Question 31:
X, Y and Z were equal partners in a firm. On 31st March, 2023, their Balance Sheet was as follows:
|
Liabilities |
` |
Assets |
` |
|
Creditors |
77,000 |
Bank |
47,000 |
|
General Reserve |
26,000 |
Debtors |
23,000 |
|
Workmen Compensation Reserve |
32,000 |
Stock |
1,10,000 |
|
Capital A/cs: |
|
Investments |
17,000 |
|
X 60,000 |
|
Furniture |
10,000 |
|
Y 40,000 |
|
Machinery |
35,000 |
|
N 20,000 |
1,20,000 |
Profit & Loss A/c |
11,000 |
|
|
|
Advertisement Suspense A/c |
2,000 |
|
|
2,55,000 |
|
2,55,000 |
On the above date, Z retires from the firm and X and Y decided to share future profits in the ratio of 3 :2 Partners decide to show accumulated profits, losses and reserves in the Balance Sheet of the reconstituted firm at their original values.
Pass an 'Adjustment Entry' for the treatment of accumulated profits, losses and reserves.
Answer:
|
Date |
Particulars |
|
Dr. (`) |
Cr. (`) |
|
|
X’s Capital A/c |
Dr. |
12,000 |
|
|
|
Y's Capital A/c |
Dr. |
3,000 |
|
|
|
To
Z's Capital A/c |
|
|
15,000 |
|
|
(Being accumulated profits, losses and reserve adjusted) |
|
|
|
Working Note:
Net effect of accumulated profits, losses and reserve
|
General Reserve |
26,000 |
|
Workmen Compensation Reserve |
32,000 |
|
|
58,000 |
|
Less: |
|
|
Profit & Loss A/c |
11,000 |
|
Advertisement Suspense |
2,000 |
|
|
45,000 |
Note; Above amount is to be adjusted in Gaining sacrificing ratio
|
X = |
45,000 |
× |
4/15 |
= |
12,000 |
|
Y = |
45,000 |
× |
1/15 |
= |
3,000 |
|
Z = |
45,000 |
× |
5/15 |
= |
15,000 |
Gaining sacrificing
ratio
|
|
Old Ratio |
- |
New ratio |
= |
(-) Gain/(+) Sacrifice |
||
|
X = |
1/3 |
- |
3/5 |
= |
5-9/15 |
= |
-4/15 |
|
Y = |
1/3 |
- |
2/5 |
= |
5-6/15 |
= |
-1/15 |
|
Z = |
1/3 |
- |
0/5 |
= |
5-0/15 |
= |
5/15 |
Question 32:
Partnership
Deed of C and D, who are equal partners, has a clause that
any partner may retire from the firm on the following terms by giving a
six-month notice in writing:
The retiring partner shall be paid−
(a) the amount standing to the credit of his Capital Account and Current
Account.
(b) his share of profit to the date of retirement,
calculated on the basis of the average profit of the three preceding completed
years.
(c) half the amount of the goodwill of the firm
calculated at 11/2 times the average profit of the three
preceding completed years.
C gave a notice on 31st March, 2021 to retire on 30th September,
2021, when the balance of his Capital Account was ` 6,000 and his Current Account
(Dr.)
` 500. Profits for the three preceding completed years
ended 31st March, were: 2019 − `
2,800; 2020 − `
2,200 and 2021 − `
1,600. What amount is due to C as per the partnership
agreement?
