CIE Accounting Paper-2: Specimen Questions with Answers 1 - 4 of 103

Passage

M, N & O are partners sharing profit & loss in the ratio of 7: 5: 4. On April 1st 2014 they decide to change this sharing ratio to 3: 2: 1

Question number: 1 (1 of 5 Based on Passage) Show Passage

Essay Question▾

Describe in Detail

Explain the term sacrificing ratio.

Explanation

The ratio in which one or more partner surrenders their share of profit to another partner is called as sacrificing ratio. This is obtained by the formula

It reduces the share of the existing partner.

Question number: 2 (2 of 5 Based on Passage) Show Passage

Essay Question▾

Describe in Detail

What is goodwill?

Explanation

Goodwill is referred as the “value or the reputation” of the firm which the business has earned with its hard work. It is an intangible asset. Goodwill is created by the firm through its brand name, large number of customers, good customer and employee relationships.

Question number: 3 (3 of 5 Based on Passage) Show Passage

Essay Question▾

Describe in Detail

What does Gaining ratio refer to?

Explanation

The ratio in which one or more partner gains the share of profit of another partner is called as gaining ratio. This is obtained by the formula

It increases the share of the existing partner.

Question number: 4 (4 of 5 Based on Passage) Show Passage

Essay Question▾

Describe in Detail

Fill up the following journal entry

Find out the debit amount

shows a given table in calculat amount values

Date

Particulars

L. F

Debit Amt

Credit Amt

01.04. 2014

M’s capital A/C Dr

…………. .

N’s capital A/C Dr

………….

To O’s Capital A/C

36000

(Being Goodwill adjusted due to change in profit sharing ratio)

Explanation

Journal Entry in the books of M, N & O

shows a given table in calculat amount values

Date

Particulars

L. F

Debit

Amt

£

Credit Amt

£

01.04. 2014

M’s capital A/C Dr

27000

N’s capital A/C Dr

9000

To O’s Capital A/C

36000

(Being Goodwill adjusted due to change in profit sharing ratio)

Old ratio of M, N & O = 7: 5: 4

New ratio of M, N & O = 3: 2: 1

Sacrificing or Gaining ratio = Old ratio – New ratio

M = (Gaining ratio)

N = (Gaining ratio)

O = (Sacrificing ratio)

Therefore M & N Gain in the ratio of 3: 1

M =

N=