Question 56:
(a)
An extract of the Balance Sheet of Murari and Vohra sharing profits & losses in the ratio of 3 :2 was as under:
|
Liabilities |
₹ |
Assets |
₹ |
|
General Reserve |
30,000 |
Investments (Market Value ₹ 1,14,000) |
1,20,000 |
|
Contingency Reserve |
2,700 |
Advertisement Expenditure |
6,000 |
|
Profit & Loss A/c |
18,000 |
| (Deferred Revenue |
|
|
Investment Fluctuation Reserve |
9,000 |
|
|
|
Workmen Compensation Reserve |
7,200 |
|
|
|
Employees Provident Fund |
20,000 |
|
|
|
|
|
|
|
New Partner Krishna was admitted for 1/5th share of profits. A claim on account of Workmen Compensation Reserve is estimated for Rs. 900.
Journal entries to adjust accumulated profits and losses.
(b)
A, B and C were partners sharing profits and losses in the ratio of 6 : 3 : 1. They decide to take D into partnership with effect from 1st April, 2026. The new profit-sharing ratio between A, B, C and D will be 3 : 3 : 3 : 1. They also decide to record the effect of the following without affecting their book values, by passing a single adjustment entry:
|
|
Book Values ₹ |
|
General Reserve |
1,50,000 |
|
Contingency Reserve |
60,000 |
|
Profit and Loss A/c (Cr.) |
90,000 |
|
Advertisement Suspense A/c (Dr.) |
1,20,000 |
Pass the necessary single adjustment entry through the Partner's Current Account.
Answer:
Case (a)
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit ₹ |
Credit ₹ |
|
|
(i) |
|
|
|
|
|
|
Investment Fluctuation Reserve A/c |
Dr. |
|
6,000 |
|
|
|
|
To Investment A/c |
|
|
|
6,000 |
|
|
(Being ) |
|
|
|
|
|
(ii) |
|
|
|
|
|
|
|
Workmen Compensation Reserve A/c |
Dr. |
|
900 |
|
|
|
To Workmen Compensation Claim A/c |
|
|
|
900 |
|
|
|
|
|
|
|
|
(iii) |
General Reserve |
Dr. |
|
30,000 |
|
|
|
Contingency Reserve |
Dr. |
|
2,700 |
|
|
|
Profit & Loss A/c |
Dr. |
|
18,000 |
|
|
|
Investment Fluctuation Reserve A/c |
Dr. |
|
3,000 |
|
|
|
Workmen Compensation Reserve A/c |
Dr. |
|
6,300 |
|
|
|
To Murari’s Capital A/c |
|
|
|
36,000 |
|
|
To Vohra’s Capital A/c |
|
|
|
24,000 |
|
|
(Being balance of reserves transferred to capital accounts ) |
|
|
|
|
|
(iv) |
Murari’s Capital A/c |
Dr. |
|
3,600 |
|
|
|
Vohra’s Capital A/c |
Dr. |
|
2,400 |
|
|
|
To Advertisement Expenditure |
|
|
|
6,000 |
Case (b)
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit ₹ |
Credit ₹ |
|
|
(A) |
|
|
|
|
|
|
(i) |
General Reserve A/c |
Dr. |
|
36,000 |
|
|
|
Contingency Reserve A/c |
Dr. |
|
6,000 |
|
|
|
Profit & Loss A/c |
Dr. |
|
18,000 |
|
|
|
To X’s Capital A/c |
|
|
|
30,000 |
|
|
To Y’s Capital A/c |
|
|
|
18,000 |
|
|
To Z’s Capital A/c |
|
|
|
12,000 |
|
|
(Reserves distributed) |
|
|
|
|
|
|
|
|
|
|
|
|
(ii) |
X’s Capital A/c |
Dr. |
|
12,000 |
|
|
|
Y’s Capital A/c |
Dr. |
|
7,200 |
|
|
|
Z’s Capital A/c |
Dr. |
