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Page No 207:
Question 1:
What are the different ways in which a partner can retire from the firm?
Answer:
The following are the different ways in which a partner can retire from a firm.
i. With the consent of all other partners: A partner must take the consent of all the co-partners of the firm before his/her retirement. Thereafter, the partner can retire from the firm if and only if all the partners agree on the decision of his/her retirement.
ii) With an express agreement by all the partners: In case of written agreement among the partners a partner may retire from the firm by expressing his/her intention of leaving the firm though a notice to the other partners of the firm.
iii) By giving a written notice: If partnership among the partners is at will then a partner may retire by giving notice in writing to all the other partners informing them about his/her intention to retire.
Page No 207:
Question 2:
Write the various matters that need adjustments at the time of retirement of partner/partners.
Answer:
The following are the various matters that need to be adjusted at the time of retirement of partners/partner.
1. Calculation of new gaining ratio of all the remaining partners of the firm.
2. Calculation of new ratio of the remaining partners of the firm.
3. Calculation of goodwill of the new firm and its accounting treatment.
4. Revaluation of assets and liabilities of the new firm.
5. Distribution of accumulated profits and losses and reserves among all the partners (including the retiring partner).
6. Treatment of Joint Life Policy
7. Settlement of the amount due to the retiring partner
8. Adjustment of capital accounts of the remaining partners in their new profit sharing ratio.
Page No 207:
Question 3:
Distinguish between sacrificing ratio and gaining ratio.
Answer:
Basis of Difference |
Sacrificing ratio |
Gaining Ratio |
1. Meaning |
It is the ratio in which old partners agree to sacrifice their share of profit in favour of new partners/partner |
It is the ratio in which continuing partner acquires the share of profit from outgoing partner/partner |
2. Calculation |
Sacrificing Ratio = Old Ratio – New Ratio |
Gaining Ratio = New Ratio – Old Ratio |
3. Time |
It is calculated at the time of admission of new partners/partner. |
It is calculated at the time of retirement/death of old partners/partner. |
4. Objective |
It is calculated to ascertain the share of profit and loss given up by the existing partners in favour of new partners/partner. |
It is calculated to ascertain the share of profit and loss acquired by the remaining partners (of the new firm in case of retirement) from the retiring or deceased partner. |
5. Effect |
It reduces the profit share of the existing partners. |
It increases the profit share of the remaining partners. |
Page No 208:
Question 4:
Why do firm revaluate assets and reassess their liabilities on retirement or on the event of death of a partner?
Answer:
At the time of retirement or death of a partner, it becomes inevitable to revalue the assets and liabilities of the firm for ascertaining their true and fair values. The revaluation is necessary as the value of assets and liabilities may increase or decrease with the passage of time. Further, it may be possible that there are certain assets and liabilities that remained unrecorded in the books of accounts. The retiring or the deceased partner may be benefited or may bear loss due to change in the values of assets and liabilities. Therefore, the revaluation of the assets and liabilities is necessary in order to ascertain the true profit or loss that is to be divided among all the partners in their old profit sharing ratio.
Page No 208:
Question 5:
Why a retiring/deceased partner is entitled to a share of goodwill of the firm?
Answer:
Goodwill is an intangible asset of a firm that is earned by the efforts of all the partners of the firm. After the retirement or death of a partner, the fruits of the past performance and reputation will be shared only by the remaining partners. Thus the remaining partners should compensate the retiring or the deceased partner by entitling him/her a share of firm's goodwill.
Page No 208:
Question 1:
Explain the modes of payment to a retiring partner.
Answer:
The following are the modes of payment to a retiring partner.
1. If the amount due to the retiring partner is to be paid in lump sum on the day of his/her retirement then the following Journal entry need to be passed.
Retiring Partner's Capital A/c |
Dr. |
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To Cash/Bank A/c |
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(Retiring partner paid in cash) |
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|
2) If the amount due to the retiring partner is to be paid in installments then the balancing figure of his/her capital account is transferred to his/her loan account. In this case, the retiring partner receives equal installments along with the interest on the amount outstanding. The following necessary Journal entry is to be passed.
Retiring Partner's Capital A/c |
Dr. |
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To Retiring Partner's Loan A/c |
|
(Retiring partner capital account transferred to the retiring partner's loan account @ -------- % p.a.). |
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3) If the amount due to the retiring partner is to be paid partly in cash and partly in equal installments then a certain amount is paid in cash to the retiring partner on the date of the retirement and the rest amount due to him/her is transferred to his/her loan account. The following necessary Journal entry is to be passed.
Retiring Partner's Capital A/c (with the total amount due to the retiring partner) |
Dr. |
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|
To Retiring Partner's Loan A/c (with the amount transferred to the partner's loan account) |
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|
To Cash A/c (with the amount paid in cash immediately on the date of the retirement) |
|
(Retiring partner partly paid in cash and balance transferred to the partner's loan account) |
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Page No 208:
Question 2:
How will you compute the amount payable to a deceased partner?
Answer:
The legal executer of the deceased partner is entitled for the balancing figure of the deceased partner's capital account. The balancing figure of the deceased partner's capital account is derived after posting the below mentioned items in Step 1 and Step 2.
Step 1: The following items are posted in the debit side of the deceased partner's capital account.
a) Credit balance of the deceased partner's capital account and/or current account.
b) Deceased partner’s share of profit up to the date of his/her death.
c) Deceased partner’s share of goodwill.
d) Deceased partner’s share in accumulated reserves and profit account.
e) Deceased partner’s share in gain on revaluation of assets and liabilities.
f) Deceased partner’s share of Joint Life Policy.
g) Interest on capital, if any, up to the date of the death.
h) Salary or commission, if any, up to the date of the death.
Step 2: The following items are posted in the credit side of the deceased partner's capital account.
a) Debit balance of the deceased partner's capital account and/or current account.
b) Amount withdrawn in the form of drawings up to the date of death of the partner.
c) Interest on drawings, if any, up to the date of the death.
d) Deceased partner’s share in loss on revaluation of assets and liabilities.
e) Deceased partner’s share of loss up to the date of the death.
f) Deceased partner’s share in the accumulated losses of the firm.
The legal executor is entitled for the balancing figure that is the excess of the credit side over the debit side of the deceased partner's capital account.
Deceased Partner's Capital Account |
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Dr. |
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Cr. |
Date |
Particulars |
J.F. |
Amount Rs |
Date |
Particulars |
J.F. |
Amount Rs |
|
Revaluation A/c (Loss) |
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Balance b/d |
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Profit and Loss Suspense A/c (Share of loss up to the date of the death) |
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Profit and Loss Suspense A/c (Share of profit up to the date of the death) |
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Goodwill |
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Accumulated Losses A/c |
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Reserves and Profits |
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Goodwill A/c (Written off) |
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Revaluation A/c (gain) |
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Partner Executor's A/c |
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Joint Life Policy A/c |
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(Balancing Figure) |
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Interest on Capital A/c |
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Salary A/c |
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Commission A/c |
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Page No 208:
Question 3:
Explain the treatment of goodwill at the time of retirement or on the event of death of a partner?
Answer:
At the time of retirement or at the event of death of a partner, the goodwill is adjusted among the partners in gaining ratio with the share of goodwill of the retiring or the deceased partner. As per Para 16 of Accounting Standard 10, it is mandatory to record goodwill in the books only when consideration in money or money’s worth has been paid for it.
In case of retirement and death of a partner, goodwill account cannot be raised. There are namely two probable situations on which the treatment of goodwill rests.
1. If goodwill already appears in the books of the firm.
2. If no goodwill appears in the books of the firm.
Situation 1: If goodwill already appears in the books of the firm.
