(a) Manav, Mayank and Manish were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. On 31st March, 2024, their Balance Sheet showed a debit balance of ₹ 60,000 in the Profit and Loss Account. They decided that from 1st April, 2024 they will share profits in the ratio of 2 : 2 : 1. The journal entry for writing off the debit balance of Profit and Loss Account on reconstitution of the firm will be : Manav, Mayank and Manish JOURNAL | Particulars | Dr. Amount (₹) | Cr. Amount (₹) | | --- | --- | --- | | (A) Manav's Capital A/c Dr. | 30,000 | | | Mayank's Capital A/c Dr. | 18,000 | | | Manish's Capital A/c Dr. | 12,000 | | | To Profit and Loss A/c | | 60,000 | | (B) Manav's Capital A/c Dr. | 24,000 | | | Mayank's Capital A/c Dr. | 24,000 | | | Manish's Capital A/c Dr. | 12,000 | | | To Profit and Loss A/c | | 60,000 | | (C) Mayank's Capital A/c Dr. | 6,000 | | | To Manav's Capital A/c | | 6,000 | | (D) Manav's Capital A/c Dr. | 6,000 | | | To Mayank's Capital A/c | | 6,000 | OR (b) Murthy and Madhavan were partners in a firm sharing profits and losses in the ratio of 3 : 1. They admitted Shriniwas as a new partner in the firm. On admission of Shriniwas, there existed a balance of ₹ 8,00,000 in debtors account and a balance of ₹ 50,000 in provision for bad debts account. Debtors of ₹ 60,000 proved bad and hence were written off. It was decided to maintain a provision for bad debts at 10% of the debtors. The revaluation account will be debited by ________ on the reconstitution of the firm. (A) ₹ 80,000 (B) ₹ 10,000 (C) ₹ 84,000 (D) ₹ 74,000

(a) Manav, Mayank and Manish were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. On

Question

(a) Manav, Mayank and Manish were partners in a firm sharing profits and losses in the ratio of 5 : 3 : 2. On 31st March, 2024, their Balance Sheet showed a debit balance of ₹ 60,000 in the Profit and Loss Account. They decided that from 1st April, 2024 they will share profits in the ratio of 2 : 2 : 1. The journal entry for writing off the debit balance of Profit and Loss Account on reconstitution of the firm will be :

Manav, Mayank and Manish JOURNAL

Particulars	Dr. Amount (₹)	Cr. Amount (₹)
(A) Manav's Capital A/c Dr.	30,000
Mayank's Capital A/c Dr.	18,000
Manish's Capital A/c Dr.	12,000
To Profit and Loss A/c		60,000
(B) Manav's Capital A/c Dr.	24,000
Mayank's Capital A/c Dr.	24,000
Manish's Capital A/c Dr.	12,000
To Profit and Loss A/c		60,000
(C) Mayank's Capital A/c Dr.	6,000
To Manav's Capital A/c		6,000
(D) Manav's Capital A/c Dr.	6,000
To Mayank's Capital A/c		6,000

(b) Murthy and Madhavan were partners in a firm sharing profits and losses in the ratio of 3 : 1. They admitted Shriniwas as a new partner in the firm. On admission of Shriniwas, there existed a balance of ₹ 8,00,000 in debtors account and a balance of ₹ 50,000 in provision for bad debts account. Debtors of ₹ 60,000 proved bad and hence were written off. It was decided to maintain a provision for bad debts at 10% of the debtors. The revaluation account will be debited by ________ on the reconstitution of the firm. (A) ₹ 80,000 (B) ₹ 10,000 (C) ₹ 84,000 (D) ₹ 74,000

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Part (a)Concept understanding — Partnership Profit Distribution Rules

Partnership Capital Accounting — A First Look

Think of a partnership like a group of friends pooling money to start a roadside food stall. Each friend brings in some cash — that’s their capital. But unlike a simple piggy bank, a partnership needs a clear record of who put in how much, because profits (and losses) are shared in a fixed ratio, and partners may withdraw money, lend extra funds, or take a salary.

That record is what Partnership Capital Accounting is about.

