Question 66:
Sushil
and Satish are partners in a firm sharing profits in the ratio of 3
: 2. Their Balance Sheet as at 31st March, 2023 was as follows:
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Liabilities |
` |
Assets |
` |
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Outstanding
Rent |
13,000 |
Cash |
10,000 |
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|
Creditors |
20,000 |
Sundry
Debtors |
80,000 |
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Workmen
Compensation Reserve |
|
5,600 |
Less : Provision for Doubtful
Debts |
4,000 |
76,000 |
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Capital
A/cs: Sushil |
50,000 |
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Stock |
20,000 |
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Satish |
60,000 |
1,10,000 |
Profit
and Loss A/c |
4,000 |
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Machinery |
38,600 |
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1,48,600 |
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1,48,600 |
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On 1st April, 2023, they admitted Samir as a partner for 1/6th share on the
following terms:
(i) Samir brings in ` 40,000 as his share of Capital but he is unable to bring
any amount for Goodwill.
(ii) Claim on account of Workmen Compensation is ` 3,000.
(iii) To write off Bad Debts amounted to
` 6,000.
(iv) Creditors are to be paid ` 2,000 more.
(v) There being a claim against the firm for damages, liabilities to the extent
of ` 2,000 should be created.
(vi) Outstanding rent be brought down to
` 11,200.
(vii) Goodwill is valued at 112 years' purchase of the average
profits of last 3 years, less
` 12,000. Profits for the last
3 years amounted to ` 10,000; ` 20,000 and ` 30,000.
Pass Journal entries, prepare Partners'
Capital Accounts and opening Balance Sheet.
Answer:
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Journal |
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Date |
Particulars |
L.F. |
Debit ` |
Credit ` |
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2023 |
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April 1 |
Revaluation A/c |
Dr. |
|
2,000 |
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To
Provision for Doubtful Debts A/c |
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|
2,000 |
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|
(Provision on
debtors increased) |
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April 1 |
Revaluation A/c |
Dr. |
|
2,000 |
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To
Creditors A/c |
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|
2,000 |
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(Creditors
increased) |
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April 1 |
Revaluation A/c |
Dr. |
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2,000 |
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To
Claim for Damages A/c |
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|
2,000 |
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(Liability
increased) |
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April 1 |
Outstanding Rent
A/c |
Dr. |
|
1,800 |
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To Revaluation A/c |
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|
1,800 |
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|
(Liability
decreased) |
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April 1 |
Sushil’s
Capital A/c |
Dr |
|
2,520 |
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Satish’s
Capital A/c |
Dr |
|
1,680 |
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To Revaluation A/c |
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|
4,200 |
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(Loss on
revaluation transferred to Partners’ Capital A/c) |
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April 1 |
Workmen
Compensation Reserve A/c |
Dr. |
|
5,600 |
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To Workmen Compensation Claim A/c |
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|
3,000 |
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To Sushil’s
Capital A/c |
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|
1,560 |
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To Satish’s
Capital A/c |
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|
1,040 |
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(Surplus Workmen
Compensation Reserve distributed) |
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April 1 |
Bank A/c |
Dr |
|
40,000 |
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To
Samir’s Capital A/c |
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|
40,000 |
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(Capital
brought in cash) |
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April 1 |