Step 1: Write off the existing goodwill
If goodwill already appears in the old balance sheet of the firm (if mentioned in the question), then first of all, this goodwill should be written off and should be distributed among all the partners of the firm including the retiring or the deceased partner in their old profit sharing ratio. The following Journal entry is passed to write off the old/existing goodwill.
All Partners' Capital A/c |
Dr. |
|
|
To Goodwill A/c |
|
(Goodwill written of among all the partners in their old ratio) |
|
|
Step 2: Adjusting goodwill through partner's capital account.
After writing off the old goodwill, the goodwill need to be adjusted through the partner's capital account with the share of the goodwill of the retiring or the deceased partner. The following Journal entry is passed.
Remaining Partner's Capital A/c |
Dr. |
|
|
To Retiring/Deceased Partner's Capital A/c |
|
(Gaining Partner's Capital A/c is debited in their gaining share and retiring/deceased partner's capital account in credited for their share of goodwill) |
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|
Situation 2: If no goodwill appears in the books of the firm.
As no goodwill appears in the books of the firm, so the goodwill is adjusted through the partner's capital account with the share of the goodwill of the retiring or the deceased partner. The following Journal entry is passed.
Remaining Partner's Capital A/c |
Dr. |
|
|
To Retiring/Deceased Partner's Capital A/c |
|
(Gaining partner's capital account is debited in their gaining share and retiring/deceased partner's capital account in credited for their share of goodwill) |
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|
Page No 208:
Question 4:
Discuss the various methods of computing the share in profits in the event of death of a partner.
Answer:
In case of death of a partner during the year, his/her executer is entitled for share of profit up to the date of death of the partner.
The share of profit can be calculated by one of the two methods.
1) On time basis: Under this method, profit up to the date of the death of the partner is calculated on the basis of the last year's/years' profit or average profit of last few years. In this approach, it is assumed that the profit will be uniform throughout the current year. The deceased partner will be entitled for the share of the profit proportionately up to the date of his/her death.
Share of Deceased Partner in Profit =
Example- A, B and C are equal partners. The profit of the firm for the years 2008, 2009 and 2010 are Rs 10,00,000, Rs 7,00,000 and Rs 13,00,000 respectively. C dies on April 30, 2011. The share of C in the firm's profit will be calculated on the basis of average profit of last three years. Firm closes its books every year on December 31.
In this case, C's share in the profits will be calculated for four months, i.e. from January 01, 2011 to April 30, 2011.
2) On the sale basis: Under this method, profit is calculated on the basis of last year's sale. In this situation, it is assumed that the net profit margin of the current year's sale is similar to that of the last year's.
Share of Deceased Partner's Profit =×Sales from the beginning of the current year up to the date of death × Share of deceased partner
Example- X Y and Z are equal partners. The last year's sales and profit were Rs 25,00,000 and Rs 2,50,000. Z died on the April 30, 2011. Sales of the current year till the date of Z's death amounts to Rs 12,00,000. Firm closes its books on December 31 every year.
Page No 208:
Question 1:
Aparna, Manisha and Sonia are partners sharing profits in the ratio of 3:2:1. Manisha retires and goodwill of the firm is valued at Rs 1,80,000. Aparna and Sonia decided to share future in the ratio of 3:2. Pass necessary Journal entries.
Answer:
Books of Aparna, and Sonia
Journal
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|
|||||
Date |
Particulars |
L.F. |
Amount Rs |
Amount Rs |
||
|
Aparna’s Capitals A/c |
Dr. |
|
18,000 |
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Sonia’s Capital A/c |
Dr. |
|
42,000 |
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To Manisha’s Capital A/c |
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|
60,000 |
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|
(Manisha’s share of goodwill adjusted to Aparna’s and Sonia’s Capital Account in their gaining ratio ) |
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||
Working Notes:
1. Manisha’s share in goodwill:
Total goodwill of the firm × Retiring Partner’s Share =
2. Gaining Ratio = New Ratio − Old Ratio
Aparna Gaining share
Gaining Ratio between Aparna and Sonia = 3 : 7
3. Aparna’s share in goodwill
Sonia’s share in goodwill
Page No 208:
Question 2:
Sangeeta, Saroj and Shanti are partners sharing profits in the ratio of 2:3:5. Goodwill is appearing in the books at a value of Rs 60,000. Sangeeta retires and goodwill is valued at Rs 90,000. Saroj and Shanti decided to share future profits equally. Record necessary Journal entries.
Answer:
Books of Saroj and Shanti
Journal
|
|
|||||
Date |
Particulars |
L.F. |
Amount Rs |
Amount Rs |
||
|
Sangeeta’s Capital A/c |
Dr. |
|
12,000 |
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Saroj’s Capital A/c |
Dr. |
|
18,000 |
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Shanti’s Capital A/c |
Dr. |
|
30,000 |
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To Goodwill A/c |
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|
60,000 |
||
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(Goodwill written off) |
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Saroj’s Capital A/c |
Dr. |
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18,000 |
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To Sangeeta’s Capital A/c |
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|
18,000 |
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|
(Sangeeta’s share of goodwill adjusted to Saroj’s Capital Account in her gaining ratio) |
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Working Notes:
1. Sangeeta’s share of goodwill.
Total goodwill of the firm ´ Retiring Partner’s share
2. Gaining Ratio = New Ratio – Old Ratio
Saroj’s Gaining Share
Shanti’s Gaining Share
Page No 208:
Question 3:
Himanshu, Gagan and Naman are partners sharing profits and losses in the ratio of 3 : 2 : 1. On March 31, 2019, Naman retires.
The various assets and liabilities of the firm on the date were as follows:
Cash Rs 10,000, Building Rs 1,00,000, Plant and Machinery Rs 40,000, Stock Rs 20,000, Debtors Rs 20,000 and Investments Rs 30,000.
The following was agreed upon between the partners on Naman’s retirement:
(i) | Building to be appreciated by 20%. |
(ii) | Plant and Machinery to be depreciated by 10%. |
(iii) | A provision of 5% on debtors to be created for bad and doubtful debts. |
(iv) | Stock was to be valued at Rs 18,000 and Investment at Rs 35,000. |
Record the necessary journal entries to the above effect and prepare the Revaluation Account.
Answer:
Books of Himanshu and Gagan
Journal |
|
|||||
Date |
Particulars |
L.F. |
Amount Rs |
Amount Rs |
||
|
Building A/c |
Dr. |
|
20,000 |
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Investment A/c |
Dr. |
|
5,000 |
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To Revaluation A/c |
Dr. |
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|
25,000 |
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|
(Value of Building and Investment increased at the time of Naman's retirement) |
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Revaluation A/c |
Dr. |
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7,000 |
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To Plant and Machinery A/c |
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4,000 |
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To Provision for Bad and Doubt Debts A/c |
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1,000 |
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To Stock A/c |
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2,000 |
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(Assets revalued and Provision for Bad and Doubtful Debts made at the time of Naman's retirement) |
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Revaluation A/c |
Dr. |
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18,000 |
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To Himanshu’s Capital A/c |
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9,000 |
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To Gagan’s Capital A/c |
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6,000 |
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To Naman’s Capital A/c |
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3,000 |
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(Profit on revaluation transferred to all Partners’ Capital Accounts in their old profit sharing ratio) |
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Revaluation Account |
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Dr. |
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Cr. |
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Particular |
Amount Rs |
Particular |
Amount Rs |
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Plant and Machinery |
4,000 |
Building |
20,000 |
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Stock |
2,000 |
Investment |
5,000 |
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Provision for Bad and Doubtful Debts |
1,000 |
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Profit transferred to Capital Account: |
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Himanshu |
9,000 |
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Gagan |
6,000 |
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Naman |
3,000 |
18,000 |
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25,000 |
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25,000 |
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Page No 208:
Question 4:
Naresh, Raj Kumar and Bishwajeet are equal partners. Raj Kumar decides to retire. On the date of his retirement, the Balance Sheet of the firm showed the following: General Reserves Rs 36,000 and Profit and Loss Account (Dr.) Rs 15,000.