What It Really Means

In accounting, capital is the amount a partner contributes to the firm. But it’s not just a one-time number. Over time, a partner’s capital changes due to:

Additional capital introduced
Drawings (money or goods taken out)
Share of profit or loss
Interest on capital, interest on drawings, partner’s salary, commission

The Capital Account of each partner tracks all these changes. It answers: What does the firm owe to this partner at any point?

Why It Matters

Without proper capital accounting, you cannot:

Determine each partner’s claim on the firm’s assets
Calculate interest on capital correctly
Prepare the Profit and Loss Appropriation Account
Settle accounts when a partner retires or dies

The NCERT textbook emphasises that capital accounts are personal accounts of the partners — they show the firm’s liability towards each partner.

Two Methods of Maintaining Capital Accounts

The NCERT Class 12 Accountancy textbook (Part II, Chapter 2) describes two methods:

1. Fixed Capital Method

Under this method, the capital account remains constant (except when additional capital is introduced or capital is withdrawn permanently). All other transactions — share of profit, drawings, interest, salary — are recorded in a separate Current Account.

Note

In the Fixed Capital Method, the Capital Account shows only the permanent capital. The Current Account shows the fluctuating balance.

2. Fluctuating Capital Method

Here, all transactions are recorded directly in the Capital Account. The capital balance changes every year.

Accounting Treatment — Which Account is Debited/Credited

Let’s take the most common entries. I’ll show the journal entry first, then explain.

Entry 1: Capital Introduced

When a partner brings in cash or assets:

Date	Particulars	L.F.	Debit (Rs)	Credit (Rs)
	Cash/Bank A/c	Dr.	xxx
	To Partner’s Capital A/c			xxx

Why? Cash comes in (asset increases — debit), and the firm’s liability to the partner increases (capital is a liability — credit).

Entry 2: Drawings

When a partner withdraws cash or goods for personal use:

Date	Particulars	L.F.	Debit (Rs)	Credit (Rs)
	Partner’s Capital/Current A/c	Dr.	xxx
	To Cash/Bank/Purchases A/c			xxx

Why? The firm’s liability to the partner decreases (debit the capital/current account), and cash or goods go out (credit).

Entry 3: Interest on Capital

This is an appropriation of profit. The formula (as per NCERT) is:

Interest on Capital = Capital × Rate of Time × Time (in months)/12

Journal entry:

Date	Particulars	L.F.	Debit (Rs)	Credit (Rs)
	Interest on Capital A/c	Dr.	xxx
	To Partner’s Capital/Current A/c			xxx

Then, at the end of the year, Interest on Capital is transferred to the Profit and Loss Appropriation Account:

Date	Particulars	L.F.	Debit (Rs)	Credit (Rs)
	Profit and Loss Appropriation A/c	Dr.	xxx
	To Interest on Capital A/c			xxx

Entry 4: Partner’s Salary

If the partnership deed allows a salary:

Date	Particulars	L.F.	Debit (Rs)	Credit (Rs)
	Salary to Partner A/c	Dr.	xxx
	To Partner’s Capital/Current A/c			xxx

Again, this is transferred to the Profit and Loss Appropriation Account.

Entry 5: Share of Profit

At the end of the year, after all appropriations, the remaining profit is distributed:

Date	Particulars	L.F.	Debit (Rs)	Credit (Rs)
	Profit and Loss Appropriation A/c	Dr.	xxx
	To Partner’s Capital/Current A/c			xxx

Formats as per NCERT

Format of Capital Account (Fluctuating Method)

Part (b)Concept understanding — Revaluation Account Effect

The Revaluation Account Effect – A First Look

Imagine you and your friend run a small food stall together. You've been sharing profits equally. Now, your friend wants to bring in a third partner. Before the new person joins, you both decide to get the stall's equipment and stock properly valued. The old mixer you bought for ₹5,000 is now worth only ₹3,000. But the refrigerator you'd written off is actually worth ₹8,000 more than its book value.

These changes in asset values don't belong to the new partner. They happened while only you and your friend were running the business. So, any gain or loss from revaluing assets and liabilities must be shared only between the old partners. That's the entire intuition behind the Revaluation Account.