Samir’s Current A/c |
Dr. |
|
3,000 |
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To Sushil’s
Capital A/c |
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|
1,800 |
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To Satish’s
Capital A/c |
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|
1,200 |
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(Goodwill
adjusted in the ratio 3:2 ) |
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Partners’ Capital Accounts |
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Dr. |
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Cr. |
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Particulars |
Sushil |
Satish |
Samir |
Particulars |
Sushil |
Satish |
Samir |
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Profit &
Loss A/c |
2,400 |
1,600 |
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Balance b/d |
50,000 |
60,000 |
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Revaluation A/c |
2,520 |
1,680 |
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Bank A/c |
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|
40,000 |
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Balance c/d |
48,440 |
58,960 |
40,000 |
Workmen
Compensation Reserve |
1,560 |
1,040 |
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Z's Current A/c |
1,800 |
1,200 |
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53,360 |
62,240 |
40,000 |
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53,360 |
62,240 |
40,000 |
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Balance sheet as on 1st April, 2023 after Z’s
admission |
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Liabilities |
` |
Assets |
` |
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Outstanding Rent |
11,200 |
Cash |
50,000 |
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Workmen
Compensation Claim |
3,000 |
Stock |
20,000 |
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Creditors |
22,000 |
Machinery |
38,600 |
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Claim for
Damages |
2,000 |
Samir‘s Current A/c |
3,000 |
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Capital |
|
Debtors |
80,000 |
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Sushil |
48,440 |
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Less
: Provision for D.D. |
6,000 |
74,000 |
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Satish |
58,960 |
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Samir |
40,000 |
1,47,400 |
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1,85,600 |
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1,85,600 |
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Working
Notes:
WN1: Calculation
of Goodwill
Average Profit =10,000+20,000+30,000/3=60,000/3= ` 20,000
Goodwill = Average Profits × Number of years' purchase
= (20,000×1.5) - 12,000 = 30,000 - 12,000 = ` 18,000
WN 2: Calculation of Z’s share of goodwill
Samir's share of goodwill = 18,000×1/6= ` 3,000
Question 67:
Rajesh and Ravi are partners sharing profits in the ratio of 3 : 2. Their Balance Sheet at 31st March, 2023 stood as:
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BALANCE SHEET as at 31st March, 2023 |
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Liabilities |
` |
Assets |
` |
||
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Creditors |
38,500 |
Cash |
2,000 |
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Outstanding
Rent |
4,000 |
Stock |
15,000 |
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Capital
A/cs: |
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Prepaid
Insurance |
1,500 |
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Rajesh |
29,000 |
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Debtors |
9,400 |
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Ravi |
15,000 |
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Less : Provision for Doubtful
Debts |
400 |
9,000 |
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Machinery |
19,000 |
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Building |
35,000 |
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Furniture |
5,000 |
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|
86,500 |
|
86,500 |
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Raman is admitted as a new partner introducing a capital of ` 16,000. The new profit-sharing ratio is decided as 5 : 3 :
2. Raman is unable to bring in any cash for goodwill. So, it is decided to
value the goodwill on the basis of Raman's share in the profits and the capital
contributed by him. Following revaluations are made:
(a) Stock to decrease by 5%;
(b) Provision for Doubtful Debts is to be
` 500;
(c) Furniture to decrease by 10%;
(d) Building is valued at ` 40,000.
Show necessary Ledger Accounts and Balance Sheet of new firm.