Pass the necessary journal entries to the above effect.
Answer:
Books of Naresh and Bishwajeet
Journal
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Date |
Particulars |
L.F. |
Amount Rs |
Amount Rs |
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|
General Reserve A/c |
Dr. |
|
36,000 |
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To Naresh’s Capital A/c |
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12,000 |
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To Raj Kumar’s Capital A/c |
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12,000 |
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To Bishwajeet’s Capital A/c |
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12,000 |
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(General Reserve distributed among old partner in old ratio) |
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Naresh’s Capital A/c |
Dr. |
|
5,000 |
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Raj Kumar’s Capital A/c |
Dr. |
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5,000 |
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Bishwajeet’s Capital A/c |
Dr. |
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5,000 |
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To Profit and Loss A/c |
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15,000 |
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(Debit balance of Profit and Loss Account written off) |
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Page No 209:
Question 5:
Liabilities
|
Amount
Rs
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Assets
|
Amount
Rs
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Creditors
|
49,000
|
Cash
|
8,000
|
Reserves
|
18,500
|
Debtors
|
19,000
|
Digvijay’s Capital
|
82,000
|
Stock
|
42,000
|
Brijesh’s Capital
|
60,000
|
Buildings
|
2,07,000
|
Parakaram’s Capital
|
75,500
|
Patents
|
9,000
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2,85,000
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2,85,000
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Answer:
Books of Digvijay and Parakaram
Revaluation Account
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|
|||||
Dr.
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|
Cr.
|
|
|||
Particular
|
Amount
Rs
|
Particular
|
Amount
Rs
|
|||
Bad Debts
|
2,000
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|
|||
Patents
|
9,000
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Loss transferred to Capital Account:
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|
Digvijay
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4,400
|
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Brijesh
|
4,400
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Parakaram
|
2,200
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11,000
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11,000
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Partners’ Capital Account
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Dr.
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Cr.
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|||||||
Particularss
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Digvijay
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Brijesh
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Parakaram
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Particularss
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Digvijay
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Brijesh
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Parakaram
|
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Brijesh’s Capital A/c
|
18,667
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|
9,333
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Balance b/d
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82,000
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60,000
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75,500
|
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Revaluation (Loss)
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4,400
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4,400
|
2,200
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Digvijay’s Capital A/c
|
|
18,667
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|
|||
Brijesh’s Loan
|
|
91,000
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Parakaram’s Capital A/c
|
|
9,333
|
|
|||
Balance c/d
|
66,333
|
|
67,667
|
Reserves
|
7,400
|
7,400
|
3,700
|
|||
|
89,400
|
95,400
|
79,200
|
|
89,400
|
95,400
|
79,200
|
|||
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|
|||
Balance Sheet as on March 31, 2020
|
|||||
Liabilities
|
Amount
Rs
|
Assets
|
Amount
Rs
|
||
Creditors
|
49,000
|
Cash
|
8,000
|
||
Brijesh’s Loan
|
91,000
|
Debtors
|
19,000
|
|
|
|
|
Less: Bad Debts
|
2,000
|
17,000
|
|
Digvijay’s Capital A/c
|
66,333
|
Stock
|
42,000
|
||
Parakaram’s Capital A/c
|
67,667
|
Buildings
|
2,07,000
|
||
|
2,74,000
|
|
2,74,000
|
||
|
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|
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Page No 209:
Question 6:
Radha, Sheela and Meena were in partnership sharing profits and losses in the proportion of 3:2:1. On April 1, 2019, Sheela retires from the firm. On that date, their Balance Sheet was as follows:
Liabilities
|
Amount
Rs
|
Assets
|
Amount
Rs
|
|
Trade Creditors
|
|
3,000
|
Cash-in-Hand
|
1,500
|
Bills Payable
|
|
4,500
|
Cash at Bank
|
7,500
|
Expenses Owing
|
|
4,500
|
Debtors
|
15,000
|
General Reserve
|
|
13,500
|
Stock
|
12,000
|
Capitals:
|
|
|
Factory Premises
|
22,500
|
Radha
|
15,000
|
|
Machinery
|
8,000
|
Sheela
|
15,000
|
|
Losse Tools
|
4,000
|
Meena
|
15,000
|
45,000
|
|
|
|
|
70,500
|
|
70,500
|
|
|
|
|
|
Answer:
Books of Radha and Meena
Revaluation Account
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|
||||
Dr.
|
Cr.
|
|
|||
Particulars
|
Amount
Rs
|
Particulars
|
Amount
Rs
|
||
Machinery
|
800
|
Expenses Owing
|
750
|
||
Loose Tools
|
400
|
Factory Premises
|
1,800
|
||
Profit transferred to Capital Account:
|
|
|
|
||
Meena
|
675
|
|
|
|
|
Radha
|
450
|
|
|
|
|
Sheela
|
225
|
1,350
|
|
|
|
|
2,550
|
|
2,550
|
||
|
|
|
|
||
Parters’ Capital Account
|
|
||||||||
Dr.
|
Cr.
|
|
|||||||
Particulars
|
Radha
|
Sheela
|
Meena
|
Particulars
|
Radha
|
Sheela
|
Meena
|
||
Sheela’s Capital A/c
|
3,375
|
|
1,125
|
Balance b/d
|
15,000
|
15,000
|
15,000
|
||
Sheela’s Loan A/c
|
|
24,450
|
|
General Reserve
|
6,750
|
4,500
|
2,250
|
||
Balance c/d
|
19,050
|
|
16,350
|
Revaluation (Profit)
|
675
|
450
|
225
|
||
|
|
|
|
Radha’s Capital A/c
|
|
3,375
|
|
||
|
|
|
|
Meena’s Capital A/c
|
|
1,125
|
|
||
|
22,425
|
24,450
|
17,475
|
|
22,425
|
24,450
|
17,475
|
||
|
|
|
|
|
|
|
|
||
Balance Sheet as on April 01, 2019
|
|
|||||
Liabilities
|
Amount
Rs
|
Assets
|
Amount
Rs
|
|||
Trade Creditors
|
|
3,000
|
Cash in Hand
|
1,500
|
||
Bills Payable
|
|
4,500
|
Cash at Bank
|
7,500
|
||
Expenses Owing
|
|
3,750
|
Debtors
|
15,000
|
||
Sheela’s Loan
|
|
24,450
|
Stock
|
12,000
|
||
|
|
|
Factory Premises
|
24,300
|
||
Capitals:
|
|
|
Machinery
|
8,000
|
|
|
Radha
|
19,050
|
|
Less: 10%
|
(800)
|
7,200
|
|
Meena
|
16,350
|
35,400
|
Loose Tools
|
4,000
|
|
|
|
|
|
Less: 10%
|
(400)
|
3,600
|
|
|
|
71,100
|
|
71,100
|
||
|
|
|
|
|
||
1) Sheela’s share of goodwill
Total goodwill of the firm × Retiring Partner’s share =
2) Gaining Ratio = New Ratio − Old Ratio
Radha’s Share
Meena’s Shares
Gaining Ratio between Radha and Meena = 6 : 2 or 3 : 1
Page No 210:
Question 7:
Books of Pankaj, Naresh and Saurabh
|
|
|||||
Balance Sheet as on September 30, 2017
|
|
|||||
Liabilities
|
Amount Rs
|
Assets
|
Amount
Rs |
|||
General Reserve
|
12,000
|
Bank
|
7,600
|
|||
Sundry Creditors
|
15,000
|
Debtors
|
6,000
|
|
||
Bills Payable
|
12,000
|
Less: Provision for Doubtful Debt
|
400
|
5,600
|
||
Outstanding Salary
|
2,200
|
|
|
|||
Provision for Legal Damages
|
6,000
|
Stock
|
9,000
|
|||
Capitals:
|
|
Furniture
|
41,000
|
|||
Pankaj
|
46,000
|
|
Premises
|
80,000
|
||
Naresh
|
30,000
|
|
|
|
||
Saurabh
|
20,000
|
96,000
|
|
|
||
|
1,43,200
|
|
1,43,200
|
|||
|
|
|
|
|||
(ii) Goodwill of the firm be valued at Rs. 42,000.
