Goodwill MCQ Questions on Calculation of Capital Employed- Partnership accounts
This MCQ Test on the calculation of capital employed for goodwill valuation under capitalization method has 20 practice questions. Test your knowledge about the partnership accounts about calculation of capital employed, inclusions and exclusions from capital employed, assets side approach and liabilities side approach etc. The quiz 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
Capital employed can be calculated using how many approaches from the Balance Sheet?
A
Correct Answer: Two approaches - Liabilities side and Assets side
Capital employed can be calculated using two approaches: (1) Liabilities side approach and (2) Assets side approach.
Question 2
In liabilities side approach, which of the following is added to calculate capital employed?
C
Correct Answer: Reserves and surplus
From liabilities side: Capital Employed = Partners' Capital + Reserves - Goodwill - Fictitious Assets - Non-trade Investments.
Question 3
Goodwill appearing in the Balance Sheet should be treated in what manner while calculating capital employed?
B
Correct Answer: Deducted/Excluded
Goodwill appearing in books is deducted while calculating capital employed as it does not represent actual business capital.
Question 4
In assets side approach, outside liabilities are:
D
Correct Answer: Deducted from total assets
Assets side approach: Capital Employed = All Assets (except goodwill, fictitious assets, non-trade investments) - Outside Liabilities.
Question 5
What is the treatment of fictitious assets while calculating capital employed?
A
Correct Answer: Always deducted/excluded
Fictitious assets are always deducted/excluded as they have no realisable value and don't represent actual capital.
Question 6
Which of the following is an example of fictitious assets?
C
Correct Answer: Preliminary expenses
Preliminary expenses, deferred revenue expenditure, advertisement suspense are examples of fictitious assets that must be excluded.
Question 7
Unless specified otherwise, investments appearing in Balance Sheet are assumed to be:
B
Correct Answer: Non-trade investments
Unless investments are stated to be trade investments, they are assumed to be non-trade investments and must be excluded.
Question 8
Trade investments are investments made for:
D
Correct Answer: Furtherance of own business
Trade investments are made in another enterprise for the furtherance of own business and are included in capital employed.
Question 9
Non-trade investments are excluded from capital employed because they are:
A
Correct Answer: Not used in business operations
Non-trade investments are excluded as they are not used in business operations and represent surplus funds invested elsewhere.
Liabilities side formula: Partners' Capital + Reserves - Goodwill - Fictitious Assets - Non-trade Investments.
Question 11
Which of the following represents outside liabilities?
B
Correct Answer: Bank loan, creditors, outstanding expenses
Outside liabilities include bank loans, creditors, outstanding expenses - all external obligations of the business.
Question 12
If partner capital A/c appears on assets side of balance sheet, then while calculating capital employed these are
B
Correct Answer: Subtracted/Excluded
Partner capital accounts appearing on the assets side are basically negative capital hence subtracted or excluded
Question 13
If both approaches are used correctly, the capital employed calculated will be:
A
Correct Answer: Same from both approaches
When calculated correctly, both liabilities side approach and assets side approach will give the same capital employed.
Question 14
Which of the following is NOT excluded while calculating capital employed from assets side?
C
Correct Answer: Plant and machinery
Plant and machinery is a tangible fixed asset used in business and is part of capital employed, not excluded.
Question 15
When average capital employed is needed, it is calculated as:
B
Correct Answer: (Opening capital employed + Closing capital employed) ÷ 2
Average capital employed = (Opening Capital Employed + Closing Capital Employed) ÷ 2.
Question 16
Reserves and surplus in the Balance Sheet represent:
D
Correct Answer: Accumulated profits retained in business
Reserves and surplus represent accumulated profits retained in business and are added to calculate capital employed.
Question 17
Capital employed represents:
A
Correct Answer: Long-term funds invested in business
Capital employed represents long-term funds invested in business operations to generate profits.
Question 18
From assets side, if total assets are ₹10,00,000, goodwill ₹50,000, non-trade investments ₹1,00,000, fictitious assets ₹20,000, and outside liabilities ₹3,00,000, the capital employed conceptually is:
For the purpose of calculating capital employed, Accumulated losses appearing in the Balance Sheet should be treated as:
B
Correct Answer: Deducted like fictitious assets
Accumulated losses are treated like fictitious assets and deducted while calculating capital employed.
Question 20
If partner current A/c appears on assets side of balance sheet, then while calculating capital employed these are
B
Correct Answer: Subtracted/Excluded
Partner current A/c on assets side mean it is Debit balance in partner current A/c. It is deducted if we start from total assets or excluded if we add each individual asset to find capital employed