Answer:
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Revaluation Account |
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Dr. |
|
Cr. |
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Particulars |
` |
Particulars |
` |
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Stock |
750 |
Building |
5,000 |
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Provision for D. Debts |
500 |
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Less: Old Provision |
400 |
100 |
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Furniture |
500 |
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Profit on Revaluation transferred to |
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Rajesh Capital |
2,190 |
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Ravi Capital |
1,460 |
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|
5,000 |
|
5,000 |
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Partners’ Capital Accounts |
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Dr. |
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Cr. |
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Particulars |
Rajesh |
Ravi |
Raman |
Particulars |
Rajesh |
Ravi |
Raman |
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Balance b/d |
29,000 |
15,000 |
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Revaluation |
2,190 |
1,460 |
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Balance c/d |
31,190 |
16,460 |
16,000 |
Cash |
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|
16,000 |
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(before and just went of |
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Goodwill) |
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31,190 |
16,460 |
16,000 |
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31,190 |
16,460 |
16,000 |
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Rajesh’s Capital |
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|
1,635 |
Balance c/d |
31,190 |
16,460 |
16,000 |
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Raman’s Capital |
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|
1,635 |
Raman’s Capital |
1,635 |
1,635 |
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Balance c/d |
32,825 |
18,095 |
12,730 |
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32,825 |
18,095 |
16,000 |
|
32,825 |
18,095 |
16,000 |
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Balance Sheet as on March 31, 2023 after Raman’s admission |
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Liabilities |
` |
Assets |
` |
||
|
Creditors |
38,500 |
Cash (2,000 + 16,000) |
18,000 |
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Outstanding Rent |
4,000 |
Stock (15,000 – 750) |
14,250 |
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Capital A/cs: |
|
Prepaid Insurance |
1,500 |
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Rajesh |
32,825 |
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Debtors |
9,400 |
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|
Ravi |
18,095 |
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Less: Provision for D. Debts |
500 |
8,900 |
|
Raman |
12,730 |
63,730 |
Machinery |
19,000 |
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Building (35,000 + 5,000) |
40,000 |
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Furniture (5,000 – 500) |
4,500 |
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|
1,06,150 |
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1,06,150 |
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Working Notes-
WN1 Calculation of Sacrificing Ratio
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|
Rajesh |
Ravi |
Raman |
|
OLD RATION |
3 : |
2 |
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NEW RATIO |
5 : |
3 : |
2 |
Sacrificing Ratio = Old Ratio − New Ratio
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Rajesh’s |
=3/5-5/10 |
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=1/10 |
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Ravi’s |
=2/5-3/10 |
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=1/10 |
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Rajesh |
|
Ravi |
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Sacrificing ratio= |
1/10 |
: |
1/10 |
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= |
1 |
: |
1 |
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WN2 Calculation of Goodwill
Actual Capital of all Partners before adjustment of goodwill = Rajesh’s Capital
+ Ravi’s Capital + Raman’s Capital
= 31,190 + 16,460 + 16,000
= ` 63,650
Capitalised value on the basis of
Raman’s share =16,000×10/2=80,000
Goodwill of thefirm= Capitalised value of
the firm-Actual capital of the firm (before adjument of the goodwill)
=80,000-63,650
=16,350
Raman’s share of Goodwill =16,350×2/10=3,270
WN3 Adjustment of Raman’s share of goodwill
Rajesh and Ravi each Capital Accounts will be credited by =3,270×1/2=1,635
|
Journal |
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Particulars |
L.F. |
Debit ` |
Credit ` |
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|
Raman’s Capital A/c |
Dr. |
|
3,270 |
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|
To Rajesh’s Capital A/c |
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|
1,635 |
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To Ravi’s Capital A/c |
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|
1,635 |
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(Raman’s share of goodwill adjusted) |
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WN4 Distribution of Profit on Revaluation (in old
ratio)
Rajesh
will get =3,650×3/5=2190
Ravi will get =3,650×2/5=1460
Question 68:
On 31st
March, 2019, the Balance Sheet of A and B, who were sharing profits in the
ratio of 3 : 2 was as follows:
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Liabilities |
` |
Assets |
` |
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Creditors Investment Fluctuation Fund General Reserve Capitals A/cs: |
30,000 12,000 25,000 |
Cash at Bank |
20,000 |
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Debtors Less: Provision for Bad Debts |
85,000 5,000 |
80,000 |
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Stock Investments Furniture |
1,30,000 60,000 77,000 |
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A B |
1,60,000 1,40,000 |
3,00,000 |
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|
3,67,000 |
|
3,67,000 |
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On 1st April, 2019, they decided to admit C as a new partner for 1/5th share in the profits on the following terms:
(i) C brought `1,00,000 as his capital and `50,000 as his share of premium for goodwill.
(ii) Outstanding salaries of `2,000 be provided for.
(iii) The market value of investments was `50,000.