(iii) Rs. 26,000 from Naresh’s Capital account be transferred to his loan account and balance be paid through bank; if required, necessary loan may be obtained form Bank.
(iv) Naresh share of profit till the date of retirement is to be calculated on the basis of last years’ profit, i.e., Rs. 60,000.
(v) New profit sharing ratio of Pankaj and Saurabh is decided to be 5 : 1.
Give the necessary ledger accounts and balance sheet of the firm after Naresh’s retirement.
Answer:
Note: Naresh’s share of profit based on last year profits from 1st October to 31st March
However, the answer given in the NCERT doesn’t incorporate P/L Suspense A/c as calculated above.
Page No 211:
Question 8:
Books of Puneet, Pankaj and Pammy
|
|
||||
Balance Sheet as on March 31, 2019
|
|
||||
Liabilities
|
Amount
Rs
|
Assets
|
Amount
Rs
|
||
Sundry Creditors
|
1,00,000
|
Cash at Bank
|
20,000
|
||
Capital Accounts:
|
|
Stock
|
30,000
|
||
Puneet
|
60,000
|
|
Sundry Debtors
|
80,000
|
|
Pankaj
|
1,00,000
|
|
Investments
|
70,000
|
|
Pammy
|
40,000
|
2,00,000
|
Furniture
|
35,000
|
|
Reserve
|
|
50,000
|
Buildings
|
1,15,000
|
|
|
3,50,000
|
|
3,50,000
|
||
|
|
|
|
Mr. Pammy died on September 30, 2017. The partnership deed provided the following:
(i) The deceased partner will be entitled to his share of profit up to the date of death calculated on the basis of previous year’s profit.
(ii) He will be entitled to his share of goodwill of the firm calculated on the basis of 3 years’ purchase of average of last 4 years’ profit. The profits for the last four financial years are given below:
for 2015–16; Rs. 80,000; for 2016–17, Rs. 50,000; for 2017–18, Rs. 40,000; for 2018–19, Rs. 30,000.
The drawings of the deceased partner up to the date of death amounted to Rs. 10,000. Interest on capital is to be allowed at 12% per annum.
Surviving partners agreed that Rs. 15,400 should be paid to the executors immediately and the balance in four equal yearly instalments with interest at 12% p.a. on outstanding balance.
Show Mr. Pammy’s Capital account, his Executor’s account till the settlement of the amount due.
Answer:
Pammy’s Capital Account
|
|
||||
Dr.
|
Cr.
|
|
|||
Particulars
|
Amount
Rs
|
Particulars
|
Amount
Rs
|
||
Drawings
|
10,000
|
Balance b/d
|
40,000
|
||
Pammy Executor’s A/c
|
75,400
|
Profit and Loss (Suspense)
|
3,000
|
||
|
|
Puneet’s Capital A/c
|
15,000
|
||
|
|
Pankaj’s Capital A/c
|
15,000
|
||
|
|
Interest on Capital
|
2,400
|
||
|
|
Reserve
|
10,000
|
||
|
85,400
|
|
85,400
|
||
|
|
|
|
||
Pammy's Executor Account
|
|
||||||||
Dr.
|
Cr.
|
|
|||||||
Date
|
Particulars
|
J.F.
|
Amount
Rs
|
Date
|
Particulars
|
J.F.
|
Amount
Rs
|
||
|
|
|
|
|
|
|
|
||
Sep. 30, 2019
|
Bank
|
|
15,400
|
Sep. 30, 2019
|
Pammy’s Capital A/c
|
|
75,400
|
||
Mar. 31, 2020
|
Balance c/d
|
|
63,600
|
Mar. 31, 2020
|
Interest
|
|
3,600
|
||
|
|
|
79,000
|
|
|
|
79,000
|
||
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
Sep. 30, 2020
|
Bank
|
|
22,200
|
April 01, 2020
|
Balance b/d
|
|
63,600
|
||
|
(15,000+3,600+3,600)
|
|
|
Sep. 30, 2020
|
Interest
|
|
3,600
|
||
Mar. 31, 2021
|
Balance c/d
|
|
47,700
|
Mar. 31, 2021
|
Interest
|
|
2,700
|
||
|
|
|
69,900
|
|
|
|
69,900
|
||
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
Sep. 30, 2021
|
Bank
|
|
20,400
|
April 01, 2021
|
Balance b/d
|
|
47,700
|
||
Mar. 31, 2022
|
Balance c/d
|
|
31,800
|
Sep. 30, 2021
|
Interest
|
|
2,700
|
||
|
|
|
|
Mar. 31, 2022
|
Interest
|
|
1,800
|
||
|
|
|
52,200
|
|
|
|
52,200
|
||
|
|
|
|
|
|
|
|
||
2022
|
|
|
|
|
|
|
|
||
Sep. 30
|
Bank
|
|
18,600
|
April 01, 2022
|
Balance b/d
|
|
31,800
|
||
|
(15,000+1,800+1,800)
|
|
|
Sep. 30, 2022
|
Interest
|
|
1,800
|
||
Mar. 31, 2023
|
Balance c/d
|
|
15,900
|
Mar. 31, 2023
|
Interest
|
|
900
|
||
|
|
|
34,500
|
|
|
|
34,500
|
||
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
Sep. 30, 2023
|
Bank
|
|
16,800
|
April 01, 2023
|
Balance b/d
|
|
15,900
|
||
|
(15,000+900+900)
|
|
|
Sep. 30, 2023
|
Interest
|
|
900
|
||
|
|
|
16,800
|
|
|
|
16,800
|
||
|
|
|
|
|
|
|
|
||
Calculation of Interest
|
||||
Periods
|
Amount
Outstanding
|
Yearly Interest
|
For 6 Months
|
|
2019-20
|
60,000
|
|
|
|
2020-21
|
45,000
|
|
|
|
2021-22
|
30,000
|
|
|
|
2022-23
|
15,000
|
|
|
|
Note: Date of death of Pammy should be Sept. 30, 2019 as per Balance Sheet date given.
Page No 211:
Question 9:
Books of Prateek, Rockey and Kushal
|
|
||||
Balance Sheet as on March 31, 2020
|
|
||||
Liabilities
|
Amount
Rs
|
Assets
|
Amount
Rs
|
||
Sundry Creditors
|
16,000
|
Bills Receivable
|
16,000
|
||
General Reserve
|
16,000
|
Furniture
|
22,600
|
||
Capital Accounts:
|
|
Stock
|
20,400
|
||
Prateek
|
30,000
|
|
Sundry Debtors
|
22,000
|
|
Rockey
|
20,000
|
|
Cash at Bank
|
18,000
|
|
Kushal
|
20,000
|
70,000
|
Cash in Hand
|
3,000
|
|
|
1,02,000
|
|
1,02,000
|
||
|
|
|
|
||
a) Amount standing to the credit of the Partner’s Capital account.
b) Interest on capital at 5% per annum.
c) Share of goodwill on the basis of twice the average of the past three years’ profit and
d) Share of profit from the closing date of the last financial year to the date of death on the basis of last year’s profit.