|
4,800 |
|
|
|
To Advertisement Suspense A/c |
|
|
|
24,000 |
|
|
(Advertisement Suspense distributed) |
|
|
|
|
|
|
|
|
|
|
|
|
(B) |
|
|
|
|
|
|
April 1 |
Workmen Compensation Reserve A/c |
Dr. |
|
72,000 |
|
|
|
To X’s Capital A/c |
|
|
|
36,000 |
|
|
To Y’s Capital A/c |
|
|
|
36,000 |
|
|
(Workmen Compensation Reserve distributed) |
|
|
|
|
|
(C) |
|
|
|
|
|
|
April 1 |
Workmen Compensation Reserve A/c |
Dr. |
|
72,000 |
|
|
|
To Workmen Compensation Claim A/c |
|
|
|
48,000 |
|
|
To X’s Capital A/c |
|
|
|
12,000 |
|
|
To Y’s Capital A/c |
|
|
|
12,000 |
|
|
(Surplus Workmen Compensation Reserve distributed) |
|
|
|
|
|
(D) |
|
|
|
|
|
|
April 1 |
Investment Fluctuation Reserve A/c |
Dr. |
|
24,000 |
|
|
|
To Investment A/c |
|
|
|
10,000 |
|
|
To X’s Capital A/c |
|
|
|
7,000 |
|
|
To Y’s Capital A/c |
|
|
|
7,000 |
|
|
(Surplus Investment Fluctuation Reserve distributed) |
|
|
|
|
|
(E) |
|
|
|
|
|
|
April 1 |
General Reserve A/c |
Dr. |
|
4,800 |
|
|
|
To Investment Fluctuation Reserve A/c |
|
|
|
960 |
|
|
To X’s Capital A/c |
|
|
|
1,920 |
|
|
To Y’s Capital A/c |
|
|
|
1,920 |
|
|
(Surplus General Reserve distributed) |
|
|
|
|
|
(F) |
|
|
|
|
|
|
April 1 |
C’s Current A/c |
Dr. |
|
36,000 |
|
|
|
D’s Current A/c |
Dr. |
|
18,000 |
|
|
|
To A’s Current A/c |
|
|
|
54,000 |
|
|
(Adjustment entry made) |
|
|
|
|
Working Notes:
WN1: Calculation of Sacrifice or Gain
A :B :C=6:3:1 (Old Ratio)
A :B :C :D:=3:3:3:1 (New Ratio)
Sacrificing (or Gaining) Ratio = Old Ratio - New Ratio
A's share=6/10−3/10=6−3/10=3/10 (Sacrifice)
B's share=3/10−3/10=0
C's share=1/10−3/10=1−3/10=−2/10 (Gain)
D's share=0−1/10=−1/10 (Gain)
WN2: Calculation of Net Effect
|
General Reserve |
1,50,000 |
|
Contingency Reserve |
60,000 |
|
Profit and Loss A/c (Cr.) |
90,000 |
|
|
3,00,000 |
|
Less: Advertisement Suspense A/c (Dr.) |
1,20,000 |
|
|
1,80,000 |
WN 3: Adjustment of Net Effect
Amount credited in A's Current A/c = 1,80,000×3/10=
₹ 54,000
Amount debited in C's Current A/c = 1,80,000×2/10= ₹ 36,000
Amount debited in D's Current A/c = 1,80,000×1/10=
₹ 18,000
Question 57:
Amit and Anil are partners sharing profits and losses in the ratio of 2 : 1. Their Balance Sheet as on 31st March, 2026 was as follows:
|
Liabilities |
₹ |
Assets |
₹ |
|
Sundry Creditors |
58,000 |
Cash in Hand |
5,000 |
|
General Reserve |
12,000 |
Cash at Bank |
45,000 |
|
Capital Acs: |
|
Sundry Debtors |
60,000 |
|
Amit 1,80,000 Anil 1,50,000 |
3,30,000 |
Machinery |
1,00,000 |
|
|
|
Stock |
40,000 |
|
|
|
Building |
1,50,000 |
|
|
|
|
|
|
|
4,00,000 |
|
4,00,000 |
Ankit is admitted as a partner on the date of the Balance Sheet on the following terms:
(a) Ankit will bring in 1,00,000 as his capital and 60,000 as his share of goodwill for 1/4th share in profits.
