Question
21:
Karim, Rehman and Navel are partners sharing profits and losses in the ratio of 5 : 3 : 2. Their Balance Sheet as at 31st March, 2022 stood as follows:
|
|
||||
|
Liabilities |
(
`) |
Assets |
(
`) |
|
|
Capital
A/cs: |
|
Land
and Building |
3,50,000 |
|
|
Karim |
2,50,000 |
|
Machinery |
2,40,000 |
|
Rehman |
2,50,000 |
|
Computers |
70,000 |
|
Navel |
2,00,000 |
7,00,000 |
Investments
(Market value ` 90,000) |
1,00,000 |
|
General
Reserve |
|
60,000 |
Sundry
Debtors |
50,000 |
|
Investments
Fluctuation Reserve |
|
30,000 |
Cash
in Hand |
10,000 |
|
Sundry
Creditors |
|
90,000 |
Cash
at Bank |
55,000 |
|
|
|
|
Advertisement
Suspense |
5,000 |
|
|
|
8,80,000 |
|
8,80,000 |
|
|
|
|
|
|
They decided to share profits equally w.e.f.
1st April, 2022. They also agreed that:
(i) Value of Land and Building be decreased by 5%.
(ii) Value of Machinery be increased by 5%.
(iii) A Provision for Doubtful Debts be created @ 5% on Sundry Debtors.
(iv) A Motor Cycle valued at ` 20,000 was unrecorded and is now to be
recorded in the books.
(v) Out of Sundry Creditors, ` 10,000 is not payable.
(vi) Goodwill is to be valued at 2 years' purchase of
last 3 years profits. Profits being for 2022 − `
50,000 (Loss); 2021 − ` 2,50,000 and 2020− ` 2,50,000.
(vii) Navel was to carry out the work for reconstituting the firm at a
remuneration (including expenses) of ` 5,000. Expenses came to `
3,000.
Pass Journal entries and prepare Revaluation Account.
Answer:
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit ( `) |
Credit ( `) |
|
|
2022 |
|
|
|
|
|
|
April
1 |
General Reserve A/c |
Dr. |
|
60,000 |
|
|
|
To Karim’s Capital A/c |
|
|
|
30,000 |
|
|
To Rehman’s
Capital A/c |
|
|
|
18,000 |
|
|
To Navel’s Capital A/c |
|
|
|
12,000 |
|
|
(Being Reserve distributed) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Karim’s Capital A/c |
Dr |
|
2,500 |
|
|
|
Rehman’s Capital
A/c |
Dr. |
|
1,500 |
|
|
|
Navel’s Capital A/c |
Dr. |
|
1,000 |
|
|
|
To Advertisement Suspense A/c |
|
|
|
5,000 |
|
|
(Being Advertisement Suspense distributed) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Fluctuation Reserve A/c |
Dr. |
|
30,000 |
|
|
|
To Investment A/c |
|
|
|
10,000 |
|
|
To A’s Capital A/c |
|
|
|
10,000 |
|
|
To B’s Capital A/c |
|
|
|
6,000 |
|
|
To C’s Capital A/c |
|
|
|
4,000 |
|
|
(Being Investment Fluctuation Reserve distributed) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery A/c |
Dr. |
|
12,000 |
|
|
|
Motor Cycle A/c |
Dr. |
|
20,000 |
|
|
|
Creditors A/c |
Dr. |
|
10,000 |
|
|
|
To Revaluation A/c |
|
|
|
42,000 |
|
|
(Being Assets revalued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revaluation A/c |
|
|
25,000 |
|
|
|
To Land & Building A/c |
|
|
|
17,500 |
|
|
To Provision for Doubtful Debts A/c |
|
|
|
2,500 |
|
|
To Bank A/c (Remuneration) |
|
|
|
5,000 |
|
|
(Being Assets revalued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revaluation A/c |
|
|
17,000 |
|
|
|
To Karim’s Capital A/c |
|
|
|
8,500 |
|
|
To Rehman’s Capital A/c |
|
|
|
5,100 |
|
|
To Navel’s Capital A/c |
|
|
|
3,400 |
|
|
(Being Profit on revaluation transferred to Partners’ Capital A/c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Rehman’s Capital