Profits for the year ending on March 31, 2018, March 31, 2019 and March 31, 2020 were Rs. 12,000, Rs. 16,000 and Rs. 14,000 respectively. Profits were shared in the ratio of capitals.
Pass the necessary journal entries and draw up Rockey’s capital account to be rendered to his executor.
Answer:
Books of Prateek and Kushal
Journal
|
|
||||||
Date
|
Particulars
|
L.F.
|
Amount
Rs
|
Amount
Rs
|
|||
2017
|
|
|
|
|
|
||
June 30
|
Interest on Capital A/c
|
Dr.
|
|
250
|
|
||
|
Profit and Loss (Suspense) A/c
|
Dr.
|
|
1,000
|
|
||
|
General Reserve A/c
|
Dr.
|
|
4,571
|
|
||
|
To Rockey’s Capital A/c
|
|
|
|
5,821
|
||
|
(Share of profit, interest on capital and share of General
Reserve credited to Rockey’s Capital Account)
|
|
|
|
|||
|
|
|
|
|
|
|
|
June 30
|
Prateek’s Capital A/c
|
Dr.
|
|
4,800
|
|
||
|
Kushal’s Capital A/c
|
Dr.
|
|
3,200
|
|
||
|
To Rockey’s Capital A/c
|
|
|
|
8,000
|
||
|
(Rockey’s share of goodwill adjusted to Prateek’s and
Kushal’s Capital Account in their gaining ratio, 3:2)
|
|
|
|
|||
|
|
|
|
|
|||
June 30
|
Rockey’s Capital A/c
|
Dr.
|
|
33,821
|
|
||
|
To Rockey Executor’s A/c
|
|
|
|
33,821
|
||
|
(Balance of Rockey’s Capital Account transferred to his
Executor’s Account)
|
|
|
|
|||
|
|
|
|
|
|||
Rockey’s Capital Account
|
|
||||||||
Dr.
|
Cr.
|
|
|||||||
Date
|
Particulars
|
J.F.
|
Amount
Rs
|
Date
|
Particulars
|
J.F.
|
Amount
Rs
|
||
2020
|
|
|
|
2020
|
|
|
|
||
April 1
|
Rockey's Executor A/c
|
|
33,821
|
April 1
|
Balance b/d
|
|
20,000
|
||
|
|
|
|
|
Interest on Capital
|
|
250
|
||
|
|
|
|
|
Profit and Loss (Suspense) A/c
|
|
1,000
|
||
|
|
|
|
|
General Reserve
|
|
4,571
|
||
|
|
|
|
|
Prateek’s Capital
|
|
4,800
|
||
|
|
|
|
|
Kushal’s Capital
|
|
3,200
|
||
|
|
|
33,821
|
|
|
|
33,821
|
||
|
|
|
|
|
|
|
|
||
1. Rockey’s Share of Profit = Previous year’s profit × Proportionate Period × Share of Deceased Partner
=
2. Rockey’s Share of Goodwill
Goodwill of a firm = Average profit × Numbers of year’s Purchase
Goodwill of a firm = 14,000 × 2 = Rs 28,000
3. Gaining Ratio = New Ratio − Old Ratio
Gaining Ratio between Prateek and Kushal = 9:4 or 3:2
4. Interest on Capital for 3 months i.e. from April 1, 2020 to June 30, 2020
Amount of × Rate of Interest × Period
Page No 212:
Question 10:
Narang, Suri and Bajaj are partners in a firm sharing profits and losses in proportion of 1/2 , 1/6 and 1/3 respectively. The Balance Sheet on April 1, 2020 was as follows:
Books of Suri, Narang and Bajaj
Balance Sheet as on April 1, 2020
|
|
|||||
Liabilities
|
Amount
Rs
|
Assets
|
Amount
Rs
|
|||
Bills Payable
|
12,000
|
Freehold Premises
|
40,000
|
|||
Sundry Creditors
|
18,000
|
Machinery
|
30,000
|
|||
Reserves
|
12,000
|
Furniture
|
12,000
|
|||
Capital Accounts:
|
|
Stock
|
22,000
|
|||
Narang
|
30,000
|
|
Sundry Debtors
|
20,000
|
|
|
Suri
|
30,000
|
|
Less: Reserve for Bad Debt
|
1,000
|
19,000
|
|
Bajaj
|
28,000
|
88,000
|
|
|
||
|
|
|
Cash
|
7,000
|
||
|
1,30,000
|
|
1,30,000
|
|||
|
|
|
|
Answer:
Revaluation Account
|
|
|||||
Dr.
|
Cr.
|
|
||||
Particulars
|
Amount
Rs
|
Particulars
|
Amount
Rs
|
|||
Machinery
|
3,000
|
Freehold Properties
|
8,000
|
|||
Furniture
|
840
|
Stock
|
3,300
|
|||
Reserve for Bad debts
|
500
|
|
|
|||
Capitals:
|
|
|
|
|||
Narang
|
3,480
|
|
|
|
||
Suri
|
1,160
|
|
|
|
||
Bajaj
|
2,320
|
6,960
|
|
|
||
|
11,300
|
|
11,300
|
|||
|
|
|
|
|||
Partners’ Capital Account
|
|
||||||||
Dr.
|
Cr.
|
|
|||||||
Particulars
|
Narang
|
Suri
|
Bajaj
|
Particulars
|
Narang
|
Suri
|
Bajaj
|
||
Bajaj’s Capital A/c
|
5,250
|
1,750
|
|
Balance b/d
|
30,000
|
30,000
|
28,000
|
||
Bajaj's Loan
|
|
|
41,320
|
Reserves
|
6,000
|
2,000
|
4,000
|
||
|
|
|
|
Revaluation (Profit)
|
3,480
|
1,160
|
2,320
|
||
Balance c/d
|
34,230
|
31,410
|
|
Narang’s Capital A/c
|
|
|
5,250
|
||
|
|
|
|
Suri’s Capital A/c
|
|
|
1,750
|
||
|
39,480
|
33,160
|
41,320
|
|
39,480
|
33,160
|
41,320
|
||
|
|
|
|
|
|
|
|
||
Suri's Current A/c
|
|
15,000
|
|
Balance b/d
|
34,230
|
31,410
|
|
||
|
|
|
|
Narang's Current A/c
|
15,000
|
|
|
||
Balance c/d
|
49,230
|
16,410
|
|
|
|
|
|
||
|
49,230
|
31,410
|
|
|
49,230
|
31,410
|
|
||
|
|
|
|
|
|
|
|
||
Balance Sheet as on April 01, 2020
|
|
||||||
Liabilities
|
Amount
Rs
|
Assets
|
Amount
Rs
|
||||
Bills Payable
|
12,000
|
Free hold Premises
|
48,000
|
||||
Sundry Creditors
|
18,000
|
Machinery
|
|
27,000
|
|||
Bajaj’s Loan
|
41,320
|
Furniture
|
|
11,160
|
|||
Suri’s Current
|
15,000
|
Stock
|
25,300
|
||||
Capital Account:
|
|
Sundry Debtors
|
20,000
|
|
|||
Narang
|
49,230
|
|
Less: Reserve for Bad Debt
|
1,500
|
18,500
|
||
Suri
|
16,410
|
65,640
|
Cash
|
|
7,000
|
||
|
|
|
Narang’s Current Account
|
15,000
|
|||
|
1,51,960
|
|
1,51,960
|
||||
|
|
|
|
||||
Balance in Narang’s Capital
|
=
|
34,230
|
Balance in Suri’s Capital
|
=
|
31,410
|
Total Capital of the New firm after revaluation of assets and
|
|
|
liabilities and adjustment of Goodwill and Reserves
|
=
|
Rs 65,640
|
NOTE:
Page No 213:
Question 11:
The Balance Sheet of Rajesh, Pramod and Nishant who were sharing profits in proportion to their capitals stood as on March 31, 2015:
Books of Rajesh, Pramod and Nishant
Balance Sheet as on March 31, 2015
|
|
|||||
Liabilities
|
Amount
Rs
|
Assets
|
Amount
Rs
|
|||
Bills Payable
|
6,250
|
Factory Building
|
12,000
|
|||
Sundry Creditors
|
10,000
|
Debtors
|
10,500
|
|
||
Reserve Fund
|
2,750
|
Less: Reserve
|
500
|
10,000
|
||
Capital Accounts:
|
|
Bills Receivable
|
7,000
|
|||
Rajesh
|
20,000
|
|
Stock
|
15,500
|
||
Pramod
|
15,000
|
|
Plant and Machinery
|
11,500
|
||
Nishant
|
15,000
|
50,000
|
Bank Balance
|
13,000
|
||
|
69,000
|
|
69,000
|
|||
|
|
|
|
Answer:
Journal
|
|||||
Date
|
Particulars
|
L.F.
