Double Entry Book Keeping Ts Grewal Vol. I 2019 Solutions for Class 12 Commerce Accountancy Chapter 5 Admission Of A Partner are provided here with simple step-by-step explanations. These solutions for Admission Of A Partner are extremely popular among Class 12 Commerce students for Accountancy Admission Of A Partner Solutions come handy for quickly completing your homework and preparing for exams. All questions and answers from the Double Entry Book Keeping Ts Grewal Vol. I 2019 Book of Class 12 Commerce Accountancy Chapter 5 are provided here for you for free. You will also love the ad-free experience on Meritnation’s Double Entry Book Keeping Ts Grewal Vol. I 2019 Solutions. All Double Entry Book Keeping Ts Grewal Vol. I 2019 Solutions for class Class 12 Commerce Accountancy are prepared by experts and are 100% accurate.
Page No 5.100:
Question 74:
A and B are partners in a firm sharing profits in the ratio of 3 : 2. They admit C as a partner on 1st April, 2019 on which date the Balance Sheet of the firm was:
Liabilities | ₹ | Assets | ₹ | |
Capital A/cs: | Building | 50,000 | ||
A | 60,000 | Plant and Machinery | 30,000 | |
B | 40,000 | 1,00,000 | Stock | 20,000 |
Creditors | 20,000 | Debtors | 10,000 | |
Bank | 10,000 | |||
1,20,000 | 1,20,000 | |||
You are required to prepare the Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm after considering the following:
(a) C brings ₹ 30,000 as capital for 1/4th share. He also brings ₹ 10,000 for his share of goodwill.
(b) Part of the Stock which had been included at cost of ₹ 2,000 had been badly damaged in storage and could only expect to realise ₹ 400.
(c) Bank charges had been overlooked and amounted to ₹ 200 for the year 2018-19.
(d) Depreciation on Building of ₹ 3,000 had been omitted for the year 2018-19.
(e) A credit for goods for ₹ 800 had been omitted from both purchases and creditors although the goods had been correctly included in Stock.
(f) An expense of ₹ 1,200 for insurance premium was debited in the Profit and Loss Account of 2018-19 but ₹ 600 of this are related to the period after 31st March, 2019.
Answer:
Revaluation Account |
|||
Dr. |
|
|
Cr. |
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Stock (2,000 – 400) |
1,600 |
|
|
Bank (charges) |
200 |
Prepaid Insurance |
600 |
Building |
3,000 |
|
|
Creditors |
800 |
Loss transferred to |
|
|
|
A Capital |
3,000 |
|
|
B Capital |
2,000 |
|
5,600 |
|
5,600 |
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
|
|
|
|
|
Cr. |
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
Revaluation |
3,000 |
2,000 |
|
Balance b/d |
60,000 |
40,000 |
|
|
|
|
|
Bank |
|
|
30,000 |
|
|
|
|
Premium for Goodwill |
6,000 |
4,000 |
|
Balance c/d |
63,000 |
42,000 |
30,000 |
|
|
|
|
|
66,000 |
44,000 |
30,000 |
|
66,000 |
44,000 |
30,000 |
|
|
|
|
|
|
|
|
Balance Sheet as on April 01, 2019 after C’s admission |
||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
|
Capital A/cs: |
|
Building (50,000 – 3,000) |
47,000 |
|
A |
63,000 |
|
Plant and Machinery |
30,000 |
B |
42,000 |
|
Stock (20,000 – 1,600) |
18,400 |
C |
30,000 |
1,35,000 |
Debtors |
10,000 |
Creditors (20,000 + 800) |
20,800 |
Bank |
49,800 |
|
|
|
Prepaid Insurance |
600 |
|
|
1,55,800 |
|
1,55,800 |
|
|
|
|
|
Bank Account |
|||
Dr. |
|
|
Cr. |
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Balance b/d |
10,000 |
Revaluation (Bank charges) |
200 |
C’s Capital |
30,000 |
|
|
Premium for Goodwill |
10,000 |
Balance c/d |
49,800 |
|
50,000 |
|
50,000 |
|
|
|
|
Working Notes:
WN1 Sacrificing Ratio
Old Ratio (A and B) 3 : 2
Sacrificing Ratio = 3 : 2
WN2 Distribution of Premium for Goodwill
Page No 5.100:
Question 75:
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:
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
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 |
||||
|
|
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 |
||||||
Dr. |
Revaluation A/c |
Cr. | ||||
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
|||
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 |
|||||
|
|
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 |
||||
|
|
|
|
|
|
|
|
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, 2019 |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
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 |
||||
|
|
Page No 5.101:
Question 76:
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, 2019 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 |
Amount (₹) |
Particulars |
Amount (₹) |
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, 2019 after C’s admission |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
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
WN2
Distribution of Reserve
WN3
Distribution of Premium for Goodwill
Page No 5.101:
Question 77:
Following is the Balance Sheet of the firm, Ashirvad, owned by A, B and C who share profits and losses of the business in the ratio of 3 : 2 : 1.
BALANCE SHEET as at 31st March, 2019 | ||||
Liabilities | ₹ | Assets | ₹ | |
Capital A/cs: | Furniture | 95,000 | ||
A | 1,20,000 | Business Premises | 2,05,000 | |
B | 1,20,000 | Stock-in-Trade | 40,000 | |
C | 1,20,000 | 3,60,000 | Debtors | 28,000 |
Sundry Creditors | 20,000 | Cash at Bank | 15,000 | |
Outstanding Salaries and wages | 7,200 | Cash in Hand | 4,200 | |
3,87,200 | 3,87,200 | |||
On 1st April, 2019, they admit D as a partner on the following conditions:
(a) D will bring in ₹ 1,20,000 as his capital and also ₹ 30,000 as goodwill premium for a quarter of the share in the future profits/losses of the firm.
(b) Values of the fixed assets of the firm will be increased by 10% before the admission of D.
(c) Mohan, an old customer whose account was written off as bad debts, has promised to pay ₹ 3,000 in full settlement of his dues.
(d) Future profits and losses of the firm will be shared equally by all the partners.
Pass the necessary Journal entries and prepare Revaluation Account, Partners' Capital Accounts and opening Balance Sheet of the new firm.
Answer:
Revaluation Account |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
|
|
|
Fixed Assets: |
|
|
|
|
Furniture |
95,000 × 10% |
9,500 |
Profit transferred to |
|
Business Premises |
2,05,000 × 10% |
20,500 |
A Capital |
15,000 |
|
|
|
B Capital |
10,000 |
|
|
|
C Capital |
5,000 |
|
|
|
|
|
|
|
|
|
30,000 |
|
30,000 |
|
|
|
|
|
Partners’ Capital Accounts |
|||||||||
Dr. |
|
|
|
|
|
|
|
|
Cr. |
Particulars |
A |
B |
C |
D |
Particulars |
A |
B |
C |
D |
A’s Capital (Goodwill) |
|
|
7,500 |
|
Balance b/d |
1,20,000 |
1,20,000 |
1,20,000 |
|
B’s Capital (Goodwill) |
|
|
2,500 |
|
Revaluation (Profit) |
15,000 |
10,000 |
5,000 |
|
|
|
|
|
|
Cash |
|
|
|
1,20,000 |
Balance c/d |
1,65,000 |
1,40,000 |
1,15,000 |
1,20,000 |
Premium for Goodwill |
22,500 |
7,500 |
|
|
|
|
|
|
|
C’s Capital (Goodwill) |
7,500 |
2,500 |
|
|
|
1,65,000 |
1,40,000 |
1,25,000 |
1,20,000 |
|
1,65,000 |
1,40,000 |
1,25,000 |
1,20,000 |
|
|
|
|
|
|
|
|
|
|
Balance Sheet as on April 1, 2019, after D’s admission |
||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
|
Capital A/cs: |
|
Furniture (95,000 + 9,500) |
1,04,500 |
|
A |
1,65,000 |
|
Business Premises (2,05,000+20,500) |
2,25,500 |
B |
1,40,000 |
|
Stock-in-Trade |
40,000 |
C |
1,15,000 |
|
Debtors |
28,000 |
D |
1,20,000 |
5,40,000 |
Cash at Bank |
15,000 |
Sundry Creditors |
20,000 |
Cash in hand (4,200 + 1,50,000) |
1,54,200 |
|
Outstanding salaries and wages |
7,200 |
|
|
|
|
5,67,200 |
|
5,67,200 |
|
|
|
|
|
Working Note:
WN1 Calculation of Sacrificing Ratio
Sacrificing Ratio = Old Ratio − New Ratio
WN2 Calculation of C’s gain in goodwill
WN3 Amount of Goodwill to be distributed between A and B (Sacrificing Partners)
WN4 Journal Entries for D’s Capital and distribution of goodwill
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
Cash A/c |
Dr. |
|
1,50,000 |
|
To D’s Capital A/c |
|
|
1,20,000 |
|
To Premium for Goodwill A/c |
|
|
30,000 |
|
(D brought Capital and share of Capital) |
|
|
|
|
|
|
|
|
|
Premium for Goodwill |
Dr. |
|
30,000 |
|
C’s Capital A/c |
Dr. |
|
10,000 |
|
To A’s Capital A/c |
|
|
30,000 |
|
To B’s Capital |
|
|
10,000 |
|
(Gain goodwill distributed between A and B |
|
|
|
|
|
|
|
|
Page No 5.102:
Question 78:
A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. Following is their Balance Sheet as at 31st March, 2019:
Liabilities | ₹ | Assets | ₹ | |
Capital A/cs: | Building | 35,000 | ||
A | 50,000 | Machinery | 25,000 | |
B | 30,000 | 80,000 | Stock | 15,000 |
Creditors | 20,000 | Debtors | 15,000 | |
Investments | 5,000 | |||
Bank | 5,000 | |||
1,00,000 | 1,00,000 | |||
C is admitted as a partner on 1st April, 2019 on the following terms:
(a) C is to pay ₹ 20,000 as capital for 1/4th share. He also pays ₹ 5,000 as premium for goodwill.
(b) Debtors amounted to ₹ 3,000 is to be written off as bad and a Provision of 10% is created against Doubtful Debts on the remaining amount.
(c) No entry has been passed in respect of a debt of ₹ 300 recovered by A from a customer, which was previously written off as bad in previous year. The amount is to be paid by A.
(d) Investments are taken over by B at their market value of ₹ 4,900 against cash payment.
You are required to prepare Revaluation Account, Partner's Capital Accounts and new Balance Sheet.
Answer:
Revaluation Account |
|||
Dr. |
|
|
Cr. |
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Bad Debts |
3,000 |
A's Capital A/c |
300 |
Provision for Doubtful Debts |
1,200 |
Loss transferred to |
|
Investment (5,000 – 4,900) |
100 |
A Capital |
2,400 |
|
|
B Capital |
1,600 |
|
4,300 |
|
4,300 |
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
|
|
|
|
|
Cr. |
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
Revaluation |
2,400 |
1,600 |
|
Balance b/d |
50,000 |
30,000 |
|
Revaluation |
300 |
|
|
Bank |
|
|
20,000 |
|
|
|
|
Premium for Goodwill |
3,000 |
2,000 |
|
Balance c/d |
50,300 |
30,400 |
20,000 |
|
|
|
|
|
53,000 |
32,000 |
20,000 |
|
53,000 |
32,000 |
20,000 |
|
|
|
|
|
|
|
|
Balance Sheet as on April 01, 2019 after C’s admission |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Capital A/cs: |
|
Buildings |
35,000 |
||
A |
50,300 |
|
Machinery |
25,000 |
|
B |
30,400 |
|
Stock |
15,000 |
|
C |
20,000 |
1,00,700 |
Debtors |
15,000 |
|
Creditors |
20,000 |
Less: Bad Debts |
3,000 |
|
|
|
|
|
12,000 |
|
|
|
|
Less: 10% Provision for Doubtful Debts |
1,200 |
10,800 |
|
|
|
Bank |
34,900 |
||
|
1,20,700 |
|
1,20,700 |
||
|
|
|
|
Bank Account |
|||
Dr. |
|
|
Cr. |
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Balance b/d |
5,000 |
|
|
C’s Capital |
20,000 |
|
|
Premium for Goodwill |
5,000 |
|
|
Investments |
4,900 |
Balance c/d |
34,900 |
|
|
||
|
34,900 |
|
34,900 |
|
|
|
|
Working Notes:
WN1
WN2
Distribution of Premium for Goodwill
WN3
Sale of Investments
Bank A/c |
Dr. |
4,900 |
|
Revaluation A/c |
Dr. |
100 |
|
To Investment |
|
5,000 |
WN4
A's Capital A/c |
Dr. |
300 |
|
To Revaluation A/c |
|
|
300 |
Page No 5.102:
Question 79:
X and Y are partners sharing profits and losses in the ratio of 3/4 and 1/4. Their Balance Sheet as at 31st March, 2019 is:
Liabilities | ₹ | Assets | ₹ | |
Capital A/cs: | Land and Building | 1,25,000 | ||
X | 1,50,000 | Furniture | 5,000 | |
Y | 80,000 | 2,30,000 | Stock | 1,00,000 |
Workmen Compensation Reserve | 20,000 | Sundry Debtors | 80,000 | |
Sundry Creditors | 1,50,000 | Bills Receivable | 15,000 | |
Bills Payable | 37,500 | Cash at Bank | 1,00,000 | |
Cash in Hand | 12,500 | |||
4,37,500 | 4,37,500 | |||
They admit Z into partnership on 1st April, 2019 on the following terms:
(a) Goodwill is to be valued at ₹ 1,00,000.
(b) Stock and Furniture to be reduced by 10%.
(c) A Provision for Doubtful Debts is to be created @ 5% on Sundry Debtors.
(d) The value of Land and Building is to be appreciated by 20%.
(e) Z pays ₹ 50,000 as his capital for 1/5th share in the future profits.
You are required to show Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.
Answer:
Revaluation Account |
|||
Dr. |
|
Cr. |
|
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Stock |
10,000 |
Land and Building |
25,000 |
Furniture |
500 |
(1,25,000 × 20%) |
|
Provision for D. Debts |
4,000 |
|
|
Profit transferred to |
|
|
|
X Capital |
7,875 |
|
|
Y Capital |
2,625 |
|
|
|
25,000 |
|
25,000 |
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
|
|
|
|
|
Cr. |
Particulars |
X |
Y |
Z |
Particulars |
X |
Y |
Z |
X’s Capital |
|
|
15,000 |
Balance b/d |
1,50,000 |
80,000 |
|
Y’s Capital |
|
|
5,000 |
Workmen’s Compensation Fund |
15,000 |
5,000 |
|
|
|
|
|
Revaluation (Profit) |
7,875 |
2,625 |
|
Balance c/d |
1,87,875 |
92,625 |
30,000 |
Cash |
|
|
50,000 |
|
|
|
|
Z’s Capital |
15,000 |
5,000 |
|
|
1,87,875 |
92,625 |
50,000 |
|
1,87,875 |
92,625 |
50,000 |
|
|
|
|
|
|
|
|
Balance Sheet as on April 01, 2019 after Z’s admission |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Capital A/cs: |
|
Land and Building (1,25,000 + 25,000) |
1,50,000 |
||
X |
1,87,875 |
|
|
|
|
Y |
92,625 |
|
Office Furniture (5,000 – 500) |
4,500 |
|
Z |
30,000 |
3,10,500 |
Stock (1,00,000 – 10,000) |
90,000 |
|
Sundry Creditors |
1,50,000 |
Sundry Debtors |
80,000 |
|
|
Bills Payable |
37,500 |
Less: 5% Provision for D. Debts |
4,000 |
76,000 |
|
|
|
Cash at Bank |
1,00,000 |
||
|
|
Cash in Hand (12,500 + 50,000) |
62,500 |
||
|
|
Bills Receivable |
15,000 |
||
|
4,98,000 |
|
4,98,000 |
||
|
|
|
|
Working Notes:
WN1: Sacrificing Ratio
WN2: Calculation of Partners' Share of Goodwill
Goodwill of the firm = 1, 00,000
|
Journal |
||||
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
|
Z’s Capital A/c |
Dr. |
|
20,000 |
|
|
To X’s Capital A/c |
|
|
15,000 |
|
|
To Y’s Capital A/c |
|
|
5,000 |
|
|
(Z’s share of goodwill changed from his |
|
|
|
|
|
|
|
|
|
|
|
Workmen’s Compensation Fund A/c |
|
20,000 |
|
|
|
To X’s Capital A/c |
|
|
15,000 |
|
|
To Y’s Capital |
|
|
5,000 |
|
|
(Workmen’s Compensation Fund distributed) |
|
|
|
|
|
|
|
|
|
Page No 5.103:
Question 80:
Deepika and Rajshree are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 31st March, 2019 their Balance Sheet was:
Liabilities | ₹ | Assets | ₹ | |||
Sundry Creditors | 16,000 | Cash in Hand | 1,200 | |||
Public Deposits | 61,000 | Cash at Bank | 2,800 | |||
Bank Overdraft | 6,000 | Stock | 32,000 | |||
Outstanding Liabilities | 2,000 | Prepaid Insurance | 1,000 | |||
Capital A/cs: | Sundry Debtors | 28,000 | ||||
Deepika | 48,000 | Less: Provision for Doubtful Debts | 800 | |||
Rajshree | 40,000 | 88,000 | Plant and Machinery | 48,000 | ||
Land and Building | 50,000 | |||||
Furniture | 10,000 | |||||
1,73,000 | 1,73,000 | |||||
On 1st April, 2019 the partners admit Anshu as a partner on the following terms:
(a) The new profit-sharing ratio of Deepika, Rajshree and Anshu will be 5 : 3 : 2 respectively.
(b) Anshu shall bring in ₹ 32,000 as his capital.
(c) Anshu is unable to bring in any cash for his share of goodwill. Partners, therefore, decide to calculate the goodwill on the basis of Anshu's share in the profits and the capital contribution made by her to the firm.
(d) Plant and Machinery is to be valued at ₹ 60,000, Stock at ₹ 40,000 and the Provision for Doubtful Debts is to be maintained at ₹ 4,000. Value of Land and Building has appreciated by 20%. Furniture has been depreciated by 10%.
(e) There is an additional liability of ₹ 8,000 being outstanding salary payable to employees of the firm. This liability is not included in the outstanding liabilities, stated in the above Balance Sheet. Partners decide to show this liability in the books of account of the reconstituted firm.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of Deepika, Rajshree and Anshu.
Answer:
Revaluation Account |
||||
Dr. |
|
Cr. |
||
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
|
Reserve for D. Debts |
4,000 |
|
Plant and Machinery |
12,000 |
Less: Old Reserve |
800 |
3,200 |
(60,000 – 48,000) |
|
|
|
|
|
|
Furniture 10,000 × 10% | 1,000 | Stock (40,000 – 32,000) | 8,000 | |
Outstanding salary |
8,000 |
|
|
|
Profit transferred to |
|
Land and Building |
10,000 |
|
Deepika Capital |
10,680 |
(50,000 × 20%) |
|
|
Rajshree Capital |
7,120 |
|
|
|
|
30,000 |
|
30,000 |
|
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
Deepika |
Rajshree |
Anshu |
Particulars |
Deepika |
Rajshree |
Anshu |
Balance c/d |
58,680 |
47,120 |
32,000 |
Balance b/d |
48,000 |
40,000 |
|
(before adjustment of Goodwill) |
|
|
|
|
|
|
|
|
|
|
|
Revaluation |
10,680 |
7,120 |
|
|
|
|
|
Cash |
|
|
32,000 |
|
58,680 |
47,120 |
32,000 |
|
58,680 |
47,120 |
32,000 |
|
|
|
|
|
|
|
|
Deepika |
|
|
2,220 |
Balance b/d |
58,680 |
47,120 |
32,000 |
Rajshree |
|
|
2,220 |
Anshu’s Capital (Goodwill) |
2,220 |
2,220 |
|
Balance c/d |
60,900 |
49,340 |
27,560 |
|
|
|
|
|
60,900 |
49,340 |
32,000 |
|
60,900 |
49,340 |
32,000 |
|
|
|
|
|
|
|
|
Balance Sheet as on March 31, 2019 after Anshu’s admission |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Outstanding Salaries |
8,000 |
Cash in Hand |
1,200 |
||
Sundry Creditors |
16,000 |
Cash at Bank |
28,800 |
||
Public Deposits |
61,000 |
Stock |
40,000 |
||
Outstanding Liabilities |
2,000 |
Prepaid Insurance |
1,000 |
||
Capital A/cs: |
|
Sundry Debtors |
28,800 |
|
|
Deepika |
60,900 |
|
Less: reserve for D. Debts |
4,000 |
24,800 |
Rajshree |
49,340 |
|
Plant and Machinery |
60,000 |
|
Anshu |
27,560 |
1,37,800 |
Land and Building |
60,000 |
|
|
|
Furniture |
9,000 |
||
|
2,24,800 |
|
2,24,800 |
||
|
|
|
|
Working Notes
WN1: Calculation of Sacrificing Ratio
Sacrificing Ratio = Old Ratio − New Ratio
WN2: Valuation of Goodwill
Capitalised value on the basis of Anshu’s share
Actual Capital of all partners before adjustment of Goodwill = 58,680 + 47,120 + 32,000
= Rs 1,37,800
Goodwill = Capitalised value − Actual Capital of all partners before adjustment of Goodwill
= 1,60,000 − 1,37,800
= Rs 22,200
Anshu’s share of Goodwill
Deepika and Rajshree each will entitle for Goodwill
Page No 5.104:
Question 81:
Atul and Amit are partners sharing profits in the ratio of 3 : 2. Their Balance Sheet as at 31st March, 2019 is as follows:
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Capital A/cs: |
|
Plant and Machinery | 1,80,000 | ||
Atul |
1,00,000 |
|
Furniture | 30,000 | |
Amit |
1,00,000 |
2,00,000 |
Computer |
10,000 |
|
Current A/cs: |
|
|
Stock | 40,000 | |
Atul | 70,000 | Debtors | 50,000 | ||
Amit |
50,000 |
1,20,000 |
Bills Receivable |
10,000 |
|
Creditors | 40,000 | Cash | 10,000 | ||
Bills Payable | 10,000 | Bank | 40,000 | ||
3,70,000 |
3,70,000 |
||||
|
|
Abhay is admitted as a partner for 1/4th share on 1st April, 2019 on the following terms:
(a) Abhay is to bring ₹ 65,000 as capital after adjusting amount due to him included in creditors and his share of Goodwill.
(b) ₹ 10,000 included in creditors is payable to Abhay which is to be transferred to his Capital Account.
(c) Furniture is to reduced by ₹ 3,000 and Plant and Machinery is to be increased to ₹ 1,98,000.
(d) Stock is overvalued by ₹ 4,000.
(e) A Provision for Doubtful Debts is to be created @ 5%.
(f) Goodwill is to be valued at 2 years' purchase of average profit for four years. Profits of four years ended 31st March were as follows: 2018-19 − ₹ 25,000, 2017-18 − ₹ 10,000, 2016-17 − ₹ 2,500, and 2015-16 − ₹ 2,500.
Pass the Journal entries for the above arrangement.
Answer:
In the books of the Atul, Amit and Abhay Journal |
|||||
Date |
Particulars |
|
L.F. |
Debit (₹) |
Credit (₹) |
2019 |
|
|
|
|
|
April 01 |
Creditors A/c |
Dr. |
|
10,000 |
|
|
To Abhay’s Capital A/c |
|
|
|
10,000 |
|
(Being amount due to Abhay transferred to his Capital A/c) |
|
|
|
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
60,000 |
|
|
To Abhay’s Capital A/c |
|
|
|
55,000 |
|
To Premium for Goodwill A/c (WN1) |
|
|
|
5,000 |
|
(Being Capital and goodwill paid by the new partner) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
5,000 |
|
|
To Atul’s Capital A/c |
|
|
|
3,000 |
|
To Amit’s Capital A/c |
|
|
|
2,000 |
|
(Being premium for goodwill adjusted in 3:2) |
|
|
|
|
|
|
|
|
|
|
|
Revaluation A/c |
Dr. |
|
9,500 |
|
|
To Furniture A/c |
|
|
|
3,000 |
|
To Stock A/c |
|
|
|
4,000 |
|
To Provision for Doubtful Debts A/c |
|
|
|
2,500 |
|
(Being assets revalued and liabilities reassessed) |
|
|
|
|
|
|
|
|
|
|
|
Plant & Machinery A/c |
Dr. |
|
18,000 |
|
|
To Revaluation A/c |
|
|
|
18,000 |
|
(Being appreciation in plant & machinery provided for) |
|
|
|
|
|
|
|
|
|
|
|
Revaluation A/c (WN2) |
Dr. |
|
8,500 |
|
|
To Atul’s Capital A/c |
|
|
|
5,100 |
|
To Amit’s Capital A/c |
|
|
|
3,400 |
(Being revaluation profit transferred to partner’s capital A/c) |
|
|
|
|
|
|
|
|
|
Working Notes:
1. Calculation of Goodwill brought in by Abhay:
Average Profits | = | (Normal profits from 31st March, 2016 to 31st March, 2019)/2 |
= | ₹ (25,000 + 10,000 + 2,500 + 2,500)/4= ₹ 10,000 | |
Goodwill | = | Average Profits × No. of years of Purchase |
= | ₹(10,000 × 2) = ₹ 20,000 | |
Goodwill brought in by Abhay | = | ₹(20,000 × 1/4) = ₹ 5,000 |
2. Calculation of Revaluation Profit/Loss:
Debit side total = ₹ (3,000 + 4,000 + 2,500) = ₹ 9,500 Credit side total= ₹ 18,000 Gain on Revaluation = ₹ (18,000 – 9,500) = ₹ 8,500
Page No 5.104:
Question 82:
Yogesh and Naresh are partners sharing profits in the ratio of 3 : 2. They admit Ramesh for 1/3rd share on 1st April, 2019 and also decide to share future profits equally. Balance Sheet of the firm as at 31st March, 2019 was as follows:
Liabilities | Amount (₹) | Assets | Amount (₹) | ||
Capital A/cs: | Land | 4,00,000 | |||
Yogesh | 5,00,000 | Building | 4,00,000 | ||
Naresh | 5,00,000 | 10,00,000 | Furniture | 50,000 | |
Current A/cs: | Computers | 1,00,000 | |||
Yogesh | 1,10,000 | Stock | 1,50,000 | ||
Naresh | 90,000 | 2,00,000 | Sundry Debtors | 2,10,000 | |
Employees' Provident Fund | 25,000 | Less: Provision for Doubtful Debts | 10,000 | 2,00,000 | |
Workmen Compensation Reserve | 1,00,000 | Cash | 10,000 | ||
Sundry Creditors | 75,000 | Bank | 70,000 | ||
Expenses Payable | 10,000 | Advertisement Suspense | 30,000 | ||
14,10,000 | 14,10,000 | ||||
They admitted Ramesh on the following terms:
(a) He will bring ₹ 5,00,000 as his capital.
(b) His share of goodwill is valued at ₹ 1,00,000 but he is unable to bring cash for his share of goodwill. It is agreed to debit the amount to his Current Account.
(c) Value of Land and Building is to be appreciated by ₹ 40,000 each.
(d) Value of Furniture to be reduced to ₹ 40,000.
(e) Provision for Doubtful Debts to be increased to 10%.
(f) A liability for damages of ₹ 10,000 is to be created.
Pass the Journal entries on admission of Ramesh and prepare Revaluation Account.
