Adjustment entry compensates old partners without distributing reserve, so reserve appears at original value in new Balance Sheet.
Question 9
Profit & Loss Account debit balance is shown in Balance Sheet under:
B
Correct Answer: Assets side as accumulated loss
P&L A/c debit balance (accumulated loss) is shown on assets side of Balance Sheet as fictitious asset.
Question 10
When Workmen Compensation Reserve equals the claim amount:
B
Correct Answer: Dr. Reserve, Cr. Workmen Compensation Claim A/c
When reserve equals claim, entire reserve is transferred to Workmen Compensation Claim Account, nothing to partners.
Question 11
The purpose of distributing reserves to old partners is:
D
Correct Answer: To compensate them for accumulated profits they created
Reserves represent undistributed profits earned by old partners in past, so they deserve compensation for it on admission.
Question 12
If General Reserve is Rs. 60,000 and 15,000 is to be transferred to Investment Fluctuation Reserve:
B
Correct Answer: Transfer 45,000 to old partners, transfer 15,000 to General reserve
After transferring required amount to Investment Fluctuation Reserve, balance of General Reserve is distributed to old partners.
Question 13
When market value of investments exceeds book value then entry will be:
Dr. Investment Fluctuation Reserve and credit partners capital A/c. Another ehtry will be , Dr. Investments (to bring to MV), Cr. Revaluation A/c (gain).
Question 14
Single Adjustment entry method for adjustment of reserves is used when partners decide to:
B
Correct Answer: Show reserves at existing book values
Adjustment entry compensates for reserves/losses without actually distributing them, keeping them at book values in new firm.
Question 15
Accumulated Losses does not include
A
Correct Answer: Profit and Loss A/c (cr) balance
Profit and loss (cr) balance is a profit element and appears on liabilities side of balance sheet and not a part of accumulated losses