(b) Machinery is to be appreciated to 1,20,000 and the value of building is to be appreciated by 10%.
(c) Stock is found overvalued by 4,000.
(d) General Reserve will continue to appear in the books of the reconstituted firm at its original value.
(e) A Provision for Doubtful Debts is to be created at 5% of debtors.
(f) Creditors were unrecorded to the extent of 1,000.
Prepare Revaluation Account and Partners Capital Accounts.
Answer:
|
Revaluation Account |
|||
|
Particulars |
₹ |
Particulars |
₹ |
|
Stock |
4,000 |
Machinery |
20,000 |
|
Provision for Doubtful Debts |
3,000 |
Building |
15,000 |
|
Creditors |
1,000 |
|
|
|
Gain |
27,000 |
|
|
|
|
|
|
|
|
|
35,000 |
|
35,000 |
|
Capital account |
|||||||
|
Particulars |
Amit |
Anil |
Ankit |
Particulars |
Amit |
Anil |
Ankit |
|
To Balance c/d |
2,40,000 |
1,80,000 |
1,00,000 |
By Balance b/d |
1,80,000 |
1,50,000 |
- |
|
|
|
|
|
By Bank A/c |
- |
- |
1,00,000 |
|
|
|
|
|
By Premium A/c |
40,000 |
20,000 |
- |
|
|
|
|
|
By Revaluation A/c |
18,000 |
9,000 |
- |
|
|
|
|
|
By Ankit’s Current A/c |
2,000 |
1,000 |
|
|
|
2,40,000 |
1,80,000 |
1,00,000 |
|
2,40,000 |
1,80,000 |
1,00,000 |
|
|
|
|
|
|
|
|
|
Working note:
1. Goodwill 60,000 shared in 2:1 in sacrificing ratio
Amit=60,000×2/3=40,000
Anil=60,000×1/3=20,000
|
Ankit’s Current A/c |
Dr. |
3,000 |
|
|
To Amit’s capital A/c |
|
|
2,000 |
|
To Anil’s capital A/c |
|
|
1,000 |
|
(Being sacrificing partners compensated for sacrifice) |
|
|
|
2. Profit of Revaluation shared in old ratio (2:1)
Amit=27,000×2/3=18,000
Anil=27,000×1/3=9,000
3. General Reserve 12,000 adjusted in gaining and sacrificing ratio
Share of Ankit=12,000×1/4=3,000
3,000 compensated in 2:1 in sacrificing ratio
Amit=3,000 ×2/3=2,000
Anil=3,000 ×1/3=1,000
Note: since no information regarding how Ankit will compensate, will be compensated through Ankit’s current account.
Question 58:
Vimal and Nirmal are partners in a firm sharing profits and losses in the ratio of 5:3. They admit Kailash into the firm on 1st April, 2026, when their Balance Sheet was as follows:
|
Liabilities |
₹ |
Assets |
₹ |
|
Vimal's Capital |
32,000 |
Goodwill |
8,000 |
|
Nirmal's Capital |
34,000 |
Machinery |
38,000 |
|
General Reserve |
8,000 |
Furniture |
5,000 |
|
Bank Loan |
6,000 |
Debtors |
23,000 |
|
Creditors |
6,000 |
Stock |
7,000 |
|
|
|
Cash |
5,000 |
|
|
|
|
|
|
|
86,000 |
|
86,000 |
Terms of Kailash's admission were as follows:
(i) Kailash will bring ₹ 30,000 as his share of capital and will be entitled to 1/3rd share in the profits.
(ii) Kailash is not to bring goodwill in cash, Vimal and Nirmal raise the goodwill in the books.
(iii) Goodwill of the firm is valued on the basis of 2 years' purchase of the average profit of the last three years. Average profit of the last three years is ₹ 6,000.
(iv) Machinery and stock are revalued at ₹ 45,000 and ₹ 8,000 respectively.
Prepare a Revaluation Account and Partners' Capital Accounts incorporating the above adjustments.