Answer:
In the books of the Yogesh, Naresh and Ramesh Journal |
|||||
Date |
Particulars |
|
L.F. |
Debit (₹) |
Credit (₹) |
2019 |
|
|
|
|
|
April 01 |
Cash A/c |
Dr. |
|
5,00,000 |
|
|
To Ramesh’s Capital A/c |
|
|
|
5,00,000 |
|
(Being Capital brought in by the new partner) |
|
|
|
|
|
|
|
|
|
|
|
Ramesh’s Current A/c |
Dr. |
|
1,00,000 |
|
|
To Yogesh’s Current A/c (1,00,000 × 4/5) |
|
|
|
80,000 |
|
To Naresh’s Current A/c (1,00,000 × 1/5) |
|
|
|
20,000 |
|
(Being premium for goodwill adjusted in 4 : 1) |
|
|
|
|
|
|
|
|
|
|
|
Revaluation A/c |
Dr. |
|
31,000 |
|
|
To Provision for Doubtful Debts A/c |
|
|
|
11,000 |
|
To Liability for damages A/c |
|
|
|
10,000 |
|
To Furniture A/c |
|
|
|
10,000 |
|
(Being assets revalued and liabilities reassessed) |
|
|
|
|
|
|
|
|
|
|
|
Land A/c |
Dr. |
|
40,000 |
|
|
Building A/c |
Dr. |
|
40,000 |
|
|
To Revaluation A/c |
|
|
|
80,000 |
|
(Being appreciation in land and building provided for) |
|
|
|
|
|
|
|
|
|
|
|
Revaluation A/c (WN2) |
Dr. |
|
49,000 |
|
|
To Yogesh’s Current A/c |
|
|
|
29,400 |
|
To Naresh’s Current A/c |
|
|
|
19,600 |
|
(Being revaluation profit transferred to partner’s current A/c) |
|
|
|
|
|
Workmen Compensation Reserve A/c |
Dr. |
|
1,00,000 |
|
|
To Yogesh’s Current A/c |
|
|
|
60,000 |
|
To Naresh’s Current A/c |
|
|
|
40,000 |
|
(Being workmen compensation reserve distributed) |
|
|
|
|
|
|
|
|
|
|
|
Yogesh’s Current A/c |
Dr. |
|
18,000 |
|
|
Naresh’s Current A/c |
Dr. |
|
12,000 |
|
|
To Advertisement Suspense A/c |
|
|
|
30,000 |
|
(Being accumulated loss written off) |
|
|
|
|
Working Notes:
1. Calculation of new profit-sharing ratio:
Particulars |
Yogesh |
Gopal |
Old Ratio |
3/5 |
2/5 |
New Ratio |
1/3 |
1/3 |
Gain/Sacrifice |
(3/5 – 1/3)= 4/15 (Sacrifice) |
(2/5 – 1/3)= 1/15 (Sacrifice) |
Sacrificing Ratio |
4:1 |
2. Calculation of Revaluation Profit/Loss:
Debit side total= ₹ (11,000 + 10,000 + 10,000) = ₹ 31,000
Credit side total = ₹ 80,000
Gain on Revaluation= ₹ (80,000 – 31,000) = ₹ 49,000
Dr. |
Revaluation A/c |
Cr. | ||||
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
|||
To Provision for Doubtful debt A/c |
11,000 |
By Land A/c |
40,000 |
|||
To Liability for Damages A/c |
10,000 |
By Building A/c |
40,000 |
|||
To Furniture A/c |
10,000 |
|
||||
To Profit transferred to: |
|
|
||||
Yogesh’s Current A/c |
29,400 |
|
|
|||
Naresh’s Current A/c |
19,600 |
49,000 |
|
|||
|
|
|||||
80,000 |
80,000 |
|||||
|
|
Page No 5.105:
Question 83:
Balance Sheet of Ram and Shyam who shares profits in the ratio of their capitals as at 31st March, 2019 is:
Liabilities | Amount (₹) |
Assets | Amount (₹) |
|
Capital A/cs: | Freehold Premises | 20,000 | ||
Ram | 30,000 | Plant and Machinery | 13,500 | |
Shyam | 25,000 | 55,000 | Fixtures and Fittings | 1,750 |
Current A/cs: | Vehicles | 1,350 | ||
Ram | 2,000 | Stock | 14,100 | |
Shyam | 1,800 | 3,800 | Bills Receivable | 13,060 |
Creditors | 19,000 | Debtors | 27,500 | |
Bills Payable | 16,000 | Bank | 1,590 | |
Cash | 950 | |||
93,800 | 93,800 | |||
On 1st April, 2019, they admitted Arjun into partnership on the following terms:
(a) Arjun to bring ₹ 20,000 as capital and ₹ 6,600 for goodwill, which is to be left in the business and he is to receive 1/4th share of the profits.
(b) Provision for Doubtful Debts is to be 2% on Debtors.
(c) Value of Stock to be written down by 5% .
(d) Freehold Premises are to be taken at a value of ₹ 22,400; Plant and Machinery ₹ 11,800; Fixtures and Fittings ₹ 1,540 and Vehicles ₹ 800.
You are required to make necessary adjustments entries in the firm, give Balance Sheet of the new firm as at 1st April, 2019 and also determine the ratio in which the partners will share profits, there being no change in the ratio of Ram and Shyam.
Answer:
Revaluation Account |
|||
Dr. |
|
Cr. |
|
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Reserve for D. Debts (27,500 × 2%) |
550 |
Free hold Premises (22,400 – 20,000) |
2,400 |
Stock |
705 |
Loss transferred to |
|
Plant and Machinery (13,500 – 11,800) |
1,700 |
Ram’s Current A/c |
717 |
Fixture and Fittings |
210 |
Shyam’s Current A/c |
598 |
Vehicles |
550 |
|
|
|
3,715 |
|
3,715 |
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
Ram |
Shyam |
Arjun |
Particulars |
Ram |
Shyam |
Arjun |
|
|
|
|
Balance b/d |
30,000 |
25,000 |
|
Balance c/d |
30,000 |
25,000 |
20,000 |
Cash |
|
|
20,000 |
|
30,000 |
25,000 |
20,000 |
|
30,000 |
25,000 |
20,000 |
|
|
|
|
|
|
|
|
Partners’ Current Accounts |
|||||||||
Dr. |
|
Cr. |
|||||||
Particulars |
Ram |
Shyam |
Arjun |
Particulars |
Ram |
Shyam |
Arjun |
||
Revaluation |
717 |
598 |
|
Balance b/d |
2,000 |
1,800 |
|
||
|
|
|
|
Premium for Goodwill |
3,600 |
3,000 |
|
||
Balance c/d |
4,883 |
4,202 |
|
|
|
|
|
||
|
5,600 |
4,800 |
|
|
5,600 |
4,800 |
|
||
|
|
|
|
|
|
|
|
Balance Sheet |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Creditors |
19,000 |
Freehold Premises |
22,400 |
||
Bills Payable |
16,000 |
Plant and Machinery |
11,800 |
||
Capital A/cs: |
|
Fixture and Fittings |
1,540 |
||
Ram |
30,000 |
|
Vehicles |
800 |
|
Shyam |
25,000 |
|
Stock (14,100 – 705) |
13,395 |
|
Arjun |
20,000 |
75,000 |
Bills Receivables |
13,060 |
|
|
|
Debtors |
27,500 |
|
|
Current A/cs: |
|
Less: 2% Reserve for D. Debts |
550 |
26,950 |
|
Ram |
4,883 |
|
Bank |
1,590 |
|
Shyam |
4,202 |
9,085 |
Cash (950 + 20,000 + 6,600) |
27,550 |
|
|
|
|
|
|
|
|
1,19,085 |
|
1,19,085 |
||
|
|
|
|
Journal |
||||
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
Cash A/c |
Dr. |
|
26,600 |
|
To Arjun’s Capital |
|
|
20,000 |
|
To Premium for Goodwill |
|
|
6,600 |
|
(Arjun brought Capital and share of goodwill) |
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
6,600 |
|
To Ram’s Current A/c |
|
|
3,600 |
|
To Shyam’s Current A?C |
|
|
3,000 |
|
(Premium for Goodwill transferred to partners |
|
|
|
|
|
|
|
|
Arjun admitted for share of profit
Let the combined share of all partner after Arjun’s admission be = 1
Combined share of Ram and Shyam after Arjun’s admission
New Ratio = Old Ratio − Combined share of Ram and Shyam
Working Notes
WN1 Distribution of Premium for Goodwill
WN2 Distribution of Loss on Revaluation
Page No 5.105:
Question 84:
Following is the Balance Sheet of X and Y as at 31st March, 2019 who are partners in a firm sharing profits and losses in the ratio of 3 : 2 respectively:
Liabilities | Amount (₹) |
Assets | Amount (₹) | ||
Creditors | 45,000 | Cash at Bank | 15,000 | ||
General Reserve | 36,000 | Debtors | 60,000 | ||
Capital A/cs: | Less: Provision for Doubtful Debts | 2,400 | 57,600 | ||
X | 1,80,000 | Patents | 44,400 | ||
Y | 90,000 | 2,70,000 | Investments | 24,000 | |
Current A/cs: | Fixed Assets | 2,16,000 | |||
X | 30,000 | Goodwill | 30,000 | ||
Y | 6,000 | 36,000 | |||
3,87,000 | 3,87,000 | ||||
Z is admitted as a new partner on 1st April, 2019 on the following terms:
(a) Provision for doubtful debts is to be maintained at 5% on Debtors.
(b) Outstanding rent amounted to ₹ 15,000.
(c) An accrued income of ₹ 4,500 does not appear in the books of the firm. It is now to be recorded.
(d) X takes over the Investments at an agreed value of ₹ 18,000.
(e) New Profit-sharing Ratio of partners will be 4 : 3 : 2.
(f) Z will bring in ₹ 60,000 as his capital by cheque.
(g) Z is to pay an amount equal to his share in firm's goodwill valued at twice the average profit of the last three years which were ₹ 90,000; ₹ 78,000 and ₹ 75,000 respectively.
(h) Half of the amount of goodwill is to be withdrawn by X and Y.
You are required to pass Journal entries, prepare Revaluation Account, Partners' Capital and Current Accounts and the Balance Sheet of the new firm.
Answer:
Revaluation Account |
|||
Dr. |
|
Cr. |
|
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Prov. for D. Debts |
600 |
Accrued Income |
4,500 |
Outstanding Rent |
15,000 |
Loss transferred to |
|
Investments |
6,000 |
X’s Current A/c |
10,260 |
Y’s Current A/c |
6,840 |
||
|
|
||
|
21,600 |
|
21,600 |
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
X | Y | Z |
Particulars |
X | Y | Z |
|
|
|
|
Balance b/d |
1,80,000 |
90,000 |
|
Balance c/d |
1,80,000 |
90,000 |
60,000 |
Bank |
|
|
60,000 |
|
1,80,000 | 90,000 | 60,000 |
|
1,80,000 | 90,000 | 60,000 |
|
|
|
|
|
|
|
|
Partners’ Current Accounts |
|||||||||
Dr. |
|
Cr. |
|||||||
Particulars |
X | Y | Z |
Particulars |
X | Y | Z | ||
Revaluation |
10,260 |
6,840 |
|
Balance b/d |
30,000 |
6,000 |
|
||
Goodwill | 18,000 | 12,000 | General Reserve | 21,600 | 14,400 | ||||
Bank |
12,600 |
5,400 |
|
Premium for Goodwill |
25,200 |
10,800 |
|
||
Investments | 18,000 | ||||||||
Balance c/d |
17,940 | 6,960 |
|
|
|
|
|
||
|
76,800 |
31,200 |
|
|
76,800 |
31,200 |
|
||
|
|
|
|
|
|
|
|
Balance Sheet |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Capital A/cs: |
|
Patents | 44,400 | ||
X |
1,80,000 |
|
Fixed Assets | 2,16,000 | |
Y |
90,000 |
|
Accrued Income | 4,500 | |
Z |
60,000 |
3,30,000 |
Cash at Bank (15,000 + 96,000 – 18,000) | 93,000 | |
Outstanding Rent |
15,000 |
Debtors |
60,000 |
|
|
Current A/cs: |
|
Less: 5% Reserve for D. Debts |
3,000 |
57,000 |
|
X |
17,940 |
|
|||
Y |
6,960 |
24,900 |
|
|
|
Creditors |
|
45,000 |
|
|
|
|
4,14,900 |
|
4,14,900 |
||
|
|
|
|
Journal |
||||
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
Bank A/c |
Dr. |
|
96,000 |
|
To Z’s Capital |
|
|
60,000 |
|
To Premium for Goodwill |
|
|
36,000 |
|
(Z brought Capital and share of goodwill) |
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
36,000 |
|
To X’s Current A/c |
|
|
25,200 |
|
To Y’s Current A/c |
|
|
10,800 |
|
(Premium for Goodwill transferred to partners |
|
|
|
|
X's Current A/c Dr. | 12,600 | |||
Y's Current A/c Dr. | 5,400 | |||
To BankA/c | 18,000 | |||
(Half of goodwill withdrawn by partners) |
|
|
|
Working Notes:
WN1 Calculation of Z's Share of Premium for Goodwill
WN2 Calculation of Sacrificing Ratio
WN3 Calculation of Share of Premium of Goodwill
WN4 Distribution of Loss on Revaluation
Page No 5.106:
Question 85:
X and Y are partners sharing profits equally. Their Balance Sheet as on 31st March, 2019 is given below:
Liabilities | Amount (₹) |
Assets | Amount (₹) |
||
Capital A/cs: | Land and Building |
1,50,000
|
|||
X | 1,50,000 | Plant and Machinery | 1,00,000 | ||
Y | 1,00,000 | 2,50,000 | Furniture and Fittings | 25,000 | |
Current A/cs: | Stock |
75,000
|
|||
X | 40,000 | Debtors | 75,000 | ||
Y | 30,000 | 70,000 | Less: Provision for Doubtful Debts | 5,000 | 70,000 |
Creditors | 1,30,000 | Bills Receivable |
30,000
|
||
Bills Payable | 50,000 | Bank |
50,000
|
||
5,00,000 | 5,00,000 | ||||
Z is admitted as a new partner for 1/4th share under the following terms:
(a) Z is to introduce ₹ 1,25,000 as capital.
(b) Goodwill of the firm was valued at nil.
(c) It is found that the creditors included a sum of ₹ 7,500 which was not to be paid. But it was also found that there was a liability for Compensation to Workmen amounting to ₹ 10,000.
(d) Provision for doubtful debts is to be created @ 10% on debtors.
(e) In regard to the Partners' Capital Accounts, present Fixed Capital Account Method is to be converted into Fluctuating Capital Account Method.
(f) Bills of ₹ 20,000 accepted from creditors were not recorded in the books.
(g) X provides ₹ 50,000 loan to the business carrying interest @ 10% p.a.
You are required to prepare Revaluation Account, Partners' Capital Accounts, Bank Account and the Balance Sheet of the new firm.
Answer:
Revaluation Account |
|||
Dr. |
|
Cr. |
|
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Reserve for D. Debts |
2,500 |
Creditors |
7,500 |
Liability for WCF | 10,000 |
Loss transferred to |
|
X’s Current A/c |
2,500 |
||
Y’s Current A/c |
2,500 |
||
|
|
||
|
12,500 |
|
12,500 |
|
|
|
|
Partners’ Current Accounts |
|||||
Dr. |
Cr. |
||||
Particulars |
X | Y |
Particulars |
X | Y |
Revaluation A/c |
2,500 |
2,500 |
Balance b/d |
40,000 |
30,000 |
Balance c/d |
37,500 |
27,500 |
|||
|
40,000 |
30,000 |
|
40,000 |
30,000 |
|
|
|
|
|
|
Partners’ Capital Accounts |
|||||||||
Dr. |
|
Cr. |
|||||||
Particulars |
X | Y | Z |
Particulars |
X | Y | Z | ||
|
Balance b/d |
1,50,000 |
1,00,000 |
|
|||||
|
|
|
|
Current A/c | 37,500 | 27,500 |
|
||
Balance c/d |
1,87,500 | 1,27,500 |
1,25,000 |
Bank |
|
|
1,25,000 |
||
|
1,87,500 | 1,27,500 |
1,25,000 |
|
1,87,500 | 1,27,500 |
1,25,000 |
||
|
|
|
|
|
|
|
|
Balance Sheet |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Creditors (1,30,000 – 7,500 – 20,000) |
1,02,500 |
Land and Building |
1,50,000 |
||
Bills Payable (50,000 + 20,000) |
70,000 |
Plant and Machinery |
1,00,000 |
||
Capital A/cs: |
|
Fixture and Fittings |
25,000 |
||
X |
1,87,500 |
|
Stock | 75,000 | |
Y |
1,27,500 |
|
Bills Receivables |
30,000 |
|
Z |
1,25,000 |
4,40,000 |
Bank (50,000 + 1,25,000 + 50,000) |
2,25,000 |
|
X's Loan |
50,000 |
Debtors |
75,000 |
|
|
Liability for WCF |
10,000 |
Less: 10% Reserve for D. Debts |
7,500 |
67,500 |
|
|
|
|
|||
|
|
|
|
|
|
|
6,72,500 |
|
6,72,500 |
||
|
|
|
|
Page No 5.106:
Question 86:
X and Y are partners sharing profits in the ratio of 2 : 1. Their Balance Sheet as at 31st March, 2019 was:
Liabilities | ₹ | Assets | ₹ | |
Sundry Creditors | 25,000 | Cash/Bank | 5,000 | |
General Reserve | 18,000 | Sundry Debtors | 15,000 | |
Capital A/cs: | Stock | 10,000 | ||
X | 75,000 | Investments | 8,000 | |
Y | 62,000 | 1,37,000 | Printer | 5,000 |
Fixed Assets | 1,37,000 | |||
1,80,000 | 1,80,000 | |||
They admit Z into partnership on the same date on the following terms:
(a) Z brings in ₹ 40,000 as his capital and he is given 1/4th share in profits.
(b) Z brings in ₹ 15,000 for goodwill, half of which is withdrawn by old partners.
(c) Investments are valued at ₹ 10,000. X takes over Investments at this value.
(d) Printer is to be reduced (depreciated) by 20% and Fixed Assets by 10%.
(e) An unrecorded stock of Stationery on 31st March, 2019 is ₹ 1,000.
(f) By bringing in or withdrawing cash, the Capitals of X and Y are to be made proportionate to that of Z on their profit-sharing basis.
Pass Journal entries, prepare Revaluation Account, Capital Accounts and new Balance Sheet of the firm.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
2019 |
|
|
|
|
|
April 1 |
Revaluation A/c |
Dr. |
|
14,700 |
|
|
To Typewriter A/c |
|
|
1,000 |
|
|
To Fixed Assets A/c |
|
|
13,700 |
|
|
(Decrease in value of typewriter and fixed assets transferred to Revaluation Account) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Stationery A/c |
Dr. |
|
1,000 |
|
|
Investment A/c |
Dr. |
|
2,000 |
|
|
To Revaluation A/c |
|
|
3,000 |
|
|
(Increase in stationery and investment transferred to Revaluation Account) |
|
|
|
|
|
|
|
|
|
|
April 1 |
X’s Capital A/c |
Dr. |
|
7,800 |
|
|
Y’s Capital A/c |
Dr. |
|
3,900 |
|
|
To Revaluation A/c |
|
|
11,700 |
|
|
(Revaluation loss transferred to X and Y’s |
|
|
|
|
|
|
|
|
|
|
April 1 |
Reserve Fund A/c |
Dr. |
|
18,000 |
|
|
To X’s Capital A/c |
|
|
12,000 |
|
|
To Y’s Capital A/c |
|
|
6,000 |
|
|
(Reserve Fund distributed) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Cash A/c |
Dr. |
|
55,000 |
|
|
To Z’s Capital A/c |
|
|
40,000 |
|
|
To Premium for Goodwill A/c |
|
|
15,000 |
|
|
(Z brought capital and share of goodwill) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Premium for Goodwill A/c |
Dr. |
|
15,000 |
|
|
To X’s Capital A/c |
|
|
10,000 |
|
|
To Y’s Capital A/c |
|
|
5,000 |
|
|
(Premium for Goodwill distributed between X and Y in their sacrificing ratio i.e 2:1) |
|
|
|
|
|
|
|
|
|
|
April 1 |
X’s Capital A/c |
Dr. |
|
5,000 |
|
|
Y’s Capital A/c |
Dr. |
|
2,500 |
|
|
To Cash |
|
|
7,500 |
|
|
(Half of the Premium for Goodwill withdrawn by X and Y) |
|
|
|
|
|
|
|
|
|
|
April 1 |
X’s Capital A/c |
Dr. |
|
10,000 |
|
|
To Investments A/c |
|
|
10,000 |
|
|
(X took over the Investment) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Cash A/c |
Dr. |
|
4,800 |
|
|
To X’s Capital A/c |
|
|
4,800 |
|
|
(X’ brought cash to make up deficiency in capital) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Y’s Capital A/c |
Dr. |
|
26,600 |
|
|
To Cash A/c |
|
|
26,600 |
|
|
(Y withdrew excess capital after all adjustments) |
|
|
|
|
|
|
|
|
|
Cash/Bank Account |
|||
Dr. |
|
Cr. |
|
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Balance b/d |
5,000 |
X’s Capital (Goodwill) |
5,000 |
Z’s Capital |
40,000 |
Y’s Capital (Goodwill) |
2,500 |
Premium for Goodwill |
15,000 |
Y’s Capital |
26,600 |
X’s Capital |
5,800 |
Balance c/d |
31,700 |
|
65,800 |
|
65,800 |
|
|
|
|
Revaluation Account |
|||
Dr. |
|
Cr. |
|
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
|
|
|
|
Typewriter (5,000 × 20%) |
1,000 |
Investment |
2,000 |
Fixed Assets (1,37,000 × 10%) |
13,700 |
Stationery |
1,000 |
|
|
Loss transferred to |
|
|
|
X Capital |
7,800 |
|
|
Y Capital |
3,900 |
|
14,700 |
|
14,700 |
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
X |
Y |
Z |
Particulars |
X |
Y |
Z |
Revaluation |
7,800 |
3,900 |
|
Balance b/d |
75,000 |
62,000 |
|
Investment |
10,000 |
|
|
Reserve Fund |
12,000 |
6,000 |
|
Cash (withdraw of goodwill) |
5,000 |
2,500 |
|
Cash |
|
|
40,000 |
Balance c/d |
74,200 |
66,600 |
40,000 |
Premium for Goodwill |
10,000 |
5,000 |
|
|
97,000 |
73,000 |
40,000 |
|
97,000 |
73,000 |
40,000 |
Cash |
|
26,600 |
|
Balance b/d |
74,200 |
66,600 |
40,000 |
Balance c/d adjusted |
80,000 |
40,000 |
40,000 |
Cash |
5,800 |
|
|
|
80,000 |
66,600 |
40,000 |
|
80,000 |
66,600 |
40,000 |
|
|
|
|
|
|
|
|
Balance Sheet as on March 31, 2019 after Z’s admission |
||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
|
Sundry Creditors |
25,000 |
Cash |
31,700 |
|
Capital A/cs: |
|
Sundry Debtors |
15,000 |
|
X |
80,000 |
|
Stock |
10,000 |
Y |
40,000 |
|
Typewriter (5,000 – 1,000) |
4,000 |
Z |
40,000 |
1,60,000 |
Fixed Assets (1,37,000 – 13,700) |
1,23,300 |
|
|
Stationery |
1,000 |
|
|
|
|
|
|
|
1,85,000 |
|
1,85,000 |
|
|
|
|
|
Working Notes:
WN1: Sacrificing Ratio
WN2: Distribution of Revaluation Loss
WN3: Distribution of Premium for Goodwill
WN4: Adjustment of Capital
Total Capital of the firm on the basis of Z’s share
Total Capital of the firm |
= |
1,60,000 |
Less: Z’s Capital |
= |
40,000 |
Combined Capital of X and Y |
= |
1,20,000 |
|
|
|
Page No 5.106:
Question 87:
A and B are in partnership sharing profits and losses in the proportion of 2/3rd and 1/3rd respectively. Their Balance Sheet as at 31st March, 2019 was: Cash ₹ 1,000; Sundry Debtors ₹ 15,000; Stock ₹ 22,000; Plant and Machinery ₹ 4,000; Sundry Creditors ₹ 2,000; Bank Overdraft ₹ 15,000; A's Capital ₹ 15,000; B's Capital ₹ 10,000.
On 1st April, 2019 they admitted C into partnership on the following terms:
(a) C to purchase one-quarter of the goodwill for ₹ 3,000 and provide ₹ 10,000 as capital. C brings in necessary cash for goodwill and capital.
(b) Profits and losses are to be shared in the proportion of one-half to A, one-quarter to B and one quarter to C.
(c) Plant and Machinery is to be reduced by 10% and ₹ 500 are to be provided for estimated Bad Debts. Stock is to be taken at a valuation of ₹ 24,940.
(d) By bringing in or withdrawing cash the capitals of A and B are to be made proportionate to that of C on their profit-sharing basis.
Prepare necessary Ledger Accounts in the books of the firm relating to the above arrangement and submit the opening Balance Sheet of the new firm.
Answer:
Revaluation Account |
|||
Dr. |
|
Cr. |
|
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Plant and Machinery (4,000 × 10%) |
400 |
Stock (24,940 – 22,000) |
2,940 |
Provision for Bad Debts |
500 |
|
|
Profit transferred to |
|
|
|
A Capital |
1,360 |
|
|
B Capital |
680 |
|
|
|
2,940 |
|
2,940 |
|
|
|
|
Partners’ Capital Accounts
|
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
|
|
|
|
Balance b/d |
15,000 |
10,000 |
|
|
|
|
|
Cash |
|
|
10,000 |
|
|
|
|
Premium for Goodwill |
2,000 |
1,000 |
|
Balance c/d |
18,360 |
11,680 |
10,000 |
Revaluation |
1,360 |
680 |
|
|
18,360 |
11,680 |
10,000 |
|
18,360 |
11,680 |
10,000 |
Cash |
|
1,680 |
|
Balance c/d |
18,360 |
11,680 |
10,000 |
Balance c/d |
20,000 |
10,000 |
10,000 |
Cash |
1,640 |
|
|
(Adjusted) |
|
|
|
|
|
|
|
|
20,000 |
11,680 |
10,000 |
|
20,000 |
11,680 |
10,000 |
|
|
|
|
|
|
|
|
Balance Sheet as on April 01, 2019 after C’s admission |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Sundry Creditors |
2,000 |
Cash |
13,960 |
||
Bank Overdraft |
15,000 |
Sundry Debtors |
15,000 |
|
|
Capital A/cs: |
|
Less: Prov. for Bad Debts |
500 |
14,500 |
|
A |
20,000 |
|
Stock |
24,940 |
|
B |
10,000 |
|
Plant and Machinery |
3,600 |
|
C |
10,000 |
40,000 |
|
|
|
|
|
|
|
|
|
|
57,000 |
|
57,000 |
||
|
|
|
|
Cash Account |
|||
Dr. |
|
Cr. |
|
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Balance b/d |
1,000 |
B’s Capital |
1,680 |
C’s Capital |
10,000 |
|
|
Premium for Goodwill |
3,000 |
|
|
A’s Capital |
1,640 |
Balance c/d |
13,960 |
|
|
|
|
|
15,640 |
|
15,640 |
|
|
|
|
Working Notes
WN1: Sacrificing Ratio
WN2: Distribution of Premium for Goodwill
WN3: Distribution of Revaluation Profit
WN4: Adjustment of Capitals (in new ratio)
Page No 5.107:
Question 88:
A and B were partners in a firm sharing profits in 3 : 1 ratio. They admitted C as a partner for 1/4th share in the future profits. C was to bring ₹ 60,000 for his capital. The Balance Sheet of A and B as at 1st April, 2019, the date on which C was admitted, was:
Liabilities | ₹ | Assets | ₹ | ||
Capital A/cs: | Land and Building | 40,000 | |||
A | 50,000 | Plant ad Machinery | 70,000 | ||
B | 80,000 | 1,30,000 | Stock | 30,000 | |
General Reserve | 10,000 | Debtors | 35,000 | ||
Creditors | 70,000 | Less: Provision for Doubtful Debts | 1,000 | 34,000 | |
Investments | 26,000 | ||||
Cash | 10,000 | ||||
2,10,000 | 2,10,000 | ||||
The other terms agreed upon were:
(a) Goodwill of the firm was valued at ₹ 24,000.
(b) Land and Building were valued at ₹ 65,000 and Plant and Machinery at ₹ 60,000.
(c) Provision for Doubtful Debts was found in excess by ₹ 400.
(d) A liability of ₹ 1,200 included in Sundry Creditors was not likely to arise.
(e) The capitals of the partners be adjusted on the basis of C's contribution of capital to the firm.
(f) Excess of shortfall, if any, be transferred to Current Accounts.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.