What It Really Means

The Revaluation Account is a nominal account (like a Profit & Loss account) that is opened only when there is a change in the profit-sharing ratio among partners – typically at the time of admission, retirement, or death of a partner. Its job is to capture the net effect (profit or loss) of revaluing the firm's assets and liabilities to their current market values.

Why does this matter? Because the new partner should not bear the burden of past errors or benefit from hidden gains that existed before they joined. The Revaluation Account ensures that all past adjustments are settled among the old partners only.

Accounting Treatment – The Debit/Credit Logic

The rule is simple:

Increase in asset value → Credit Revaluation Account (it's a gain)
Decrease in asset value → Debit Revaluation Account (it's a loss)
Increase in liability → Debit Revaluation Account (it's a loss – you owe more)
Decrease in liability → Credit Revaluation Account (it's a gain – you owe less)

Once all revaluation entries are passed, the Revaluation Account shows either a profit (credit balance) or a loss (debit balance). This profit or loss is then transferred to the old partners' capital accounts in their old profit-sharing ratio.

Important

The new partner is never affected by the Revaluation Account balance. Only old partners share this gain or loss.

The Proforma (Format) of Revaluation Account

Here is the standard format as per NCERT Class 12 Accountancy:

Dr.		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Decrease in Assets	...	By Increase in Assets	...
To Increase in Liabilities	...	By Decrease in Liabilities	...
To Unrecorded Liabilities	...	By Unrecorded Assets	...
To Loss transferred to Old Partners' Capital A/c (in old ratio)	...	By Profit transferred to Old Partners' Capital A/c (in old ratio)	...
Total	...	Total	...

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Part (a)

A debit balance in the Profit and Loss Account is an accumulated loss. On reconstitution it must be written off to the old partners in their old ratio (5 : 3 : 2) — not the new ratio.

Partner	Share	Amount (₹)
Manav	5/10 × 60,000	30,000
Mayank	3/10 × 60,000	18,000
Manish	2/10 × 60,000	12,000

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Part (a): Option (A) — write off the ₹60,000 debit balance to the old partners in old ratio 5:3:2 (Manav 30,000, Mayank 18,000, Manish 12,000). Part (b): Option (C) — the Revaluation Account is debited by ₹84,000.

Part (a)

A debit balance in the Profit and Loss Account represents an accumulated loss of past years. When a firm is reconstituted (here, a change in the profit-sharing ratio), such accumulated losses belong to the old partners and are written off in their old profit-sharing ratio. Each old partner's capital account is debited (loss reduces capital) and Profit and Loss A/c is credited to close it. The new ratio (2:2:1) applies only to future profits.

Working Note — Distribution in old ratio 5 : 3 : 2

Partner	Share of Loss	Amount (₹)
Manav	5/10	30,000
Mayank	3/10	18,000
Manish	2/10	12,000
Total		60,000

Journal Entry

Particulars	Dr. (₹)	Cr. (₹)
Manav's Capital A/c Dr.	30,000
Mayank's Capital A/c Dr.	18,000
Manish's Capital A/c Dr.	12,000
To Profit and Loss A/c		60,000
(Accumulated loss written off in old ratio 5:3:2)

This matches option (A). …

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Same / Similar Concept — real previous-year questions on the same or a closely similar concept, not this exact question.

Showing the 12 most recent of 136 on this concept.

CBSE 2026Set 67/3/11 markMCQ
$Q. (a) Atul, Bajaj and Madan were partners in a firm sharing profits and losses in the ratio of 1 : 2 : 5. The partnership deed provides that interest on a partner's drawings shall be charged @ 18% per annum. During the year ended 31st March, 2025, Bajaj withdrew ₹ 7,000 at the end of each quarter. Interest on Bajaj's drawings will be : (A) ₹ 1,890 (B) ₹ 3,150 (C) ₹ 420 (D) ₹ 5,040$
(OR)
$(b) Damodar, Rao and Shridharan were partners in a firm sharing profits and losses in the ratio of 3 : 1 : 1. Their fixed capitals were ₹ 4,00,000; ₹ 3,00,000 and ₹ 2,00,000 respectively. Interest on capital is allowed at the rate of 6% per annum. Journal entry for allowing interest on Rao's capital will be : (A) Profit & Loss Appropriation A/c Dr. — Debit ₹ 18,000 | To Rao's Capital A/c — Credit ₹ 18,000 (B) Profit & Loss Appropriation A/c Dr. — Debit ₹ 18,000 | To Rao's Current A/c — Credit ₹ 18,000 (C) Interest on Capital A/c Dr. — Debit ₹ 18,000 | To Rao's Current A/c — Credit ₹ 18,000 (D) Interest on Capital A/c Dr. — Debit ₹ 18,000 | To Rao's Capital A/c — Credit ₹ 18,000$
›Reveal solutionSolution
Part (a): Interest on Bajaj's drawings = ₹1,890 (option A). Part (b): Interest on Rao's capital ₹18,000 debited to Interest on Capital A/c and credited to Rao's Current A/c (option C).