A/c |
Dr. |
|
10,000 |
|
|
|
Navel’s Capital A/c |
Dr. |
|
40,000 |
|
|
|
To Karim’s Capital A/c |
|
|
|
50,000 |
|
|
(Being Goodwill adjusted) |
|
|
|
|
|
|
|
|
|
|
|
|
Revaluation A/c |
|
||||||||
|
Dr. |
|
Cr. |
|||||||
|
Particulars |
( `) |
Particulars |
( `) |
|
|||||
|
Land & Building A/c |
17,500 |
Machinery A/c |
12,000 |
|
|||||
|
Provision for Doubtful Debts A/c |
2,500 |
Motor Cycle A/c |
20,000 |
|
|||||
|
Bank A/c (Remuneration) |
5,000 |
Creditors A/c |
10,000 |
|
|||||
|
Profit transferred to: |
|
|
|
|
|||||
|
Karim’s Capital A/c |
8,500 |
|
|
|
|
||||
|
Rehman’s Capital
A/c |
5,100 |
|
|
|
|
||||
|
Navel’s Capital A/c |
3,400 |
17,000 |
|
|
|
||||
|
|
42,000 |
|
42,000 |
|
|||||
|
|
|
|
|
|
|||||
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|
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Working Notes:
WN1: Calculation of sacrifice or gain
Karim:Rehman:
Navel=5:3:2(Old Ratio)
Karim:Rehman: Navel
=1:1:1(New Ratio)
Sacrificing (or Gaining Ratio) = Old Ratio - New Ratio
Karim's share=5/10−1/3=15−10/30=5/30(Sacrifice)
Rehman's share=3/10−1/3=9−10/30=−1/30(Gain)
Navel 's share=2/10−1/3=6−10/30=−4/30(Gain)
WN2: Valuation
of Goodwill
Goodwill=Average Profit×No. of years' Purchase
=1,50,000×2= ` 3,00,000
WN3: Adjustment of Goodwill
Amount credited to Karim's Capital A/c=3,00,000×5/30= ` 50,000
Amount debited to Rehman's Capital A/c=3,00,000×1/30= ` 10,000
Amount debited to Navel's Capital A/c=3,00,000×4/30= ` 40,000
Question 22: Hari, Kunal and Uma are partners in a firm sharing profits and losses in the ratio of 5 :3: 2. From 1st April, 2018 they decided to share future profits and losses in the ratio of 2:5:3.Their Balance Sheet showed a balance of 75,000 in the Profit and Loss Account and a balance of `15,000 in Investment Fluctuation Fund. For this purpose, it was agreed that:
(i) Goodwill of the firm was valued at `3,00,000.
(ii) That investments (having a book value of R 50,000) were valued at `35,000.
(iii) That stock having a book value of `50,000 be depreciated by 109%.
Pass the necessary Journal entries for the above in the books of the firm. (CBSE 2019)
Answer;
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit ( `) |
Credit ( `) |
|
|
2022 |
Kunal’s Capital
A/c |
Dr |
|
60,000
30,000 |
90,000 |
|
|
Uma’s Capital A/c |
Dr. |
|
||
|
|
To Hari’s Capital A/c |
|
|
||
|
|
(Being Goodwill adjusted) |
|
|
|
|
|
|
|
|
|
15,000 |
15,000 |
|
|
Investment Fluctuation Reserve A/c |
Dr. |
|
||
|
|
To Investment A/c |
|
|
||
|
|
(Being decrease in the value of investment, adjusted in Investment
Fluctuation Reserve) |
|
|
||
|
|
|
|
|
|
|
|
|
Revaluation A/c |
Dr. |
|
5,000 |
|
|
|
To Stock A/c |
|
|
|
5,000 |
|
|
(Being decrease in the value of Stock debited in revaluation a/c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery A/c |
Dr. |
|
12,000 |
|
|
|
Motor Cycle A/c |
Dr. |
|
20,000 |
|
|
|
Creditors A/c |
Dr. |
|
10,000 |
|
|
|
To Revaluation A/c |
|
|
|
42,000 |
|
|
(Being Assets revalued) |
|
|
|
|
|
|
Profit and loss a/c |
Dr. |
|
75,000 |
|
|
|
To Hari’s Capital A/c |
|
|
|
37,500 |
|
|
To Kunal’s
Capital A/c |
|
|
|
22,100 |
|
|
To Uma’s Capital A/c |