Answer:
|
C’s Capital Account |
|||||
|
Dr. |
|
Cr. |
|||
|
Particulars |
` |
Particulars |
` |
||
|
C’s
Loan A/c |
7,700 |
Balance
b/d |
6,000 |
||
|
|
|
C’s
Current A/c |
1,700 |
||
|
|
7,700 |
|
7,700 |
||
|
|
|
|
|
||
|
C’s Current Account |
|||||
|
Dr. |
|
Cr. |
|||
|
Particulars |
` |
Particulars |
` |
||
|
Balance
b/d |
500 |
Profit
and Loss Suspense A/c (Share of profit) (WN 1) |
550 |
||
|
C’s
Capital A/c (balancing figure) |
1,700 |
D’s
Current A/c (Share of goodwill) (WN 2) |
1,650 |
||
|
|
2,200 |
|
2,200 |
||
|
|
|
|
|
||
Working Notes:
WN 1 Calculation of Profit (from April 01, 2021
to Sept. 30, 2021)
Average profit = total profit of past
given years/number of years
Average
profit =2,800+2,200+1,600/3=2,200
C’s share of profit (for last 6 month)=Average
profit×C’s share×6/12
=2,200×1/2×6/12=550
WN 2 Calculation
of Goodwill
Goodwill = Average Profit × 1.5
= 2,200 × 1.5 = ` 3,300
C’s Share of Goodwill =3,300×1/2=1650
Question 33:
Alfa, Beta and Gama are in partnership sharing profits in the ratio of 5:3:2.Their Balance Sheet on 1st April, 2022, the day Beta decided to retire from firm, was as follows:
|
Liabilities |
` |
Assets |
` |
|
Alfa's Capital |
3,00,000 |
Building |
2,50,000 |
|
Beta's Capital |
2,00,000 |
Machinery |
1,50,000 |
|
Gama's Capital |
2,00,000 |
Investments |
2.50,000 |
|
General Reserve |
1,00,000 |
Debtors |
1,00,000 |
|
Sundry Creditors |
1,00,000 |
Stock |
50,000 |
|
|
|
Cash at Bank |
1,00,000 |
|
|
9,00,000 |
|
9,00,000 |
The terms of retirement were:
(i) Beta takes goodwill from Alfa for ` 30,000 and from Gama for ` 40,000 for foregoing his share of profits.
(ii) Stock to be appreciated by 20% and building by 50,000.
(iii) Investments were sold for 2,70,000.
(iv) Beta is paid by bank draft.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.
Answer:
|
Revaluation A/c |
|||
|
Particulars |
` |
Particulars |
` |
|
Gain |
|
Building |
50,000 |
|
Capital A/cs: |
|
Investments |
20,000 |
|
Alfa's 40,000 |
|
Stock |
10,000 |
|
Beta's 24,000 |
|
|
|
|
Gama's 16,000 |
80,000 |
|
|
|
|
80,000 |
|
80,000 |
|
Capital A/c |
|||||||
|
Particulars |
Alfa |
Beta |
Gama |
Particulars |
Alfa |
Beta |
Gama |
|
To Beta's Capital A/c |
30,000 |
- |
40,000 |
By Balance B/d |
3,00,000 |
2,00,000 |
2,00,000 |
|
To Bank A/c |
- |
3,24,000 |
- |
By Revaluation A/c |
40,000 |
24,000 |
16,000 |
|
To Balance C/d |
3,60,000 |
- |
1,96,000 |
By General Reserve |
50,000 |
30,000 |
20,000 |
|
|
|
|
|
By Alfa's Capital A/c |
- |
30,000 |
- |
|
|
|
|
|
By Gama's Capital A/c |
- |
40,000 |
- |
|
|
3,90,000 |
3,24,000 |
2,36,000 |
|
3,90,000 |
3,24,000 |
2,36,000 |
|
Balance Sheet |
|||
|
Liabilities
|
` |
Assets |
` |
|
Alfa's
Capital |
3,60,000 |
Building |
3,00,000 |
|
Beta's
Capital |
1,96,000 |
Machinery |
1,50,000 |
|
Sundry
Creditors |
1,00,000 |
Debtors |
1,00,000 |
|
|
|
Stock |
60,000 |
|
|
|
Cash at
Bank |
46,000 |
|
|
|
|
|
|
|
9,00,000 |
|
9,00,000 |
Question 34:
Kanika, Disha and Kabir were partners
sharing profits in the ratio of 2 : 1 : 1. On 31st
March, 2016, their Balance Sheet was as under:
|
|
|
|
|||
|
Liabilities |
(`) |
Assets |
(`) |
||
|
Trade
creditors |
53,000 |
Bank |
60,000 |
||
|
Employees' Provident Fund |
47,000 |
Debtors |
60,000 |
||
|
Kanika's Capital |
2,00,000 |
Stock |
1,00,000 |
||
|
Disha's Capital |
1,00,000 |
Fixed assets |
2,40,000 |
||
|
Kabir's Capital |
80,000 |
Profit and Loss A/c |
20,000 |
||
|
|
|
|
|
||
|
|
|
|
|
||
|
|
|
|
|
||
|
|
4,80,000 |
|
4,80,000 |
||
|
|
|
|
|
||
|
|
|
|
|
|
|
Kanika retired on 1st April, 2016. For
this purpose, the following adjustments were agreed upon:
(a) Goodwill of the firm was valued at 2 years' purchase of average profits of
three completed years preceding the date of retirement. The profits for the
year:
2013-14 were ` 1,00,000 and for 2014-15
were ` 1,30,000.