Part (a)

When a fixed amount is withdrawn at equal intervals, interest on drawings is found by the average period method.
$Interest on Drawings = Total Drawings \times Rate \times (Average Period \div 12)$
Working Note

Total drawings = 7,000 × 4 = ₹28,000.

Withdrawal at the end of each quarter: first drawing (30 Jun) has 9 months to run; last drawing (31 Mar) has 0 months. Average period = (9 + 0) ÷ 2 = 4.5 months. …
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CBSE 2026Set 67/3/11 markMCQ
$Q. Divya and Bholi were partners in a firm sharing profits and losses in the ratio of 3 : 1. On 1st April, 2024, their fixed capitals were ₹ 8,00,000 and ₹ 6,00,000 respectively. On 30th September, 2024, Bholi introduced ₹ 50,000 as additional capital. Partnership deed provided that interest on capital will be allowed @ 12% p.a. Interest on Bholi's capital for the year ended 31st March, 2025 was : (A) ₹ 78,000 (B) ₹ 75,000 (C) ₹ 72,000 (D) ₹ 3,000$
›Reveal solutionSolution
The interest on Bholi's capital for the year ended 31st March, 2025, is ₹75,000.

In a partnership firm, interest on capital is an allowance provided to partners for contributing capital to the business. It is typically calculated at a specified rate on the opening capital balance for the entire accounting period. However, if a partner introduces additional capital during the year, interest is calculated on this additional amount only for the period it remained in the business. This ensures fairness, as partners are compensated for the exact duration their capital was employed by the firm.

Interest on capital is considered an appropriation of profits, not a charge against profits. This means it is allowed only if there are sufficient profits; if profits are less than the total interest on capital, the interest is allowed only to the extent of profits, distributed in the ratio of capital. If there are losses, no interest on capital is allowed.

To calculate Bholi's interest on capital, we need to consider her initial capital and the additional capital introduced, along with the respective periods for which each amount was outstanding.

Solution

The interest on Bholi's capital for the year ended 31st March, 2025 is calculated as follows:

Interest on Initial Capital:

Bholi's initial fixed capital on 1st April, 2024, was ₹6,00,000. This capital remained in the business for the entire financial year (12 months).

Interest = ₹6,00,000 $\times$ 12% $\times$ (12/12) = ₹72,000

Interest on Additional Capital:

Bholi introduced additional capital of ₹50,000 on 30th September, 2024. This means the additional capital was available to the firm from 1st October, 2024, until the end of the financial year, 31st March, 2025. This period is 6 months (October, November, December, January, February, March).

Interest = ₹50,000 $\times$ 12% $\times$ (6/12) = ₹3,000

Total Interest on Bholi's Capital:

Total interest on Bholi's capital for the year is the sum of interest on her initial capital and interest on her additional capital.

Total Interest = ₹72,000 + ₹3,000 = ₹75,000 …
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CBSE 2026Set 67/4/11 markMCQ
$Q. Ankur and Angad were partners in a firm sharing profits and losses in the ratio of 8 : 7. On 1st July, 2024, Angad advanced a loan of ₹ 8,00,000 to the firm. There is no partnership deed. Angad demands interest on loan @ 10% p.a. On 31st March, 2025, the amount of interest on loan due to Angad will be : (A) ₹ 36,000 (B) ₹ 48,000 (C) ₹ 80,000 (D) ₹ 60,000$
›Reveal solutionSolution
When there is no partnership deed, interest on a partner's loan is allowed at 6% per annum as per the Indian Partnership Act, 1932. For Angad's loan of ₹8,00,000 for 9 months, the interest due is ₹36,000.