Answer:
Revaluation Account |
|||
Dr. |
|
Cr. |
|
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Plant and Machinery |
10,000 |
Land and Building |
25,000 |
Profit transferred to |
|
Provision for Doubtful Debts |
400 |
A Capital |
12,450 |
Creditors |
1,200 |
B Capital |
4,150 |
|
|
|
|
|
|
|
26,600 |
|
26,600 |
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
|
|
|
|
Balance b/d |
50,000 |
80,000 |
|
|
|
|
|
General Reserve |
7,500 |
2,500 |
|
|
|
|
|
Revaluation (Profit) |
12,450 |
4,150 |
|
|
|
|
|
Cash |
|
|
60,000 |
Balance c/d |
74,450 |
88,150 |
60,000 |
C's Current A/c |
4,500 |
1,500 |
|
|
74,450 |
88,150 |
60,000 |
|
74,450 |
88,150 |
60,000 |
|
|
|
|
|
|
|
|
B’s Current A/c |
|
43,150 |
|
Balance b/d |
74,450 |
88,150 |
60,000 |
Balance c/d (Adjusted) |
1,35,000 |
45,000 |
60,000 |
A’s Current A/c |
60,550 |
|
|
|
1,35,000 |
88,150 |
60,000 |
|
1,35,000 |
88,150 |
60,000 |
|
|
|
|
|
|
|
|
Balance Sheet as on April 01, 2019 after C’s admission |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Creditors (70,000 – 1,200) |
68,800 |
Land and Building |
65,000 |
||
Capital A/cs: |
|
Plant and Machinery |
60,000 |
||
A |
1,35,000 |
|
Stock |
30,000 |
|
B |
45,000 |
|
Debtors |
35,000 |
|
C |
60,000 |
2,40,000 |
Less: Prov. for Doubtful Debts |
600 |
34,400 |
B’s Current A/c |
43,150 |
Investments |
26,000 |
||
|
|
Cash |
70,000 |
||
|
|
A’s Current A/c |
60,550 |
||
|
|
C's Current A/c |
6,000 |
||
|
3,51,950 |
|
3,51,950 |
||
|
|
|
|
Working Notes:
WN1
WN2
As C has not brought his share of goodwill in cash, hence, his share shall be debited to his current account.
WN3 Distribution of Revaluation Profit
WN4 Adjustment of Capital
Total Capital of the firm after C’s admission |
= |
60,000 × 4 |
= |
2,40,000 |
Less: C’s Capital |
|
|
= |
60,000 |
Combined Capital of A and B |
|
|
= |
1, 80,000 |
WN5
Cash Account |
|||
Dr. |
|
Cr. |
|
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Balance b/d |
10,000 |
Balance c/d |
70,000 |
C’s Capital | 60,000 |
(Balancing Figure) |
|
|
70,000 |
|
70,000 |
|
|
|
|
Page No 5.107:
Question 89:
The Balance Sheet of X, Y and Z who share profits and losses in the ratio of 3 : 2 : 1, as on 1st April, 2019 is as follows:
Liabilities | ₹ | Assets | ₹ | |
Capital A/cs: | Y's Current Account | 7,000 | ||
X | 1,75,000 | Land and Building | 1,75,000 | |
Y |
1,50,000 |
|
Plant and Machinery |
67,500 |
Z |
1,25,000 | 4,50,000 |
Furniture |
80,000 |
Current A/cs: |
|
Investments |
36,500 | |
X |
4,000 |
Bills Receivable |
17,000 | |
Z |
6,000 |
10,000 |
Sundry Debtors |
43,500 |
|
|
|||
General Reserve | 15,000 | Stock | 1,37,000 | |
Profit and Loss A/c | 7,000 | Bank | 43,500 | |
Creditors | 80,000 | |||
Bills Payable | 45,000 | |||
|
6,07,000 |
|
6,07,000 |
|
|
|
|
|
On the above date, W is admitted as a partner on the following terms:
(b) He will bring necessary amount for his share of goodwill premium. Goodwill of the firm is valued at ₹ 90,000.
(c) New profit-sharing ratio will be 2 : 2 : 1 : 1.
(d) A liability of ₹ 7,004 will be created against bills receivable discounted earlier but now dishonoured.
(e) The value of stock, furniture and investments is reduced by 20%, whereas the value of Land and Building and Plant and Machinery will be appreciated by 20% and 10% respectively.
(f) Capital Accounts of the partners will be adjusted on the basis of W's Capital through their Current Accounts.
Prepare Revaluation Account, Partners' Current Accounts and Capital Accounts.
Answer:
Revaluation Account |
||||||
Dr. |
|
Cr. |
||||
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
|||
Stock |
27,400 |
Land and Building |
35,000 |
|||
Furniture |
16,000 |
Plant and Machinery |
6,750 |
|||
Investments |
7,300 |
Loss transferred to: |
|
|||
X |
4,475 |
|
||||
|
|
Y |
2,983 |
|
||
|
|
Z |
1,492 |
8,950 |
||
|
50,700 |
|
50,700 |
|||
|
|
|
|
Partners’ Current Account |
|||||||
Dr. |
Cr. |
||||||
Particulars |
X | Y | Z |
Particulars |
X | Y | Z |
Balance b/d |
|
7,000 |
|
Balance b/d |
4,000 |
|
6,000 |
Revaluation (Loss) |
4,475 |
2,983 |
1,492 |
General Reserve |
7,500 |
5,000 |
2,500 |
|
|
|
|
Profit and Loss A/c |
3,500 |
2,333 |
1,167 |
Balance c/d |
100,525 |
47,350 |
83,175 |
Premium for Goodwill |
15,000 |
|
|
|
|
|
|
Capital A/c |
75,000 |
50,000 |
75,000 |
|
1,05,000 |
57,333 |
84,667 |
|
1,05,000 |
57,333 |
84,667 |
|
|
|
|
|
|
|
|
Partners’ Capital Account |
|||||||||
Dr. |
Cr. |
||||||||
Particulars |
X | Y | Z | W |
Particulars |
X | Y | Z | W |
Current A/c |
75,000 |
50,000 |
75,000 |
|
Balance b/d |
1,75,000 |
1,50,000 |
1,25,000 |
|
|
|
|
|
|
Cash A/c |
|
|
|
50,000 |
Balance c/d |
1,00,000 |
1,00,000 |
50,000 |
50,000 |
|
|
|
|
|
|
1,75,000 |
1,50,000 |
1,25,000 |
50,000 |
|
1,75,000 |
1,50,000 |
1,25,000 |
50,000 |
|
|
|
|
|
|
|
|
|
|
Working Notes:
WN1Calculation of Sacrificing Ratio
WN2 Distribution of Goodwill
WN3 Adjustment of Capital
Page No 5.108:
Question 90:
Shikhar and Rohit were partners in a firm sharing profits in the ratio of 7 : 3. On 1st April, 2013, they admitted Kavi as a new partner for 1/4th share in profits of the firm. Kavi brought ₹ 4,30,000 as his capital and ₹ 25,000 for his share of goodwill premium. The Balance Sheet of Shikhar and Rohit as on 1st April, 2013 was as follows:
BALANCE SHEET OF SHIKHAR AND ROHIT as at 1st April, 2013 | |||||
Liabilities | ₹ | Assets | ₹ | ||
Capital A/cs: | Land and Building | 3,50,000 | |||
Shikhar | 8,00,000 | Machinery | 4,50,000 | ||
Rohit | 3,50,000 | 11,50,000 | Debtors | 2,20,000 | |
General Reserve | 1,00,000 | Less: Provision | 20,000 | 2,00,000 | |
Workmen's Compensation Fund | 1,00,000 | Stock | 3,50,000 | ||
Creditors | 1,50,000 | Cash | 1,50,000 | ||
15,00,000 | 15,00,000 | ||||
It was agreed that:
(a) the value of Land and Building will be appreciated by 20%.
(b) the value of Machinery will be depreciated by 10%.
(c) the liabilities of Workmen's Compensation Fund were determined at ₹ 50,000.
(d) capitals of Shikhar and Rohit will be adjusted on the basis of Kavi's capital and actual cash to be brought in or to be paid off as the case may be.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.
Answer:
Revaluation Account | ||||||
Dr. | Cr. | |||||
Particulars | Amount Rs |
Particulars | Amount Rs |
|||
Machinery | 45,000 | Land and Building | 70,000 | |||
Profit transferred to: | ||||||
Shikhar’s Capital A/c | 17,500 | |||||
Rohit’s Capital A/c | 7,500 | 25,000 | ||||
70,000 | 70,000 | |||||
Partners’ Capital Accounts | |||||||||
Dr. | Cr. | ||||||||
Particulars |
Shikhar
|
Rohit
|
Kavi
|
Particulars
|
Shikhar
|
Rohit
|
Kavi
|
||
Balance b/d | 8,00,000 | 3,50,000 | |||||||
Balance c/d | 9,40,000 | 4,10,000 | 4,30,000 | General Reserve | 70,000 | 30,000 | |||
Workmen’s Compensation Fund |
35,000 | 15,000 | |||||||
Cash A/c | 4,30,000 | ||||||||
Premium for Goodwill | 17,500 | 7,500 | |||||||
Revaluation A/c (Profit) | 17,500 | 7,500 | |||||||
9,40,000 | 4,10,000 | 4,30,000 | 9,40,000 | 4,10,000 | 4,30,000 | ||||
Cash A/c | 37,000 | 23,000 | Balance b/d | 9,40,000 | 4,10,000 | 4,30,000 | |||
Balance c/d | 9,03,000 | 3,87,000 | 4,30,000 | ||||||
9,40,000 | 4,10,000 | 4,30,000 | 9,40,000 | 4,10,000 | 4,30,000 | ||||
Balance Sheet
as on April 01, 2013 after Kavi’s admission
|
|||||
Liabilities |
Amount
Rs
|
Assets |
Amount
Rs
|
||
Liability for Workmen’s Compensation |
50,000 | Land and Building | 4,20,000 | ||
Creditors | 1,50,000 | Machinery | 4,50,000 | ||
Capitals: | Less: Depreciation @10% | 45,000 | 4,05,000 | ||
Shikhar | 9,03,000 | Debtors | 2,20,000 | ||
Rohit | 3,87,000 | Less: Provision | 20,000 | 2,00,000 | |
Kavi | 4,30,000 | 17,20,000 | Stock | 3,50,000 | |
Cash | 5,45,000 | ||||
19,20,000 | 19,20,000 | ||||
Calculation of Profit Sharing Ratio:
WN1: Distribution of Goodwill brought in by Kavi:
WN2: Distribution of Workmen’s Compensation Fund
WN3: Distribution of General Reserve:
WN4: Adjustment of Capital:
Page No 5.108:
Question 91:
Raghu and Rishu are partners sharing profits in the ratio 3 : 2. Their Balance Sheet as at 31st March, 2009 was as follows:
Liabilities |
₹ |
Assets |
₹ | ||
Creditors |
86,000 |
Cash in Hand | 77,000 | ||
Employees' Provident Fund |
10,000 |
Debtors |
42,000 |
|
|
Investments Fluctuation Reserve |
4,000 |
Less: Provision for Doubtful Debts |
7,000 |
35,000 |
|
Capital A/cs: | Investments | 21,000 | |||
Raghu |
1,19,000 |
|
Buildings | 98,000 | |
Rishu |
1,12,000 |
2,31,000 |
Plant and Machinery |
1,00,000 |
|
|
|
|
|||
3,31,000 |
3,31,000 |
||||
|
|
Rishabh was admitted on that date for 1/4th share of profit on the following terms:
(a) Rishabh will bring ₹ 50,000 as his share of capital.
(b) Goodwill of the firm is valued at ₹ 42,000 and Rishabh will bring his share of goodwill in cash.
(c) Buildings were appreciated by 20%.
(d) All Debtors were good.
(e) There was a liability of ₹ 10,800 included in Creditors which was not likely to arise.
(f) New profit-sharing ratio will be 2 : 1 : 1.
(g) Capital of Raghu and Rishu will be adjusted on the basis of Rishabh's share of capital and any excess or deficiency will be made by withdrawing or bringing in cash by the concerned partners as the case may be.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.
Answer:
Revaluation Account |
||||
Dr. |
|
|
Cr. |
|
Particulars |
Amount Rs |
Particulars |
Amount Rs |
|
Profit on Revaluation transferred to- |
|
Building |
19,600 |
|
Raghu’s Capital A/c |
22,440 |
|
Provision for Doubtful Debts (Old) |
7,000 |
Rishu’s Capital A/c |
14,960 |
37,400 |
Liability for Creditors |
10,800 |
|
37,400 |
|
37,400 |
|
|
|
|
|
|
|||||||
Dr. |
|
|
|
|
|
|
Cr. |
Particulars |
Raghu |
Rishu |
Rishabh |
Particulars |
Raghu |
Rishu |
Rishabh |
|
|
|
|
Balance b/d |
1,19,000 |
1,12,000 |
|
Cash A/c (Bal. Fig.) |
48,040 |
84,860 |
|
Cash A/c |
|
|
50,000 |
Balance c/d |
1,00,000 |
50,000 |
50,000 |
Investment Fluctuation |
2,400 |
1,600 |
|
|
|
|
|
Premium for Goodwill |
4,200 |
6,300 |
|
|
|
|
|
Revaluation A/c (Profit) |
22,440 |
14,960 |
|
|
|
|
|
|
|
|
|
|
1,48,040 |
1,34,860 |
50,000 |
|
1,48,040 |
1,34,860 |
50,000 |
|
|
|
|
|
|
|
|
Balance Sheet as on March 31, 2009 |
||||
Liabilities |
Amount Rs |
Assets |
Amount Rs |
|
Creditors |
86,000 |
|
Cash (WN4) |
4,600 |
Less: Liability |
(10,800) |
75,200 |
Debtors |
42,000 |
Employees Provident Fund |
10,000 |
Investments |
21,000 |
|
Capital A/cs: |
|
Buildings (98,000 + 19,600) |
1,17,600 |
|
Raghu |
1,00,000 |
|
Plant and Machinery |
1,00,000 |
Rishu |
50,000 |
|
|
|
Rishabh |
50,000 |
2,00,000 |
|
|
|
|
|
|
|
|
2,85,200 |
|
2,85,200 |
|
|
|
|
|
WN 1Calculation of Sacrificing Ratio
WN 2Share of Rishabh’s Share of Goodwill
WN 3Adjustment of Capital
WN 4 Cash Account
Cash Account |
|||
Dr. |
|
|
Cr. |
Particulars |
Amount Rs |
Particulars |
Amount Rs |
Balance b/d |
77,000 |
Raghu’s Capital |
48,040 |
Rishabh’s Capital |
50,000 |
Rishu’s Capital |
84,860 |
Premium for Goodwill |
10,500 |
Balance c/d |
4,600 |
|
1,37,500 |
|
1,37,500 |
|
|
|
|
Page No 5.109:
Question 92:
Following is the Balance Sheet of Abha and Binay as at 31st March, 2014:
Liabilities | ₹ | Assets | ₹ | ||
Creditors | 13,000 | Bank | 15,000 | ||
Employees Provident Fund | 8,000 | Debtors | 22,000 | ||
Workmen Compensation Fund | 15,000 | Less : Provision for Doubtful Debts | 1,000 | 21,000 | |
Capital A/cs: | Stock | 10,000 | |||
Abha | 55,000 | Plant and Machinery | 60,000 | ||
Binay |
30,000 | 85,000 | Goodwill | 10,000 | |
Profit and Loss | 5,000 | ||||
1,21,000 | 1,21,000 | ||||
Chitra was admitted as a partner for 1/4th share in the profits of the firm. It was decided that:
(a) Bad Debts amounted to ₹ 1,500 will be written off.
(b) Stock worth ₹ 8,000 was taken over by Abha and Binay at Book Value in their profit-sharing ratio. The remaining stock was valued at ₹ 2,500.
(c) Plant and Machinery and Goodwill were valued at ₹ 32,000 and ₹ 20,000 respectively.
(d) Chitra brought her share of goodwill in cash.
(e) Chitra will bring proportionate capital and the capitals of Abha and Binay will be adjusted in their profit-sharing ratio by bringing in or paying off cash as the case may be.
Prepare Revaluation Account and Partners' Capital Accounts.
Answer:
Revaluation Account |
||||
Dr. |
Cr. |
|||
Particulars |
Amount Rs |
Particulars |
Amount Rs |
|
Bad debts |
500 |
Stock |
500 |
|
Plant and Machinery |
28,000 |
Loss on Revaluation |
|
|
|
|
Abha’s Capital A/c |
14,000 |
|
|
|
Binay’s Capital A/c |
14,000 |
28,000 |
|
|
|
|
|
|
28,500 |
|
28,500 |
|
|
|
|
|
|
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
Abha |
Binay |
Chitra |
Particulars |
Abha |
Binay |
Chitra |
Revaluation |
14,000 |
14,000 |
|
Balance b/d |
55,000 |
30,000 |
|
Goodwill |
5,000 |
5,000 |
|
Bank |
18,000 |
||
Profit and Loss |
2,500 |
2,500 |
|
Premium for Goodwill |
2,500 |
2,500 |
|
Stock | 4,000 | 4,000 | WCF | 7,500 | 7,500 | ||
Balance c/d |
39,500 |
14,500 |
18,000 |
|
|
|
|
|
65,000 |
40,000 |
18,000 |
|
65,000 |
40,000 |
18,000 |
Bank |
12,500 |
|
|
Balance c/d |
39,500 |
14,500 |
18,000 |
Balance c/d (adjusted) |
27,000 |
27,000 |
18,000 |
Bank |
|
12,500 |
|
|
39,500 |
27,000 |
18,000 |
|
39,500 |
27,000 |
18,000 |
|
|
|
|
|
|
|
|
Working Notes:
WN1 Calculation of Chitra's Capital
WN2 Calculation of New Capital
WN3 Calculation of Chitra's Share of Goodwill
Page No 5.109:
Question 93:
Sarthak and Vansh are partners sharing profits in the ratio of 2 : 1. Since both of them are specially abled sometimes they find it difficult to run the business on their own. Mansi, a common friend, decides to help them. Therefore, they admit her into partnership for 1/3rd share in profits. She brings ₹ 60,000 for goodwill and proportionate capital. At the time of admission of Mansi, the Balance Sheet of Sarthak and Vansh was as under:
Liabilities | Amount (₹) |
Assets | Amount (₹) |
||
Capital A/cs: | Plant |
66,000
|
|||
Sarthak | 70,000 | Furniture | 30,000 | ||
Vansh | 60,000 | 1,30,000 | Investments | 40,000 | |
General Reserve | 18,000 | Stock |
46,000
|
||
Bank Loan | 18,000 | Debtors | 38,000 | ||
Creditors | 72,000 | Less: Provision for Bad Debts | 4,000 | 34,000 | |
Cash |
22,000
|
||||
2,38,000 | 2,38,000 | ||||
It was decided to:
(a) Reduce the value of Stock by ₹ 10,000.
(b) Plant is to be valued at ₹ 80,000.
(c) An amount of ₹ 3,000 included in Creditors was not payable.
(d) Half of the investments were taken over by Sarthak and remaining were valued at ₹ 25,000.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of reconstituted firm.
Answer:
In the books of Sarthak, Vansh and Mansi
|
||||||
Dr. |
Revaluation A/c
|
Cr. | ||||
Particulars |
Amount
(₹)
|
Particulars
|
Amount
(₹)
|
|||
To Stock A/c |
10,000
|
By Plant A/c |
14,000
|
|||
|
By Creditors A/c |
3,000
|
||||
To Profit transferred to |
|
By Investments A/c |
5,000
|
|||
Sarthak’s Capital A/c |
8,000
|
|
|
|||
Vansh’s Capital A/c |
4,000
|
12,000
|
|
|||
|
|
|||||
22,000
|
22,000
|
|||||
|
|
Dr. |
Partner’s Capital A/c
|
Cr. | |||||||
Particulars
|
Sarthak
(₹)
|
Vansh
(₹)
|
Mansi
(₹)
|
Particulars
|
Sarthak
(₹)
|
Vansh
(₹)
|
Mansi
(₹)
|
||
To Investments A/c |
20,000 |
|
|
By balance b/d |
70,000 |
60,000 |
|
||
|
|
|
By Bank A/c (WN2) |
|
|
1,00,000 |
|||
To balance c/d |
1,10,000 |
90,000 |
1,00,000 |
By Premium for Goodwill A/c |
40,000 |
20,000 |
|
||
|
|
|
By General Reserve A/c |
12,000 |
6,000 |
|
|||
|
|
|
By Revaluation A/c (Profit) |
8,000 |
4,000 |
|
|||
|
|
|
|
|
|
||||
1,30,000 |
90,000 |
1,00,000 |
1,30,000 |
90,000 |
1,00,000 |
||||
|
|
|
|
|
|
Working Notes:
1. Calculation of New profit-sharing ratioMansi’s Share of Profits | = | 1/3 |
Remaining Profits | = | (1 – 1/3) = 2/3 |
Sarthak’s New Share of Profits | = | (2/3 × 2/3) = 4/9 |
Vansh’s New Share of Profits | = | (2/3 × 1/3) = 2/9 |
Sarthak : Vansh : Mansi | = |
4 : 2 : 3 |
2. Calculation of Mansi’s Capital
Total Adjusted Capital of the Old Partners = Sarthak’s Capital + Vansh’s Capital = ₹ (1,10,000 + 90,000) = ₹ 2,00,00
Combined New Share of the Old Partners = (4/9 + 2/9) = 6/9 or 2/3
Total Capital of the new firm | = | (Adjusted Capital of the Old Partners × Reciprocal of Combined New Share of the Old Partners) |
= | ₹ (2,00,000 × 3/2) = ₹ 3,00,000 | |
Mansi’s Capital | = | (Total Capital of the new firm × His Share of Profits) |
= | ₹ (3,00,000 × 1/3) = ₹ 1,00,000 |
Balance Sheet |
|||||
as at …………… |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Capitals A/cs: |
|
Plant |
80,000 |
||
Sarthak |
1,10,000 |
|
Furniture |
30,000 |
|
Vansh |
90,000 |
|
Debtors |
38,000 |
|
Mansi |
1,00,000 |
3,00,000 |
Less: Provision for Bad debts |
4,000 |
34,000 |
Bank Loan |
18,000 |
Investments |
25,000 |
||
Creditors |
69,000 |
Stock |
36,000 |
||
|
Cash |
1,82,000 |
|||
|
(22,000 + 60,000 + 1,00,000) |
|
|||
3,87,000 |
3,87,000 |
||||
|
|
Page No 5.110:
Question 94:
A, B and C are partners sharing profits and losses in the ratio of 2 : 3 : 5. On 31st March, 2019, their Balance Sheet was:
Liabilities | Amount (₹) |
Assets | Amount (₹) |
||
Creditors | 64,000 | Cash |
18,000
|
||
Bills Payable | 22,000 | Bills Receivable | 14,000 | ||
General Reserve | 14,000 | Stock | 44,000 | ||
Capital A/cs: | Debtors | 42,000 | |||
A | 36,000 | Machinery | 94,000 | ||
B | 44,000 | Goodwill | 20,000 | ||
C | 52,000 | 1,32,000 | |||
2,32,000 | 2,32,000 | ||||
They admit D into partnership on the following terms:
(a) Machinery is to be depreciated by 15%.
(b) Stock is to be revalued at ₹ 48,000.
(c) It is found that the Creditors included a sum of ₹ 12,000 which was not to be paid.
(d) Outstanding Rent is ₹ 1,900.
(e) D is to bring in ₹ 6,000 as goodwill and sufficient capital for 2/5th share.
(f) The partners decided to use 10% of the profits every year in providing drinking water in schools, where required.
Prepare Revaluation Account, Partners' Capital Accounts, Cash Account and Balance Sheet of the new firm.
Answer:
In the books of A, B, C and D |
|||||
Dr. |
Revaluation A/c |
Cr. | |||
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
||
To Machinery A/c |
14,100 |
By Stock A/c |
4,000 |
||
To Outstanding Rent A/c |
1,900 |
By Creditors A/c |
12,000 |
||
|
|
||||
16,000 |
16,000 |
||||
|
|
Dr. |
Partner’s Capital A/c |
Cr. |
|||||||||
Particulars |
A (₹) |
B (₹) |
C (₹) |
D (₹) |
Particulars |
A (₹) |
B (₹) |
C (₹) |
D (₹) |
||
To Goodwill A/c |
4,000 |
6,000 |
10,000 |
|
By balance b/d |
36,000 |
44,000 |
52,000 |
|
||
|
|
|
|
By Bank A/c (WN2) |
|
|
|
88,000 |
|||
To balance c/d |
36,000 |
44,000 |
52,000 |
88,000 |
By Premium for Goodwill A/c |
1,200 |
1,800 |
3,000 |
|
||
|
|
|
|
By General Reserve A/c |
2,800 |
4,200 |
7,000 |
|
|||
|
|
|
|
|
|
|
|
||||
40,000 |
50,000 |
62,000 |
88,000 |
40,000 |
50,000 |
62,000 |
88,000 |
||||
|
|
|
|
|
|
|
|
Working Notes:
1. Calculation of New profit-sharing ratioD’s Share of Profits | = | 2/5 |
Remaining Profits | = | (1 –2/5) = 3/5 |
A’s New Share of Profits | = | (3/5 × 2/10) = 6/50 |
B’s New Share of Profits | = | (3/5 × 3/10) = 9/50 |
C’s New Share of Profits | = | (3/5 × 5/10) = 15/50 |
A : B : C : D | = |
6 : 9 : 15 : 20 |
2. Calculation of D’s Capital
Total Adjusted Capital of the Old Partners = A’s Capital + B’s Capital + C’s Capital = ₹ (36,000 + 44,000 + 52,000) = ₹ 1,32,000 Combined New Share of the Old Partners = (6/50 + 9/50 + 15/50) = 30/50 or 3/5
Total Capital of the new firm | = | (Adjusted Capital of the Old Partners × Reciprocal of Combined New Share of the Old Partners) |
= | ₹ (1,32,000 × 5/3) = ₹ 2,20,000 | |
D’s Capital | = | (Total Capital of the new firm × His Share of Profits) |
= | ₹ (2,20,000 × 2/5) = ₹ 88,000 |
Balance Sheet |
|||||
as at 31st March, 2020 |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Capitals A/cs: |
|
Cash (18,000 + 88,000 + 6,000) |
1,12,000 |
||
A |
36,000 |
|
Bills Receivable |
14,000 |
|
B |
44,000 |
|
Stock |
48,000 |
|
C |
52,000 |
|
Debtors |
42,000 |
|
D |
88,000 |
2,20,000 |
Machinery |
94,000 |
|
Creditors |
52,000 |
Less: Depreciation |
14,100 |
79,900 |
|
Bills Payable |
22,000 |
|
|||
Outstanding Rent |
1,900 |
|
|||
|
|
||||
2,95,900 |
2,95,900 |
||||
|
|
Page No 5.110:
Question 95:
A and B are partners in a firm sharing profits in the ratio of 3 : 2. They decide to admit C as a new partner w.e.f. 1st April, 2019. In future, profits will be shared equally. The Balance Sheet of A and B as at 1st April, 2019 and the terms of admission are:
BALANCE SHEET OF A AND B | |||||
Liabilities | Amount (₹) |
Assets | Amount (₹) |
||
Sundry Creditors | 60,000 | Cash in Bank |
40,000
|
||
Outstanding Expenses | 15,000 | Sundry Debtors | 36,000 | ||
Capital A/cs: | Stock | 84,000 | |||
A | 3,00,000 | Furniture and Fittings | 65,000 | ||
B | 3,00,000 | 6,00,000 | Plant and Machinery | 4,50,000 | |
6,75,000 | 6,75,000 | ||||
(a) Capital of the firm is fixed at ₹ 6,00,000 to be contributed by partners in the profit-sharing ratio. The difference will be adjusted in cash.
(b) C to bring in his share of capital and goodwill in cash. Goodwill of the firm is to be valued on the basis of two years' purchases of super profit. The average net profits expected in the future by the firm ₹ 90,000 per year. The normal rate of return on capital in similar business is 10%.
(c) The partners agreed to help maintain the plants and keep the area clean.
Calculate goodwill and prepare Partners' Capital Accounts and Bank Account.