|
Amount
Rs
|
Amount
Rs
|
|
2015
|
|
|
|
|
|
Mar.31
|
Revaluation A/c
|
Dr.
|
1,840
|
||
To Stock A/c
|
|
1,550
|
|||
To Reserve for Doubtful Debts A/c
|
|
25
|
|||
To Reserve for Legal Charges A/c
|
|
265
|
|||
(Assets and Liabilities are revalued)
|
|
||||
|
|
|
|
|
|
Mar.31
|
Factory Building A/c
|
Dr.
|
1,440
|
||
To Revaluation A/c
|
|
1,440
|
|||
(Factory Building appreciated)
|
|
||||
|
|
||||
Mar.31
|
Rajesh’s Capital A/c
|
Dr.
|
160
|
||
Pramod’s Capital A/c
|
Dr.
|
120
|
|||
Nishant’s Capital A/c
|
Dr.
|
120
|
|||
To Revaluation A/c
|
|
400
|
|||
(Loss on Revaluation adjusted to Partners’ Capital Account)
|
|
||||
|
|||||
Mar.31
|
Rajesh’s Capital A/c
|
Dr.
|
2,000
|
||
Nishant’s Capital A/c
|
Dr.
|
1,000
|
|||
To Pramod Capital’s A/c
|
|
3,000
|
|||
(Pramod’s share of goodwill adjusted to Rajesh’s and Nishant’s Capital Account in their gaining ratio)
|
|
||||
Mar.31
|
Reserve Fund A/c
|
Dr.
|
2,750
|
||
To Rajesh’s Capital A/c
|
|
1,100
|
|||
To Pramod’s Capital A/c
|
|
825
|
|||
To Nishant’s Capital A/c
|
|
825
|
|||
(Reserve Fund distributed all the partners)
|
|
||||
|
|
|
|
|
|
Mar.31
|
Pramod’s Capital A/c
|
Dr.
|
18,705
|
||
To Pramod’s Loan A/c
|
|
18,705
|
|||
(Pramod’s Capital transferred to his Loan Account)
|
|
||||
|
|
|
|
|
|
Mar.31
|
Rajesh’s Capital A/c
|
Dr.
|
940
|
||
Nishant’s Capital A/c
|
Dr.
|
2,705
|
|||
To Rajesh’s Current A/c
|
|
940
|
|||
To Nishant’s Current A/c
|
|
2,705
|
|||
(Excess in Capital Account is transferred to Current Account)
|
|
1) Pramod’s share of goodwill = Total goodwill of the firm × Retiring Partner’s Share
2) Gaining Ratio = New Ratio − Old Ratio
Gaining Ratio between Rajesh and Nishant = 2 : 1
The following Journal entry is passed to record the withdrawal of surplus capital by the partners.
Journal entry
Rajesh’s Capital A/c |
Dr.
|
940 | |
Nishant’s Capital A/c |
Dr.
|
2,705 | |
To Bank A/c | 3,645 | ||
(Surplus Capital withdrawn) |
Page No 213:
Question 12:
Following is the Balance Sheet of Jain, Gupta and Malik as on March 31, 2016.
Books of Jain, Gupta and Malik Balance Sheet as on March 31, 2016
|
|
||||
Liabilities |
Amount Rs |
Assets |
Amount Rs |
||
Sundry Creditors |
19,800 |
Land and Building |
26,000 |
||
Telephone Bills Outstanding |
300 |
Bonds |
14,370 |
||
Accounts Payable |
8,950 |
Cash |
5,500 |
||
Accumulated Profits |
16,750 |
Bills Receivable |
23,450 |
||
|
|
Sundry Debtors |
26,700 |
||
Capitals : |
|
Stock |
18,100 |
||
Jain |
40,000 |
|
Office Furniture |
18,250 |
|
Gupta |
60,000 |
|
Plants and Machinery |
20,230 |
|
Malik |
20,000 |
1,20,000 |
Computers |
13,200 |
|
|
1,65,800 |
|
1,65,800 |
||
|
|
|
|
||
The partners have been sharing profits in the ratio of 5:3:2. Malik decides to retire from business on April 1, 2016 and his share in the business is to be calculated as per the following terms of revaluation of assets and liabilities : Stock, Rs 20,000; Office furniture, Rs 14,250; Plant and Machinery Rs 23,530; Land and Building Rs 20,000.
A provision of Rs 1,700 to be created for doubtful debts. The goodwill of the firm is valued at Rs 9,000.
The continuing partners agreed to pay Rs 16,500 as cash on retirement of Malik, to be contributed by continuing partners in the ratio of 3:2. The balance in the capital account of Malik will be treated as loan.
Prepare Revaluation account, capital accounts, and Balance Sheet of the reconstituted firm.