In partnership accounting, the absence of a partnership deed is a critical factor. When partners do not have a written agreement, or if the existing deed is silent on a particular matter, the provisions of the Indian Partnership Act, 1932, automatically apply. This Act serves as a default framework to ensure fairness and prevent disputes.

One of the key provisions of this Act, specifically Section 13(d), addresses interest on a partner's loan to the firm. It states that if a partner has advanced a loan to the firm, they are entitled to receive interest on that loan at a rate of 6% per annum. This is a statutory right and overrides any personal demands made by a partner, such as Angad's demand for 10% interest in this case.

Important

When there is no partnership deed, or the deed is silent, the Indian Partnership Act, 1932, applies. As per Section 13(d) of this Act, a partner is entitled to interest on a loan advanced to the firm at 6% per annum.

It is also crucial to understand that interest on a partner's loan is considered a charge against profits, not an appropriation of profits. This means it must be paid whether the firm makes a profit or incurs a loss. It is treated as an expense of the business, similar to interest paid on a loan from an external party, and is debited to the Profit & Loss Account.

Working Notes

Applicable Rate of Interest on Loan:

Since there is no partnership deed, the provisions of the Indian Partnership Act, 1932, apply. As per Section 13(d) of the Act, interest on a partner's loan is allowed at 6% per annum.

Watch out

Angad's demand for 10% p.a. interest is not applicable in the absence of a partnership deed explicitly stating this rate. The statutory rate of 6% p.a. must be followed.

Period for which Interest is Due:

Angad advanced the loan on 1st July, 2024. The accounting period ends on 31st March, 2025.

The period for which interest is due is from 1st July, 2024, to 31st March, 2025.

This duration covers July, August, September, October, November, December, January, February, and March.

Number of months = 9 months.

Calculation of Interest on Angad's Loan:

Loan Amount = ₹8,00,000

Rate of Interest = 6% p.a. (as per Indian Partnership Act, 1932)

Period = 9 months

Interest on Loan = Loan Amount $\times$ Rate $\times$ Period

Interest on Loan = ₹8,00,000 $\times \frac{6}{100} \times \frac{9}{12}$

Interest on Loan = ₹48,000 $\times \frac{9}{12}$

Interest on Loan = ₹4,000 $\times 9$

Interest on Loan = ₹36,000 …
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CBSE 2026Set 67/4/11 markMCQ
$Q. Anita and Priyal were partners in a firm sharing profits and losses in the ratio of 3 : 2. On 1st April, 2024, their capital accounts showed balances of ₹ 3,00,000 and ₹ 4,00,000 respectively. The partnership deed provided for interest on capital @ 8% p.a. The firm earned a profit of ₹ 28,000 for the year ended 31st March, 2025. Interest on capital allowed to Anita and Priyal was : (A) Anita ₹ 24,000, Priyal ₹ 32,000 (B) Anita ₹ 16,000, Priyal ₹ 12,000 (C) Anita ₹ 12,000, Priyal ₹ 16,000 (D) Anita ₹ 16,800, Priyal ₹ 11,200$
›Reveal solutionSolution
When the available profit is less than the total interest on capital due, the interest on capital is restricted to the available profit and distributed among partners in the ratio of their individual interest entitlements. For Anita and Priyal, the interest on capital allowed will be ₹12,000 and ₹16,000 respectively.

In partnership accounting, the treatment of interest on capital is a crucial concept, especially when the firm's profit is insufficient to cover the full amount of interest. Interest on capital is generally considered an appropriation of profit, not a charge against profit. This means it is paid only if there are profits, and only to the extent of available profits.

Here's the rule:

If the partnership deed provides for interest on capital, but it does not explicitly state that interest on capital is a charge against profits (meaning it must be paid even if it results in a loss), then it is treated as an appropriation. In such cases, if the total amount of interest on capital due to all partners exceeds the net profit available for appropriation, the interest on capital is restricted to the available profit. This available profit is then distributed among the partners in the ratio of their individual interest on capital entitlements.