Answer:
|
Revaluation Account |
|||
|
Particulars |
₹ |
Particulars |
₹ |
|
Gain |
8,000 |
Machinery |
7,000 |
|
Vimal’s cap-5,000 |
|
Stock |
1,000 |
|
Nirmal’s cap- 3,000 |
|
|
|
|
|
8,000 |
|
8,000 |
|
Capital account |
|||||||
|
Particulars |
Vimal |
Nirmal |
Kailash |
Particulars |
Vimal |
Nirmal |
Kailash |
|
To Goodwill A/c |
5,000 |
3,000 |
- |
By Balance b/d |
32,000 |
34,000 |
- |
|
To Goodwill A/c |
5,000 |
3,000 |
- |
By Cash A/c |
- |
- |
30,000 |
|
To Balance c/d |
39,500 |
38,500 |
30,000 |
By Goodwill A/c |
7,500 |
4,500 |
- |
|
|
|
|
|
By Revaluation A/c |
5,000 |
3,000 |
- |
|
|
|
|
|
By General reserve A/c |
5,000 |
3,000 |
|
|
|
49,500 |
44,500 |
30,000 |
|
49,500 |
44,500 |
30,000 |
|
|
|
|
|
|
|
|
|
Working note:
1. Goodwill valuation
Goodwill = 6,000×2=12,000
2. Goodwill 12,000 raised in 3:2 in sacrificing ratio
Vimal =12,000×3/5=7,500
Nirmal =12,000×2/5=4,500
|
Goodwill A/c |
Dr. |
12,000 |
|
|
To Vimal’s capital A/c |
|
|
7,500 |
|
To Nirmal’s capital A/c |
|
|
4,500 |
|
(Being goodwill raised) |
|
|
|
Goodwill 12,000 written off in 5:3:4 in sacrificing ratio
Vimal =12,000×5/12=5,000
Nirmal =12,000×3/12=3,000
Kailash = 12,000×4/12=4,000
|
Vimal’s capital A/c |
Dr. |
5,000 |
|
|
Nirmal’s capital A/c |
Dr. |
3,000 |
|
|
Kailash’s current A/c |
Dr. |
4,000 |
|
|
To Goodwill A/c |
|
|
12,000 |
|
(Being goodwill written off) |
|
|
|
1. Profit of Revaluation shared in old ratio (3:2)
Vimal =8,000×3/5=5,000
Nirmal =8,000×3/5=3,000
2. General reserve shared in old ratio (3:2)
Vimal =8,000×3/5=5,000
Nirmal =8,000×3/5=3,000
Note: Since, Kailash is not to bring goodwill in cash,will be compensated through Kailash’s current account.
Question 59:
Gini, Bini and Mini are equal partners with capitals of ₹15,000; ₹17,500 and ₹20,000 respectively. They agree to admit Vini into equal partnership upon payment in cash ₹15,000 for 1/4th share of the goodwill and ₹18,000 as his capital, both sums to remain in the business. The liabilities of the old firm were ₹30,000 and the assets, apart from cash, consist of Motors ₹12,000, Furniture ₹4,000, Stock ₹26,500 and Debtors ₹37,800. The Motors and Furniture were revalued at ₹9,500 and ₹3,800 respectively.
Pass Journal entries to give effect to the above arrangement and also show Balance Sheet of the new firm.
