Partnership

Admission

Easy

common

The past average profits of a business works out at Rs. 20,000 and it is expected that such profits are likely to continue for another three years, the value of goodwill based on average profit method will be……. .

Rs.60,000.

Rs.20,000.

Rs.40,000.

Rs.50,000.

✅ Correct Option: 1

Under the Average Profit Method, goodwill is valued by multiplying the average profit by the number of years for which the profit is expected to continue.

Formula: Goodwill = Average Profit × Number of Years' Purchase

Given:

Average Profit = Rs. 20,000
Number of Years' Purchase = 3 years

Goodwill = 20,000 × 3 = Rs. 60,000

The number of years' purchase represents the period for which the buyer is willing to pay for the future profits. Since profits are expected to continue for 3 more years, the goodwill captures the present value of these 3 years of profit at Rs. 20,000 per year.

Correct Answer: Option 1 - Rs. 60,000

2025: 22 May Shift 1

A new partner can be admitted:

2026: 21 May Shift 1

The purpose of preparing the Revaluation Account is:

2025: 14 May Shift 1

$A$ and $B$ are partners in a firm sharing profits in the ratio of $5:3$ . They admit $C$ as a new partner for $\frac{1}{7}$ th share in the profits. The new profit sharing ratio will be $4:2:1$ . The sacrificing ratio of $A$ and $B$ is

2023: 20 June Shift 2

Arrange the following statements in proper sequence in context of admission of partner.

A. Finalising terms for admission of new partner

B. Calculation of sacrificing/ gaining ratio

C. Finalising balance in partner's capital A/c

D. Calculation of new profit sharing ratio

E. Valuation and adjustment of goodwill

Choose the correct answer from the options given below:

2025: 16 May Shift 1

Match List-I with List-II

List-I	List-II
(A) Accumulated Profits/Losses	(I) New Ratio
(B) Share of goodwill at the time of admission of a partner	(II) Gaining Ratio
(C) Division of profits after admission of a partner	(III) Old Ratio
(D) Share of goodwill at the time of retirement/death of a partner	(IV) Sacrificing Ratio

Choose the correct answer from the options given below:

2025: 3 June Shift 1

The journal entries are as under

Incoming partners' current A/c. Dr.

To Sacrificing partners capital A/c.

What statement among the following is TRUE for the above entry?

The past average profits of a business works out at Rs. 20,000 and it is expected that such profits are likely to continue for another three years, the value of goodwill based on average profit method will be……. .

Solution

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CUET Accountancy Past Year Questions (Topic-Wise)