Let's apply this concept to the given problem.

Working Notes

Calculation of Anita's full Interest on Capital:

Anita's Capital = ₹3,00,000

Interest Rate = 8% p.a.

Full Interest on Capital for Anita = ₹3,00,000 $\times$ 8/100 = ₹24,000

Calculation of Priyal's full Interest on Capital:

Priyal's Capital = ₹4,00,000

Interest Rate = 8% p.a.

Full Interest on Capital for Priyal = ₹4,00,000 $\times$ 8/100 = ₹32,000

Total full Interest on Capital:

Total full Interest on Capital = Anita's Interest + Priyal's Interest

Total full Interest on Capital = ₹24,000 + ₹32,000 = ₹56,000

Comparison with Available Profit:

Firm's Profit for the year = ₹28,000

Total full Interest on Capital = ₹56,000

Since the firm's profit (₹28,000) is less than the total full interest on capital (₹56,000), the interest on capital will be restricted to the available profit of ₹28,000.

Watch out

A common mistake is to simply pay the full interest on capital, which would result in a loss for the firm. Interest on capital is an appropriation, not a charge, unless the deed explicitly states otherwise. Therefore, it cannot exceed the available profit.

Ratio for distributing restricted Interest on Capital: …
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CBSE 2026Set 67/5/11 markMCQ
$Q. Munna and Sonu were partners in a firm sharing profits and losses in the ratio of 4 : 1. Their fixed capitals were ₹ 40,00,000 and ₹ 30,00,000 respectively. During the year ended 31st March, 2025, Munna withdrew ₹ 50,000 for personal use. Interest on drawings was to be charged @ 6% p.a. The journal entry for charging interest on Munna’s drawings will be : (A) Interest on Drawings A/c Dr. — Debit ₹ 1,500 | To Munna’s Capital A/c — Credit ₹ 1,500 (B) Munna’s Capital A/c Dr. — Debit ₹ 1,500 | To Interest on Drawings A/c — Credit ₹ 1,500 (C) Interest on Drawings A/c Dr. — Debit ₹ 1,500 | To Munna’s Current A/c — Credit ₹ 1,500 (D) Munna’s Current A/c Dr. — Debit ₹ 1,500 | To Interest on Drawings A/c — Credit ₹ 1,500$
›Reveal solutionSolution
Munna's Current A/c Dr. ₹1,500 | To Interest on Drawings A/c Cr. ₹1,500 — the correct entry is (D).

Concept: Interest on Drawings in a Partnership

When a partner withdraws money for personal use, the partnership charges interest on those drawings to compensate the firm for the loss of capital employed. This interest is an appropriation of profit (not a charge against profit like interest on a loan), meaning it reduces the partner's share of distributable profit.

Accounting Treatment

The entry for charging interest on drawings involves two steps conceptually, though in practice we often combine them:

Interest on Drawings Account is credited (it is an income to the firm, increasing the pool available for appropriation).

The partner's account is debited (the partner owes this amount to the firm; it reduces his claim).

Because the firm maintains fixed capital accounts (capitals are ₹40,00,000 and ₹30,00,000 and remain unchanged), all adjustments for interest, salary, drawings, and profit shares flow through the Current Accounts of the partners. The fixed capital method keeps the Capital Account static; the Current Account is the working account that absorbs all operational adjustments.

Thus the journal entry is:

Partner's Current A/c Dr.

To Interest on Drawings A/c

This debits the partner's Current Account (reducing his balance or increasing his debit balance) and credits Interest on Drawings, which will later be transferred to the Profit & Loss Appropriation Account on the credit side, increasing distributable profit.

Watch out

A common mistake is to debit "Interest on Drawings A/c" thinking it is an expense. Interest on drawings is not an expense; it is an appropriation item (a recovery from the partner). The Interest on Drawings Account is credited, not debited.