Answer:
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit ₹ |
Credit ₹ |
|
|
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
3,3000 |
|
|
|
To Vini’s capital A/c To Premium for Goodwill A/c |
|
|
|
1,8000 1,5000 |
|
|
(Being Mini’s brought his share of goodwill and capital in cash) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
1,5000 |
|
|
|
To Gini’s Capital A/c To Bini’s Capital A/c To Mini’s Capital A/c |
|
|
|
5000 5000 5000 |
|
|
(Being w’s share of Goodwill transferred in their sacrificing Ratio) |
|
|
|
|
|
Revaluation A/c Dr. To Motor A/c To Furniture A/c (Being decrease in value assets transferred to Revaluation A/c) |
2700 |
2500 200 |
|||
|
Gini’s Capital A/c Dr. Bini’s Capital A/c Dr. Mini’s Capital A/c Dr. To Revaluation A/c (Being loss of Revaluation of transferred to old partners capital A/c) |
900 900 900 |
2700 |
|||
|
|
|
|
|
|
|
Balance sheet of new firm |
||||
|
Liabilities |
₹ |
Assets |
₹ |
|
|
Liabilities |
30,000 |
Cash balance (2,200+33,000) |
35,200 |
|
|
Gini 's Capital |
19,100 |
|
Motor |
9,500 |
|
Bini 's Capital Mini’s Capital |
21,600 24,100 |
|
furniture Stock |
3,800 26,500 |
|
Vini’s Capital |
18,000 |
82,800 |
Debtors |
37,800 |
|
|
1,12,800 |
1,12,800 |
||
|
|
|
|
|
|
Working notes;
WN-1
Memorandum balance sheet is prepared to find out Cash balance.
|
Liabilities |
₹ |
Assets |
₹ |
|
|
Liabilities |
30,000 |
Cash balance (Balancing figure) |
2200 |
|
|
Gini's Capital |
15,000 |
|
Motor |
12,000 |
|
Bini 's Capital Mini’s Capital |
17,500 20,000 |
52,500 |
furniture Stock |
4,000 26,500 |
|
|
|
|
Debtors |
37,800 |
|
|
82,500 |
82,500 |
||
|
|
|
|
|
|
WN-2
Old ratio of Gini: Bini: Vini =1;1;1
W is admitted for ¼ share
Let total profit =1
Remaining profit after Vini’s admission= 1-1/4=3/4
Gini =3/4×1/3=3/12
Bini =3/4×1/3=3/12
Mini =3/4×1/3=3/12
Vini =1/4×3/3=3/12
Therefore share of Gini, Bini , Mini and Vini =3:3:3:3=1:1:1:1
Sacrificing ratio= old –new
Gini =1/3-1/4=1/12
Bini =1/3-1/4=1/12
Mini =1/3-1/4=1/12
Sacrificing ratio of Gini, Bini , Mini = 1:1:1
WN-4
|
Particulars |
₹ |
Particulars |
₹ |
|
To Motors A/c To Furniture A/c |
2500 200 |
By Loss Capital A/c (In old Ratio) Gini =2700×1/3=900 Bini =2700×1/3=900 Mini =2700×1/3=900 |
2700 |
|
|
2700 |
|
2700 |
WN-5
|
Partners’ Capital A/c
|
|||||||||
|
Particulars |
Gini ₹ |
Bini ₹ |
Mini ₹ |
Vini ₹ |
Particulars |
Gini ₹ |
Bini ₹ |
Mini ₹ |
Vini ₹ |
|
To ravaluation A/c To balance c/d |
900 19,100 |
900 21,600 |
900 24,100 |
- 1,8000 |
By Balance b/d By Cash A/c By Premium A/c |
15,000 - 5000 |
17,500 - 5000 |
20,000 - 5000 |
- 18,000 - |
|
|
20,000 |
22,500 |
25,000 |
18,000 |
|
20,000 |
22,500 |
25,000 |
18,000 |
Question 60:
Following was the Balance Sheet of A and B who were sharing profits in the ratio of 2 : 1 as at 31st March, 2026:
|
|
||||
|
Liabilities |
₹ |
Assets |
₹ |
|
|
Capital A/c’s: |
|
Building |
25,000 |
|
|
A |
15,000 |
|
Plant and Machinery |
17,500 |
|
B |
10,000 |
25,000 |
Stock |
10,000 |
|
Sundry Creditors |
|
32,950 |
Sundry Debtors |
4,850 |
|
|
|
|
Cash in Hand |
600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,950 |
|
57,950 |
|
|
|
|
|
|
They admit C
into partnership on the following terms:
(a) C was to
bring ₹ 7,500 as his capital and ₹3,000 as goodwill for 1/4th share in
the firm.
(b) Values of the Stock and Plant and Machinery were to be reduced by 5%.
(c) A Provision for Doubtful Debts was to be created in respect of Sundry
Debtor ₹375.