(iv) A debtor whose dues of `18,000 were written off as bad debts paid `12,000 in full settlement.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the new firm. (CBSE 2020)
Answer:
|
Revaluation A/c |
||||
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Particulars |
` |
Particulars |
` |
|
|
To Outstanding salary To Gain transferred to: (WN1) |
2,000 10,000 |
By Bad debts Recovered A/c |
12,000 |
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A’s Capital A/c B’s Capital A/c |
6,000 4,000 |
|||
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|
12,000 |
|
12,000 |
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Capital A/c |
|||||||
|
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
|
To
Balance c/d |
2,12,200 |
1,74,800 |
1,00,000 |
By
Balance b/d By
revaluation A/c By
Investment Fluctuation Fund (WN2) By
General Reserve A/c(WN3) By
Bank A/c By
Premium A/c (WN4) |
1,60,000 6,000 1,200 15,000 - 30,000 |
140,000 4,000 800 10,000 - 20,000 |
- - - - 1,00,000 - |
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|
2,12,200 |
1,74,800 |
1,00,000 |
|
2,12,200 |
1,74,800 |
1,00,000 |
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Balance Sheet |
||||||
|
Particulars |
` |
Particulars |
` |
|||
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Creditors O/s Salary Capitals A/cs: |
30,000 2,000 4,87,000 |
Cash (WN5) |
1,82,000 |
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Debtors Less: Pro. D. D. |
85,000 5,000 |
80,000 |
||||
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Stock Investment Furniture |
1,30,000 50,000 77,000 |
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A B C |
2,12,200 1,74,800 1,00,000 |
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|
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5,19,000 |
|
5,19,000 |
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Working Notes;
WN1 Distribution of Revaluation Gain in 3:2
A=10,000×3/5=6,000
B=10,000×2/5=4,000
WN2 Investment fluctuation Reserve in 3:2
A = 2,000×3/5 =
1,200
B = 2,000×2/5 =
800
WN3 General Reserve in 3:2
A = 25,000×3/5 =
15,000
B = 25,000×2/5 =
10,000
\
WN4 Distribution of Premium in Sacrificing Ratio 3:2
A = 50,000×3/5 =
30,000
B = 50,000×2/5 =
20,000
WN5 Cash balance
Cash Balance = 20,000+1,00,000+50,000+12,000
Cash Balance = 1,82,000
Question 69:
Divya, Yasmin and Fatima are partners in a firm, sharing profits and losses in 11 : 7 : 2 respectively. The Balance Sheet of the firm on 31st March, 2018 was as follows:
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BALANCE SHEET as at
31st March, 2018 |
|||||
|
Liabilities |
` |
Assets |
` |
||
|
Sundry
Creditors |
70,000 |
Factory
Building |
7,35,000 |
||
|
Public
Deposits |
1,19,000 |
Plant
and Machinery |
1,80,000 |
||
|
Reserve
Fund |
90,000 |
Furniture |
2,60,000 |
||
|
Outstanding
Expenses |
10,000 |
Stock |
1,45,000 |
||
|
Capital
A/cs: |
|
Debtors |
1,50,000 |
|
|
|
Divya |
5,10,000 |
|
Less: Provision |
(30,000) |
1,20,000 |
|
Yasmin |
3,00,000 |
|
Cash
at Bank |
1,59,000 |
|
|
Fatima |
5,00,000 |
13,10,000 |
|
|
|
|
|
15,99,000 |
|
15,99,000 |
||
|
|
|
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|
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On 1st April, 2018, Aditya is admitted as a partner for one-fifth share in
the profits with a capital of ` 4,50,000 and necessary amount for his share of goodwill on
the following terms:
(a) Furniture of ` 2,40,000 were to be taken over Divya, Yasmin and Fatima
equally.
(b) A creditor of ` 7,000 not recorded in books to be taken into account.
(c) Goodwill of the firm is to be valued at 2.5 years' purchase of average
profits of last two years. The profit of the last three years were:
2015-16 − ` 6,00,000; 2016-17 − ` 2,00,000; 2017-18 − ` 6,00,000.