(b) Fixed Assets were to be increased to ` 3,00,000.
(c) Stock was to be valued at 120%.
(d) The amount payable to Kanika was transferred to
her Loan Account.
Prepare Revaluation Account, Capital
Accounts of the partners and the Balance Sheet of the reconstituted
firm.
(AI 2017 C)
Answer:
|
Revaluation Account |
|||||
|
Dr. |
Cr. |
||||
|
Particulars |
` |
Particulars |
` |
||
|
Revaluation Profit |
|
Fixed Assets |
60,000 |
||
|
Kanika’s Capital |
40,000 |
|
Stock |
20,000 |
|
|
Disha’s Capital |
20,000 |
|
|
|
|
|
Kabir’s Capital |
20,000 |
80,000 |
|
|
|
|
|
80,000 |
|
80,000 |
||
|
|
|
|
|
||
|
Partners’ Capital Account |
||||||||
|
Dr. |
Cr. |
|||||||
|
Particulars |
Kanika |
Disha |
Kabir |
Particulars |
Kanika |
Disha |
Kabir |
|
|
Profit & Loss A/c |
10,000 |
5,000 |
5,000 |
Balance b/d |
2,00,000 |
1,00,000 |
80,000 |
|
|
Kanika’s
Capital A/c |
|
35,000 |
35,000 |
Disha’s
Capital A/c |
35,000 |
|
|
|
|
Kanika’s
Loan A/c |
3,00,000 |
|
|
Kabir’s
Capital A/c |
35,000 |
|
|
|
|
Balance c/d |
|
80,000 |
60,000 |
Revaluation |
40,000 |
20,000 |
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3,10,000 |
1,20,000 |
1,00,000 |
|
3,10,000 |
1,20,000 |
1,00,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet as on March 31,
2016 |
||||
|
Liabilities |
(`) |
Assets |
(`) |
|
|
Employees’ Provident Fund |
47,000 |
Bank |
60,000 |
|
|
Trade Creditors |
53,000 |
Sundry Debtors |
60,000 |
|
|
Kanika’s Loan A/c |
3,00,000 |
Stock |
1,20,000 |
|
|
Capitals |
|
Fixed Assets |
3,00,000 |
|
|
Disha |
80,000 |
|
|
|
|
Kabir |
60,000 |
1,40,000 |
|
|
|
|
5,40,000 |
|
5,40,000 |
|
|
|
|
|
|
|
Working Notes:
WN1: Calculation of Goodwill
Goodwill=Average Profits×Number of Years' Purchase
Average Profits=Total ProfitsNumber of Years=1,00,000+1,30,000−20,000/3=2,10,000/3=` 70,000
Goodwill=70,000×2=` 1,40,000
Kanika's share=1,40,000×2/4=70,000 (to be borne by gaining partners in gaining ratio)
Note: Since no information is given about the share of gain,
it is assumed that the old partners are gaining in their old profit sharing
ratio.
Question 35:
N, S and G were partners in a firm sharing profits and
losses in the ratio of 2 : 3 : 5. On 31st March, 2016
their Balance Sheet was as under:
|
Liabilities |
(`) |
Assets |
(`) |
||
|
Creditors |
1,65,000 |
Cash |
1,20,000 |
||
|
General Reserve |
90,000 |
Debtors |
1,35,000 |
|
|
|
Capitals: |
|
Less: Provision |
15,000 |
1,20,000 |
|
|
N |
2,25,000 |
|
Stock |
1,50,000 |
|
|
S |
3,75,000 |
|
Machinery |
4,50,000 |
|
|
G |
4,50,000 |
10,50,000 |
Patents |
90,000 |
|
|
|
|
|
Building |
3,00,000 |
|
|
|
|
|
Profit and Loss Account |
75,000 |
|
|
|
13,05,000 |
|
13,05,000 |
||
|
|
|
|
|
||
G retired on the above date and it was agreed that:
(a) Debtors of ` 6,000 will
be written off as bad debts and a provision of 5% on debtors for bad and
doubtful debts will be maintained.