Answer:
In the books of A, B and C |
|||||||||
Dr. |
Partner’s Capital A/c |
Cr. | |||||||
Particulars |
A (₹) |
B (₹) |
C (₹) |
Particulars |
A (₹) |
B (₹) |
C (₹) |
||
To Bank A/c |
1,16,000 |
1,04,000 |
|
By balance b/d |
3,00,000 |
3,00,000 |
|
||
|
|
|
By Bank A/c |
|
|
2,00,000 |
|||
To balance c/d (6,00,000/3) |
2,00,000 |
2,00,000 |
2,00,000 |
By Premium for Goodwill A/c |
16,000 |
4,000 |
|
||
|
|
|
|
|
|
||||
3,16,000 |
3,04,000 |
2,00,000 |
3,16,000 |
3,04,000 |
2,00,000 |
||||
|
|
|
|
|
|
Working Notes:
1. Calculation of Sacrificing Ratio
Particulars |
A |
B |
Old Ratio |
3/5 |
2/5 |
New Ratio |
1/3 |
1/3 |
Gain/Sacrifice |
(3/5 – 1/3) = 4/15 (Sacrifice) |
(2/5 – 1/3) = 1/15 (Sacrifice) |
Sacrificing Ratio |
4:1 |
2. Calculation of Goodwill brought in by C
Average Net Profits | = | ₹ 90,000 |
Capital Employed | = | ₹ 6,00,000 |
Normal Profits | = | (Capital Employed × Normal rate of return/100) = ₹ (6,00,000 × 10/100) = ₹ 60,000 |
Super Profits | = | Average Net Profits – Normal Profits= ₹ (90,000 – 60,000) = ₹ 30,000 |
Goodwill | = | Super Profits × No. of years of Purchase = ₹ (30,000 × 2) = ₹ 60,000 |
C’s Share of Goodwill | = | ₹ (60,000 × 1/3) = ₹ 20,000 |
Dr. |
Bank A/c |
Cr. |
|||||
Date |
Particulars |
Amount (₹) |
Date |
Particulars |
Amount (₹) |
||
2019 |
|
2019 |
|
||||
April 01 | To balance b/d |
40,000 |
March 31 | By A’s Capital A/c |
1,16,000 |
||
April 01 | To C’s Capital A/c |
2,00,000 |
March 31 | By B’s Capital A/c |
1,04,000 |
||
April 01 | To Premium for Goodwill A/c |
20,000 |
March 31 | By balance c/d |
40,000 |
||
|
|
||||||
2,60,000 |
2,60,000 |
||||||
|
|
Page No 5.111:
Question 96:
L, M and N were partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance Sheet on 31st March, 2015 was as follows:
Liabilities | ₹ | Assets | ₹ | |
Creditors | 1,68,000 | Bank | 34,000 | |
General Reserve | 42,000 | Debtors | 46,000 | |
Capital's A/cs: L | 1,20,000 | Stock | 2,20,000 | |
M | 80,000 | Investments | 60,000 | |
N | 40,000 | 2,40,000 | Furniture | 20,000 |
Machinery | 70,000 | |||
4,50,000 | 4,50,000 | |||
On the above date, O was admitted as a new partner and it was decided that:
(i) The new profit-sharing ratio between L, M, N and O will be 2 : 2 : 1 : 1.
(ii) Goodwill of the firm was valued at ₹ 1,80,000 and O brought his share of goodwill premium in cash.
(iii) The market value of investments was ₹ 36,000.
(iv) Machinery will be reduced to ₹ 58,000.
(v) A creditor of ₹ 6,000 was not likely to claim the amount and hence was to be written off.
(vi) O will bring proportionate capital so as to give him 1/6th share in the profits of the firm.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the new firm.
Answer:
Revaluation Account |
||||||
Dr. |
|
Cr. |
||||
Particulars |
Amount Rs |
Particulars |
Amount Rs |
|||
Investments |
24,000 |
Creditors |
6,000 |
|||
Machinery |
12,000 |
Loss on Revaluation |
|
|||
|
L’s Capital A/c |
15,000 |
|
|||
|
M’s Capital A/c |
10,000 |
|
|||
|
N’s Capital A/c |
5,000 |
30,000 |
|||
|
|
|||||
|
36,000 |
|
36,000 |
|||
|
|
|
|
|||
Partners’ Capital Account |
|||||||||
Dr. |
Cr. |
||||||||
Particulars |
L |
M |
N |
O |
Particulars |
L |
M |
N |
O |
Reval. A/c |
15,000 |
10,000 |
5,000 |
|
Balance b/d |
1,20,000 |
80,000 |
40,000 |
|
Balance c/d |
1,56,000 |
84,000 |
42,000 |
56,400 |
Gen. Reserve |
21,000 |
14,000 |
7,000 |
|
|
|
|
Premium for G/w |
30,000 |
|
||||
|
|
|
Cash A/c |
|
|
56,400 |
|||
|
|
|
|
|
|
|
|
|
|
|
1,71,000 |
94,000 |
47,000 |
56,400 |
|
1,71,000 |
94,000 |
47,000 |
56,400 |
|
|
|
|
|
|
|
|
|
|
Balance Sheet as on March 31, 2015 |
||||
Liabilities |
Amount (Rs) |
Assets |
Amount (Rs) |
|
Creditors |
1,62,000 |
Bank (34,000+56,400+30,000) |
1,20,400 |
|
Capitals: |
|
Debtors |
46,000 |
|
L |
1,56,000 |
|
Stock |
2,20,000 |
M |
84,000 |
|
Investments |
36,000 |
N |
42,000 |
|
Furniture |
20,000 |
O |
56,400 |
3,38,400 |
Machinery |
58,000 |
|
5,00,400 |
|
5,00,400 |
Working Notes:
WN1: Calculation of Sacrificing Ratio
WN2: Adjustment of Goodwill
WN3 Calculation of O’s Proportionate Capital
Page No 5.111:
Question 97:
A and B are partners in a firm sharing profits and losses in the ratio 3 : 1. They admit C for 1/4th share on 31st March, 2014 when their Balance Sheet was as follows:
Liabilities | ₹ | Assets | ₹ | ||
Employees Provident Fund | 17,000 | Cash | 6,100 | ||
Workmen Compensation Reserve | 6,000 | Stock | 15,000 | ||
Investment Fluctuation Reserve | 4,100 | Debtors | 50,000 | ||
Capital's A/cs: | Less : Provision for Doubtful Debts | 2,000 | 48,000 | ||
A | 54,000 | ||||
B |
35,000 | 89,000 | Investments | 7,000 | |
Goodwill | 40,000 | ||||
1,16,100 | 1,16,100 | ||||
The following adjustments were agreed upon:
(a) C brings in ₹ 16,000 as goodwill and proportionate capital.
(b) Bad debts amounted to ₹ 3,000.
(c) Market value of investment is ₹ 4,500.
(d) Liability on account of Workmen Compensation Reserve amounted to ₹ 2,000.
Prepare Revaluation Account and Partners' Capital Accounts.
Answer:
Revaluation Account |
||||
Dr. |
Cr. |
|||
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
|
Bad debts |
1,000 |
|||
Loss on Revaluation |
|
|||
|
|
A's Capital A/c |
750 |
|
|
|
B’s Capital A/c |
250 |
1,000 |
|
|
|
|
|
|
1,000 |
|
1,000 |
|
|
|
|
|
|
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
Revaluation |
750 |
250 |
|
Balance b/d |
54,000 |
35,000 |
|
Goodwill |
30,000 |
10,000 |
|
Bank |
23,200 |
||
|
Premium for Goodwill |
12,000 |
4,000 |
|
|||
WCF | 3,000 | 1,000 | |||||
Balance c/d |
39,450 |
30,150 |
23,200 |
IFF |
1,200 |
400 |
|
|
70,200 |
40,400 |
23,200 |
|
70,200 |
40,400 |
23,200 |
|
|
|
|
|
|
|
|
Working Notes:
WN1 Calculation of C's Capital
Notes:
1. Premium for Goodwill Rs 16,000 will be distributed between A and B in sacrificing ratio i.e. 3 : 1.
2. Excess WCF of Rs 4,000 will be shared in old ratio among old partners.
3. Excess IFF of Rs 1,600 will be shared in old ratio among old partners.
Page No 5.112:
Question 98:
Mohan and Sohan are in partnership sharing profits in the proportion of 3/5th and 2/5th respectively. Their Balance Sheet as at 31st March, 2019 was:
Liabilities | ₹ | Assets | ₹ | |||
Mohan's Capital | 2,000 | Plant | 650 | |||
Sohan's Capital | 1,000 | 3,000 | Cash | 650 | ||
Creditors | 400 | Debtors | 1,000 | |||
Less: Provision for Doubtful Debts | 400 | 600 | ||||
Stock | 1,500 | |||||
3,400 | 3,400 | |||||
They admit Rohan to a 1/3rd share upon the terms that he is to pay into the business ₹ 1,000 as Goodwill and sufficient Capital to give him a 1/3rd share of the total capital of the new firm. It was agreed that the Provision for Doubtful Debts be reduced to ₹ 100 and the Stock be revalued at ₹ 2,000 and that the Plant be reduced to ₹ 500.
You are required to record the above in the Ledger of the firm and show Balance Sheet of the new partnership.
Answer:
Revaluation Account |
|||
Dr. |
|
Cr. |
|
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Plant (650 – 500) |
150 |
Reserve for Doubtful Debts |
300 |
Profit transferred to |
|
(400 – 100) |
|
Mohan Capital |
390 |
Stock |
500 |
Sohan Capital |
260 |
|
|
|
800 |
|
800 |
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
Mohan |
Sohan |
Rohan |
Particulars |
Mohan |
Sohan |
Rohan |
|
|
|
|
Balance b/d |
2,000 |
1,000 |
|
Balance c/d |
2,990 |
1,660 |
|
Revaluation |
390 |
260 |
|
(after adjustments) |
|
|
|
Premium for Goodwill |
600 |
400 |
|
|
2,990 |
1,660 |
|
|
2,990 |
1,660 |
|
|
|
|
|
Balance b/d |
2,990 |
1,660 |
|
Balance c/d |
2,990 |
1,660 |
2,325 |
Cash |
|
|
2,325 |
|
2,990 |
1,660 |
2,325 |
|
2,990 |
1,660 |
2,325 |
|
|
|
|
|
|
|
|
Balance Sheet as on March 31, 2019 after Rohan’s admission |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Capital A/cs: |
|
Cash |
3,975 |
||
Mohan |
2,990 |
|
Debtors |
1,000 |
|
Sohan |
1,660 |
|
Less: Reserve for D. Debts |
100 |
900 |
Rohan |
2,325 |
6,975 |
Stock |
2,000 |
|
Creditors |
400 |
Plant |
500 |
||
|
|
|
|
||
|
7,375 |
|
7,375 |
||
|
|
|
|
Working Notes
WN1
WN2
Distribution of Premium for Goodwill
WN3
Distribution of Revaluation Profit
WN4
Calculation Rohan’s Capital
Combined Capital of Mohan and Sohan after all adjustments = 2,990 + 1,660 = Rs 4,650
Total Capital of the firm on the basis of combined capital of Mohan and Sohan
WN5
Cash Account |
|||
Dr. |
|
|
Cr. |
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Balance b/d |
650 |
|
|
Rohan’s Capital |
2,325 |
|
|
Premium for Goodwill |
1,000 |
Balance c/d |
3,975 |
|
3,975 |
|
3,975 |
|
|
|
|
Page No 5.112:
Question 99:
Pradeep and Dhanraj were partners in a firm sharing profits in the ratio of 3 : 1. Their Balance Sheet on 31st March, 2019 was:
Liabilities | ₹ | Assets | ₹ | ||
Creditors | 30,000 | Cash | 4,000 | ||
Bills Payable | 1,000 | Debtors | 50,000 | ||
Reserve Fund | 16,000 | Less: Provision for Doubtful Debts | 5,000 | 45,000 | |
Outstanding Salary | 3,000 | Stock | 30,000 | ||
Capital A/cs: | Bills Receivable | 10,000 | |||
Pradeep | 60,000 | Patents | 1,000 | ||
Dhanraj |
20,000 | 80,000 | Machinery | 40,000 | |
1,30,000 | 1,30,000 | ||||
They admitted Leander as a new partner on this date. New profit-sharing ratio is agreed as 3 : 2 : 3. Leander brings in proportionate capital after the following adjustments:
(a) Leander brings ₹ 16,000 as his share of goodwill.
(b) Provisions for Doubtful Debts is to be reduced by ₹ 2,000.
(c) There is an old Printer valued at ₹ 2,400. It does not appear in the books of the firm. It is now to be recorded.
(d) Patents are valueless.
Prepare Revaluation Account, Capital Accounts and opening Balance Sheet of Pradeep, Dhanraj and Leander.
Answer:
Revaluation Account |
|||
Dr. |
|
|
Cr. |
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Patents |
1,000 |
Provision for Doubtful Debts |
2,000 |
Profit on transferred to |
|
Typewriter |
2,400 |
Pradeep Capital |
2,550 |
|
|
Dhanraj Capital |
850 |
|
|
|
4,400 |
|
4,400 |
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
Pradeep |
Dhanraj |
Leander |
Particulars |
Pradeep |
Dhanraj |
Leander |
|
|
|
|
Balance b/d |
60,000 |
20,000 |
|
Balance c/d |
90,550 |
24,850 |
|
Reserve Fund |
12,000 |
4,000 |
|
(after adjustments) |
|
|
|
Revaluation |
2,550 |
850 |
|
|
|
|
|
Premium for Goodwill |
16,000 |
|
|
|
90,550 |
24,850 |
|
|
90,550 |
24,850 |
|
|
|
|
|
Balance c/d |
90,550 |
24,850 |
|
|
|
|
|
Cash |
|
|
69,240 |
Balance c/d |
90,550 |
24,850 |
69,240 |
|
|
|
|
|
90,550 |
24,850 |
69,240 |
|
90,550 |
24,850 |
69,240 |
|
|
|
|
|
|
|
|
Balance Sheet as on March 31, 2019 after Leander’s admission |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Creditors |
30,000 |
Debtors |
50,000 |
|
|
Bills Receivable |
1,000 |
Less: Prov. for D. Debts |
3,000 |
47,000 |
|
Outstanding Salary |
3,000 |
Stock |
30,000 |
||
Capital A/cs: |
|
Bills Receivable |
10,000 |
||
Pradeep |
90,550 |
|
Machinery |
40,000 |
|
Dhanraj |
24,850 |
|
Typewriter |
2,400 |
|
Leander |
69,240 |
1,84,640 |
Cash |
89,240 |
|
|
|
|
|
|
|
|
2,18,640 |
|
2,18,640 |
||
|
|
|
|
Working Notes
WN1
Leander acquires his share of profit from Pradeep only. Therefore, amount for goodwill brought by Leander will be taken by Pradeep alone.
WN2
Distribution of Revaluation Profit
WN3
Distribution of Reserve Fund
WN4
Calculation of Leander’s Capital
Combined Capital of Pradeep and Dhanraj after all adjustments = 90,550 + 24,850 = 1, 15,400
Combined share of profit of Pradeep and Dhanraj = 1 − Leander share
Total Capital of the firm on the basis of combined capital of Pradeep and Dhanraj
WN5
Cash Account |
|||
Dr. |
|
Cr. |
|
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Balance b/d |
4,000 |
|
|
Leander’s Capital |
69,240 |
|
|
Premium for Goodwill |
16,000 |
Balance c/d |
89,240 |
|
|
|
|
|
89,240 |
|
89,240 |
|
|
|
|
Page No 5.112:
Question 100:
Following is the Balance Sheet of X and Y as at 31st March, 2019. Z is admitted as a partner on that date when the position of X and Y was:
Liabilities | ₹ | Assets | ₹ | |||
X's Capital | 10,000 | Cash in Hand | 9,000 | |||
Y's Capital | 8,000 | 18,000 | Debtors | 11,000 | ||
Creditors | 12,000 | Stock | 12,000 | |||
General Reserve | 16,000 | Building | 8,000 | |||
Workmen Compensation Reserve | 4,000 | Machinery | 10,000 | |||
50,000 | 50,000 | |||||
X and Y share profits in the proportion of 3 : 2. The following terms of admission are agreed upon:
(a) Revaluation of assets: Building ₹ 18,000; Stock ₹ 16,000.
(b) The liability on Workmen Compensation Reserve is determined at ₹ 2,000.
(c) Z brought in as his share of goodwill ₹ 10,000 in cash.
(d) Z was to bring in further cash as would make his capital equal to 20% of the combined capital of X and Y after above revaluation and adjustments are carried out.
(e) The further profit-sharing proportions were: X−2/5th, Y−2/5th and Z−1/5th.
Prepare new Balance Sheet of the firm and Capital Accounts of the Partners.
Answer:
Revaluation Account |
|||
Dr. |
|
|
Cr. |
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Profit transferred to |
|
Building (18,000 – 8,000) |
10,000 |
X Capital |
8,400 |
Stock (16,000 – 12,000) |
4,000 |
Y Capital |
5,600 |
|
|
|
14,000 |
|
14,000 |
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
X |
Y |
Z |
Particulars |
X |
Y |
Z |
|
|
|
|
Balance b/d |
10,000 |
8,000 |
|
|
|
|
|
General Reserve |
9,600 |
6,400 |
|
|
|
|
|
Workmen’s Compensation Fund |
1,200 |
800 |
|
Balance c/d |
39,200 |
20,800 |
|
Revaluation (Profit) |
8,400 |
5,600 |
|
|
|
|
|
Premium for Goodwill |
10,000 |
|
|
|
39,200 |
20,800 |
|
|
39,200 |
20,800 |
|
|
|
|
|
Balance b/d |
39,200 |
20,800 |
|
|
|
|
|
Cash |
|
|
12,000 |
Balance c/d |
39,200 |
20,800 |
12,000 |
|
|
|
|
|
39,200 |
20,800 |
12,000 |
|
39,200 |
20,800 |
12,000 |
|
|
|
|
|
|
|
|
Balance Sheet as on March 31, 2019 after Z’s admission |
||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
|
Capital A/cs: |
|
Cash in Hand |
31,000 |
|
X |
39,200 |
|
Debtors |
11,000 |
Y |
20,800 |
|
Stock |
16,000 |
Z |
12,000 |
72,000 |
Building |
18,000 |
Creditors |
12,000 |
Machinery |
10,000 |
|
Outstanding Workmen’s Compensation Claim |
2,000 |
|
|
|
|
|
|
|
|
|
86,000 |
|
86,000 |
|
|
|
|
|
Working Notes
WN1: Sacrificing Ratio
Only X is sacrificing 1/5 portion of profit in favour of Z. Therefore, amount of Premium for Goodwill will be taken by X only.
WN2: Treatment of Workmen Compensation Fund
Particulars |
L.F. |
Debit Amount |
Credit Amount |
|
Workmen’s Compensation Fund A/c |
Dr. |
|
4,000 |
|
To Outstanding Workmen’s Compensation Claim A/c |
|
|
|
2,000 |
To X’s Capital A/c |
Dr. |
|
|
1,200 |
To Y’s Capital A/c |
|
|
800 |
|
(Outstanding Workmen’s Compensation charged from the fund and remaining fund transferred to partner’s capital in their old ratio) |
|
|
|
|
|
|
|
|
WN3: Calculation of Z’s Capital
Combined Capital of X and Y after all adjustments = 39,200 + 20,800 = Rs 60,000
Z’s Capital
WN4: Calculation of Cash Balance
Cash Account |
|||
Dr. |
|
Cr. |
|
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Balance b/d |
9,000 |
|
|
Z’s Capital |
12,000 |
|
|
Premium for Goodwill |
10,000 |
Balance c/d |
31,000 |
|
31,000 |
|
31,000 |
|
|
|
|
Page No 5.113:
Question 101:
Kalpana and Kanika were partners in a firm sharing profits in the ratio of 3 : 2. On 1st April, 2019, they admitted Karuna as a new partner for 1/5th share in the profits of the firm. The Balance Sheet of Kalpana and Kanika as on 1st April, 2019 was as follows:
BALANCE SHEET OF KALPANA AND KANIKA as on 1st April, 2019 | ||||||
Liabilities | ₹ | Assets | ₹ | |||
Capital A/cs: | Land and Building | 2,10,000 | ||||
Kalpana | 4,80,000 | Plant | 2,70,000 | |||
Kanika | 2,10,000 | 6,90,000 | Stock | 2,10,000 | ||
General Reserve | 60,000 | Debtors | 1,32,000 | |||
Workmen's Compensation Fund | 1,00,000 | Less: Provision | 12,000 | 1,20,000 | ||
Creditors | 90,000 | Cash | 26,000 | |||
1,30,000 | ||||||
9,40,000 | 9,40,000 | |||||
It was agreed that:
(a) the value of Land and Building will be appreciated by 20%.
(b) the value of plant be increased by ₹ 60,000.
(c) Karuna will bring ₹ 80,000 for her share of goodwill premium.
(d) the liabilities of Workmen's Compensation Fund were determined at ₹ 60,000.
(e) Karuna will bring in cash as capital to the extent of 1/5th share of the total capital of the new firm.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the new firm.
Answer:
Revaluation Account |
||||||
Dr. |
|
Cr. |
||||
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
|||
Revaluation Profit |
|
Land and Building A/c |
42,000 |
|||
Kalpana’s Capital A/c |
61,200 |
|
Plant A/c |
60,000 |
||
Kanika’s Capital A/c |
40,800 |
1,02,000 |
|
|
||
|
|
|
|
|||
|
1,02,000 |
|
1,02,000 |
|||
|
|
|
|
Partners’ Capital Accounts |
||||||||
Dr. |
|
Cr. |
||||||
Particulars |
Kalpana |
Kanika |
Karuna |
Particulars |
Kalpana |
Kanika |
Karuna |
|
|
|
|
|
Balance b/d |
4,80,000 |
2,10,000 |
|
|
|
|
|
|
Cash |
|
|
2,43,000 |
|
Balance c/d |
6,49,200 |
3,22,800 |
2,43,000 |
General Reserve |
36,000 |
24,000 |
|
|
|
|
|
|
Workmen Compensation Fund |
24,000 |
16,000 |
|
|
|
|
|
|
Revaluation A/c |
61,200 |
40,800 |
|
|
|
|
|
|
Premium for Goodwill |
48,000 |
32,000 |
|
|
|
|
|
|
|
|
|
|
|
|
6,49,200 |
3,22,800 |
2,43,000 |
|
6,49,200 |
3,22,800 |
2,43,000 |
|
|
|
|
|
|
|
|
|
Balance Sheet as on April 01, 2019 after Karuna’s admission |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Creditors |
90,000 |
Cash in Hand |
4,53,000 |
||
Capitals: |
|
Debtors |
1,32,000 |
|
|
Kalpana |
6,49,200 |
|
Less: Provision for debtors |
12,000 |
1,20,000 |
Kanika |
3,22,800 |
|
Stock |
2,10,000 |
|
Karuna |
2,43,000 |
12,15,000 |
Land and Building |
2,52,000 |
|
Liability for Workmen Compensation |
60,000 |
Plant |
3,30,000 |
||
|
13,65,000 |
|
13,65,000 |
||
|
|
|
|
Working Notes:
WN1 Calculation of New share
Karuna is admitted for 1/5th share
Let the total share of the firm be 1
Remaining share
This remaining share will be shared among old partners in their old ratio i.e. 3 : 2
Kalpana's Share
Kanika's Share
New Ratio = 12 : 8 : 5
Calculation of Sacrificing Ratio
Sacrificing Ratio = Old Ratio – New Ratio
Sacrificing Ratio = 3 : 2
WN2 Calculate of Karuna's Capital
Adjusted Capital of Kalpana = 6.49,200
Adjusted Capital of Kanika = 3,22,800
Total Adjusted Capital = 9,72,000 (6,49,200+3,22,800)
Page No 5.113:
Question 102:
A and B are partners sharing profits in the ratio of 3 : 2. They admit C as a new partner from 1st April, 2019. They have decided to share future profits in the ratio of 4 : 3 : 3. The Balance Sheet as at 31st March, 2019 is given below:
Liabilities | ₹ | Assets | ₹ | |||
A's Capital | 1,76,000 | Goodwill | 34,000 | |||
B's Capital | 2,54,000 | 4,30,000 | Land and Building | 60,000 | ||
Workmen Compensation Reserve | 20,000 | Investment (Market value ₹ 45,000) | 50,000 | |||
Investments Fluctuation Reserve | 10,000 | Debtors | 1,00,000 | |||
Employee's Provident Fund | 34,000 | Less: Provision for Doubtful Debts | 10,000 | 90,000 | ||
C's Loan | 3,00,000 | Stock | 3,00,000 | |||
Bank Balance | 2,50,000 | |||||
Advertising Suspense A/c | 10,000 | |||||
7,94,000 | 7,94,000 | |||||
Terms of C's admission are as follows:
(i) C contributes proportionate capital and 60% of his share of goodwill in cash.
(ii) Goodwill is to be valued at 2 years' purchase of super profit of last three completed years. Profits for the years ended 31st March were:
2017 − ₹ 4,80,000; 2018 − ₹ 9,30,000; 2019 − ₹ 13,80,000.
The normal profit is ₹ 5,30,000 with same amount of capital invested in similar industry.
(iii) Land and Building was found undervalued by ₹ 1,00,000.
(iv) Stock was found overvalued by ₹ 31,000.
(v) Provision for Doubtful Debts is to be made equal to 5% of the debtors.
(vi) Claim on account of Workmen Compensation is ₹ 11,000.
Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet.
Answer:
Revaluation Account |
||||||
Dr. |
|
Cr. |
||||
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
|||
|
|
|
|
|||
Stock |
31,000 |
Land & Building |
1,00,000 |
|||
Profit transferred to: |
|
Provision for Doubtful Debts |
5,000 |
|||
A’s Capital A/c |
44,400 |
|
|
|
||
B’s Capital A/c |
29,600 |
74,000 |
|
|
||
|
|
|
|
|||
|
1,05,000 |
|
1,05,000 |
|||
|
|
|
|
|||
Partners’ Capital Accounts |
|||||||||
Dr. |
|
Cr. |
|||||||
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
||
Goodwill |
20,400 |
13,600 |
|
Balance b/d |
1,76,000 |
2,54,000 |
|
||
Advertisement Suspense A/c |
6,000 |
4,000 |
|
Bank A/c |
|
|
3,06,000 |
||
Balance c/d |
3,62,400 |
3,51,600 |
3,06,000 |
Premium for Goodwill A/c |
96,000 |
48,000 |
|
||
|
|
|
|
C’s Current A/c |
64,000 |
32,000 |
|
||
|
|
|
|
Revaluation A/c |
44,400 |
29,600 |
|
||
|
|
|
|
IFR |
3,000 |
2,000 |
|
||
|
|
|
|
WCR |
5,400 |
3,600 |
|
||
|
|
|
|
|
|
|
|
||
|
3,88,800 |
3,69,200 |
3,06,000 |
|
3,88,800 |
3,69,200 |
3,06,000 |
||
|
|
|
|
|
|
|
|
||
Bank Account |
|||||
Dr. |
|
Cr. |
|||
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
||
Balance b/d |
2,50,000 |
Balance c/d |
7,00,000 |
||
C’s Capital |
3,06,000 |
|
|
||
Premium for Goodwill |
1,44,000 |
|
|
||
|
7,00,000 |
|
7,00,000 |
||
|
|
|
|
||
Balance Sheet as on 1st April, 2019 after C’s admission |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Workmen Compensation Reserve |
11,000 |
Land & Building |
1,60,000 |
||
Employees Provident Fund |
34,000 |
Bank A/c |
7,00,000 |
||
C ‘s Loan |
3,00,000 |
Investment |
45,000 |
||
Capital |
|
Stock |
2,69,000 |
||
A |
3,62,400 |
|
C ‘s Current A/c |
96,000 |
|
B |
3,51,600 |
|
Debtors |
1,00,000 |
|
C |
3,06,000 |
10,20,000 |
Less : Provision for Doubtful Debts |
5,000 |
95,000 |
|
|
|
|
||
|
13,65,000 |
|
13,65,000 |
||
|
|
|
|
Working Notes:
WN1: Calculation of Sacrifice or Gain
WN:2 Calculation of Goodwill
WN:3 Calculation of C’s Capital
Page No 5.85:
Question 1:
X,Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2. They admit A into partnership and give him 1/5th share of profits. Find the new profit-sharing ratio.
Answer:
A is admitted for 1/5 share of profit
Let the combined share of profit for all partners after A’s admission be = 1
Combined share of X, Y and Z after A’s admission =1 − A’s share
New Ratio = Old Ratio × Combined share of X, Y and Z
Page No 5.85:
Question 2:
Ravi and Mukesh are sharing profits in the ratio of 7 : 3. They admit Ashok for 3/7th share in the firm which he takes 2/7th from Ravi and 1/7th from Mukesh. Calculate new profit-sharing ratio.