|
|
|
15,000 |
|
|
(Being Profit on revaluation transferred to Partners’ Capital A/c) |
|
|
|
|
|
|
Hari’s Capital A/c |
Dr. |
|
2,500 |
|
|
|
Kunal’s Capital
A/c |
Dr. |
|
1,500 |
|
|
|
Uma’s Capital A/c |
Dr. |
|
1,000 |
|
|
|
To Revaluation A/c |
|
|
|
5,000 |
|
|
(Being loss of revaluation a/c is debited to partners’ capital a/c
) |
|
|
|
|
|
|
|
|
|
|
|
Working
notes;
Old ratio = Hari : Kunal : Uma = 5:3:2
New ratio = Hari : Kunal
: Uma = 2:5:3
Sacrificing ratio = Old ratio-new
ratio
Hari= 5/10-2/10=5-2/10=3/10
(Sacrifice)
Kunal= 3/10-5/10=3-5/10= -2/10 (gain)
Uma= 2/10-3/10=2-3/10= -1/10
(gain)
Treatment
of goodwill
Goodwill
of the firm 3,00,000
Share of
Hari= 3,00000×3/10
=90,000
Share of
Kunal= 3,00,000×2/10 =60,000
Share of
Uma= 3,00,000
×1/10 =30,000
Question
23:
A, B and C are sharing profits and losses
in the ratio of 2 : 2 : 1. They decided to share
profit w.e.f. 1st April, 2022 in the ratio
of 5 : 3 : 2. They also decided not to change the
values of assets and liabilities in the books of account. The book values and
revised values of assets and liabilities as on the date of change were as
follows:
|
|
Book values (
`) |
Revised values
( `) |
|
Machinery |
2,50,000 |
3,00,000 |
|
Computers |
2,00,000 |
1,75,000 |
|
Sundry
Creditors |
90,000 |
75,000 |
|
Outstanding
Expenses |
15,000 |
25,000 |
Pass an adjustment entry.
Answer:
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit ( `) |
Credit ( `) |
|
|
2022 |
|
|
|
|
|
|
April 1 |
A’s Capital A/c (30,000×110=3,000) |
Dr. |
|
3,000 |
|
|
|
To B’s Capital A/c |
|
|
|
3,000 |
|
|
(Being Adjustment entry made for change in ratio) |
|
|
|
|
|
|
|
|
|
|
|
Working Notes:
WN1: Calculation
of Sacrifice or Gain
A:B:C=2:2:1(Old Ratio)
A:B:C=5:3:2(New Ratio)
Sacrificing (or Gaining Ratio) = Old Ratio - New Ratio
A's share=2/5−5/10=4−5/10=−1/10(Gain)
B's share=2/5−3/10=4−3/10=1/10(Sacrifice)
C's share=1/5−2/10=2−2/10=0
WN2: Calculation of Profit or Loss on Revaluation
|
Revaluation A/c |
|||||
|
Dr. |
|
Cr. |
|||
|
Particulars |
( `) |
Particulars |
( `) |
||
|
Computers A/c |
25,000 |
Machinery A/c |
50,000 |
||
|
Outstanding expenses A/c |
10,000 |
Creditors A/c |
15,000 |
||
|
Profit on Revaluation |
30,000 |
|
|
||
|
|
|
|
|
||
|
|
65,000 |
|
65,000 |
||
|
|
|
|
|
||
Question 24: A, B
and C were partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance Sheet as on 31st March, 2015 was as
follows:
|
|
|
|||
|
Liabilities |
(
`) |
Assets |
(
`) |
|
|
Creditors |
50,000 |
Land |
50,000 |
|
|
Bills
Payable |
20,000 |
Building |
50,000 |
|
|
General
Reserve |
30,000 |
Plant |
1,00,000 |
|
|
Capital
A/cs: |
|
Stock |
40,000 |
|
|
A |
1,00,000 |
|
Debtors |
30,000 |
|
B |
50,000 |
|
Bank |
5,000 |
|
C |
25,000 |
1,75,000 |
|
|
|
|
2,75,000 |
|
2,75,000 |
|
|
|
|
|
|
|
From 1st April, 2015, A, B
and C decided to share profits equally. For this it was agreed that:
(i) Goodwill of the firm will be valued at
`
1,50,000.
(ii) Land will be revalued at ` 80,000 and building be depreciated by 6%.
(iii) Creditors of
` 6,000 were not likely to be claimed and hence should be written
off.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of
the reconstituted firm.