Answer:
In the books of Jain and Gupta
Revaluation Account |
|
|||||
Dr. |
Cr. |
|
||||
Particulars |
Amount Rs |
Particulars |
Amount Rs |
|||
Office Furniture |
4,000 |
Stock |
1,900 |
|||
Land and Building |
6,000 |
Plant and Machinery |
3,300 |
|||
Provision for Doubtful Debts |
1,700 |
Loss transferred to |
|
|||
|
|
Jain's Capital A/c |
3,250 |
|
||
|
|
Gupta's Capital A/c |
1,950 |
|
||
|
|
Malik's Capital A/c |
1,300 |
6,500 |
||
|
11,700 |
|
11,700 |
|||
|
|
|
|
|||
Partners’ Capital Account |
|
||||||||
Dr. |
Cr. |
|
|||||||
Particulars |
Jain |
Gupta |
Malik |
Particulars |
Jain |
Gupta |
Malik |
||
Revaluation (Loss) |
3,250 |
1,950 |
1,300 |
Balance b/d |
40,000 |
60,000 |
20,000 |
||
Malik’s Capital |
1,125 |
675 |
|
Accumulated Profits |
8,375 |
5,025 |
3,350 |
||
Cash |
|
|
16,500 |
Jain’s Capital A/c |
|
|
1,125 |
||
Malik’s Loan |
|
|
7,350 |
Gupta’s Capital A/c |
|
|
675 |
||
Balance c/d |
53,900 |
69,000 |
|
Cash |
9,900 |
6,600 |
|
||
|
58,275 |
71,625 |
25,150 |
|
58,275 |
71,625 |
25,150 |
||
|
|
|
|
|
|
|
|
||
Balance Sheet |
|||||
Liabilities |
Amount Rs |
Assets |
Amount Rs |
||
Sundry Creditors |
19,800 |
Stock (18,100 + 1,900) |
20,000 |
||
Telephone Bills Outstanding |
300 |
Bonds |
14,370 |
||
Accounts Payable |
8,950 |
Cash |
5,500 |
||
Malik’s Loan |
7,350 |
Bills Receivable |
23,450 |
||
|
|
Sundry Debtors |
26,700 |
|
|
Partners’ Capital: |
|
Less: Provision for Bad Debts |
1,700 |
25,000 |
|
Jain |
53,900 |
|
Land and Building (26,000 – 6,000) |
20,000 |
|
Gupta |
69,000 |
1,22,900 |
Office Furniture (18,250 – 4,000) |
14,250 |
|
|
|
Plant and Machinery (20,230 + 3,300) |
23,530 |
||
|
|
Computers |
13,200 |
||
|
1,59,300 |
|
1,59,300 |
||
|
|
|
|
Working Note:
1) Malik’s share of goodwill = Total Goodwill × Retiring Partner Share =
2) Gaining Ratio = New Ratio – Old Ratio
Gaining Ratio between Jain and Gupta = 10:6 or 5:3
Page No 214:
Question 13:
Arti, Bharti and Seema are partners sharing profits in the proportion of 3:2:1 and their Balance Sheet as on March 31, 2020 stood as follows :
Books of Arti, Bharti and Seema
Balance Sheet as on March 31, 2016
|
|
||||
Liabilities
|
Amount
Rs
|
Assets
|
Amount
Rs
|
||
Bills Payable
|
12,000
|
Buildings
|
21,000
|
||
Creditors
|
14,000
|
Cash in Hand
|
12,000
|
||
General Reserve
|
12,000
|
Bank
|
13,700
|
||
Capitals:
|
|
Debtors
|
12,000
|
||
Arti 20,000
|
|
Bills Receivable
|
4,300
|
||
Bharti
|
12,000
|
|
Stock
|
1,750
|
|
Seema
|
8,000
|
40,000
|
Investment
|
13,250
|
|
|
78,000
|
|
78,000
|
||
|
|
|
|
Answer:
Books of Arti and Seema
Journal
|
|
||||||
Date |
Particulars |
L.F. |
Amount Rs |
Amount Rs |
|||
2020 |
|
|
|
|
|
||
June 12 |
Interest on Capital A/c |
Dr. |
|
240 |
|
||
|
General Reserve A/c |
Dr. |
|
4,000 |
|
||
|
Profit and Loss (Suspense) A/c |
Dr. |
|
3,333 |
|
||
|
To Bharti’s Capital A/c |
|
|
|
7,573 |
||
|
(Profit, interest and general reserve are in credited to Bharti’s Capital account) |
|
|
|
|||
|
|
|
|
|
|
|
|
June 12 |
Arti’s Capital A/c |
Dr. |
|
3,600 |
|
||
|
Seema’s Capital A/c |
Dr. |
|
1,200 |
|
||
|
To Bharti’s Capital A/c |
|
|
|
4,800 |
||
|
(Bharti’s share of goodwill adjusted to Arti’s and Seema’s Capital Account in their gaining ratio, 3:1) |
|
|
|
|||
|
|
|
|
|
|
||
June 12 |
Bharti’s Capital A/c |
Dr. |
|
24,373 |
|
||
|
To Bharti’s Executor’s A/c |
|
|
|
24,373 |
||
|
(Bharti’s capital account is transferred to her executor’s account) |
|
|
|
|||
|
|
|
|
|
|
|
|
June 12 |
Bank A/c |
Dr. |
|
16,200 |
|
||
|
To Investment A/c |
|
|
|
13,250 |
||
|
To Profit on Sale of Investment |
|
|
|
2,950 |
||
|
(Investment sold) |
|
|
|
|
||
|
|
|
|
|
|
|
|
June 12 |
Bharti’s Executor A/c |
Dr. |
|
24,373 |
|
||
|
To Bank A/c |
|
|
|
24,373 |
||
|
(Bharti Executor paid) |
|
|
|
|
||
|
|
|
|
|
|
||
Bharti’s Capital Account |
|
||||||||
Dr. |
Cr. |
|
|||||||
Date |
Particulars |
J.F. |
Amount Rs |
Date |
Particulars |
J.F. |
Amount Rs |
||
2020 |
|
|
|
2020 |
|
|
|
||
June 12 |
Bharti's Executor’s A/c |
|
24,373 |
Mar. 31 |
Balance b/d |
|
12,000 |
||
|
|
|
|
June 12 |
Interest on Capital |
|
240 |
||
|
|
|
|
|
Profit and Loss (Suspense) |
|
3,333 |
||
|
|
|
|
|
General Reserve |
|
4,000 |
||
|
|
|
|
|
Arti’s Capital A/c |
|
3,600 |
||
|
|
|
|
|
Seema’s Capital A/c |
|
1,200 |
||
|
|
|
24,373 |
|
|
|
24,373 |
||
|
|
|
|
|
|
|
|
||
Bharti’s Executor’s Account
|
|
||||||||
Dr. |
Cr. |
|
|||||||
Date |
Particulars |
J.F. |
Amount Rs |
Date |
Particulars |
J.F. |
Amount Rs |
||
2020 |
|
|
|
2020 |
|
|
|
||
June 12 |
Bank |
|
24,373 |
June 12 |
Bharti's Capital A/c |
|
24,373 |
||
|
|
|
|
|
|
|
|
||
|
|
|
24,373 |
|
|
|
24,373 |
||
|
|
|
|
|
|
|
|
||
Working Notes:
1. Bharti’s share of profit = Profit is 10% of sales
Sales during the last year for that period were Rs 1,00,000
If sales are Rs 1,00,000, then the profit is Rs 10,000
2. Bharti’s Share of Goodwill
Goodwill of the firm = Average Profit × Number of Years Purchase
Or, 9,000 − 20% of 9,000 = 9,000 − 1,800 = Rs 7,200
Goodwill of the firm = 7,200 × 2 = Rs 14,400
3. Gaining Ratio = New Ratio − Old Ratio
Gaining ratio between Arti and Seema = 3:1
4. Interest on Capital for 73 days, i.e. from April 1, 2020 to June 12, 2020
Interest on capital = Amount of Capital × Ratio of Interest × Period
Page No 215:
Question 14:
Nithya, Sathya and Mithya were partners sharing profits and losses in the ratio of 5:3:2. Their Balance Sheet as on March 31, 2020 was as follows :
Books of Nithya, Sathya and Mithya Balance Sheet at March 31, 2020 |
|
||||
Liabilities |
Amount Rs |
Assets |
Amount Rs |
||
Creditors |
14,000 |
Investments |
10,000 |
||
Reserve Fund |
6,000 |
Goodwill |
5,000 |
||
Capitals: |
|
Premises |
20,000 |
||
Nithya |
30,000 |
|
Patents |
6,000 |
|
Sathya |
30,000 |
|
Machinery |
30,000 |
|
Mithya |
20,000 |
80,000 |
Stock |
13,000 |
|
|
|
Debtors |
8,000 |
||
|
|
Bank |
8,000 |
||
|
1,00,000 |
|
1,00,000 |
||
|
|
|
|
||
Mithya dies on August 1, 2015. The agreement between the executors of Mithya and the partners stated that:
(a) Goodwill of the firm be valued at times the average profits of last four years. The profits of four years were : in 2016-17, Rs.13,000; in 2017-18, Rs.12,000; in 2018-19, Rs.16,000; and in 2014-15, Rs.15,000.
(b) The patents are to be valued at Rs 8,000, Machinery at Rs 25,000 and Premises at Rs 25,000.
(c) The share of profit of Mithya should be calculated on the basis of the profit of 2019-20.
(d) Rs 4,200 should be paid immediately and the balance should be paid in 4 equal half-yearly instalments carrying interest @ 10%.