(b) Patents will be completely written off and stock, machinery and building
will be depreciated by 5%.
(c) An unrecorded creditor of `
30,000 will be taken into account.
(d) N and S will share the future profits in 2 : 3 ratio.
(e) Goodwill of the firm on G's retirement was valued at ` 90,000.
Pass necessary Journal entries for the above transactions in the books of the
firm on G's retirement. (Foreign 2017)
Answer:
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit (`) |
Credit (`) |
|
|
|
General Reserve A/c |
Dr. |
|
90,000 |
|
|
|
To N’s Capital A/c |
|
|
|
18,000 |
|
|
To S’s Capital A/c |
|
|
|
27,000 |
|
|
To G’s Capital A/c |
|
|
|
45,000 |
|
|
(Balance in reserve distributed among all partners in old
ratio) |
|
|
|
|
|
|
|
|
|
|
|
|
|
N’s Capital A/c |
Dr. |
|
15,000 |
|
|
|
S’s Capital A/c |
Dr. |
|
22,500 |
|
|
|
G’s Capital A/c |
Dr. |
|
37,500 |
|
|
|
To Profit & Loss A/c |
|
|
|
75,000 |
|
|
(Debit balance P&L A/c written off among all partners
in old ratio) |
|
|
|
|
|
|
|
|
|
|
|
|
|
N’s Capital A/c |
Dr. |
|
18,000 |
|
|
|
S’s Capital A/c |
Dr. |
|
27,000 |
|
|
|
To G’s Capital A/c |
|
|
|
45,000 |
|
|
(Goodwill adjusted in gaining ratio) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revaluation A/c |
Dr. |
|
1,65,000 |
|
|
|
To Patent A/c |
|
|
|
90,000 |
|
|
To Stock A/c |
|
|
|
7,500 |
|
|
To Machinery A/c |
|
|
|
22,500 |
|
|
To Building A/c |
|
|
|
15,000 |
|
|
To Creditors A/c |
|
|
|
30,000 |
|
|
(Decrease in assets and increase in liabilities debited to
Revaluation A/c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Doubtful Debts A/c |
Dr. |
|
2,550 |
|
|
|
To Revaluation A/c |
|
|
|
2,550 |
|
|
(Excess provision written back) |
|
|
|
|
|
|
|
|
|
|
|
|
|
N’s Capital A/c |
Dr. |
|
32,490 |
|
|
|
S’s Capital A/c |
Dr. |
|
48,735 |
|
|
|
G’s Capital A/c |
Dr. |
|
81,225 |
|
|
|
To Revaluation A/c |
|
|
|
1,62,450 |
|
|
(Loss on revaluation debited to partners’ capital accounts
in old ratio) |
|
|
|
|
|
|
|
|
|
|
|
|
|
G’s Capital A/c |
Dr. |
|
4,21,275 |
|
|
|
To G’s Loan A/c |
|
|
|
4,21,275 |
|
|
(Amount due to G transferred to his loan A/c) |
|
|
|
|
Working Notes:
WN1: Calculation of G’s Share of Goodwill
G's share=Firm's Goodwill×G's Profit Share
G's share=90,000×5/10=45,000 (to be borne by gaining partners in gaining ratio)
WN2: Calculation of Gaining
Ratio
Gaining Ratio = New Ratio − Old Ratio
N's gain=2/5−2/10=2/10
S's gain=3/5−3/10=3/10Gaining Ratio=2:3
N's share=45,000×2/5=18,000
S's share=45,000×3/5=27,000
WN2: Calculation of Excess/Deficit Provision for
Doubtful Debts
Required Provision @5%=1,35,000−6,000×5100=6,450
Existing Provision after writing bad-debts= 9,000
Excess Provision to be written back=2,550 9,000−6,450
WN3: Calculation of G’s Loan Balance
Amount due to G = Opening Capital + Credits – Debits
=
4,50,000 + (45,000 + 45,000) – (37,500 + 81,225)
= ` 4,21,275
Ts Grewal Solution 2023-2024
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Class 12 / Volume – I