(d) At time of Aditya's admission. Yasmin also brought in ` 50,000 as fresh capital.
(e) Plant and Machinery is re-valued to
` 2,00,000 and expenses
outstanding were brought down to ` 9,000.
Prepare Revaluation Account, Partners Capital Account and the Balance Sheet of
the reconstituted firm.
Answer:
|
In the books of Divya, Yasmin, Fatima and Aditya |
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|
Dr. |
Revaluation A/c |
Cr. |
||||
|
Particulars |
` |
Particulars |
` |
|||
|
To
Sundry Creditors A/c |
7,000 |
By
Plant and Machinery A/c |
20,000 |
|||
|
To
Profit Transferred to: |
|
By
Outstanding Expenses A/c |
1,000 |
|||
|
Divya’s
Capital A/c |
7,700 |
|
|
|
||
|
Yasmin’s Capital A/c |
4,900 |
|
|
|
||
|
Fatima’s Capital A/c |
1,400 |
14,000 |
|
|
||
|
|
|
|
|
|||
|
|
21,000 |
|
21,000 |
|||
|
|
|
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|
|||
|
Dr. |
Partner’s Capital A/c |
Cr. |
|||||||||
|
Particulars |
Divya ` |
Yasmin ` |
Fatima ` |
Aditya ` |
Particulars |
Divya ` |
Yasmin ` |
Fatima ` |
Aditya ` |
||
|
To
Furniture A/c |
80,000 |
80,000 |
80,000 |
|
By
balance b/d |
5,10,000 |
3,00,000 |
5,00,000 |
|
||
|
|
|
|
|
|
By
Bank A/c |
|
50,000 |
|
4,50,000 |
||
|
To
balance c/d |
5,97,200 |
3,76,400 |
4,50,400 |
4,50,000 |
By
Premium |
1,10,000 |
70,000 |
20,000 |
|
||
|
|
|
|
|
|
for
Goodwill A/c |
|
|
|
|
||
|
|
|
|
|
|
By
Reserve Fund A/c |
49,500 |
31,500 |
9,000 |
|
||
|
|
|
|
|
|
By
Revaluation A/c |
7,700 |
4,900 |
1,400 |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
6,77,200 |
4,56,400 |
5,30,400 |
4,50,000 |
|
6,77,200 |
4,56,400 |
5,30,400 |
4,50,000 |
||
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||
Working Notes:
Calculation of Goodwill brought in by Aditya
|
Average
Profits |
= |
(Normal
profits from 31st March, 2017 to 31st March, 2018)/2 |
|
|
= |
` (2,00,000 + 6,00,000)/2=
`
4,00,000 |
|
Goodwill |
= |
Average
Profits × No. of years of Purchase |
|
|
= |
` (4,00,000 × 2.5) =
`
10,00,000 |
|
Goodwill
brought in by Aditya |
= |
` (10,00,000 × 1/5) = ` 2,00,000 |
|
Balance Sheet |
|||||
|
as at 31st March, 2018 |
|||||
|
Liabilities |
` |
Assets |
` |
||
|
Capitals: |
|
Factory
Building |
7,35,000 |
||
|
Divya |
5,97,200 |
|
Plant
and Machinery |
2,00,000 |
|
|
Yasmin |
3,76,400 |
|
Furniture |
20,000 |
|
|
Fatima |
4,50,400 |
|
Stock |
1,45,000 |
|
|
Aditya |
4,50,000 |
18,74,000 |
Debtors |
1,50,000 |
|
|
Sundry
Creditors |
77,000 |
Less: Provision |
(30,000) |
1,20,000 |
|
|
Public
Deposits |
1,19,000 |
Cash
at Bank |
8,59,000 |
||
|
Outstanding
Expenses |
9,000 |
(1,59,000
+ 2,00,000 + 50,000 + 4,50,000) |
|
||
|
|
|
|
|
||
|
|
20,79,000 |
|
20,79,000 |
||
|
|
|
|
|
||
Question 70:
A and B are partners
in a firm. The net profit of the firm is divided as follows: 1/2 to A,
1/3 to B and 1/6 carried to a Reserve. They admit C as a
partner on 1st April, 2023 on which date, the Balance Sheet of the firm was:
|
|
||||
|
Liabilities |
` |
Assets |
` |
|
|
Capital
A/cs: |
|
Building |
50,000 |
|
|
A |
50,000 |
|
Plant
and Machinery |
30,000 |
|
B |
40,000 |
90,000 |
Stock |
18,000 |
|
Reserve |
|
10,000 |
Debtors |
22,000 |
|
Creditors |
|
20,000 |
Bank |
5,000 |
|
Outstanding
Expenses |
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
1,25,000 |
|
1,25,000 |
|
|
|
|
|
|
Following
are the required adjustments on admission of C:
(a) C brings in ` 25,000 towards his capital.