Record the necessary journal entries to give effect to the above and write the executor’s account till the amount is fully paid. Also prepare the Balance Sheet of Nithya and Sathya as it would appear on August 1, 2020 after giving effect to the adjustments.
Answer:
Books of Nithya and Sathya
Journal
|
|
||||||
Date
|
Particulars
|
L.F.
|
Amount
Rs
|
Amount
Rs
|
|||
2020
|
|
|
|
|
|
||
Aug. 1
|
Nithya’s Capital A/c
|
Dr.
|
|
2,500
|
|
||
|
Sathya’s Capital A/c
|
Dr.
|
|
1,500
|
|
||
|
Mithya’s Capital A/c
|
Dr.
|
|
1,000
|
|
||
|
To Goodwill A/c
|
|
|
|
5,000
|
||
|
(Goodwill written off among all the partners)
|
|
|
|
|||
|
|
|
|
|
|
|
|
Aug. 1
|
Patents A/c
|
Dr.
|
|
2,000
|
|
||
|
Premises A/c
|
Dr.
|
|
5,000
|
|
||
|
To Revaluation A/c
|
|
|
|
7,000
|
||
|
(Increase in the value of patents and premises)
|
|
|
|
|||
|
|
|
|
|
|
||
Aug. 1
|
Revaluation A/c
|
Dr.
|
|
5,000
|
|
||
|
To Machinery A/c
|
|
|
|
5,000
|
||
|
(Decrease in the value of machinery)
|
|
|
|
|
||
|
|
|
|
|
|
|
|
Aug. 1
|
Revaluation A/c
|
Dr.
|
|
2,000
|
|
||
|
To Nithya’s Capital A/c
|
|
|
|
1,000
|
||
|
To Sathya’s Capital A/c
|
|
|
|
600
|
||
|
To Mithya’s Capital A/c
|
|
|
|
400
|
||
|
(Profit on revaluation of assets and liabilities transferred
to Partners’ Capital Account)
|
|
|
|
|||
|
|
|
|
|
|
|
|
Aug. 1
|
Reserve Fund A/c
|
Dr.
|
|
6,000
|
|
||
|
To Nithya’s Capital A/c
|
|
|
|
3,000
|
||
|
To Sathya’s Capital A/c
|
|
|
|
1,800
|
||
|
To Mithya’s Capital A/c
|
|
|
|
1,200
|
||
|
(Reserve Fund transferred to Partners’ Capital Account)
|
|
|
|
|||
|
|
|
|
|
|
|
|
Aug. 1
|
Nithya’s Capital A/c
|
Dr.
|
|
4,375
|
|
||
|
Sathya’s Capital A/c
|
Dr.
|
|
2,625
|
|
||
|
To Mithya’s Capital A/c
|
|
|
|
7,000
|
||
|
(Mithya’s share of goodwill adjusted to Nithya’s and
Sathya’s Capital Account in their gaining ratio, 5:3)
|
|
|
|
|||
|
|
|
|
|
|
|
|
Aug. 1
|
Profit and Loss A/c (Suspense)
|
Dr.
|
|
1,000
|
|
||
|
To Mithya’s Capital A/c
|
|
|
|
1,000
|
||
|
(Profit till date of death credited to Mithya’s Capital
Account)
|
|
|
|
|||
|
|
|
|
|
|
|
|
Aug. 1
|
Mithya’s Capital A/c
|
Dr.
|
|
28,600
|
|
||
|
To Mithya Executors A/c
|
|
|
|
28,600
|
||
|
(Mithya’s Capital Account transferred to her executor
account)
|
|
|
|
|||
|
|
|
|
|
|
|
|
Aug. 1
|
Mithya Executor’s A/c
|
Dr.
|
|
4,200
|
|
||
|
To Cash A/c
|
|
|
|
4,200
|
||
|
(Cash paid to Mithya's executor)
|
|
|
|
|
||
|
|
|
|
|
|
||
Mithya Executor’s Account
|
|
|||||||||
Dr.
|
Cr.
|
|
||||||||
Date
|
Particulars
|
J.F.
|
Amount
Rs
|
Date
|
Particulars
|
J.F.
|
Amount
Rs
|
|||
2020
|
|
|
|
2020
|
|
|
|
|||
Aug. 1
2021 |
Bank
|
|
4,200
|
Aug. 1
2021 |
Mithya’s Capital A/c
|
|
28,600
|
|||
Jan. 31
|
Bank (6,100 + 1220)
|
|
7,320
|
Jan. 31
|
Interest
|
|
1,220
|
|||
Mar. 31
|
Balance c/d
|
|
18,605
|
Mar. 31
|
Interest
|
|
305
|
|||
|
|
|
30,125
|
|
|
|
|
30,125
|
||
|
|
|
|
|
|
|
|
|||
2021
|
|
|
|
2021
|
|
|
|
|||
July 31
2022 |
Bank (6,100 + 305 + 610)
|
|
7,015
|
April 01
July 31 2022 |
Balance b/d
Interest |
|
18,605
610 |
|||
Jan. 31 |
Bank (6,100 + 610) |
|
6,710
|
Jan. 31
|
Interest
|
|
610
|
|||
Mar. 31
|
Balance c/d
|
|
6202
|
Mar. 31
|
Interest
|
|
102
|
|||
|
|
|
|
|
|
|
||||
|
|
|
19,927
|
|
|
|
19,927
|
|||
|
|
|
|
|
|
|
|
|||
2022
|
|
|
|
2022
|
|
|
|
|||
July 31
|
Bank (6,100 + 102 + 203)
|
|
6,405
|
April 01
|
Balance b/d
|
|
6,202
|
|||
|
|
|
|
July 31
|
Interest
|
|
203
|
|||
|
|
|
6,405
|
|
|
|
|
6,405
|
||
|
|
|
|
|
|
|
|
|||
Balance Sheet
As on August 1, 2020 |
||||
Liabilities
|
Amount
Rs
|
Assets
|
Amount
Rs
|
|
Creditors
|
14,000
|
Investments
|
10,000
|
|
Mithya’s Executor’s Loan A/c
|
24,400
|
Premises
|
25,000
|
|
Partners’ Capital A/c
|
|
Machinery
|
25,000
|
|
Nithya
|
27,125
|
|
Stock
|
13,000
|
Sathya
|
28,275
|
55,400
|
Debtors
|
8,000
|
|
|
Patents
|
8,000
|
|
|
|
Bank (8,000 – 4,200)
|
3,800
|
|
|
|
Profit and Loss (Suspense)
|
1,000
|
|
|
|
|
|
|
|
93,800
|
|
93,800
|
|
|
|
|
|
Partners’ Capital Accounts
|
|
|||||||
Dr.
|
Cr.
|
|
||||||
Particulars
|
Nithya
|
Sathya
|
Mithya
|
Particulars
|
Nithya
|
Sathya
|
Mithya
|
|
Goodwill
|
2,500
|
1,500
|
1,000
|
Balance b/d
|
30,000
|
30,000
|
20,000
|
|
Mithya’s Capital A/c
|
4,375
|
2,625
|
|
Revaluation A/c
|
1,000
|
600
|
400
|
|
Mithya's Executor’s A/c
|
|
|
28,600
|
Reserve Fund
|
3,000
|
1,800
|
1,200
|
|
Balance c/d
|
27,125
|
28,275
|
|
Profit and Loss A/c (Suspense)
|
|
|
1,000
|
|
|
|
|
|
Nithya’s Capital A/c
|
|
|
4,375
|
|
|
|
|
|
Sathya’s Capital A/c
|
|
|
2,625
|
|
|
34,000
|
32,400
|
29,600
|
|
34,000
|
32,400
|
29,600
|
|
|
|
|
|
|
|
|
|
|
View NCERT Solutions for all chapters of Class 15