Solution

Working Note 1: Calculation of Interest on Drawings

Munna withdrew ₹50,000 during the year ended 31st March, 2025. The question does not specify the date(s) of withdrawal, so we apply the average period method: interest is calculated for an average period of 6 months (half the year).
$\text{Interest on Drawings} = \text{Drawings} \times \frac{\text{Rate}}{100} \times \frac{\text{Time (months)}}{12}$ $= 50{,}000 \times \frac{6}{100} \times \frac{6}{12} = 50{,}000 \times 0.06 \times 0.5 = ₹1{,}500$

Journal Entry for Charging Interest on Munna's Drawings

| Date | Particulars | L.F. | Debit (₹) | Credit (₹) | …
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CBSE 2026Set MARCH1 markMCQ
$Q. The capital proportion of A, B and C is 1:2:3 respectively. The divisible profit is ₹ 1,20,000. What will be the amount of profit of C?$
(a) 60,000
(b) 40,000
(c) 20,000
(d) 50,000
›Reveal solutionSolution

C's share of the 1,20,000 divisible profit in the 1 : 2 : 3 ratio is 60,000, so the answer is (a).

Total of the ratio = 1 + 2 + 3 = 6 parts.

Partner Ratio Share of 1,20,000
A 1/6 20,000
B 2/6 40,000

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CBSE 2026Set MARCH1 markMCQ
$Q. At the time of the reconstruction of a partnership firm _____ is prepared.$
(a) Trading account
(b) Revaluation account
(c) Realisation account
(d) Profit and loss appropriation account
›Reveal solutionSolution

A Revaluation Account is prepared at reconstitution of a partnership firm, so the answer is (b).

When a partnership is reconstituted (admission, retirement, death or change in ratio) the firm keeps running; only the values of its assets and liabilities are re-stated to their fair values. These changes are recorded in the Revaluation Account, and its profit or loss is shared among the old partners in the old r …

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CBSE 2026Set MARCH1 markMCQ
$Q. Profit or loss of revaluation account is transferred to _____ account in _____ ratio.$
(a) Old partner, equal
(b) All partners, new profit-loss sharing ratio
(c) Old partners, sacrificing ratio
(d) Old partners, old ratio
›Reveal solutionSolution

Profit or loss of the Revaluation Account is transferred to the old partners in the old ratio, so the answer is (d).

The revaluation of assets and liabilities reflects value changes that accrued while only the old partners were carrying on the business. Therefore the balancing profit or loss of the Revaluation Account is credited or debited t …

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CBSE 2026Set MARCH1 mark
$Q. Unrecorded asset is ______ to revaluation account.$
›Reveal solutionSolution

An unrecorded asset is credited to the Revaluation Account.

The Revaluation (Profit and Loss Adjustment) Account records the effect of re-valuing assets and liabilities when a firm is reconstituted (admission, retirement or death). By convention:

Item Treatment in Revaluation A/c
Increase in asset / decrease in liability / unrecorded asset Credit (gain)
Decrease in asset / increase in liability / unrecorded liability Debit (loss)
…

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$Q. At the time of admission of a new partner, where is the value of the unrecorded liabilities transferred?$
›Reveal solutionSolution

The value of unrecorded liabilities is transferred to the debit side of the Revaluation Account.

At admission, assets and liabilities are revalued. Bringing an unrecorded (previously omitted) liability into the books increases the firm's liabilities, which is a loss; therefore it is debited to the Revaluation Account. The net result of the Revaluation Account (profit or loss) i …

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CBSE 2026Set ANNUAL1 markMCQ
$Q. Interest on capital in the absence of partnership deed :$
(a) 6%
(b) 10%
(c) 12%
(d) is not paid
›Reveal solutionSolution

Correct option: (d) is not paid.

When there is no partnership deed, the Indian Partnership Act, 1932 applies and it allows no interest on partners' capital. Interest on capital is payable only if the deed expressly provides fo …

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$Q. State whether True or False: Revaluation account is a real account.$
›Reveal solutionSolution

The statement is False.

The Revaluation Account records increases and decreases in the values of assets and liabilities at the time of reconstitution and its balance (profit or loss) is transferred to the partners' capital accounts. Since it deals wit …

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Item	Treatment in Revaluation A/c
Increase in asset / decrease in liability / unrecorded asset	Credit (gain)
Decrease in asset / increase in liability / unrecorded liability	Debit (loss)
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Partner	Ratio	Share of 1,20,000
A	1/6	20,000
B	2/6	40,000

Part (a)

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