Answer:
|
Revaluation Account |
||||
|
Dr. |
Cr. |
|||
|
Particulars |
( `) |
Particulars |
( `) |
|
|
Building A/c |
3,000 |
Land A/c |
30,000 |
|
|
Revaluation
Profit |
|
Creditors A/c |
6,000 |
|
|
A |
16,500 |
|
|
|
|
B |
11,000 |
|
|
|
|
C |
5,500 |
33,000 |
|
|
|
|
|
|
|
|
|
|
36,000 |
|
36,000 |
|
|
|
|
|
|
|
|
Partners’ Capital Account |
|||||||
|
Dr. |
Cr. |
||||||
|
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
|
A’s Capital A/c |
- |
- |
25,000 |
Balance b/d |
1,00,000 |
50,000 |
25,000 |
|
Balance c/d |
1,56,500 |
71,000 |
10,500 |
R/v Profit |
16,500 |
11,000 |
5,500 |
|
|
|
|
|
General Reserve |
15,000 |
10,000 |
5,000 |
|
|
|
|
|
C’s Capital A/c |
25,000 |
- |
- |
|
|
1,56,500 |
71,000 |
35,500 |
|
1,56,500 |
71,000 |
35,500 |
|
|
|
|
|
|
|
|
|
|
Balance Sheet as on March 31, 2015 |
|||||
|
Liabilities |
( `) |
Assets |
( `) |
||
|
Capital A/c |
|
Land |
50,000 |
|
|
|
A |
1,56,500 |
|
Add:
Increase |
30,000 |
80,000 |
|
B |
71,000 |
|
Building |
50,000 |
|
|
C |
10,500 |
2,38,000 |
Less:
Dep. |
3,000 |
47,000 |
|
|
|
Plant |
1,00,000 |
||
|
Creditors |
50,000 |
|
Bank |
5,000 |
|
|
Less:
Written-off |
6,000 |
44,000 |
Stock |
40,000 |
|
|
Bills Payable |
20,000 |
Debtors |
30,000 |
||
|
|
|
|
|
||
|
|
3,02,000 |
|
3,02,000 |
||
|
|
|
|
|
||
Working
Notes
A's share=3/6−1/3 = 1/6 (Sacrifice)
B's share=2/6−1/3 = Nil
C's share=1/6−1/3 = -1/6 (Gain)
C will compensate by passing an entry
|
C’s capital a/c To A’s capital a/c |
Dr. |
25,000 |
25,000 |
Question
25:
Balance Sheet of X and Y, who share profits and losses as 5 : 3, as at 1st April, 2022 is:
|
|
|||
|
Liabilities |
(
`) |
Assets |
(
`) |
|
X's Capital |
52,000 |
Goodwill |
8,000 |
|
Y's Capital |
54,000 |
Machinery |
38,000 |
|
General
Reserve |
4,800 |
Furniture |
15,000 |
|
Sundry
Creditors |
5,000 |
Sundry
Debtors |
33,000 |
|
Employees'
Provident Fund |
1,000 |
Stock |
7,000 |
|
Workmen
Compensation Reserve |
10,000 |
Bank |
25,000 |
|
|
|
Advertisement
Suspense A/c |
800 |
|
|
|
|
|
|
|
1,26,800 |
|
1,26,800 |
|
|
|
|
|
On the above date, they decided to change their profit-sharing ratio to 3 : 5 and agreed upon the following:
(a) Goodwill be valued on the basis of two years' purchase of the average
profit of the last three years. Profits for the years ended 31st March, are: 2020
− ` 7,500; 2021 − ` 4,000; 2022 − ` 6,500.
(b) Machinery and Stock be revalued at ` 45,000 and
`
8,000 respectively.
(c) Claim on account of workmen compensation is ` 6,000.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet
of the new firm.