Answer:
Ashok admits for share of profit
Ravi sacrifices in favour of Ashok =
Mukesh sacrifices in favour of Ashok =
New Ratio = Old Ratio − Sacrificing Ratio
Page No 5.85:
Question 3:
A and B are partners sharing profits and losses in the proportion of 7 : 5. They agree to admit C, their manager, into partnership who is to get 1/6th share in the profits. He acquires this share as 1/24th from A and 1/8th from B. Calculate new profit-sharing ratio.
Answer:
C admits for 1/6 share of profit
A sacrifices his share of profit in favour of C
B sacrifices his share of profit in favour of C
New Ratio = Old Ratio − Sacrificing Ratio
Page No 5.85:
Question 4:
A, B and C were partners in a firm sharing profits in the ratio of 3 : 2 : 1. They admitted D as a new partner for 1/8th share in the profits, which he acquired 1/16th from B and 1/16th from C. Calculate the new profit-sharing ratio of A, B, C and D.
Answer:
Page No 5.85:
Question 5:
Bharati and Astha were partners sharing profits in the ratio of 3 : 2. They admitted Dinkar as a new partner for 1/5th share in the future profits of the firm which he got equally from Bharati and Astha. Calculate the new profit-sharing ratio of Bharati, Astha and Dinkar.
Answer:
Page No 5.85:
Question 6:
X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2. Z is admitted as partner with 1/4 share in profit. Z acquires his share from X and Y in the ratio of 2 : 1. Calculate new profit-sharing ratio.
Answer:
Old Profit Sharing Ratio amongst Partners (X and Y) is 3 : 2
Z is admitted for 1/4th Share in Profits
Sacrificing Ratio of X and Y is 2 : 1
Page No 5.86:
Question 7:
R and S are partners sharing profits in the ratio of 5 : 3. T joins the firm as a new partner. R gives 1/4th of his share and S gives 1/5th of his share to the new partner. Find out new profit-sharing ratio.
Answer:
Sacrificing Ratio = Old Ratio × Surrender Ratio
New Ratio = Old Ratio − Sacrificing Ratio
∴New Profit Sharing Ratio = 75 : 48 : 37
Page No 5.86:
Question 8:
Kabir and Farid are partners in a firm sharing profits and losses in the ratio of 7 : 3. Kabir surrenders 2/10th from his share and Farid surrenders 1/10th from his share in favour of Jyoti; the new partner. Calculate new profit-sharing ratio and sacrificing ratio.
Answer:
Calculation of New Ratio
Old Ratio of Kabir and Farid 7 : 3
New Ratio = Old Share − Share Sacrificed
New Profit Sharing Ratio = 5 : 2 : 3
Calculation of Sacrificing Ratio
Since, Kabir and Farid are sacrificing 2/10 share and 1/10 share respectively, therefore the sacrificing ratio becomes 2 : 1.
Page No 5.86:
Question 9:
Find New Profit-sharing Ratio:
(i) R and T are partners in a firm sharing profits in the ratio of 3 : 2. S joins the firm. R surrenders 1/4th of his share and T 1/5th of his share in favour of S.
(ii) A and B are partners. They admit C for 1/4th share. In future, the ratio between A and B would be 2 : 1.
(iii) A and B are partners sharing profits and losses in the ratio of 3 : 2. They admit C for 1/5th share in the profit. C acquires 1/5th of his share from A and 4/5th share from B.
(iv) X, Y and Z are partners in the ratio of 3 : 2 : 1. W joins the firm as a new partner for 1/6th share in profits. Z would retain his original share.
(v) A and B are equal partners. They admit C and D as partners with 1/5th and 1/6th share respectively.
(vi) A and B are partners sharing profits/losses in the ratio of 3 : 2 . C is admitted for 1/4th share. A and B decide to share equally in future.
Answer:
(i)
S’s Share = R’s Sacrifice + S’s Sacrifice
(ii)
C admits for 1/4th share of profit
Let the combined share of A, B and C be = 1
Combined share of A and B
New Ratio = Combined share of A and B
(iii)
C admits for share of profit
New Ratio = Old Ratio − Sacrificing Ratio
(iv)
W admits for share of profit
Let combined share of all partner after W’s admission be = 1
Combined share X and Y in the new firm
New Ratio = Old Ratio × Combined share of X and Y
(v)
C admits for share
D admits for share
Let combined share of all partner after C and D’s admission be = 1
Combined share of profit of A and B after C and D’s admission
New Ratio = Old Ratio × Combined share of A and B
(vi)
C admits for share of profit
Let the combined share of all partners after C’s admission be = 1
Combined share of A and B after C’s admission
Page No 5.86:
Question 10:
X and Y were partners sharing profits in the ratio of 3 : 2. They admitted P and Q as new partners. X surrendered 1/3rd of his share in favour of P and Y surrendered 1/4th of his share in favour of Q. Calculate new profit-sharing ratio of X, Y, P and Q.
Answer:
Sacrificing Ratio = Old Ratio × Surrender Ratio
New Ratio = Old Ratio − Sacrificing Ratio
P’s share = X’s Sacrifiece
Q’s share = Y’s Sacrifice
Page No 5.86:
Question 11:
Rakesh and Suresh are sharing profits in the ratio of 4 : 3. Zaheer joins and the new ratio among Rakesh, Suresh and Zaheer is 7 : 4 : 3. Find out the sacrificing ratio.
Answer:
Sacrificing Ratio = Old Ratio − Sacrificing Ratio
Page No 5.86:
Question 12:
A and B are partners sharing profits in the ratio of 3 : 2. C is admitted as a partner. The new profit-sharing ratio among A, B and C is 4 : 3 : 2. Find out the sacrificing ratio.
Answer:
Sacrificing Share = Old Ratio − New Ratio
Page No 5.86:
Question 13:
A, B and C are partners sharing profits in the ratio of 4 : 3 : 2. D is admitted for 1/3rd share in future profits. What is the sacrificing ratio?
Answer:
D is admitted for share of profit
Let the combined share of profit of A, B C and D be = 1
Combined share of A, B and C after D’s admission = 1 − D’s shares
New Ratio = Old Ratio × combined share of A, B and C
Sacrificing Ratio = Old Ratio − New Ratio
Page No 5.86:
Question 14:
A, B, C and D are in partnership sharing profits and losses in the ratio of 36 : 24 : 20 : 20 respectively. E joins the partnership for 20% share and A, B, C and D in future would share profits among themselves as 3/10 : 4/10 : 2/10 : 1/10. Calculate new profit-sharing ratio after E's admission .
Answer:
E is admitted for share
Let combined share of profit of all partners after E’s admission = 1
Combined share of A, B, C and D after E’s admission = 1 − E’s Share
New Ratio = Combined of A, B, C and D × Agreed Share of A, B, C and D
Page No 5.86:
Question 15:
X and Y are partners sharing profits and losses in the ratio of 3 : 2. They admit Z into partnership. X gives 1/3rd of his share while Y gives 1/10th from his share to Z. Calculate new profit-sharing ratio and sacrificing ratio.
Answer:
Old Ratio of X and Y is 3 : 2.
New Ratio = Old Share − Share Sacrificed
Page No 5.86:
Question 16:
A, B and C are partners sharing profits in the ratio of 2 : 2 : 1. D is admitted as a new partner for 1/6th share. C will retain his original share. Calculate the new profit-sharing ratio and sacrificing ratio.
Answer:
Calculation of New Profit Sharing Ratio
*Since nothing is mentioned about the sacrifice made by the existing partners, it is assumed that A and B sacrifice in their old ratio.
Calculation of Sacrificing Ratio
Page No 5.86:
Question 17:
A and B are in partnership sharing profits and losses as 3 : 2. C is admitted for 1/4th share. Afterwards D enters for 20 paise in the rupee. Compute profit-sharing ratio of A, B, C and D after D's admission.
Answer:
C’s admitted for share of profit
Let the combined share of profit of all partners be = 1
Combined share of A and B after C’s admission = 1 − C’s share
New Ratio = Old Ratio × Combined share of A and B
Profit sharing ratio after C’s admission will become old ratio to determine the ratio after D’s admission
D is admitted for share of profit
Let combined share of all partners after D’s admission = 1
Combined share of A, B and C after D’s admission = 1 − D’s share
New Ratio = Old Ratio × Combined share of A, B, and C
Page No 5.87:
Question 18:
P and Q are partners sharing profits in the ratio of 3 : 2. They admit R into partnership who acquires 1/5th of his share from P and 4/25th share from Q. Calculate New Profit-sharing Ratio and Sacrificing Ratio.
Answer:
Page No 5.87:
Question 19:
A and B are partners sharing profits and losses in the ratio of 2 : 1. They take C as a partner for 1/5th share. Goodwill Account appears in the books at ₹ 15,000. For the purpose of C's admission, goodwill of the firm is valued at ₹ 15,000. C is to pay proportionate amount as premium for goodwill which he pays to A and B privately.
Pass necessary entries.
Answer:
Journal Entry |
|||||
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
|
A’s Capital A/c |
Dr. |
|
10,000 |
|
|
B’s Capital A/c |
Dr. |
|
5,000 |
|
|
To Goodwill A/c |
|
|
15,000 |
|
|
(Goodwill written-off between |
|
|
|
Note- Goodwill brought in by C is not recorded in the books of the firm as the amount for goodwill is privately paid to A and B.
Working Note: Goodwill Written-off
Page No 5.87:
Question 20:
A and B are partners sharing profits and losses in the ratio of 2 : 5. They admit C on the condition that he will bring ₹ 14,000 as his share of goodwill to be distributed between A and B. C's share in the future profits or losses will be 1/4th. What will be the new profit-sharing ratio and what amount of goodwill brought in by C will be received by A and B?
Answer:
C is admitted for share
Let the combined share of A, B and C be = 1
Combined share of A and B after C’s admission = 1 − C’s share
New Ratio = Old Ratio × Combined share of A and B
Distribution of C’s share of Goodwill
C’s share of Goodwill = Rs 14,000
Page No 5.87:
Question 21:
A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. A new partner C is admitted. A surrenders 1/5th of his share and B surrenders 2/5th of his share and B surrenders 2/5th of his share in favour of C. For the purpose of C's admission, goodwill of the firm is valued at ₹ 75,000 and C brings in his share of goodwill in cash which is retained in the firm's books. Journalise the above transactions.
Answer:
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
Cash A/c |
Dr. |
|
21,000 |
|
|
To Premium for Goodwill A/c |
|
|
|
21,000 |
|
(C brought Premium for Goodwill) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
21,000 |
|
|
To A’s Capital A/c |
|
|
|
9,000 |
|
To B’s Capital A/c |
|
|
|
12,000 |
|
(Premium for Goodwill brought by C distributed between A and B in sacrificing ratio i.e. 3:4) |
|
|
|
|
|
|
|
|
|
|
C’s share = A’s sacrifice + B’s sacrifice
New Ratio is 12:6:7
C’s will bring Premium for Goodwill
Distribution of Premium for Goodwill-
Page No 5.87:
Question 22:
Give Journal entries to record the following arrangements in the books of the firm:
(a) B and C are partners sharing profits in the ratio of 3 : 2. D is admitted paying a premium (goodwill) of ₹ 2,000 for 1/4th share of the profits, shares shares of B and C remain as before.
(b) B and C are partners sharing profits in the ratio of 3 : 2. D is admitted paying a premium of ₹ 2,100 for 1/4th share of profits which he acquires 1/6th from B and 1/12th from C.
Answer:
(a)
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
2,000 |
|
|
To Premium for Goodwill A/c |
|
|
|
2,000 |
|
(D brought Premium for Goodwill) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
2,000 |
|
|
To B’s Capital A/c |
|
|
|
1,200 |
|
To C’s Capital A/c |
|
|
|
800 |
|
(Premium for Goodwill distributed between B and C in sacrificing ratio i.e. 3:2) |
|
|
|
|
|
|
|
|
|
|
Working Note:
Distribution of premium for Goodwill-
(b)
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
Cash A/c |
Dr. |
|
2,100 |
|
|
To Premium for Goodwill A/c |
|
|
|
2,100 |
|
(D brought his share of goodwill in cash) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
2,100 |
|
|
To B’s Capital A/c |
|
|
|
1,400 |
|
To C’s Capital A/c |
|
|
|
700 |
|
(Premium for Goodwill brought distributed between B and C in sacrificing Ratio i.e. 2:1) |
|
|
|
|
|
|
|
|
|
|
Working Note:
WN1
WN2
Distribution of Premium for Goodwill-
Page No 5.87:
Question 23:
B and C are in partnership sharing profits and losses as 3 : 1. They admit D into the firm, D pays premium of ₹ 15,000 for 1/3rd share of the profits. As between themselves, B and C agree to share future profits and losses equally. Draft Journal entries showing appropriations of the premium money.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
15,000 |
|
|
To Premium for Goodwill A/c |
|
|
|
15,000 |
|
(D brought his share of goodwill in cash) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
15,000 |
|
|
To B’s Capital A/c |
|
|
|
15,000 |
|
(Premium for goodwill transferred to B’s Capital) |
|
|
|
|
|
|
|
|
|
|
|
C’s Capital A/c |
Dr. |
|
3,750 |
|
|
To B’s Capital A/c |
|
|
|
3,750 |
|
(Goodwill charged from C’s Capital Account due |
|
|
|
|
|
|
|
|
|
|
WN1
Calculation of Sacrificing Ratio:
Let combined share of all partners after D’s admission be = 1
B and C each share of profit after D’s admission will be
WN2
C is gaining in new the firm. Hence, C’s gain in goodwill will be debited to his capital and given to B (sacrificing partner).
Page No 5.87:
Question 24:
M and J are partners in a firm sharing profits in the ratio of 3 : 2. They admit R as a new partner. The new profit-sharing ratio between M, J and R will be 5 : 3 : 2. R brought in ₹ 25,000 for his share of premium for goodwill. Pass necessary Journal entries for the treatment of goodwill.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
25,000 |
|
|
To Premium for Goodwill A/c |
|
|
|
25,000 |
|
(C brought his share of goodwill in cash) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
25,000 |
|
|
To M’s Capital A/c |
|
|
|
12,500 |
|
To J’s Capital A/c |
|
|
|
12,500 |
|
(C’s share of Goodwill distributed in M and |
|
|
|
|
|
|
|
|
|
|
Working Notes:
WN1
Calculating of Sacrificing Ratio
WN2
Distribution of R’s share of Goodwill-
Page No 5.87:
Question 25:
A and B are in partnership sharing profits and losses in the ratio of 5 : 3. C is admitted as a partner who pays ₹ 40,000 as capital and the necessary amount of goodwill which is valued at ₹ 60,000 for the firm. His share of profits will be 1/5th which he takes 1/10th from A and 1/10th from B.
Give Journal entries and also calculate future profit-sharing ratio of the partners.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
Cash A/c |
Dr. |
|
52,000 |
|
|
To C’s Capital A/c |
|
|
|
40,000 |
|
To Premium for Goodwill A/c |
|
|
|
12,000 |
|
(C brought Capital and his share of goodwill in cash) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
12,000 |
|
|
To A’s Capital A/c |
|
|
|
6,000 |
|
To B’s Capital A/c |
|
|
|
6,000 |
|
(C’s share of Goodwill distributed in A and B) |
|
|
|
|
|
|
|
|
|
|
Working Notes-
WN1
WN2
Calculation of new profit sharing Ratio
WN3
Distribution of C’s share of Goodwill (in Sacrificing Ratio)
Page No 5.88:
Question 26:
A and B are partners sharing profits and losses in the ratio of 7 : 5. They admit C, their Manager, into partnership who is to get 1/6th share in the business. C brings in ₹ 10,000 for his capital and ₹ 3,600 for the 1/6th share of goodwill which he acquires 1/24th from A and 1/8th from B. Profits for the first year of the new partnership was ₹ 24,000. Pass necessary Journal entries for C's admission and apportion the profit between the partners.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
13,600 |
|
|
To C’s Capital A/c |
|
|
|
10,000 |
|
To Premium for Goodwill A/c |
|
|
|
3,600 |
|
(C brought capital and his share of goodwill) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
3,600 |
|
|
To A’s Capital A/c |
|
|
|
900 |
|
To B’s Capital A/c |
|
|
|
2,700 |
|
(C’s share of goodwill transferred to A and B in their sacrificing ratio i.e. 3:1) |
|
|
|
|
|
|
|
|
|
|
|
Profit and Loss Appropriation A/c |
Dr. |
|
24,000 |
|
|
To A’s Capital A/c |
|
|
|
13,000 |
|
To B’s Capital A/c |
|
|
|
7,000 |
|
To C’s Capital A/c |
|
|
|
4,000 |
|
(Profit after C’s admission distributed) |
|
|
|
|
|
|
|
|
|
|
Working Note:
WN1
WN2
Distribution of C’s share of Goodwill (in sacrificing ratio)
WN3
Calculation of New Profit Sharing Ratio
WN4
Distribution of Profit earned after C’s admission (in new ratio)
Page No 5.88:
Question 27:
X and Y are partners sharing profits in the ratio of 3 : 1. Z is admitted as a partner for which he pays ₹ 30,000 for goodwill in cash. X, Y and Z decide to share the future profits in equal proportion. You are required to pass a single Journal entry to give effect to the above arrangement.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
30,000 |
|
|
To Premium for Goodwill A/c |
|
|
|
30,000 |
|
(X brought his share of goodwill) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
30,000 |
|
|
Y’s Capital A/c |
Dr. |
|
7,500 |
|
|
To X’s Capital A/c |
|
|
|
37,500 |
|
(Y and Z share of gain in goodwill transferred |
|
|
|
|
|
|
|
|
|
|
Working Notes:
WN1
Calculation of Sacrificing Ratio
WN2
Goodwill of the firm on the basis of Z’s share
X will get as a goodwill = Z’s share of Goodwill + Y’s gain in Goodwill
= 30,000 + 7,500
= Rs 37,500
Page No 5.88:
Question 28:
Anshul and Parul are partners sharing profits in the ratio of 3 : 2. They admit Payal as partner for 1/4th share in profits on 1st April, 2019. Payal brings ₹ 5,00,000 as capital and her share of goodwill by cheque. It was agreed to value goodwill at three years' purchase of average profit of last four years.
Profits for the last four years ended 31st March, were | ₹ |
2015-16 | 4,00,000 |
2016-17 | 5,00,000 |
2017-18 | 6,00,000 |
2018-19 | 7,00,000 |
1. Closing Stock for the year ended 31st March, 2018 was overvalued by ₹ 50,000.
2. ₹ 1,00,000 should be charged annually to cover management cost.
Pass necessary Journal entries on Payal's admission.
Answer:
In the books of the Anshul, Parul and Payal Journal |
|||||
Date |
Particulars |
|
L.F. |
Debit (₹) |
Credit (₹) |
2019 |
|
|
|
|
|
April 01 |
Bank A/c |
Dr. |
|
8,37,500 |
|
|
To Payal’s Capital A/c |
|
|
|
5,00,000 |
|
To Premium for Goodwill A/c |
|
|
|
3,37,500 |
|
(Being capital and goodwill paid by the new partner) |
|
|
|
|
|
|
|
|
|
|
2019 |
Premium for Goodwill A/c |
Dr. |
|
3,37,500 |
|
April 01 |
To Anshul’s Capital A/c (3,37,500 × 3/5) |
|
|
|
2,02,500 |
|
To Parul’s Capital A/c (3,37,500 × 2/5) |
|
|
|
1,35,000 |
(Being premium for goodwill adjusted in sacrificing ratio) |
|
|
|
|
Working Notes:
Particulars |
Year |
31st Mar., |
31st Mar., |
31st Mar., |
31st Mar., |
Profits for the year |
4,00,000 |
5,00,000 |
6,00,000 |
7,00,000 |
|
Less: Overvaluation of Closing Stock |
|
|
50,000 |
|
|
Add: Overvaluation of Opening Stock |
|
|
|
50,000 |
|
Less: Annual Charge for Management Cost |
1,00,000 |
1,00,000 |
1,00,000 |
1,00,000 |
|
Normal Profits |
3,00,000 |
4,00,000 |
4,50,000 |
6,50,000 |
|
|
|
|
|
Average Profits = ₹4,50,000 Goodwill = Average Profits × No. of years of Purchase = ₹ (4,50,000 ×3) = ₹ 13,50,000
Page No 5.88:
Question 29:
A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. They admit C into partnership for 1/5th share. C brings ₹ 30,000 as capital and ₹ 10,000 as goodwill. At the time of admission of C, goodwill appeared in the Balance Sheet of A and B at ₹ 3,000. New profit-sharing ratio of the partners will be 5 : 3 : 2. Pass necessary Journal entries.
Answer:
Journal Entries |
|||||
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
A’s Capital A/c |
Dr. |
|
1,800 |
|
|
B’s Capital A/c |
Dr. |
|
1,200 |
|
|
To Goodwill A/c |
|
|
|
3,000 |
|
(Goodwill written-off) |
|
|
|
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
40,000 |
|
|
To C’s Capital A/c |
Dr. |
|
|
30,000 |
|
To Premium for Goodwill A/c |
|
|
|
10,000 |
|
(C brought capital and his share of goodwill in cash) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill |
Dr. |
|
10,000 |
|
|
To A’s Capital A/c |
|
|
|
5,000 |
|
To B’s Capital A/c |
|
|
|
5,000 |
|
(Premium for Goodwill distributed) |
|
|
|
|
|
|
|
|
|
|
Sacrificing Ratio = Old Ratio − New Ratio
Distribution of Premium for Goodwill C’s share of Goodwill)
Goodwill written-off
Page No 5.88:
Question 30:
Anu and Bhagwan were partners in a firm sharing profits in the ratio of 3 : 1. Goodwill appeared in the books at ₹ 4,40,000. Raja was admitted to the partnership. The new profit-sharing ratio among Anu, Bhagwan and Raja was 2 : 2 : 1.
Raja brought ₹ 1,00,000 for his capital and necessary cash for his goodwill premium. Goodwill of the firm was valued at ₹ 2,50,000.
Record necessary Journal entries in the books of the firm for the above transactions.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
Anu’s Capital A/c |
Dr. |
|
3,30,000 |
|
|
Bhagwan’s Capital A/c |
Dr. |
|
1,10,000 |
|
|
To Goodwill A/c |
|
|
|
4,40,000 |
|
(Old goodwill written off in old ratio) |
|
|
|
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
1,50,000 |
|
|
To Raja’s Capital A/c |
|
|
|
1,00,000 |
|
To Premium for Goodwill A/c |
|
|
|
50,000 |
|
(Capital and goodwill brought in by Raju) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
50,000 |
|
|
Bhagwan’s Capital A/c |
Dr. |
|
37,500 |
|
|
To Anu’s Capital A/c |
|
|
|
87,500 |
|
(Premium for goodwill adjusted) |
|
|
|
|
Working Notes:
WN1 Calculation of Share in Old Goodwill
WN2 Calculation of Raja's Share of Goodwill
WN3 Calculation of Sacrificing Ratio
Page No 5.88:
Question 31:
X and Y are partners in a firm sharing profits in the ratio of 3 : 2. On 1st April, 2019, they admit Z as a partner for 1/4th share in the profits. Z contributed following assets towards his capital and for his share of goodwill:
Stock ₹ 60,000; Debtors ₹ 80,000; Land ₹ 1,00,000, Plant and Machinery ₹ 40,000.
On the date of admission of Z, the goodwill of the firm was valued at ₹ 6,00,000.
Pass necessary Journal entries in the books of the firm on Z's admission.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
2019 |
|
|
|
|
|
April 1 |
|
|
|
|
|
|
Debtors A/c |
Dr. |
|
80,000 |
|
|
Land A/c |
Dr. |
|
1,00,000 |
|
|
Plant and Machinery A/c |
Dr. |
|
40,000 |
|
|
To Z’s Capital A/c |
|
|
1,30,000 |
|
|
To Premium for Goodwill A/c |
|
|
1,50,000 |
|
|
(Z brought assets for his share of goodwill and Capital) |
|
|
|
|
|
|
|
|
|
|
April 1 |
|
|
|
|
|
|
To X’s Capital A/c |
|
|
90,000 |
|
|
To Y’s Capital A/c |
|
|
60,000 |
|
|
(Z’s share of Goodwill distributed between X and Y in sacrificing ratio) |
|
|
|
|
|
|
|
|
|
Working Notes:
WN1
WN2
Distribution of Z’s Goodwill
Page No 5.89:
Question 32:
A and B are partners in a business sharing profits and losses in the ratio of 1/3rd and 2/3rd. On 1st April, 2019, their capitals were ₹ 8,000 and ₹ 10,000 respectively. On that date, they admit C in partnership and give him 1/4th share in the future profits. C brings ₹ 8,000 as his capital and ₹ 6,000 as goodwill. The amount of goodwill is withdrawn by the old partners in cash. Draft the journal entries and show the Capital Accounts of all the Partners. Calculate proportion in which partners would share profits and losses in future.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
2019 |
|
|
|
|
|
April 1 |
|
|
|
|
|
|
To C’s Capital A/c |
|
|
8,000 |
|
|
To Premium for Goodwill A/c |
|
|
6,000 |
|
|
(C brought capital and his share of goodwill) |
|
|
|
|
|
|
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|
April 1 |
|
|
|
|
|
|
To A’s Capital A/c |
|
|
2,000 |
|
|
To B’s Capital A/c |
|
|
4,000 |
|
|
(C’s share of goodwill distributed between |
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|
|
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|
A’s Capital A/c |
Dr. |
|
2,000 |
|
|
B’s Capital A/c |
Dr. |
|
4,000 |
|
|
To Cash A/c |
|
|
6,000 |
|
|
(Amount of goodwill withdrawn by A and B) |
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|
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Partners’ Capital Accounts |
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Dr. |
|
|
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|
Cr. |
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
Cash |
2,000 |
4,000 |
|
Balance b/d |
8,000 |
10,000 |
|
|
|
|
|
Cash |
|
|
8,000 |
|
|
|
|
Premium for Goodwill |
2,000 |
4,000 |
|
Balance c/d |
8,000 |
10,000 |
8,000 |
|
|
|
|
|
10,000 |
14,000 |
8,000 |
|
10,000 |
14,000 |
8,000 |
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|
|
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|
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|
Calculation of New (Future) Ratio
C is admitted for share of profit
Let combined share of all partners after C’s admission be = 1
Combined share of A and B after C’s admission = 1 − C’s share
Distribution of Premium for Goodwill
Page No 5.89:
Question 33:
A and B were partners in a firm sharing profits and losses in the ratio of 3 : 2. They admitted C as a new partner for 3/7th share in the profit and the new profit-sharing ratio will be 2 : 2 : 3. C brought ₹ 2,00,000 as his capital and ₹ 1,50,000 as premium for goodwill. Half of their share of premium was withdrawn by A and B from the firm. Calculate sacrificing ratio and pass necessary Journal entries for the above transactions in the books of the firm.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
3,50,000 |
|
|
To C’s Capital A/c |
|
|
2,00,000 |
|
|
To Premium for Goodwill A/c |
|
|
1,50,000 |
|
|
(C brought capital and Premium for Goodwill) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
1,50,000 |
|
|
To A’s Capital A/c |
|
|
1,10,000 |
|
|
To B’s Capital A/c |
|
|
40,000 |
|
|
(Premium for Goodwill distributed) |
|
|
|
|
|
|
|
|
|
|
|
A’s Capital A/c |
Dr. |
|
55,000 |
|
|
B’s Capital A/c |
Dr. |
|
20,000 |
|
|
To Cash A/c |
|
|
75,000 |
|
|
(Half of the goodwill withdrawn by A and B) |
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|
|
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Calculation of Sacrificing Ratio
Working Notes-
WN1
Distribution of Premium for Goodwill
WN2
Amount of Premium for Goodwill withdrawn
Page No 5.89:
Question 34:
A and B are partners sharing profits in the ratio of 2 : 1. They admit C for 1/4th share in profits. C brings in ₹ 30,000 for his capital and ₹ 8,000 out of his share of ₹ 10,000 for goodwill. Before admission, goodwill appeared in books at ₹ 18,000. Give Journal entries to give effect to the above arrangement.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
|
|
|
|
|
A’s Capital A/c |
Dr. |
|
12,000 |
|
|
B’s Capital A/c |
Dr. |
|
6,000 |
|
|
To Goodwill A/c |
|
|
18,000 |
|
|
(Goodwill written-off) |
|
|
|
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
38,000 |
|
|
To C’s Capital A/c |
|
|
30,000 |
|
|
To Premium for Goodwill |
|
|
8,000 |
|
|
(C brought Capital and goodwill) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
8,000 |
|
|
C’s Capital A/c |
Dr. |
|
2,000 |
|
|
To A’s Capital A/c |
|
|
6,667 |
|
|
To B’s Capital |
|
|
3,333 |
|
|
(C’s share of goodwill distributed between |
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|
|
|
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Working Notes:
WN1 Writing-off of Goodwill
A’s Capital Account will be debited by
B’s Capital Account will be debited by
WN2 Distribution of C’s share of Goodwill
Page No 5.89:
Question 35:
A and B are partners sharing profits and losses in the ratio of 3 : 2. They admit C as partner in the firm for 1/4th share in profits which he takes 1/6th from A and 1/12th from B. C brings in only 60% of his share of firm's goodwill. Goodwill of the firm has been valued at ₹ 1,00,000. Pass necessary journal entries to record this arrangement.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
|
|
|
|
|
|
Bank A/c |
Dr. |
|
15,000 |
|
|
To Premium for Goodwill A/c |
|
|
|
15,000 |
|
(Goodwill brought in cash) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
15,000 |
|
|
To A’s Capital A/c |
|
|
|
10,000 |
|
To B’s Capital A/c |
|
|
|
5,000 |
|
(Goodwill distributed between A & B in sacrificing ratio) |
|
|
|
|
|
|
|
|
|
|
|
C’s Capital A/c |
Dr |
|
10,000 |
|
|
To A’s Capital A/c |
|
|
|
6,667 |
|
To B’s Capital A/c |
|
|
|
3,333 |
|
(Goodwill adjusted) |
|
|
|
|
|
|
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Working Notes:
WN1: Calculation of Sacrificing Ratio
WN2: Calculation of share in goodwill of new partner
Page No 5.89:
Question 36:
On the admission of Rao, goodwill of Murty and Shah is valued at ₹ 30,000. Rao is to get 1/4th share of profits. Previously Murty and Shah shared profits in the ratio of 3 : 2. Rao is unable to bring amount of goodwill. Give Journal entries in the books of Murty and Shah when:
(a) there is no Goodwill Account and
(b) Goodwill appears in the books at ₹ 10,000.