(d) Building was to be appreciated by 10%.
Pass necessary Journal entries to give effect to the arrangements. Prepare
Profit and Loss Adjustment Account (or Revaluation Account), Partners' Capital
Accounts and Balance Sheet of the new firm.
Answer:
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit ₹ |
Credit ₹ |
|
|
|
|
|
|
|
|
|
|
Profit and Loss Adjustment A/c |
Dr. |
|
1,750 |
|
|
|
To Stock A/c |
|
|
500 |
|
|
|
To Plant and Machinery A/c |
|
|
875 |
|
|
|
To Reserve for Doubtful Debts A/c |
|
|
375 |
|
|
|
(Decrease in stock and Plant and creation of Reserve for Doubtful Debt transferred to Profit and Loss Adjustment Account) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Building A/c |
Dr. |
|
2,500 |
|
|
|
To Profit and Loss Adjustment A/c |
|
|
2,500 |
|
|
|
(Increase in value of Building of transferred to Profit and loss Adjustment Accounts) |
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Profit and Loss Adjustment A/c |
|
750 |
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To A’s Capital A/c |
|
|
500 |
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To B’s Capital A/c |
|
|
250 |
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(Profit
on revaluation of asset and liabilities |
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Cash A/c |
Dr. |
|
10,500 |
|
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To C’s Capital A/c |
|
|
7,500 |
|
|
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To Premium for Goodwill A/c |
|
|
3,000 |
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(C brought capital and share of goodwill) |
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Premium for Goodwill A/c |
Dr. |
|
3,000 |
|
|
|
To A’s Capital A/c |
|
|
2,000 |
|
|
|
To B’s Capital A/c |
|
|
1,000 |
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|
|
(Premium
for Goodwill distributed between |
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Profit and Loss Adjustment Account |
|||
|
Dr. |
|
Cr. |
|
|
Particulars |
₹ |
Particulars |
₹ |
|
Stock |
500 |
|
|
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Plant and Machinery |
875 |
Building |
2,500 |
|
Reserve for Doubtful Debts |
375 |
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Profit transferred to |
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A Capital |
500 |
|
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B Capital |
250 |
|
|
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|
2,500 |
|
2,500 |
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Partners’ Capital Accounts |
|||||||
|
Dr. |
|
Cr. |
|||||
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Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
|
|
|
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Balance b/d |
15,000 |
10,000 |
|
|
|
|
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Cash |
|
|
7,500 |
|
|
|
|
|
Premium for Goodwill |
2,000 |
1,000 |
|
|
Balance c/d |
17,500 |
11,250 |
7,500 |
Profit and Loss Adjustment (Profit) |
500 |
250 |
|
|
|
17,500 |
11,250 |
7,500 |
|
17,500 |
11,250 |
7,500 |
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Balance Sheet as on March 31, 2026 after admission of C |
|||||
|
Liabilities |
₹ |
Assets |
₹ |
||
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||
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Capital Accounts: |
|
Building (25,000 + 2,500) |
27,500 |
||
|
A |
17,500 |
|
Plant and Machinery (17,500 – 875) |
16,625 |
|
|
B |
11,250 |
|
Stock (10,000 – 500) |
9,500 |
|
|
C |
7,500 |
36,250 |
|
||
|
Sundry Creditors |
32,950 |
Sundry Debtors |
4,850 |
|
|
|
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Less: Provision for D. Debts |
375 |
4,475 |
|
|
|
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Cash in Hand (600 + 10,500) |
11,100 |
||
|
|
69,200 |
|
69,200 |
||
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Working Notes:
WN1
|
|
A |
B |
|
Sacrificing ratio |
2 : |
1 |
WN2
Distribution of Premium for Goodwill (in
sacrificing ratio)
A will get =3,000×2/3=2,000
B will get =3,000×1/3=1,000
WN3
Distribution of Profit from Profit and loss Adjustment Account (in old ratio)
A will get =750×2/3=500
B will get =750×1/3=250
Ts Grewal Solution 2026-2027
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Class 12 / Volume – I