Death of a Partner: Capital Account & Executor Settlement: 18 MCQs with answers
All 18 multiple-choice questions from this kit, free and with no sign-up.
Warm-up · 7 questions
Q1. What is the primary purpose of preparing the deceased partner's capital account?
BeginnerShow answer & explanation
To determine the amount payable to his executor
The capital account at death is a settlement statement showing the total amount owed to the deceased partner's executor.
Q2. In which ratio is the net revaluation gain or loss shared at the time of a partner's death?
BeginnerShow answer & explanation
Old profit-sharing ratio
Since no new ratio has been agreed, the old profit-sharing ratio applies to revaluation and goodwill.
Q3. A partner dies 3 months after the last balance sheet date. What time fraction is used for profit up to death?
BeginnerShow answer & explanation
3/12
The time fraction is months up to death divided by 12, so 3/12.
Q4. Which of the following is added to the deceased partner's capital account?
BeginnerShow answer & explanation
Salary due up to death
Salary due is a claim against the firm and is credited to the capital account.
Q5. A partner withdrew ₹900 per month for 3 months before death. How much is deducted as drawings?
BeginnerShow answer & explanation
₹2,700
Drawings = 900 × 3 = ₹2,700.
Q6. After all adjustments, the balance of the deceased partner's capital account is transferred to:
BeginnerShow answer & explanation
Executor's Account
The final balance is transferred to the Executor's Account, which is a liability.
Q7. The deceased partner's share of goodwill is credited to his capital account and the same amount is debited to the continuing partners' capital accounts in their gaining ratio.
BeginnerShow answer & explanation
True
The deceased partner's share of goodwill is credited to his capital account and the same amount is debited to the continuing partners' capital accounts in their gaining ratio.
Building up · 6 questions
Q8. Narendra died on 30th June. His opening capital was ₹12,000 and interest on capital is 10% p.a. What is the interest on capital due to him?
IntermediateShow answer & explanation
₹300
Interest = 12,000 × 10% × 3/12 = ₹300.
Q9. Firm's goodwill is ₹90,000. Narendra's profit share is 2/10. What is his share of goodwill?
IntermediateShow answer & explanation
₹18,000
Share of goodwill = 2/10 × 90,000 = ₹18,000.
Q10. Last year's profit was ₹40,000. A partner with 1/4 share died after 3 months. What is his share of profit up to death?
IntermediateShow answer & explanation
₹2,500
Profit for 3 months = 40,000 × 3/12 = ₹10,000; his share = 1/4 × 10,000 = ₹2,500.
Q11. Which account is prepared to record revaluation of assets and liabilities at the time of a partner's death?
IntermediateShow answer & explanation
Profit and Loss Adjustment Account
Revaluation adjustments are routed through the Profit and Loss Adjustment Account.
Q12. What does 'three years' purchases' mean in goodwill valuation?
IntermediateShow answer & explanation
Goodwill = 3 × Average Profit
'Three years' purchases' means goodwill is three times the average profit.
Q13. A firm's average profit is ₹30,000 and goodwill is valued at 3 times average profit. What is the firm's goodwill?
IntermediateShow answer & explanation
₹90,000
Goodwill = 3 × 30,000 = ₹90,000.
Topper level · 5 questions
Q14. A partner dies. The firm revalues assets and finds a net gain of ₹12,000. The old ratio is 5:3:2. What is the deceased partner's share of the gain if his share is 2/10?
AdvancedShow answer & explanation
₹2,400
Share of gain = 2/10 × 12,000 = ₹2,400.
Q15. A partner with 1/4 share died 3 months after the last balance sheet. Average profit is ₹90,000. What is his share of profit up to death?
AdvancedShow answer & explanation
₹5,625
Profit for 3 months = 90,000 × 3/12 = ₹22,500; his share = 1/4 × 22,500 = ₹5,625.
Q16. A student calculates profit up to death using the full year's profit instead of the proportionate profit. What is the error?
AdvancedShow answer & explanation
He ignored the time fraction (months ÷ 12)
The correct formula includes the time fraction; using full-year profit omits it.
Q17. A partner named Narendra died on June 30. His opening capital was ₹12,000, and he was entitled to a salary of ₹1,200 per month. If the average profit of the last four years is ₹30,000, calculate the total amount payable to his executor, considering his drawings of ₹900 per month for three months and interest on capital at 10% p.a.
AdvancedShow answer & explanation
₹18,300
The total amount payable to the executor includes: Opening capital (₹12,000) + Salary for 3 months (₹3,600) + Interest on capital (₹300) + Share of profit up to death (₹2,000) - Drawings (₹2,700) = ₹12,000 + ₹3,600 + ₹300 + ₹2,000 - ₹2,700 = ₹18,300.
Q18. A partner with a 1/4 share dies, and the firm has a net revaluation gain of ₹12,000 shared in the old ratio of 5:3:2. Calculate the deceased partner's share of this gain and determine the total balance in his capital account after accounting for his drawings of ₹2,700 and profit up to death based on last year's profit of ₹40,000 for 3 months.
AdvancedShow answer & explanation
₹7,300
The deceased partner's share of the revaluation gain is ₹12,000 × 2/10 = ₹2,400. Profit up to death is ₹40,000 × 3/12 × 1/4 = ₹2,500. Thus, the balance in his capital account is Share of revaluation gain (₹2,400) + Profit up to death (₹2,500) - Drawings (₹2,700) = ₹2,400 + ₹2,500 - ₹2,700 = ₹2,200. This is incorrect; t…
Your notes can be a kit like these
Every kit here was made from real study material. Point Veda at a chapter, a PDF, a photo or a link and get notes, flashcards, practice MCQs, games and a scored test — free, in 42 languages.
- Chapter notes
- Flashcards
- Practice MCQs
- Scored tests
- Exam prep
Get Veda free See what students get
Free to start · No ads · Works in 42 languages