Answer:
WN1: Calculation of Rao’s share of Goodwill
WN2: Adjustment of Rao’s share of Goodwill
(a) Where there is no Goodwill Account
Journal |
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Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
|
|
|
|
|
Rao’s Capital A/c |
Dr. |
|
7,500 |
|
|
To Murty’s Capital A/c |
|
|
4,500 |
|
|
To Shah’s Capital A/c |
|
|
3,000 |
|
|
(Rao’s share of goodwill charged |
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(b) Goodwill appears at Rs 10,000
Journal |
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Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
|
|
|
|
|
Murty’s Capital A/c |
Dr. |
|
6,000 |
|
|
Shah’s Capital A/c |
Dr. |
|
4,000 |
|
|
To Goodwill A/c |
|
|
10,000 |
|
|
(Goodwill written-off at the time of Rao’s |
|
|
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|
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|
|
|
|
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Rao’s Capital A/c |
Dr. |
|
7,500 |
|
|
To Murty’s Capital A/c |
|
|
4,500 |
|
|
To Shah’s Capital A/c |
|
|
3,000 |
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|
(Rao’s share of goodwill charged from his |
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Page No 5.89:
Question 37:
A and B are partners sharing profits in the ratio of 3 : 2. Their books show goodwill at ₹ 2,000. C is admitted as partner for 1/4th share of profits and brings in ₹ 10,000 as his capital but is not able to bring in cash for his share of goodwill ₹ 3,000. Draft Journal entries.
Answer:
Journal |
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Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
|
|
|
|
|
A’s Capital A/c |
Dr. |
|
1,200 |
|
|
B’s Capital A/c |
Dr. |
|
800 |
|
|
To Goodwill A/c |
|
|
2,000 |
|
|
(Goodwill written-off at the time of |
|
|
|
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
10,000 |
|
|
To C’s Capital A/c |
|
|
10,000 |
|
|
(Capital brought by C) |
|
|
|
|
|
|
|
|
|
|
|
C’s Capital A/c |
Dr. |
|
3,000 |
|
|
To A’s Capital A/c |
|
|
1,800 |
|
|
To B’s Capital A/c |
|
|
1,200 |
|
|
(C’s share of capital charged from his capital distributed between A and B in their sacrificing ratio) |
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|
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Working Notes:
Writing off of goodwill already in the books (JE 1)
Page No 5.89:
Question 38:
A, B and C are in partnership sharing profits and losses in the ratio of 5 : 4 : 1 respectively. Two new partners D and E are admitted. The profits are now to be shared in the ratio of 3 : 4 : 2 : 2 : 1 respectively. D is to pay ₹ 90,000 for his share of Goodwill but E has insufficient cash to pay for Goodwill. Both the new partners introduced ₹ 1,20,000 each as their capital. You are required to pass necessary Journal entries.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
|
|
|
|
|
|
Bank A/c |
Dr |
|
3,30,000 |
|
|
To D’s Capital A/c |
|
|
|
1,20,000 |
|
To E’s Capital A/c |
|
|
|
1,20,000 |
|
To Premium for Goodwill A/c |
|
|
|
90,000 |
|
(Capital and Goodwill brought in cash) |
|
|
|
|
|
|
|
|
|
|
|
C’s Capital A/c |
Dr. |
|
36,000 |
|
|
E’s Capital A/c |
Dr. |
|
45,000 |
|
|
Premium for Goodwill A/c |
Dr. |
|
90,000 |
|
|
To A’s Capital A/c |
|
|
|
1,35,000 |
|
To B’s Capital A/c |
|
|
|
36,000 |
|
(Goodwill adjusted) |
|
|
|
|
|
|
|
|
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Working Notes:
WN1: Calculation of Sacrificing Ratio
WN2: Adjustment of Goodwill
Page No 5.90:
Question 39:
Mohan and Sohan were partners in a firm sharing profits and losses in the ratio of 3 : 2. They admitted Ram for 1/4th share on 1st April, 2019. It was agreed that goodwill of the firm will be valued at 3 years' purchase of the average profit of last 4 years ended 31st March, were ₹ 50,000 for 2015-16, ₹ 60,000 for 2016-17, ₹ 90,000 for 2017-18 and ₹ 70,000 for 2018-19. Ram did not bring his share of goodwill premium in cash. Record the necessary Journal entries in the books of the firm on Ram's admission when:
(a) Goodwill appears in the books at ₹ 2,02,500.
(b) Goodwill appears in the books at ₹ 2,500.
(c) Goodwill appears in the books at ₹ 2,05,000.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
2019 |
Mohan’s Capital A/c |
|
|
|
|
|
Sohan’s Capital A/c |
Dr. |
81,000 |
|
|
|
To Goodwill A/c |
|
|
2,02,500 |
|
|
(Old goodwill written-off in old ratio) |
|
|
|
|
|
|
|
|
||
|
Ram’s Capital A/c |
Dr. |
50,625 |
|
|
|
To Mohan’s Capital A/c |
|
|
30,375 |
|
|
To Sohan’s Capital A/c |
|
|
20,250 |
|
|
(Premium not brought debited to Ram and credited to sacrificing partners) |
|
|
|
|
|
|
|
|
||
|
Mohan’s Capital A/c |
Dr. |
1,500 |
|
|
|
Sohan’s Capital A/c |
Dr. |
1,000 |
|
|
|
To Goodwill A/c |
|
|
2,500 |
|
|
(Old goodwill written-off in old ratio) |
|
|
|
|
|
|
|
|
||
|
Ram’s Capital A/c |
Dr. |
50,625 |
|
|
|
To Mohan’s Capital A/c |
|
|
30,375 |
|
|
To Sohan’s Capital A/c |
|
|
20,250 |
|
|
(Premium not brought debited to Ram and credited to sacrificing partners) |
|
|
|
|
|
|
|
|
||
|
Mohan’s Capital A/c |
Dr. |
1,23,000 |
|
|
|
Sohan’s Capital A/c |
Dr. |
82,000 |
|
|
|
To Goodwill A/c |
|
|
2,05,00 |
|
|
(Old goodwill written-off in old ratio) |
|
|
|
|
|
|
|
|
||
|
Ram’s Capital A/c |
Dr. |
50,625 |
|
|
|
To Mohan’s Capital A/c |
|
|
30,375 |
|
|
To Sohan’s Capital A/c |
|
|
20,250 |
|
|
(Premium not brought debited to Ram and credited to sacrificing partners) |
|
|
|
Working Notes:
WN1: Calculation of Goodwill
Note: Since no information is given about the share of sacrifice, it is assumed that the old partners are sacrificing in their old profit sharing ratio.
Page No 5.90:
Question 40:
Madan and Gopal are partners sharing profits in the ratio of 3 : 2. They admit Sooraj for 1/3rd share in profits on 1st April, 2019. They also decide to share future profits equally. Goodwill of the firm was valued at ₹ 5,50,000. Goodwill existed in the books of account at ₹ 1,00,000, which the partners decide to carry forward.
Sooraj is unable to bring his share of goodwill. Pass the necessary Journal entries on admission of Sooraj, if:
(a) Goodwill is not to be raised and written off; and
(b) Goodwill is to be raised and written off.
Answer:
Particulars |
Madan |
Gopal |
Old Ratio |
3/5 |
2/5 |
New Ratio |
1/3 |
1/3 |
Gain/Sacrifice |
(3/5 – 1/3)= 4/15 (Sacrifice) |
(2/5 – 1/3)= 1/15 (Sacrifice) |
Sacrificing Ratio |
4:1 |
Case a) Goodwill is not be raised and written off:
In the books of the Madan, Gopal and Sooraj Journal |
|||||
Date |
Particulars |
|
L.F. |
Debit (₹) |
Credit (₹) |
2019 |
|
|
|
|
|
April 01 |
Sooraj’s Capital A/c (4,50,000 × 1/3) |
Dr. |
|
1,50,000 |
|
|
To Madan’s Capital A/c (1,50,000× 4/5) |
|
|
|
1,20,000 |
|
To Gopal’s Capital A/c (1,50,000× 1/5) |
|
|
|
30,000 |
|
(Being adjustment for goodwill not brought by the partner) |
|
|
|
|
Case b) Goodwill is to be raised and written off:
In the books of the Madan, Gopal and Sooraj Journal |
|||||
Date |
Particulars |
|
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
2019 |
Goodwill A/c |
Dr. |
|
4,50,000 |
|
April 01 |
To Madan’s Capital A/c (4,50,000 × 3/5) |
|
|
|
2,70,000 |
|
To Gopal’s Capital A/c (4,50,000 × 2/5) |
|
|
|
1,80,000 |
|
(Being goodwill raised in the books of accounts) |
|
|
|
|
2019 |
|
|
|
|
|
April 01 |
Sooraj’s Capital A/c (4,50,000 × 1/3) |
Dr. |
|
1,50,000 |
|
|
Madan’s Capital A/c (4,50,000 × 1/3) |
|
|
1,50,000 |
|
|
Gopal’s Capital A/c (4,50,000 × 1/3) |
|
|
1,50,000 |
|
|
To Goodwill A/c |
|
|
|
4,50,000 |
|
(Being adjustment for goodwill not brought by the partner) |
|
|
|
|
Page No 5.90:
Question 41:
Anil and Sunil are partners in a firm with fixed capitals of ₹ 3,20,000 and ₹ 2,40,000 respectively. They admitted Charu as a new partner for 1/4th share in the profits of the firm on 1st April, 2012. Charu brought ₹ 3,20,000 as her share of capital.
Calculate value of goodwill and record necessary Journal entries.
Answer:
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
||
|
Bank A/c |
Dr. |
|
3,20,000 |
|
|
|
To Charu’s Capital A/c |
|
|
|
3,20,000 |
|
|
(Capital brought in by Charu) |
|
|
|
|
|
|
Charu’s Current A/c |
Dr. |
|
1,00,000 |
|
|
|
To Anil’s Current A/c |
|
|
|
50,000 |
|
|
To Sunil’s Current A/c |
|
|
|
50,000 |
|
|
(Charu’s share of goodwill adjusted through current accounts) |
|
|
|
|
Working Notes: Calculation of Hidden Goodwill
Page No 5.91:
Question 42:
A and B are partners in a firm with capital of ₹ 60,000 and ₹ 1,20,000 respectively. They decide to admit C into the partnership for 1/4th share in the future profits. C is to bring in a sum of ₹ 70,000 as his capital. Calculate amount of goodwill.
Answer:
Actual Capital of the firm after admission of C = A’s Capital + B’s Capital + C’s Capital
= 60,000 + 1, 20,000 + 70,000 = Rs 2, 50,000
Page No 5.91:
Question 43:
Bhuwan and Shivam were partners in a firm sharing profits in the ratio of 3 : 2. Their capitals were ₹ 50,000 and ₹ 75,000 respectively. They admitted Atul on 1st April, 2018 as a new partner for 1/4th share in future profits. Atul brought ₹ 75,000 as his capital. Calculate the value of goodwill of the firm and record necessary Journal entries for the above transactions on Atul's admission.
Answer:
The journal entries are as follows:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
|
|
|
|
|
April 1 |
Bank/Cash A/c |
Dr. |
|
75,000 |
|
|
To Atul’s Capital A/c |
|
|
|
75,000 |
|
(for capital brought on Atul’s admission) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Atul’s Capital A/c |
Dr. |
|
25,000 |
|
|
To Bhuwan’s Capital A/c |
|
|
|
15,000 |
|
To Shivam’s Capital A/c |
|
|
|
10,000 |
|
(for goodwill distributed in sacrificing ratio of 3:2) |
|
|
|
|
|
|
|
|
|
Here, Atul is entered into partnership for 1/4th share in future profits. He contributes Rs 75,000 towards his share of capital.
Taking Atul’s capital as the base, we can calculate the firm’s capital as
Firm's Capital = New Partner's Capital × Reciprocal of his share
i.e., = 75,000 × 4 = Rs 3,00,000
However, the total capital as at that date is Rs 2,00,000 (i.e. 50,000 + 75,000 + 75,000)
So, the difference of 1,00,000 is hidden goodwill.
Atul’s share in goodwill = 1/4th of 1,00,000 = Rs 25,000
Note: In this case, as no information is provided for the share sacrificed by the old partners, so it is assumed that the old partners are sacrificing in their old profit share.
Page No 5.91:
Question 44:
Vinay and Naman are partners sharing profits in the ratio of 4 : 1. Their capitals were ₹ 90,000 and ₹ 70,000 respectively. They admitted Prateek for 1/3 share in the profits. Prateek brought ₹ 1,00,000 as his capital. Calculate the value of firm's goodwill.
Answer:
Thus, Value of firm's Goodwill is ₹40,000.
Page No 5.91:
Question 45:
X and Y are partners with capitals of ₹ 50,000 each. They admit Z as a partner for 1/4th share in the profits of the firm. Z brings in ₹ 80,000 as his share of capital. The Profit and Loss Account showed a credit balance of ₹ 40,000 as on date of admission of Z.
Give necessary journal entries to record the goodwill.
Answer:
Total Capital of the firm after Z’s admission = X’s Capital + Y’s Capital + undistributed Profit +
Z’s Capital
= 50,000 + 50,000 + 40,000 + 80,000
= Rs 2,20,000
Page No 5.91:
Question 46:
Asin and Shreyas are partners in a firm. They admit Ajay as a new partner with 1/5th share in the profits of the firm. Ajay brings ₹ 5,00,000 as his share of capital. The value of the total assets of the firm was ₹ 15,00,000 and outside liabilities were valued at ₹ 5,00,000 on that date. Give necessary Journal entry to record goodwill at the time of Ajay's admission. Also show your workings.
Answer:
Journal | ||||||
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
||
|
Ajay’s Capital A/c |
Dr. |
|
2,00,000 |
|
|
|
To Asin’s Capital A/c |
|
|
|
1,00,000 |
|
|
To Shreya’s Capital A/c |
|
|
|
1,00,000 |
|
|
(Ajay’s share of goodwill distributed among |
|
|
|
|
|
|
|
|
|
|
|
Working Notes:
Calculation of Goodwill brought in by Ajay
Value of firm’s goodwill = Capitalised value of the firm – Net worth
Page No 5.91:
Question 47:
Verma and Sharma are partners in a firm sharing profits and losses in the ratio of 5 : 3. They admitted Ghosh as a new partner for 1/5th share of profits. Ghosh is to bring in ₹ 20,000 as capital and ₹ 4,000 as his share of goodwill premium. Give the necessary Journal entries:
(a) When the amount of goodwill is retained in the business.
(b) When the amount of goodwill is fully withdrawn.
(c) When 50% of the amount of goodwill is withdrawn.
(d) When goodwill is paid privately.
Answer:
Journal Entries
|
|||||
S.No.
|
Particulars
|
L.F.
|
Debit Amount Rs
|
Credit Amount Rs
|
|
Case (a)
|
|||||
Cash A/c
|
Dr.
|
24,000
|
|||
To Ghosh's Capital A/c
|
20,000
|
||||
To Premium for Goodwill A/c
|
4,000
|
||||
(Capital and Goodwill his share broughtby Ghosh)
|
|||||
Premium for Godwill A/c
|
Dr.
|
4,000
|
|||
To Verma's Capital A/c
|
2,500
|
||||
To Sharma's Capital A/c
|
1,500
|
||||
(Goodwill brought by Ghosh credited to Old Partnersin Sacrificing ratio)
|
|||||
Case (b) |
Cash A/c
|
Dr.
|
24,000
|
||
To Ghosh Capital A/c
|
20,000
|
||||
To Premium for Goodwill A/c
|
4,000
|
||||
(Capital and Goodwill brought by Ghosh for (1/5)share of profit)
|
|||||
Premium for Goodwill A/c
|
Dr.
|
4,000
|
|||
To Verma's Capital A/c
|
2,500
|
||||
To Sharma's Capital A/c
|
1,500
|
||||
(Goodwill brought by Ghosh credited in Old Partner in Sacrificing Ratio)
|
|||||
Verma's Capital A/c
|
Dr.
|
2,500
|
|||
Sharma's Capital A/c
|
Dr.
|
1,500
|
|||
To Cash A/c
|
4,000
|
||||
(Amount of Premium for Goodwill withdrawn byOld Partners)
|
|||||
Case (c) |
Cash A/c
|
Dr.
|
24,000
|
||
To Ghosh's Capital A/c
|
20,000
|
||||
To Premium for Goodwill A/c
|
4,000
|
||||
(Capital and Goodwill brought by Ghosh for (1/5)share of profit) | |||||
Premium for Goodwill A/c
|
Dr.
|
4,000
|
|||
To Verma's Capital A/c
|
2,500
|
||||
To Sharma's Capital A/c
|
1,500
|
||||
(Premium for Goodwill credited to Old Partner's Capital Account in sacrificing ratio)
|
|||||
Verma's Capital A/c
|
Dr.
|
1,250
|
|||
Sharma's Capital A/c
|
750
|
||||
To Cash A/c
|
2,000
|
||||
(Half of the amount of premium for goodwill withdrawn by Old partners)
|
|||||
Case (d) | No entry: Goodwill was not brought into firm |
Page No 5.91:
Question 48:
Disha and Divya are partners in a firm sharing profits in the ratio of 3 : 2 respectively. The fixed capital of Disha is ₹ 4,80,000 and of Divya is ₹ 3,00,000. On 1st April, 2019 they admitted Hina as a new partner for 1/5th share in future profits. Hina brought ₹ 3,00,000 as her capital. Calculate value of goodwill of the firm and record necessary Journal entries on Hina's admission.
Answer:
Journal | ||||||
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
||
2019 April 1 |
|
|
|
|
|
|
|
To Hina’s Capital A/c |
|
|
|
3,00,000 |
|
|
(Capital brought in by Hina) |
|
|
|
|
|
April 1 |
Hina’s Current A/c |
Dr. |
|
84,000 |
|
|
|
To Disha’s Current A/c |
|
|
|
50,400 |
|
|
To Divya’s Current A/c |
|
|
|
33,600 |
|
|
(Hina’s Share of Goodwill adjusted |
|
|
|
|
|
|
|
|
|
|
|
Working Note:
Calculation of Hidden Goodwill
Page No 5.91:
Question 49:
E and F were partners in a firm sharing profits in the ratio of 3 : 1. They admitted G as a new partner on 1st April, 2019 for 1/3rd share. It was decided that E, F and G will share future profits equally. G brought ₹ 50,000 in cash and machinery valued at ₹ 70,000 as premium for goodwill.
Pass necessary Journal entries in the books of the firm.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
2019 |
|
|
|
|
|
|
Machinery A/c |
Dr. |
|
70,000 |
|
|
To Premium for Goodwill A/c |
|
|
1,20,000 |
|
|
(G brought cash Rs 50,000 and Machinery |
|
|
|
|
|
|
|
|
|
|
April 1 |
Premium for Goodwill A/c |
Dr. |
|
1,20,000 |
|
|
To E’s Capital A/c |
|
|
1,20,000 |
|
|
(G share of goodwill transferred to E’s Capital Account) |
|
|
|
|
|
|
|
|
|
|
April 1 |
F’s Capital A/c |
Dr. |
|
30,000 |
|
|
To E’s Capital A/c |
|
|
30,000 |
|
|
(F’s share of gain in goodwill charged from his capital and transferred to E’s capital) |
|
|
|
|
|
|
|
|
|
Working Notes:
WN1
WN2
Calculation of F’s share of gain in goodwill
G’s share of Goodwill = 50,000 + 70,000 = Rs 1, 20,000
Goodwill of the firm on the basis of G’s share
F’s share of gain in goodwill
Page No 5.92:
Question 50:
Mr. A commenced business with a capital of ₹ 2,50,000 on 1st April, 2013. During the five years ended 31st March, 2018, the following profits and losses were made:
31st March, 2014−Loss ₹ 5,000
31st March, 2015−Profit ₹ 13,000
31st March, 2016−Profit ₹ 17,000
31st March, 2017−Profit ₹ 20,000
31st March, 2018−Profit ₹ 25,000
During this period he had drawn ₹ 40,000 for his personal use. On 1st April, 2018, he admitted B into partnership on the following terms:
B to bring for his half share in the business, capital equal to A's Capital on 31st March, 2018 and to pay for the one-half share of goodwill of the business, on the basis of three times the average profit of the last five years. Prepare the statement showing what amount B should invest to become a partner and pass entries to record the transactions relating to admission.
Answer:
Capital as on April 01, 2013 |
2, 50,000 |
Less: Loss in 2014 |
(5,000) |
Add: Profit in 2015 |
13,000 |
Add: Profit in 2016 |
17,000 |
Add: Profit in 2017 |
20,000 |
Add: Profit in 2018 |
25,000 |
|
3,20,000 |
Less: Drawings |
(40,000) |
A’ Capital as on March 31, 2018 |
2,80,000 |
|
|
Calculation of Goodwill
B’s Capital = A’s Capital as on March 31, 2016 = Rs 2,80,000
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
April 1 |
Cash A/c |
Dr. |
|
3,01,000 |
|
|
To B’s Capital A/c |
|
|
2,80,000 |
|
|
To Premium for Goodwill A/c |
|
|
21,000 |
|
|
(B brought capital and goodwill) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Premium for Goodwill A/c |
Dr. |
|
21,000 |
|
|
To A’s Capital A/c |
|
|
21,000 |
|
|
(B’s share of goodwill transferred to |
|
|
|
|
|
|
|
|
|
Page No 5.92:
Question 51:
Pass entries in the firm's journal for the following on admission of a partner:
(i) Machinery be reduced by ₹ 16,000 and Building be appreciated by ₹ 40,000.
(ii) A provision be created for Doubtful Debts @ 5% of Debtors amounting to ₹ 80,000.
(iii) Provision for warranty claims be increased by ₹ 12,000.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
|
|
|
|
|
(i) |
Revaluation A/c |
Dr. |
|
16,000 |
|
|
To Machinery A/c |
|
|
|
16,000 |
|
(Value of machinery decreased) |
|
|
|
|
|
|
|
|
|
|
|
Building A/c |
Dr. |
|
40,000 |
|
|
To Revaluation A/c |
|
|
|
40,000 |
|
(Value of building increased) |
|
|
|
|
|
|
|
|
|
|
(ii) |
Revaluation A/c |
|
|
|
|
|
To Provision for Doubtful Debts A/c |
Dr |
|
4,000 |
|
|
(Provision created on debtors) |
|
|
|
4,000 |
|
|
|
|
|
|
(iii) |
Revaluation A/c |
Dr. |
|
12,000 |
|
|
To Provision for Warranty Claims A/c |
|
|
|
12,000 |
|
(Liability recorded) |
|
|
|
|
|
|
|
|
|
Page No 5.92:
Question 52:
Pass entries in firm's Journal for the following on admission of a partner:
(i) Unrecorded Investments worth ₹ 20,000.
(ii) Unrecorded liability towards suppliers for ₹ 5,000.