Answer:
|
Revaluation Account |
||||
|
Dr. |
Cr. |
|||
|
Particulars |
(
`) |
Particulars |
(
`) |
|
|
Profit
transferred to: |
|
Machinery |
7,000 |
|
|
X’s Capital A/c |
5,000 |
|
Stock |
1,000 |
|
Y’s Capital A/c |
3,000 |
8,000 |
|
|
|
|
8,000 |
|
8,000 |
|
|
|
|
|
|
|
|
||||
|
Partners’ Capital Account |
|||||
|
Dr. |
Cr. |
||||
|
Particulars |
X |
Y |
Particulars |
X |
Y |
|
Advertisement
Suspense A/c |
500 |
300 |
Balance b/d |
52,000 |
54,000 |
|
Goodwill A/c |
5,000 |
3,000 |
General Reserve
A/c |
3,000 |
1,800 |
|
X’s Capital |
– |
3,000 |
WCF |
2,500 |
1,500 |
|
(Adjustment of
Goodwill) |
|
|
Revaluation A/c
(Profit) |
5,000 |
3,000 |
|
|
|
|
Y’s Capital A/c |
3,000 |
– |
|
Balance c/d |
60,000 |
54,000 |
(Adjustment of Goodwill) |
|
|
|
|
|
|
|
|
|
|
|
65,500 |
60,300 |
|
65,500 |
60,300 |
|
|
|
|
|
|
|
|
Balance Sheet |
|||
|
as on April 01, 2022 (after Change in Profit Sharing Ratio) |
|||
|
Liabilities |
( `) |
Assets |
( `) |
|
X’s Capital |
58,500 |
Machinery (38,000 + 7,000) |
45,000 |
|
Z’s Capital |
55,500 |
Furniture |
15,000 |
|
Sundry Creditors |
5,000 |
Sundry Debtors |
33,000 |
|
Employees’
Provident Fund |
1,000 |
Stock (7,000 +
1,000) |
8,000 |
|
Workmen’s
Compensation Reserve |
6,000 |
Bank |
25,000 |
|
|
1,26,000 |
|
1,26,000 |
|
|
|
|
|
Working Notes:
WN 1 Calculation of Sacrificing (or Gaining) Ratio
Old Ratio (X and Y) = 5 : 3
New Ratio (X and Y) = 3 : 5
Sacrificing (or Gaining) Ratio = Old Ratio − New Ratio
X's share=5/8−3/8=2/8 (Sacrifice)
Y's share=3/8−5/8=−2/8 (Gain)
WN 2 Calculation of New Goodwill
Goodwill = Average Profit × Number of Year′s Purchase = 6,000 × 2 = ` 12,000
Average profit= 7,500+4,000+6,500/3=6,000
∴Goodwill = 6,000 × 2 = ` 12,000
WN 3 Adjustment of Goodwill
Amount to be debited to X’s capital=12,000×2/8 =3,000
Amount to be debited to Y’s capital=12,000×2/8 =3,000
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit (
`) |
Credit (
`) |
|
|
|
Workmen’s
Compensation Reserve A/c |
Dr. |
|
10,000 |
|
|
|
To Workmen’s Compensation Claim A/c |
|
|
6,000 |
|
|
|
To X’s Capital A/c |
|
|
2,500 |
|
|
|
To Y’s Capital A/c |
|
|
1,500 |
|
|
|
(Being Workmen’s
compensation claim distributed among partners in their old ratio i.e. 5 : 3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
X’s Capital A/c |
Dr. |
|
5,000 |
|
|
|
Y’s Capital A/c |
Dr. |
|
3,000 |
|
|
|
To Goodwill A/c |
|
|
8,000 |
|
|
|
(Being Goodwill
written off among partners in their old ratio) |
|
|
|
|
|
|
|
|
|
|
|
|
|
X’s Capital A/c |
Dr. |
|
500 |
|
|
|
Y’s Capital A/c |
Dr. |
|
300 |
|
|
|
To Advertisement Suspense A/c |
|
|
800 |
|
|
|
(Being Advertisement
Suspense written off among partners in their old ratio) |
|
|
|
|
|
|
|
|
|
|
|
|
|
General Reserve
A/c |
Dr. |
|
4,800 |
|
|
|
To X’s Capital A/c |
|
|
3,000 |
|
|
|
To Y’s Capital A/c |
|
|
1,800 |
|
|
|
(Being General
Reserve distributed among partners in their old ratio) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revaluation A/c |
Dr. |
|
8,000 |
|
|
|
To X’s Capital A/c |
|
|
5,000 |
|
|
|
To Y’s Capital A/c |
|
|
3,000 |
|
|
|
(Being Revaluation
profit distributed among partners in their old ratio) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Y’s Capital A/c |
Dr. |
|
3,000 |
|
|
|
To X’s Capital A/c |
|
|
3,000 |
|
|
|
(Being Adjustment
of goodwill made) |
|
|
|
|
|
|
|
|
|
|
|
Ts Grewal Solution 2022-2023
Click below for more Questions
Class 12 / Volume – I
Chapter 1 – Change in Profit-Sharing Ratio Among the Existing Partner
Question No. 1 To 5
Question No. 5 To 10
Question No. 11 To 15
Question No. 16 To 20
Question No. 21 To 25
Question No. 26 To 27
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12th TS Grewal’s Accountancy Solutions