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Questions and Answers
What is the formula for calculating interest using the direct method?
What is the formula for calculating interest using the direct method?
How is the average period calculated for the average period method?
How is the average period calculated for the average period method?
In the product method, what does the total product represent?
In the product method, what does the total product represent?
Which statement accurately describes the implication of fixed capitals in the partners' accounts?
Which statement accurately describes the implication of fixed capitals in the partners' accounts?
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What is the interest calculation method utilized when the capitals are fluctuating?
What is the interest calculation method utilized when the capitals are fluctuating?
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How is the goodwill of the firm calculated based on the average profits?
How is the goodwill of the firm calculated based on the average profits?
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What was the total capital employed at the end of 2015?
What was the total capital employed at the end of 2015?
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What is the normal rate of return mentioned for a similar business?
What is the normal rate of return mentioned for a similar business?
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What is the correct adjustment for machinery during the revaluation?
What is the correct adjustment for machinery during the revaluation?
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What was the profit on revaluation according to the adjustments made?
What was the profit on revaluation according to the adjustments made?
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What amount should 'C' bring in as goodwill when joining the partnership?
What amount should 'C' bring in as goodwill when joining the partnership?
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After revaluation, what will be the new capital balance for partner A?
After revaluation, what will be the new capital balance for partner A?
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Which assets were included in the balance sheet at their revalued amounts?
Which assets were included in the balance sheet at their revalued amounts?
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How much interest on capital should Sachin receive for the year ending 31-3-2016?
How much interest on capital should Sachin receive for the year ending 31-3-2016?
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What is the total amount of interest payable on X and Y's capital for the year 2012-13?
What is the total amount of interest payable on X and Y's capital for the year 2012-13?
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What is the total interest on Shekhar’s drawings for the year ended 31/3/14?
What is the total interest on Shekhar’s drawings for the year ended 31/3/14?
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Calculate the interest on Prasanna’s total drawings for the year ended 2013-14 using the product method.
Calculate the interest on Prasanna’s total drawings for the year ended 2013-14 using the product method.
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How much total interest will Uma incur on her monthly withdrawals for the year ending 30th September 2013?
How much total interest will Uma incur on her monthly withdrawals for the year ending 30th September 2013?
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What is the total interest on Uma’s quarterly withdrawals for the year ending 31.3.14?
What is the total interest on Uma’s quarterly withdrawals for the year ending 31.3.14?
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What is the total interest on Bharath's withdrawals made at the end of each quarter for the year ending 31.3.14?
What is the total interest on Bharath's withdrawals made at the end of each quarter for the year ending 31.3.14?
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What amount should Pratham receive as yearly salary from the partnership?
What amount should Pratham receive as yearly salary from the partnership?
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What is the total loss on the Revaluation Account?
What is the total loss on the Revaluation Account?
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What is the total balance of Partners' Capital Accounts after the admission of Shiva?
What is the total balance of Partners' Capital Accounts after the admission of Shiva?
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What is the amount of goodwill valued at for the firm?
What is the amount of goodwill valued at for the firm?
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What is the cash amount brought in by the new partner, Shiva?
What is the cash amount brought in by the new partner, Shiva?
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Which asset reflects a depreciation in the balance sheet?
Which asset reflects a depreciation in the balance sheet?
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How much is the provision for doubtful debts increased?
How much is the provision for doubtful debts increased?
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What is the total value of assets in the Balance Sheet as of 31.03.2017?
What is the total value of assets in the Balance Sheet as of 31.03.2017?
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What is the new profit sharing ratio after the admission of the new partner?
What is the new profit sharing ratio after the admission of the new partner?
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Which account reflects the profit attributed to the share in loss of a deceased partner?
Which account reflects the profit attributed to the share in loss of a deceased partner?
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What would be credited in the deceased partners executors account for profit on revaluation?
What would be credited in the deceased partners executors account for profit on revaluation?
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Which entry represents the final balance transferred for a deceased partner in the executors account?
Which entry represents the final balance transferred for a deceased partner in the executors account?
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Which component of the deceased partner's executors account is used to record deceased partners drawings?
Which component of the deceased partner's executors account is used to record deceased partners drawings?
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What account is debited to indicate losses on the revaluation of assets in the executor's account?
What account is debited to indicate losses on the revaluation of assets in the executor's account?
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Study Notes
Goodwill Calculation
- Goodwill can be calculated using different methods, including:
- Years' Purchase of Average Profits: This method multiplies the average profits of a company by a predetermined number of years to arrive at the goodwill value.
- Super Profits Method: This method calculates goodwill based on the excess profit a company earns above its normal rate of return on capital employed.
- Capitalization of Average Profits: This method uses the average profits of a company and the normal rate of return to determine the capital employed and then calculates goodwill as the difference between the capital employed and the net assets.
Partner Admissions and Revaluation
- When a new partner is admitted to a firm, existing partners' capital accounts may need to be adjusted.
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Revaluation Account: A revaluation account reflects changes in the value of assets and liabilities at the time of a new partner's admission.
- It records any profits or losses resulting from the revaluation.
- This account is closed by transferring the balance to the partners' capital accounts.
Interest on Drawings
- Drawings: These are amounts withdrawn by partners from the firm's capital during the year.
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Interest on Drawings: This is an expense charged to partners for withdrawing funds before the end of the financial year.
- Different methods for calculating interest on drawings include:
- Direct Method: This method calculates interest for each individual drawing, taking into account the period during which the money was outstanding.
- Product Method: This method calculates the total interest by multiplying the sum of the individual products of drawings and the period outstanding by the rate of interest.
- Average Period Method: This method uses a simplified approach by calculating the average period for which drawings are outstanding and then multiplying by the total drawings and the interest rate.
- Different methods for calculating interest on drawings include:
Partner’s Capital Accounts
- Capital accounts track the investments and withdrawals of the partners.
- They can be maintained under fixed or fluctuating capital methods, which affect how profits and losses are distributed and how new partner’s capital is allocated.
Profit and Loss Appropriation Account
- This account shows how profits and losses are distributed among partners, taking into account factors like interest on capital, drawings, salaries, and commissions.
- It's a separate account from the profit and loss account, and is created to allocate profit/loss according to the partnership agreement.
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Description
Explore the principles of goodwill calculation and parter admissions in firms. This quiz covers various methods to calculate goodwill and the need for revaluation accounts during partner changes. Test your understanding of these key accounting concepts.