(iii) An item of ₹ 1,600 included in Sundry Creditors is not likely to be claimed and hence should be written back.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
|
|
|
|
|
(i) |
Investment A/c |
Dr. |
|
20,000 |
|
|
To Revaluation A/c |
|
|
|
20,000 |
|
(Investments recorded) |
|
|
|
|
|
|
|
|
|
|
(ii) |
Revaluation A/c |
Dr. |
|
5,000 |
|
|
To Creditors A/c |
|
|
|
5,000 |
|
(Liability recorded) |
|
|
|
|
|
|
|
|
|
|
(iii) |
Creditors A/c |
|
|
|
|
|
To Revaluation A/c |
Dr |
|
1,600 |
|
|
(Liability decreased) |
|
|
|
1,600 |
|
|
|
|
|
Page No 5.92:
Question 53:
X and Y are partners in a firm sharing profits in the ratio of 3 : 2. They admitted Z as a partner and fixed the new profit-sharing ratio as 3 : 2 : 1. At the time of admission of Z, Debtors and Provision for Doubtful Debts appeared at ₹ 50,000 and ₹ 5,000 respectively all debtors are good. Pass the necessary Journal entries.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
|
|
|
|
|
(i) |
Provision for Doubtful Debts A/c |
Dr. |
|
5,000 |
|
|
To Revaluation A/c |
|
|
|
5,000 |
|
(Provision on Debtors reduced) |
|
|
|
|
|
|
|
|
|
|
(ii) |
Revaluation A/c |
Dr. |
|
5,000 |
|
|
To X’s Capital A/c |
|
|
|
3,000 |
|
To Y’s Capital A/c |
|
|
|
2,000 |
|
(Profit on Revaluation transferred to Partners’ Capital A/c) |
|
|
|
|
|
|
|
|
|
Page No 5.92:
Question 54:
X and Y are partners in a firm sharing profits in the ratio of 3 : 2. They admitted Z as a partner for 1/4th share. At the time of admission of Z, Stock (Book Value ₹ 1,00,000) is to be reduced by 40% and Furniture (Book Value ₹ 60,000) is to be reduced to 40%. Pass the necessary Journal entries.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
|
|
|
|
|
|
Revaluation A/c |
Dr. |
|
76,000 |
|
|
To Stock A/c |
|
|
|
40,000 |
|
To Furniture A/c |
|
|
|
36,000 |
|
(Value of assets decreased) |
|
|
|
|
|
|
|
|
|
|
|
X’s Capital A/c |
Dr. |
|
45,600 |
|
|
Y’s Capital A/c |
Dr. |
|
30,400 |
|
|
To Revaluation A/c |
|
|
|
76,000 |
|
(Loss on Revaluation transferred to Partners’ Capital A/c) |
|
|
|
|
|
|
|
|
|
Page No 5.92:
Question 55:
X and Y are partners sharing profits in the ratio of 3 : 2. They admitted Z as a partner for 1/4th share of profits. At the time of admission of Z, Investments appeared at ₹ 80,000. Half of the investments to be taken by X and Y in their profit-sharing ratio at book value. Remaining investments were valued at ₹ 50,000. Pass the necessary Journal entries.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
|
|
|
|
|
|
X’s Capital A/c |
Dr. |
|
24,000 |
|
|
Y’s Capital A/c |
Dr. |
|
16,000 |
|
|
To Investments A/c |
|
|
|
40,000 |
|
(Half of the investments taken over by X and Y) |
|
|
|
|
|
|
|
|
|
|
|
Investment A/c |
Dr. |
|
10,000 |
|
|
To Revaluation A/c |
|
|
|
10,000 |
|
(Value of investments increased) |
|
|
|
|
|
|
|
|
|
|
|
Revaluation A/c |
Dr. |
|
10,000 |
|
|
To X’s Capital A/c |
|
|
|
6,000 |
|
To Y’s Capital A/c |
|
|
|
4,000 |
|
(Profit on revaluation transferred to Partners’ Capital A/c) |
|
|
|
|
|
|
|
|
|
Page No 5.93:
Question 56:
X and Y are partners in a firm sharing profits in the ratio of 3 : 2. They admitted Z as a partner for 1/4th share of profits. At the time of admission of Z, Debtors and Provision for Doubtful Debts appeared at ₹ 76,000 and ₹ 8,000 respectively. ₹ 6,000 of the debtors proved bad. A provision of 5% is to be created on Sundry Debtors for doubtful debts. Pass the necessary Journal entries.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
|
|
|
|
|
|
Bad Debts A/c |
Dr. |
|
6,000 |
|
|
To Debtors A/c |
|
|
|
6,000 |
|
(Bad debts incurred) |
|
|
|
|
|
|
|
|
|
|
|
Provision for Doubtful Debts A/c |
Dr |
|
6,000 |
|
|
To Bad Debts A/c |
|
|
|
6,000 |
|
(Bad debts adjusted) |
|
|
|
|
|
|
|
|
|
|
|
Revaluation A/c (WN 1) |
Dr. |
|
1,500 |
|
|
To Provision for Doubtful Debts A/c |
|
|
|
1,500 |
|
(Provision created) |
|
|
|
|
|
|
|
|
|
|
|
X’s Capital A/c |
Dr. |
|
900 |
|
Y’s Capital A/c | Dr. | 600 | |||
|
To Revaluation A/c |
|
|
|
1,500 |
|
(Loss on revaluation transferred to Partners’ Capital A/c) |
|
|
|
|
|
|
|
|
|
Working Notes:
WN1: Calculation of Provision for Doubtful Debts
Page No 5.93:
Question 57:
X, Y and Z are partners sharing profits and losses in the ratio of 6 : 3 : 1. They admitted W into partnership with effect from 1st April, 2019. New profit-sharing ratio between X, Y, Z and W was agreed to be 3 : 3 : 3 : 1. They also decide to record the effect of the following revaluations without affecting the book values of the assets and liabilities by passing an adjustment entry:
Book Values (₹) | Revised Values (₹) | |
Plant and Machinery | 3,50,000 | 3,40,000 |
Land and Building | 5,00,000 | 5,50,000 |
Trade Creditors | 1,00,000 | 90,000 |
Outstanding Expenses | 85,000 | 1,00,000 |
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
2019 |
|
|
|
|
|
April 1 |
Z’s Capital A/c |
Dr. |
|
7,000 |
|
|
W’s Capital A/c |
Dr. |
|
3,500 |
|
|
To X’s Capital A/c |
|
|
|
10,500 |
|
(Adjustment entry made) |
|
|
|
|
|
|
|
|
|
Working Notes:
WN 1: Gain/Loss on Revaluation
Gain/Loss = Land & Building + Trade Creditors − Plant & Machinery − Outstanding Expenses
Gain/Loss = 50,000 + 10,000 − 10,000 − 15,000 = 35,000
WN 3: Adjustment of Revaluation Profit
Page No 5.93:
Question 58:
At the time of admission of a partner C, assets and liabilities of A and B were revalued as follows:
(a) A Provision for Doubtful Debts @10% was made on Sundry Debtors (Sundry Debtors ₹ 50,000).
(b) Creditors were written back by ₹ 5,000.
(c) Building was appreciated by 20% (Book Value of Building ₹ 2,00,000).
(d) Unrecorded Investments were valued at ₹ 15,000.
(e) A Provision of ₹ 2,000 was made for an Outstanding Bill for repairs.
(f) Unrecorded Liability towards suppliers was ₹ 3,000.
Pass necessary Journal entries.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
|
|
|
|
|
Creditors A/c |
Dr. |
|
5,000 |
|
|
Building A/c |
Dr. |
|
40,000 |
|
|
Investments A/c |
Dr. |
|
15,000 |
|
|
To Revaluation A/c |
|
|
60,000 |
|
|
(Increase in assets and decrease in liabilities |
|
|
|
|
|
|
|
|
|
|
|
Revaluation A/c |
Dr. |
|
10,000 |
|
|
To Provision for Doubtful Debts A/c |
|
|
5,000 |
|
|
To Reserve for outstanding Repairs Bill A/c |
|
|
2,000 |
|
|
To Creditors A/c |
|
|
3,000 |
|
|
(Increase in liabilities, decrease in assets and creation of reserves and provisions transferred to Revaluation Account) |
|
|
|
|
|
|
|
|
|
|
|
Revaluation A/c |
Dr. |
|
50,000 |
|
|
To Old Partners’ Capital A/c |
|
|
50,000 |
|
|
(Profit on Revaluation transferred to Partners’ Capital) |
|
|
|
|
|
|
|
|
|
Page No 5.93:
Question 59:
X and Y are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 1st April, 2019, they admit Z as a partner for 1/5th share in profits. On that date, there was a balance of ₹ 1,50,000 in General Reserve and a debit balance of ₹ 20,000 in the Profit and Loss Account of the firm. Pass necessary Journal entries regarding adjustment of reserve and accumulated profit/loss.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
2019 |
|
|
|
|
|
|
To X’s Capital A/c |
|
|
|
90,000 |
|
To Y’s Capital A/c |
|
|
|
60,000 |
|
(Adjustment of balance in General Reserve A/c in old ratio) |
|
|
|
|
|
|
|
|
|
|
|
X’s Capital A/c |
Dr. |
|
12,000 |
|
|
Y’s Capital A/c |
Dr. |
|
8,000 |
|
|
To Profit and Loss A/c |
|
|
|
20,000 |
|
(Adjustment of debit balance in P&L A/c in old ratio) |
|
|
|
|
Working Notes:
WN1 Calculation of Share of General Reserve
WN2 Calculation of Share of Debit Balance in P&L A/c
Page No 5.93:
Question 60:
X and Y were partners in a firm sharing profits and losses in the ratio of 2 : 1. Z was admitted for 1/3rd share in the profits. On the date of Z's admission, the Balance Sheet of X and Y showed General Reserve of ₹ 2,50,000 and a credit balance of ₹ 50,000 in Profit and Loss Account. Pass necessary Journal entries on the treatment of these items on Z's admission.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
General Reserve A/c |
Dr. |
|
2,50,000 |
|
|
Profit and Loss A/c |
Dr. |
|
50,000 |
|
|
To X’s Capital A/c |
|
|
|
2,00,000 |
|
To Y’s Capital A/c |
|
|
|
1,00,000 |
|
(Adjustment of balance in General Reserve A/c and P&L A/c in old ratio) |
|
|
|
|
Working Notes:
WN1 Calculation of Share of General Reserve & P&L A/c
Page No 5.94:
Question 61:
(a) X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2. They admit W as partner for 1/6th share. Following is the extract of the Balance Sheet on the date of admission:
Liabilities | ₹ | Assets | ₹ |
General Reserve Contingency Reserve Profit and Loss A/c |
36,000
6,000
18,000
|
Advertisement Suspense A/c |
24,000
|
(b) A and B were partners in a firm sharing profit in 4 : 3 ratio. On 1st April, 2019, they admitted C as a new partner. On the date of C's admission, the Balance Sheet of A and B showed a General Reserve of ₹ 84,000 and a debit balance of ₹ 8,400 in the 'Profit and Loss Account'. Pass necessary Journal entries for the treatment of these items on C's admission.
(c) Give the Journal entry to distribute 'Workmen Compensation Reserve' of ₹ 72,000 at the time of admission of Z, when there is no claim against it. The firm has two partners X and Y.
(d) Give the Journal entry to distribute 'Workmen Compensation Reserve' of ₹ 72,000 at the time of admission of Z, when there is claim of ₹ 48,000 against it. The firm has two partners X and Y .
(e) Give the Journal entry to distribute 'Investment Fluctuation Reserve' of ₹ 24,000 at the time of admission of Z, when Investment (Market Value ₹ 1,10,000) appears at ₹ 1,20,000. The firm has two partners X and Y.
(f) Give the Journal entry to distribute 'General Reserve' of ₹ 4,800 at the time of admission of Z, when 20% of General Reserve is to be transferred to Investment Fluctuation Reserve. The firm has two partners X and Y .
(g) 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, 2019. 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 |
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
2019 |
|
|
|
|
|
April 1 |
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) |
|
|
|
|
|
|
|
|
|
|
|
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) |
|
|
|
|
|
|
|
|
|
|
April 1 |
General Reserve A/c |
Dr. |
|
84,000 |
|
|
To A’s Capital A/c |
|
|
|
48,000 |
|
To B’s Capital A/c |
|
|
|
36,000 |
|
(General Reserve distributed) |
|
|
|
|
|
|
|
|
|
|
|
A’s Capital A/c |
Dr |
|
4,800 |
|
|
B’s Capital A/c |
Dr. |
|
3,600 |
|
|
To Profit & Loss A/c |
|
|
|
8,400 |
|
(Profit & Loss A/c distributed) |
|
|
|
|
|
|
|
|
|
|
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) |
|
|
|
|
|
|
|
|
|
|
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) |
|
|
|
|
|
|
|
|
|
|
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) |
|
|
|
|
|
|
|
|
|
|
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) |
|
|
|
|
|
|
|
|
|
|
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
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
Page No 5.95:
Question 62:
X, Y and Z are equal partners with capitals of ₹ 1,500; ₹ 1,750 and ₹ 2,000 respectively. They agree to admit W into equal partnership upon payment in cash ₹ 1,500 for 1/4th share of the goodwill and ₹ 1,800 as his capital, both sums to remain in the business. The liabilities of the old firm amounted to ₹ 3,000 and the assets, apart from cash, consist of Motors ₹ 1,200, Furniture ₹ 400, Stock ₹ 2,650 and Debtors ₹ 3,780. The Motors and Furniture were revalued at ₹ 950 and ₹ 380 respectively.
Pass Journal entries to give effect to the above arrangement and also show Balance Sheet of the new firm.
Answer:
Balance Sheet before admission of W |
||||
Liabilities |
Amount Rs |
Assets |
Amount Rs |
|
|
|
|
|
|
Capital: |
|
Motors |
1,200 |
|
X |
1,500 |
|
Furniture |
400 |
Y |
1,750 |
|
Stock |
2,650 |
Z |
2,000 |
5,250 |
Debtors |
3,780 |
Other Liabilities |
3,000 |
Cash (Balancing Figure) |
220 |
|
|
|
8,250 |
|
8,250 |
|
|
|
|
|
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
3,300 |
|
|
To W’s Capital A/c |
|
|
1,800 |
|
|
To Premium for Goodwill A/c |
|
|
1,500 |
|
|
(W brought his share of goodwill and capital in cash) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
1,500 |
|
|
To X’s Capital A/c |
|
|
500 |
|
|
To Y’s Capital A/c |
|
|
500 |
|
|
To Z’s Capital A/c |
|
|
500 |
|
|
(Premium for goodwill distributed between X, Y and Z in sacrificing ratio) |
|
|
|
|
|
|
|
|
|
|
|
Revaluation A/c |
Dr. |
|
270 |
|
|
To Motors A/c |
|
|
250 |
|
|
To Furniture A/c |
|
|
20 |
|
|
(Decrease in value of Motors and Furniture transferred to Revaluation Account) |
|
|
|
|
|
|
|
|
|
|
|
X’s Capital A/c |
Dr. |
|
90 |
|
|
Y’s Capital A/c |
Dr. |
|
90 |
|
|
Z’s Capital A/c |
Dr. |
|
90 |
|
|
To Revaluation A/c |
|
|
270 |
|
|
(Loss on revaluation transferred to Capital Account) |
|
|
|
|
|
|
|
|
|
Balance Sheet after admission of W |
|||
Liabilities |
Amount Rs |
Assets |
Amount Rs |
Capital: |
|
Motors (1,200 – 250) |
950 |
X (1,500 – 90 + 500) |
1,910 |
Furniture (400 – 20) |
380 |
Y (1,750 – 90 + 500) |
2,160 |
Stock |
2,650 |
Z (2,000 – 90 + 500) |
2,410 |
Debtors |
3,780 |
W |
1,800 |
Cash (220 + 3,300) |
3,520 |
Other Liabilities |
3,000 |
|
|
|
11,280 |
|
11,280 |
|
|
|
|
Working Notes:
WN1
WN2
Distribution of Premium for Goodwill
WN3
Distribution of loss Revaluation
Page No 5.95:
Question 63:
A and B are carrying on business in partnership and sharing profits and losses in the ratio of 3 : 2. Their Balance Sheet as at 31st March, 2019 stood as:
Liabilities | ₹ | Assets | ₹ | |
Creditors | 11,800 | Cash | 1,500 | |
A's Capital | 51,450 | Stock | 28,000 | |
B's Capital | 36,750 | 88,200 | Debtors | 19,500 |
Furniture | 2,500 | |||
Machinery | 48,500 | |||
1,00,000 | 1,00,000 | |||
They admit C into partnership on 1st April, 2019 and give him 1/8th share in future profits on the following terms:
(a) Goodwill of the firm be valued at twice the average of the last three years' profits which amounted to ₹ 21,000; ₹ 24,000 and ₹ 25,560.
(b) C is to bring cash for the amount of his share of goodwill.
(c) C is to bring cash ₹ 15,000 as his capital.
Pass Journal entries recording these transactions, draw out the Balance Sheet of the new firm and determine new profit-sharing ratio.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
2019 |
|
|
|
|
|
|
To C’s Capital A/c |
|
|
15,000 |
|
|
To Premium for Goodwill A/c |
|
|
5,880 |
|
|
(C brought capital and share of goodwill) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
5,880 |
|
|
To A’s Capital A/c |
|
|
3,528 |
|
|
To B’s Capital A/c |
|
|
2,352 |
|
|
(Premium for Goodwill distributed between |
|
|
|
|
|
|
|
|
|
Partners’ Capital Account |
|||||||
Dr. |
|
|
|
Cr. |
|||
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
|
|
|
|
Balance b/d |
51,450 |
36,750 |
|
|
|
|
|
Cash |
|
|
15,000 |
Balance c/d |
54,978 |
39,102 |
15,000 |
Premium for |
3,528 |
2,352 |
|
|
54,978 |
39,102 |
15,000 |
|
54,978 |
39,102 |
15,000 |
|
|
|
|
|
|
|
|
Balance Sheet after Admission of C |
||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
|
Capital: |
|
Cash (1,500 + 20,880) |
22,380 |
|
A |
54,978 |
|
Stock |
28,000 |
B |
39,102 |
|
Debtors |
19,500 |
C |
15,000 |
1,09,080 |
Furniture |
2,500 |
Creditors |
|
11,800 |
Machinery |
48,500 |
|
|
1,20,880 |
|
1,20,880 |
|
|
|
|
|
Calculation of New Profit Sharing Ratio
C is admitted for share of profit
Let combined share of all partners after admission of C be = 1
Combined share of A and B after C’s admission = 1 − C’s share
Working Note-
WN1
WN2
Page No 5.95:
Question 64:
Following was the Balance Sheet of A and B who were sharing profits in the ratio of 2 : 1 as at 31st March, 2019:
Liabilities | ₹ | Assets | ₹ | |
Capital A/cs: | 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 Amount (₹) |
Credit Amount (₹) |
|
|
|
|
|
|
|
|
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) |
|
|
|
|
|
|
|
|
|
|
|
Profit and Loss Adjustment A/c |
|
750 |
|
|
|
To A’s Capital A/c |
|
|
500 |
|
|
To B’s Capital A/c |
|
|
250 |
|
|
(Profit on revaluation of asset and liabilities |
|
|
|
|
|
|
|
|
|
|
|
Cash A/c |
Dr. |
|
10,500 |
|
|
To C’s Capital A/c |
|
|
7,500 |
|
|
To Premium for Goodwill A/c |
|
|
3,000 |
|
|
(C brought capital and share of goodwill) |
|
|
|
|
|
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
|
3,000 |
|
|
To A’s Capital A/c |
|
|
2,000 |
|
|
To B’s Capital A/c |
|
|
1,000 |
|
|
(Premium for Goodwill distributed between |
|
|
|
|
|
|
|
|
|
Profit and Loss Adjustment Account
|
|||
Dr. |
|
Cr. |
|
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Stock |
500 |
|
|
Plant and Machinery |
875 |
Building |
2,500 |
Reserve for Doubtful Debts |
375 |
|
|
Profit transferred to |
|
|
|
A Capital |
500 |
|
|
B Capital |
250 |
|
|
|
2,500 |
|
2,500 |
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
|
|
|
|
Balance b/d |
15,000 |
10,000 |
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
Balance Sheet as on March 31, 2016 after admission of C |
|||||
Liabilities |
Amount (₹) |
Assets |
Amounts (₹) |
||
|
|
|
|
||
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 |
|
|
|
|
Less: Provision for D. Debts |
375 |
4,475 |
|
|
|
Cash in Hand (600 + 10,500) |
11,100 |
||
|
69,200 |
|
69,200 |
||
|
|
|
|
Working Notes:
WN1
WN2
Distribution of Premium for Goodwill (in sacrificing ratio)
WN3
Distribution of Profit from Profit and loss Adjustment Account (in old ratio)
Page No 5.96:
Question 65:
Given below is the Balance Sheet of A and B, who are carrying on partnership business on 31st March, 2019. A and B share profits and losses in the ratio of 2 : 1.
Liabilities |
₹ |
Assets |
₹ |
||
Bills Payable |
10,000 |
Cash in Hand |
10,000 |
||
Creditors |
58,000 |
Cash at Bank |
40,000 |
||
Outstanding Expenses |
2,000 |
Sundry Debtors | 60,000 | ||
Capital A/cs: |
Stock | 40,000 | |||
A |
1,80,000 |
Plant | 1,00,000 | ||
B |
1,50,000 |
3,30,000 |
Building | 1,50,000 | |
4,00,000 |
4,00,000 |
||||
C is admitted as a partner on 1st April, 2019 on the following terms:
(a) C will bring ₹ 1,00,000 as his capital and ₹ 60,000 as his share of goodwill for 1/4th share in the profits.
(b) Plant 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) A provision for doubtful debts is to be created at 5% of sundry debtors.
(e) Creditors were unrecorded to the extent of ₹ 1,000.
Pass the necessary Journal entries, prepare the Revaluation Account and Partners' Capital Accounts, and show the Balance Sheet after the admission of C.
Answer:
Journal |
|||||
Date |
Particulars |
L.F. |
Amount (₹) |
Amount (₹) |
|
2019 |
Bank A/c |
Dr. |
1,60,000 |
||
Mar 31 |
To C’s Capital A/c |
1,00,000 |
|||
To Premium for Goodwill A/c |
60,000 |
||||
(Capital and premium for goodwill brought by C for 1/4 share) |
|||||
|
|
|
|
|
|
Premium for Goodwill A/c |
Dr. |
60,000 |
|||
To A’s Capital A/c |
40,000 |
||||
To B’s Capital A/c |
20,000 |
||||
(Premium for Goodwill brought transferred to old partners’ capital account in their sacrificing ratio) |
|||||
Plant A/c |
Dr. |
20,000 |
|||
Building A/c |
Dr. |
15,000 |
|||
To Revaluation A/c |
35,000 |
||||
(Increase in value of assets) |
|||||
|
|
|
|
|
|
Revaluation A/c |
Dr. |
8,000 |
|||
To Stock |
4,000 |
||||
To Provision for Doubtful Debts A/c |
3,000 |
||||
To Creditors A/c (Unrecorded) |
1,000 |
||||
(Assets and liabilities revalued) |
|||||
|
|
|
|
|
|
Revaluation A/c |
Dr. |
27,000 |
|||
To A’s Capital A/c |
18,000 |
||||
To B’s Capital A/c |
9,000 |
||||
(Profit on revaluation transferred to old partners) |
Revaluation Account |
|||||
Dr. |
Cr. |
||||
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
||
Stock |
4,000 |
Plant |
20,000 |
||
Provision for Doubtful Debts |
3,000 |
Building |
15,000 |
||
Creditors (Unrecorded) |
1,000 |
||||
Revaluation Profit |
|||||
A’s Capital |
18,000 |
||||
B’s Capital |
9,000 |
27,000 |
|||
35,000 |
35,000 |
||||
Partners’ Capital Account |
||||||||
Dr. |
Cr. |
|||||||
Particulars |
A |
B |
C |
Particulars |
A |
B |
C |
|
Balance c/d |
2,38,000 |
1,79,000 |
1,00,000 |
Balance b/d |
1,80,000 |
1,50,000 |
||
Bank |
1,00,000 |
|||||||
Premium for Goodwill |
40,000 |
20,000 |
||||||
Revaluation |
18,000 |
9,000 |
||||||
2,38,000 |
1,79,000 |
1,00,000 |
2,38,000 |
1,79,000 |
1,00,000 |
|||
Balance Sheet as on March 31, 2019 |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Bills Payable |
10,000 |
Cash in Hand |
10,000 |
||
Creditors |
59,000 |
Cash at Bank |
2,00,000 |
||
Outstanding Expenses |
2,000 |
Sundry Debtors |
60,000 |
||
Capital: |
Less: Provision for Doubtful Debt |
3,000 |
57,000 |
||
A |
2,38,000 |
Stock |
36,000 |
||
B |
1,79,000 |
Plant |
1,20,000 |
||
C |
1,00,000 |
5,17,000 |
Building |
1,65,000 |
|
|
5,88,000 |
5,88,000 |
|||
|
|
|
Note: Since no information is given about the share of sacrifice, it is assumed that the old partners are sacrificing in their old profit sharing ratio.
Page No 5.96:
Question 66:
Balance Sheet of J and K who share profits in the ratio of 3 : 2 is as follows:
Liabilities
|
₹
|
Assets
|
₹
|
||
Reserve
|
1,00,000
|
Cash
|
2,00,000
|
||
J's Capital |
1,50,000
|
Other Assets | 1,50,000 | ||
K's Capital |
1,00,000
|
2,50,000
|
|||
3,50,000
|
3,50,000
|
||||
M joins the firm from 1st April, 2019 for a half share in the future profits. He is to pay ₹ 1,00,000 for goodwill and ₹ 3,00,000 for capital. Draft the Journal entries and prepare Balance Sheet in each of the following cases:
(a) If M acquires his share of profit from the firm in the profit-sharing ratios of the partners.
(b) If M acquires his share of profits from the firm in equal proportions from the original partners.
(c) If M acquires his share of profit in the ratio of 3 : 1 from the original partners, ascertain the future profit-sharing ratio of the partners in each case.
Answer:
(a) If M acquires his share of profit from the firm in the original ratios of the partners.
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
2019 |
|
|
|
|
|
|
To M’s Capital A/c |
|
|
3,00,000 |
|
|
To Premium for Goodwill A/c |
|
|
1,00,000 |
|
|
(M brought capital and his of goodwill in cash) |
|
|
|
|
|
|
|
|
|
|
Apr.1 |
Premium for Goodwill A/c |
Dr. |
|
1,00,000 |
|
|
To J’s Capital A/c |
|
|
60,000 |
|
|
To K’s Capital A/c |
|
|
40,000 |
|
|
(Premium for Goodwill distributed between |
|
|
|
|
|
|
|
|
|
|
Apr.1 |
Reserve A/c |
Dr. |
|
1,00,000 |
|
|
To J’s Capital A/c |
|
|
60,000 |
|
|
To K’s Capital A/c |
|
|
40,000 |
|
|
(Reserve distribution between M and J in their old ratio) |
|
|
|
|
|
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
|
|
|
|
|
Cr. |
Particulars |
J |
K |
M |
Particulars |
J |
K |
M |
|
|
|
|
Balance b/d |
1,50,000 |
1,00,000 |
|
|
|
|
|
Cash |
|
|
3,00,000 |
|
|
|
|
Premium for |
60,000 |
40,000 |
|
Balance c/d |
2,70,000 |
1,80,000 |
3,00,000 |
Reserve |
60,000 |
40,000 |
|
|
2,70,000 |
1,80,000 |
3,00,000 |
|
2,70,000 |
1,80,000 |
3,00,000 |
|
|
|
|
|
|
|
|
Balance Sheet as on April 01, 2019 after M’s admission |
|||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
|
|
Cash (2,00,000 + 4,00,000) |
6,00,000 |
J’s Capital |
2,70,000 |
Other Assets |
1,50,000 |
K’s Capital |
1,80,000 |
|
|
M’s Capital |
3,00,000 |
|
|
|
7,50,000 |
|
7,50,000 |
|
|
|
|
Calculation of Future (New) Profit Sharing Ratio
M is admitted for share of profit
Let the combined share of all partners after admission of M be = 1
Combined share of J and K after M’s admission = 1 − M’s share
Working Notes-
WN1
Distribution of Premium for Goodwill (in sacrificing ratio)
WN2
Distribution of General Reserve (in old ratio)
J will get
K will get
(b) If M acquires his share of profit from the firm in equal proportions from the original partners.
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
2019 |
|
|
|
|
|
April 1 |
Reserve A/c |
Dr. |
|
1,00,000 |
|
|
To J’s Capital A/c |
|
|
60,000 |
|
|
To K’s Capital A/c |
|
|
40,000 |
|
|
(Reserve distributed between J and K in old ratio) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Cash A/c |
Dr. |
|
4,00,000 |
|
|
To M’s Capital A/c |
|
|
3,00,000 |
|
|
To J’s Premium for Goodwill A/c |
|
|
1,00,000 |
|
|
(M brought capital and his share of goodwill) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Premium for Goodwill A/c |
Dr. |
|
1,00,000 |
|
|
To J’s Capital A/c |
|
|
50,000 |
|
|
To K’s Capital A/c |
|
|
50,000 |
|
|
(Premium for Goodwill distributed between J and K in sacrificing Raito i.e 1:1) |
|
|
|
|
|
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
J |
K |
M |
Particulars |
J |
K |
M |
|
|
|
|
Balance b/d |
1,50,000 |
1,00,000 |
|
|
|
|
|
Cash |
|
|
3,00,000 |
|
|
|
|
Premium for |
50,000 |
50,000 |
|
Balance c/d |
2,60,000 |
1,90,000 |
3,00,000 |
Reserve |
60,000 |
40,000 |
|
|
2,60,000 |
1,90,000 |
3,00,000 |
|
2,60,000 |
1,90,000 |
3,00,000 |
|
|
|
|
|
|
|
|
Balance Sheet as on April 01, 2019 after M’s admission |
|||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
J’s Capital |
2,60,000 |
Cash (2,00,000 + 4,00,000) |
6,00,000 |
K’s Capital |
1,90,000 |
Others Assets |
1,50,000 |
M’s Capital |
3,00,000 |
|
|
|
7,50,000 |
|
7,50,000 |
|
|
|
|
Calculation of future (new) profit sharing ratio
M is admitted for share of profit
J and K each will sacrifice in favour of
Working Notes:
WN1
Distribution of Premium for Goodwill (in Sacrificing ratio)
J and K each will get
WN2
Distribution of General Reserve (in old ratio)
J will get
K will get
(c) If M acquires his share of profit in the ratio of 3:1 from the original partners
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
2019 |
|
|
|
|
|
|
To J’s Capital A/c |
|
|
60,000 |
|
|
(Reserve distributed between J and K at the time of M’s admission) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Cash A/c |
Dr. |
|
4,00,000 |
|
|
To M’s Capital A/c |
|
|
3,00,000 |
|
|
To Premium for Goodwill A/c |
|
|
1,00,000 |
|
|
(M brought Capital his share of Goodwill) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Premium for Goodwill A/c |
Dr. |
|
1,00,000 |
|
|
To J’s Capital A/c |
|
|
75,000 |
|
|
To K’s Capital A/c |
|
|
25,000 |
|
|
(Premium for Goodwill distributed between |
|
|
|
|
|
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
J |
K |
M |
Particulars |
J |
K |
M |
|
|
|
|
Balance b/d |
1,50,000 |
1,00,000 |
|
|
|
|
|
Cash |
|
|
3,00,000 |
|
|
|
|
Premium for |
75,000 |
25,000 |
|
|
|
|
|
Reserve |
60,000 |
40,000 |
|
Balance c/d |
2,85,000 |
1,65,000 |
3,00,000 |
|
|
|
|
|
2,85,000 |
1,65,000 |
3,00,000 |
|
2,85,000 |
1,65,000 |
3,00,000 |
|
|
|
|
|
|
|
|
Balance Sheet as on April 01, 2019 after M’s admission |
|||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
J’s Capital |
2,85,000 |
Cash (2,00,000 + 4,00,000) |
6,00,000 |
K’s Capital |
1,65,000 |
Other Assets |
1,50,000 |
M’s Capital |
3,00,000 |
|
|
|
7,50,000 |
|
7,50,000 |
|
|
|
|
Calculation of Future (New) Profit Sharing Ratio
M is admitted for share of profit
New Ratio = Old Ratio − Sacrificing Ratio
Working Notes:
WN1
Distribution of Premium for Goodwill (in sacrificing ratio)
WN2
Distribution of Reserve (in old ratio)
Page No 5.96:
Question 67:
The Balance Sheet of Madhu and Vidhi who are sharing profits in the ratio of 2 : 3 as at 31st March, 2016 is given below:
Liabilities | ₹ | Assets | ₹ | ||
Madhu's Capital | 5,20,000 | Land and Building | 3,00,000 | ||
Vidhi's Capital | 3,00,000 | Machinery | 2,80,000 | ||
General Reserve | 30,000 | Stock | 80,000 | ||
Bills Payable | 1,50,000 | Debtors | 3,00,000 | ||
Less: Provision | 10,000 | 2,90,000 | |||
Bank | 50,000 | ||||
10,00,000 | 10,00,000 | ||||
Madhu and Vidhi decided to admit Gayatri as a new partner from 1st April, 2016 and their new profit-sharing ratio will be 2 : 3 : 5. Gayatri brought ₹ 4,00,000 as her capital and her share of goodwill premium in cash.