(b) C also brings in ` 5,000 for 1/5th share of
goodwill.
(c) Stock is undervalued by 10%.
(d) Creditors include a liability of
` 4,000, which has been
decided by the court at ` 3,200.
(e) In regard to the Debtors, the following Debts proved Bad or Doubtful−
` 2,000 due from X−bad to the full extent;
` 4,000 due from Y−insolvent, estate expected to pay
only 50%.
You are required to prepare Revaluation Account, Partners' Capital Accounts and
Balance Sheet of the new firm.
Answer:
|
Revaluation Account |
|||
|
Dr. |
|
|
Cr. |
|
Particulars |
` |
Particulars |
` |
|
Bad Debts |
2,000 |
Stock |
2,000 |
|
Provision for Doubtful Debts |
2,000 |
Creditors (4,000 – 3,200) |
800 |
|
(4,000 × 50%) |
|
|
|
|
|
|
Loss transferred to |
|
|
|
|
A Capital |
720 |
|
|
|
B Capital |
480 |
|
|
4,000 |
|
4,000 |
|
|
|
|
|
|
Partners’ Capital Accounts |
|||||||
|
Dr. |
|
|
|
|
|
|
Cr. |
|
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
|
Revaluation |
720 |
480 |
|
Balance b/d |
50,000 |
40,000 |
|
|
|
|
|
|
Reserve |
6,000 |
4,000 |
|
|
|
|
|
|
Bank |
|
|
25,000 |
|
Balance c/d |
58,280 |
45,520 |
25,000 |
Premium for Goodwill |
3,000 |
2,000 |
|
|
|
59,000 |
46,000 |
25,000 |
|
59,000 |
46,000 |
25,000 |
|
|
|
|
|
|
|
|
|
|
Balance Sheet as on April 01, 2023 after C’s admission |
|||||
|
Liabilities |
` |
Assets |
` |
||
|
Capital A/cs: |
|
Building |
50,000 |
||
|
A |
58,280 |
|
Plan and Machinery |
30,000 |
|
|
B |
45,520 |
|
Stock (18,000 × 100/90) |
20,000 |
|
|
C |
25,000 |
1,28,800 |
Debtors |
22,000 |
|
|
Creditors (20,000 – 800) |
19,200 |
Less: Bad Debts |
2,000 |
|
|
|
Outstanding Expenses |
5,000 |
Less: Prov. for D. Debts |
2,000 |
18,000 |
|
|
|
|
Bank (5,000 + 30,000) |
35,000 |
||
|
|
1,53,000 |
|
1,53,000 |
||
|
|
|
|
|
||
Working Notes
WN1
old ration ; ½:1/3=3:2
Sacrificing ratio=3:2
WN2
Distribution of Reserve
A will get =10,000×3/5=6,000
B will get =10,000×2/5=4,000
WN3
Distribution of Premium for Goodwill
A will get =5,000×3/5=3,000
B will get =5,000×2/5=2,000
Ts Grewal Solution 2023-2024
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Class 12 / Volume – I