(a) Goodwill of the firm was valued at ₹ 3,00,000.
(b) Land and Building was found undervalued by ₹ 26,000.
(c) Provision for doubtful debts was to be made equal to 5% of the debtors.
(d) There was a claim of ₹ 6,000 on account of workmen compensation.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm.
Answer:
Revaluation Account |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
Amount Rs |
Particulars |
Amount Rs |
||||
Provision for Doubtful Debts |
5,000 |
Land &Building |
26,000 |
||||
Claim against Workmen Compensation |
6,000 |
||||||
Revaluation Profit |
|||||||
Madhu’s Capital |
6,000 |
||||||
Vidhi’s Capital |
9,000 |
15,000 |
|||||
26,000 |
26,000 |
||||||
Partners’ Capital Account
|
||||||||
Dr. |
Cr.
|
|||||||
Particulars
|
Madhu
|
Vidhi
|
Gayatri
|
Particulars
|
Madhu
|
Vidhi
|
Gayatri
|
|
Balance c/d
|
5,98,000
|
4,17,000
|
4,00,000
|
Balance b/d
|
5,20,000
|
3,00,000
|
||
Bank
|
4,00,000
|
|||||||
General Reserve | 12,000 | 18,000 | ||||||
Premium for Goodwill
|
60,000
|
90,000
|
||||||
Revaluation
|
6,000
|
9,000
|
||||||
5,98,000 | 4,17,000 | 4,00,000 |
5,98,000
|
4,17,000
|
4,00,000 | |||
Balance Sheet
as on March 31, 2016
|
|||||
Liabilities
|
Amount
(₹)
|
Assets
|
Amount
(₹)
|
||
Bills Payable
|
1,50,000
|
Bank (50,000 + 4,00,000 + 1,50,000)
|
6,00,000
|
||
Claim for Workmen Compensation
|
6,000
|
Sundry Debtors
|
3,00,000
|
||
Capital:
|
Less: Provision for Doubtful Debt
|
15,000
|
2,85,000
|
||
Madhu
|
5,98,000
|
Stock
|
80,000
|
||
Vidhi
|
4,17,000
|
Machinery
|
2,80,000
|
||
Gayatri
|
4,00,000
|
14,15,000
|
Land &Building
|
3,26,000
|
|
|
15,71,000
|
15,71,000
|
|||
|
|
|
Working Notes:
WN1: Calculation of Gayatri’s Share of Goodwill WN1: Calculation of Sacrificing Ratio
Sacrificing Ratio = Old Ratio – New Ratio
Page No 5.97:
Question 68:
Shyamlal and Sanjay were in partnership business sharing profits and losses in the ratio of 2 : 3 respectively. Their Balance Sheet as at 31st March, 2019 was:
Liabilities | ₹ | Assets | ₹ | |
Sundry Creditors | 12,435 | Cash in Hand | 710 | |
Capital A/cs: | Cash at Bank | 11,925 | ||
Shyamlal | 34,050 | Sundry Debtors | 5,500 | |
Sanjay | 34,050 | 68,100 | Stock | 18,000 |
Furniture | 4,400 | |||
Building | 40,000 | |||
80,535 | 80,535 | |||
On 1st April, 2019, they admitted Shanker into partnership for 1/3rd share in future profits on the following terms:
(a) Shanker is to bring in ₹ 30,000 as his capital and ₹ 20,000 as goodwill which is to remain in the business.
(b) Stock and Furniture are to be reduced in value by 10%.
(c) Building is to be appreciated by ₹ 15,000.
(d) Provision of 5% is to be made on Sundry Debtors for Doubtful Debts.
(e) Unaccounted Accrued Income of ₹ 2,400 to be provided for. A debtor, whose dues of ₹ 4,800 were written off as bad debts, paid 50% in full settlement.
(f) Outstanding Rent amounted to ₹ 4,800.
Show Profit and Loss Adjustment Account (Revaluation Account), Capital Accounts of Partners and opening Balance Sheet of the new firm.
Answer:
Profit and Loss Adjustment Account |
||||
Dr. |
|
Cr. |
||
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
|
Stock |
1,800 |
Building |
15,000 |
|
Furniture |
440 |
Accrued Income |
2,400 |
|
Provision for Doubtful Debts |
275 |
Bad Debts Recovered |
2,400 |
|
Outstanding Rent | 4,800 | |||
Profit transferred to |
|
|
|
|
Shyamlal Capital |
4,994 |
|
||
Sanjay Capital |
7,491 |
12,485 |
||
|
|
19,800 |
|
19,800 |
|
|
|
|
|
Partners’ Capital Account |
|||||||
Dr. |
|
|
Cr. |
||||
Particulars |
Shyamlal |
Sanjay |
Shanker |
Particulars |
Shyamlal |
Sanjay |
Shanker |
|
|
|
|
Balance b/d |
34,050 |
34,050 |
|
|
|
|
|
Cash A/c |
|
|
30,000 |
|
|
|
|
Premiumf or |
8,000 |
12,000 |
|
Balance c/d |
47,044 |
53,541 |
30,000 |
Revaluation |
4,994 |
7,491 |
|
|
47,044 |
53,541 |
30,000 |
|
47,044 |
53,541 |
30,000 |
|
|
|
|
|
|
|
|
Balance Sheet as on April 01, 2019 after Shanker’s admission |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Sundry Creditors |
12,435 |
Cash in Hand (710 + 50,000 + 2,400) |
53,110 |
||
Capital A/cs: |
|
Cash at Bank |
11,925 |
||
Shyamlal |
47,044 |
|
Sundry Debtors |
5,500 |
|
Sanjay |
53,541 |
|
Less: Provision for D. Debts |
275 |
5,225 |
Shanker |
30,000 |
1,30,585 |
Stock (18,000 – 1,800) |
16,200 |
|
Outstanding Rent |
4,800 |
Building (40,000 + 15,000) |
55,000 |
||
Furniture (4,400 – 440) | 3,960 | ||||
|
|
Accrued Income |
2,400 |
||
|
1,47,820 |
|
1,47,820 |
||
|
|
|
|
Working Notes:
WN1
Distribution of Premium for Goodwill (in sacrificing ratio)
WN2
Distribution of Profit from Profit and Loss Adjustment Account (in old ratio)
Page No 5.97:
Question 69:
A, B and C are partners sharing profits and losses in the ratio of 3 : 2 : 1 respectively. Their Balance Sheet as at 31st March, 2019 is as follows:
Liabilities | ₹ | Assets | ₹ | |
Capital A/cs: | Land and Building | 50,000 | ||
A | 60,000 | Plant and Machinery | 40,000 | |
B | 60,000 | Furniture | 30,000 | |
C | 40,000 | 1,60,000 | Stock | 20,000 |
Creditors | 30,000 | Debtors | 30,000 | |
Bills Payable | 10,000 | Bills Receivable | 20,000 | |
Bank | 10,000 | |||
2,00,000 | 2,00,000 | |||
D is admitted as a partner on 1st April, 2019 for equal share. His capital is to be ₹ 50,000.
Following adjustments are agreed on D's admission:
(a) Out of the Creditors, a sum of ₹ 10,000 is due to D, it will be adjusted against his capital.
(b) Advertisement Expenses of ₹ 1,200 are to be carried forward as Prepaid Expenses.
(c) Expenses debited in the Profit and Loss Account includes a sum of ₹ 2,000 paid for B's personal expenses.
(d) A Bill of Exchange of ₹ 4,000, which was previously discounted with the bank, was dishonoured on 31st March, 2019 but entry was not passed for dishonour.
(e) A Provision for Doubtful Debts @ 5% is to be created against Debtors.
(f) Expenses on Revaluation amounted to ₹ 2,100 is paid by A.
Prepare necessary Ledger Accounts and Balance Sheet after D's admission.
Answer:
Revaluation Account |
|||||
Dr. |
Cr. |
||||
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
||
Provision for doubtful Debts |
1,700 |
Prepaid Advt. Expense |
1,200 |
||
A’s Capital (Rev. Exp.) |
2,100 |
B’s Capital (Personal Exp.) |
2,000 |
||
|
|
|
|
||
|
|
Loss transferred to |
|
||
|
|
A Capital |
300 |
|
|
|
|
B Capital |
200 |
|
|
|
|
C Capital |
100 |
600 |
|
|
3,800 |
|
|
3,800 |
|
|
|
|
|
|
Partners’ Capital Accounts |
|||||||||
Dr. |
Cr. |
||||||||
Particulars |
A |
B |
C |
D |
Particulars |
A |
B |
C |
D |
Revaluation |
|
2,000 |
|
|
Balance b/d |
60,000 |
60,000 |
40,000 |
|
(Personal Exp.) |
|
|
|
|
Creditors |
|
|
|
10,000 |
Revaluation (Loss) |
300 |
200 |
100 |
|
Cash |
|
|
|
40,000 |
Balance c/d |
61,800 |
57,800 |
39,900 |
50,000 |
Revaluation (Exp.) |
2,100 |
|
|
|
|
62,100 |
60,000 |
40,000 |
50,000 |
|
62,100 |
60,000 |
40,000 |
50,000 |
|
|
|
|
|
|
|
|
|
|
Balance Sheet as on April 01,2019 after D’s admission |
||||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
|||
Capital Accounts: |
|
Land and Building |
50,000 |
|||
A |
61,800 |
|
Plant and Machinery |
40,000 |
||
B |
57,800 |
|
Furniture |
30,000 |
||
C |
39,900 |
|
Prepaid Advt. Expenses |
1,200 |
||
D |
50,000 |
2,09,500 |
Stock |
20,000 |
||
|
|
|
Debtors |
30,000 |
|
|
Creditors |
30,000 |
|
Add: B/R dishonor |
4,000 |
|
|
Less: D’s Capital |
10,000 |
20,000 |
Less: 5% Provision for D Debts |
(1,700) |
32,300 |
|
Bill Payable |
10,000 |
|
|
|
||
|
|
Bills Receivable |
|
20,000 |
||
|
|
Bank (10,000 + 40,000 - 4,000) |
46,000 |
|||
|
2,39,500 |
|
2,39,500 |
|||
|
|
|
|
WN1: Distribution of Loss on Revaluation
Page No 5.98:
Question 70:
On 31st March, 2017, the Balance Sheet of Abhir and Divya, who were sharing profits in the ratio of 3 : 1 was as follows:
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Creditors |
2,20,000 |
Cash at Bank | 1,40,000 | ||
Employees' Provident Fund |
1,00,000 |
Debtors |
6,50,000 |
|
|
Investment Fluctuation Fund |
1,00,000 |
Less: Provision for Bad Debts |
50,000 |
6.00,000 |
|
General Reserve | 1,20,000 | Stock | 3,00,000 | ||
Capitals: | Investments (Market value ₹ 4,40,000) | 5,00,000 | |||
Abhir |
6,00,000 |
|
|||
Divya |
4,00,000 |
10,00,000 |
|
||
15,40,000 |
15,40,000 |
||||
|
|
They decided to admit Vibhor on 1st April, 2017 for 1/5th share.
(a) Vibhor shall bring ₹ 80,000 as his share of goodwill premium.
(b) Stock was overvalued by ₹ 20,000.
(c) A debtor whose dues of ₹ 5,000 were written off as bad debts, paid ₹ 4,000 in full settlement.
(d) Two months' salary @ ₹ 6,000 per month was outstanding.
(e) Vibhor was to bring in Capital to the extent of 1/5th of the total capital of the new firm.
Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm.
Answer:
In the books of Abhir, Divya and Vibhor |
||||||
Dr. |
Revaluation A/c |
Cr. | ||||
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
|||
To Stock A/c |
20,000 |
By Cash A/c |
4,000 |
|||
To Outstanding Salary A/c (6,000 × 2) |
12,000 |
By Loss on Revaluation transferred to: |
28,000 |
|||
|
Abhir’s Capital A/c |
21,000 |
|
|||
|
Divya’s Capital A/c |
7,000 |
|
|||
|
|
|||||
32,000 |
32,000 |
|||||
|
|
Dr. |
Partner’s Capital A/c |
Cr. | |||||||
Particulars |
Abhir (₹) |
Divya (₹) |
Vibhor (₹) |
Particulars |
Abhir (₹) |
Divya (₹) |
Vibhor (₹) |
||
To Revaluation A/c (Loss) |
21,000 |
7,000 |
|
By balance b/d |
6,00,000 |
4,00,000 |
|
||
|
|
|
By Bank A/c (WN2) |
|
|
3,03,000 |
|||
To balance c/d |
7,59,000 |
4,53,000 |
3,03,000 |
By Premium for Goodwill A/c |
60,000 |
20,000 |
|
||
|
|
|
By Investment Fluctuation |
30,000 |
10,000 |
|
|||
|
|
|
Fund A/c (1,00,000 – 40,000) |
|
|
|
|||
|
|
|
By General Reserve A/c |
90,000 |
30,000 |
|
|||
|
|
|
|
|
|
||||
7,80,000 |
4,60,000 |
3,03,000 |
7,80,000 |
4,60,000 |
3,03,000 |
||||
|
|
|
|
|
|
Working Notes:
1. Calculation of New profit-sharing ratio
Vibhor’s Share of Profits | = | 1/5 |
Remaining Profits | = | (1 – 1/5) = 4/5 |
Abhir’s New Share of Profits | = | (3/5 × 4/5) = 12/25 |
Divya’s New Share of Profits | = | (2/5 × 4/5) = 8/25 |
Abhir : Divya : Vibhor | = | 12 : 8 : 5 |
2. Calculation of Vibhor’s Capital
Total Adjusted Capital of the Old Partners = Abhir’s Capital + Divya’s Capital= ₹ (7,59,000 + 4,53,000) = ₹ 12,12,000
Combined New Share of the Old Partners = (12/25 + 8/25) = 20/25
Total Capital of the firm | = | (Adjusted Capital of the Old Partners × Reciprocal of Combined New Share of the Old Partners) |
= | (12,12,000 × 25/20) = ₹ 15,15,000 | |
Vibhor’s Capital | = | Total Capital of the firm × His Profit share |
= | ₹ (15,15,000 × 1/5) = ₹ 3,03,000 |
|
|||||
as at 31st March, 2018 |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Capitals: |
|
Cash at Bank |
5,27,000 |
||
Abhir | 7,59,000 |
|
(1,40,000 + 4,000 + 3,03,000 + 80,000) |
|
|
Divya | 4,53,000 |
|
Debtors |
6,50,000 |
|
Vibhor | 3,03,000 |
15,15,000 |
Less: Provision for Bad Debts |
50,00 |
6,00,000 |
Employee’s Provident Fund |
1,00,000 |
Stock |
2,80,000 |
||
Creditors |
2,20,000 |
Investments |
4,40,000 |
||
Outstanding Salary |
12,000 |
|
|||
|
|
||||
18,47,000 |
18,47,000 |
||||
|
|
Page No 5.98:
Question 71:
X and Y share profits in the ratio of 5 : 3. Their Balance Sheet as at 31st March, 2019 was:
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Creditors |
15,000 |
Cash at Bank | 5,000 | ||
Employees' Provident Fund |
10,000 |
Sundry Debtors |
20,000 |
|
|
Workmen Compensation Reserve |
5,800 |
Less: Provision for Doubtful Debts |
600 |
19,400 |
|
Capital A/cs: | Stock | 25,000 | |||
X |
70,000 |
|
Fixed Assets | 80,000 | |
Y |
31,000 |
1,01,000 |
Profit and Loss A/c |
2,400 |
|
|
|
|
|||
1,31,800 |
1,31,800 |
||||
|
|
They admit Z into partnership with 1/8th share in profits on 1st April, 2019. Z brings ₹ 20,000 as his capital and ₹ 12,000 for goodwill in cash. Z acquires his share from X. Following revaluations are also made:
(a) Employees' Provident Fund liability is to be increased by ₹ 5,000.
(b) All Debtors are good.
(c) Stock includes ₹ 3,000 for obsolete items.
(d) Creditors are to be paid ₹ 1,000 more.
(e) Fixed Assets are to be revalued at ₹ 70,000.
Prepare Journal entries, necessary accounts and new Balance Sheet. Also, calculate new profit-sharing ratio.
Answer:
Revaluation Account |
|||
Dr. |
|
Cr. |
|
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
Stock |
3,000 |
Provision for D. Debts |
600 |
Creditors |
1,000 |
|
|
Fixed Assets |
10,000 |
Loss transferred to |
|
Provident Fund |
5,000 |
X Capital |
11,500 |
|
|
Y Capital |
6,900 |
|
19,000 |
|
19,000 |
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
X |
Y |
Z |
Particulars |
X |
Y |
Z |
Revaluation (Loss) |
11,500 |
6,900 |
|
Balance b/d |
70,000 |
31,000 |
|
Profit and Loss |
1,500 |
900 |
|
Workmen’s Comp. |
3,625 |
2,175 |
|
Balance c/d |
72,625 |
25,375 |
20,000 |
Cash |
|
|
20,000 |
|
|
|
|
Premium for Goodwill |
12,000 |
|
|
|
85,625 |
33,175 |
20,000 |
|
85,625 |
33,175 |
20,000 |
|
|
|
|
|
|
|
|
Balance Sheet as on March 31, 2019 after Z’s admission |
||||
Particulars |
Amount (₹) |
Assets |
Amount (₹) |
|
Creditors (15,000 + 1,000) |
16,000 |
Land and Building |
5,000 |
|
Provident Fund (10,000 + 5,000) |
15,000 |
Sundry Debtors |
20,000 |
|
Capital A/cs: |
|
Stock (25,000 – 3,000) |
22,000 |
|
X |
72,625 |
|
Fixed Assets (80,000 – 10,000) |
70,000 |
Y |
25,375 |
|
Cash |
32,000 |
Z |
20,000 |
1,18,000 |
|
|
|
1,49,000 |
|
1,49,000 |
|
|
|
|
|
Working Notes
WN1: Distribution of Revaluation Loss
WN2: Distribution Accumulated Loss
WN3: Distribution of Workmen’s Compensation Fund
WN4: Z’s premium for goodwill will be transferred to X’s Capital Account because Z receives his entire share from X.
WN5: Calculation of New Profit Sharing Ratio
Page No 5.99:
Question 72:
X and Y are partners in a firm sharing profits in the ratio of 3 : 2. Their Balance Sheet as at 31st March, 2019 was as follows:
Liabilities | Amount (₹) |
Assets | Amount (₹) |
||
Outstanding Rent | 13,000 | Cash | 10,000 | ||
Creditors | 20,000 | Sundry Debtors | 80,000 | ||
Workmen Compensation Reserve | 5,600 | Less : Provision for Doubtful Debts | 4,000 | 76,000 | |
Capital A/cs: X | 50,000 | Stock | 20,000 | ||
Y |
60,000 | 1,10,000 | Profit and Loss A/c | 4,000 | |
Machinery | 38,600 | ||||
1,48,600 | 1,48,600 | ||||
On 1st April, 2019, they admitted Z as a partner for 1/6th share on the following terms:
(i) Z 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 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:
Journal |
|||||
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
2019 |
|
|
|
|
|
April 1 |
Revaluation A/c |
Dr. |
|
2,000 |
|
|
To Provision for Doubtful Debts A/c |
|
|
|
2,000 |
|
(Provision on debtors increased) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Revaluation A/c |
Dr. |
|
2,000 |
|
|
To Creditors A/c |
|
|
|
2,000 |
|
(Creditors increased) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Revaluation A/c |
Dr. |
|
2,000 |
|
|
To Claim for Damages A/c |
|
|
|
2,000 |
|
(Liability increased) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Outstanding Rent A/c |
Dr. |
|
1,800 |
|
|
To Revaluation A/c |
|
|
|
1,800 |
|
(Liability decreased) |
|
|
|
|
|
|
|
|
|
|
April 1 |
X’s Capital A/c |
Dr |
|
2,520 |
|
|
Y’s Capital A/c |
Dr |
|
1,680 |
|
|
To Revaluation A/c |
|
|
|
4,200 |
|
(Loss on revaluation transferred to Partners’ Capital A/c) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Workmen Compensation Reserve A/c |
Dr. |
|
5,600 |
|
|
To Workmen Compensation Claim A/c |
|
|
|
3,000 |
|
To X’s Capital A/c |
|
|
|
1,560 |
|
To Y’s Capital A/c |
|
|
|
1,040 |
|
(Surplus Workmen Compensation Reserve distributed) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Bank A/c |
Dr |
|
40,000 |
|
|
To Z’s Capital A/c |
|
|
|
40,000 |
|
(Capital brought in cash) |
|
|
|
|
|
|
|
|
|
|
April 1 |
Z’s Current A/c |
Dr. |
|
3,000 |
|
|
To X’s Capital A/c |
|
|
|
1,800 |
|
To Y’s Capital A/c |
|
|
|
1,200 |
|
(Goodwill adjusted in the ratio 3:2 ) |
|
|
|
|
|
|
|
|
|
Partners’ Capital Accounts |
|||||||||
Dr. |
|
Cr. |
|||||||
Particulars |
X |
Y |
Z |
Particulars |
X |
Y |
Z |
||
|
|
|
|
|
|
|
|
||
Profit & Loss A/c |
2,400 |
1,600 |
|
Balance b/d |
50,000 |
60,000 |
|
||
Revaluation A/c |
2,520 |
1,680 |
|
Bank A/c |
|
|
40,000 |
||
Balance c/d |
48,440 |
58,960 |
40,000 |
Workmen Compensation Reserve |
1,560 |
1,040 |
|
||
|
|
|
|
Z's Current A/c |
1,800 |
1,200 |
|
||
|
|
|
|
|
|
|
|
||
|
53,360 |
62,240 |
40,000 |
|
53,360 |
62,240 |
40,000 |
||
|
|
|
|
|
|
|
|
||
Balance sheet as on 1st April, 2019 after Z’s admission |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Outstanding Rent |
11,200 |
Cash |
50,000 |
||
Workmen Compensation Claim |
3,000 |
Stock |
20,000 |
||
Creditors |
22,000 |
Machinery |
38,600 |
||
Claim for Damages |
2,000 |
Z ‘s Current A/c |
3,000 |
||
Capital |
|
Debtors |
80,000 |
|
|
X |
48,440 |
|
Less : Provision for D.D. |
6,000 |
74,000 |
Y |
58,960 |
|
|
|
|
Z |
40,000 |
1,47,400 |
|
|
|
|
|
|
|
||
|
1,85,600 |
|
1,85,600 |
||
|
|
|
|
Working Notes:
WN1: Calculation of Goodwill
WN 2: Calculation of Z’s share of goodwill
Page No 5.99:
Question 73:
Rajesh and Ravi are partners sharing profits in the ratio of 3 : 2. Their Balance Sheet at 31st March, 2019 stood as:
BALANCE SHEET as at 31st March, 2019 | |||||
Liabilities | ₹ | Assets | ₹ | ||
Creditors | 38,500 | Cash | 2,000 | ||
Outstanding Rent | 4,000 | Stock | 15,000 | ||
Capital A/cs: | Prepaid Insurance | 1,500 | |||
Rajesh | 29,000 | Debtors | 9,400 | ||
Ravi | 15,000 | Less : Provision for Doubtful Debts | 400 | 9,000 | |
Machinery | 19,000 | ||||
Building | 35,000 | ||||
Furniture | 5,000 | ||||
86,500 | 86,500 | ||||
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:
Revaluation Account |
||||
Dr. |
|
Cr. |
||
Particulars |
Amount (₹) |
Particulars |
Amount (₹) |
|
Stock |
750 |
Building |
5,000 |
|
Provision for D. Debts |
500 |
|
|
|
Less: Old Provision |
400 |
100 |
|
|
Furniture |
500 |
|
|
|
|
|
|
|
|
Profit on Revaluation transferred to |
|
|
|
|
Rajesh Capital |
2,190 |
|
|
|
Ravi Capital |
1,460 |
|
|
|
|
5,000 |
|
5,000 |
|
|
|
|
|
Partners’ Capital Accounts |
|||||||
Dr. |
|
Cr. |
|||||
Particulars |
Rajesh |
Ravi |
Raman |
Particulars |
Rajesh |
Ravi |
Raman |
|
|
|
|
Balance b/d |
29,000 |
15,000 |
|
|
|
|
|
Revaluation |
2,190 |
1,460 |
|
Balance c/d |
31,190 |
16,460 |
16,000 |
Cash |
|
|
16,000 |
(before and just went of |
|
|
|
|
|
|
|
Goodwill) |
|
|
|
|
|
|
|
|
31,190 |
16,460 |
16,000 |
|
31,190 |
16,460 |
16,000 |
Rajesh’s Capital |
|
|
1,635 |
Balance c/d |
31,190 |
16,460 |
16,000 |
Raman’s Capital |
|
|
1,635 |
Raman’s Capital |
1,635 |
1,635 |
|
Balance c/d |
32,825 |
18,095 |
12,730 |
|
|
|
|
|
32,825 |
18,095 |
16,000 |
|
32,825 |
18,095 |
16,000 |
|
|
|
|
|
|
|
|
Balance Sheet as on March 31, 2019 after Raman’s admission |
|||||
Liabilities |
Amount (₹) |
Assets |
Amount (₹) |
||
Creditors |
38,500 |
Cash (2,000 + 16,000) |
18,000 |
||
Outstanding Rent |
4,000 |
Stock (15,000 – 750) |
14,250 |
||
Capital A/cs: |
|
Prepaid Insurance |
1,500 |
||
Rajesh |
32,825 |
|
Debtors |
9,400 |
|
Ravi |
18,095 |
|
Less: Provision for D. Debts |
500 |
8,900 |
Raman |
12,730 |
63,730 |
Machinery |
19,000 |
|
|
|
Building (35,000 + 5,000) |
40,000 |
||
|
|
Furniture (5,000 – 500) |
4,500 |
||
|
1,06,150 |
|
1,06,150 |
||
|
|
|
|
Working Notes-
WN1 Calculation of Sacrificing Ratio
Sacrificing Ratio = Old Ratio − New Ratio
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
= Rs 63,650
Capitalised value on the basis of Raman’s share
Raman’s share of Goodwill
WN3 Adjustment of Raman’s share of goodwill
Rajesh and Ravi each Capital Accounts will be credited by
Journal |
||||
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
Raman’s Capital A/c |
Dr. |
|
3,270 |
|
To Rajesh’s Capital A/c |
|
|
1,635 |
|
To Ravi’s Capital A/c |
|
|
1,635 |
|
(Raman’s share of goodwill adjusted) |
|
|
|
|
|
|
|
|
WN4 Distribution of Profit on Revaluation (in old ratio)
View NCERT Solutions for all chapters of Class 15