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Question 11 Chapter 4 - Unimax Class 12 Part 1
11. The following is the Balance Sheet of P, Q, R and S as at 31st December, 2020.
| Liabilities | Amount | Assets | Amount | |
|---|---|---|---|---|
| Creditors | 80,000 | Bills Receivable | 20,000 | |
| Reserves | 1,50,000 | Building | 6,50,000 | |
| Profit & Loss A/c (Profits) | 90,000 | Plant & Machinery | 500000 | |
| Capitals : | Stock | 3,00,000 | ||
| P | 2,00,000 | Debtors | 2,40,000 | |
| Q | 3,00,000 | Cash at Bank | 10,000 | |
| R | 5,00,000 | |||
| S | 4,00,000 | 14,00,000 | ||
| 17,20,000 | 17,20,000 |
On 1st January, 2021 the assets and liabilities were revalued as under :
| Building | Rs. 8,00,000 |
| Plant and Machinery | Rs. 3,20,000 |
| Stock | Rs. 2,60,000 |
| Creditors | Rs. 84,000 |
A provision of 5% was required on debtors. Goodwill of the firm is valued at Rs. 1,70,000. Partners agreed that from 1.1.2021 they will share profits in ratio of 4 : 3 : 2 : 1 instead of their former ratio of 5 : 4 : 2 : 1. They don’t want to record revised values of assets and liabilities in the books. They also don’t want to distribute the reserve and P & L A/cs balance.
Pass a single Journal entry to give effect to above.
Journal
| Date | Particulars | L.F. | Debit | Credit | |
|---|---|---|---|---|---|
| Jan 1 2007 | R’s Capital A/c | Dr. | 10800 | ||
| S’s Capital A/c | Dr. | 5400 | |||
| To P’s Capital A/c | 5400 | ||||
| To Q’s Capital A/c | 10800 | ||||
| (Being adjustment entry passed for accumulated profits, goodwill and profit on revaluation on change in constitution) |
Working Note :
1. Calculation of Profit/Loss on revaluation of Assets and Liabilities.
| Increase in the value of Building (Rs. 800000 – Rs. 650000) | 150000 | |
| Less decrease in value of assets | Rs. | |
| Plant & Machinery | 180000 | |
| Stock | 40000 | |
| Provision on Debtors | 12000 | |
| Increase in Creditors | 4000 | 236000 |
| Loss on Revaluation | 86000 |
Calculation of Sacrifices/ Gains to Partners
| Old Share | New Share | Difference |
| P 5/12 | 4/10 | 1/60 (Sacrifice) |
| Q 4/12 | 3/10 | 2/60 (Sacrifice) |
| R 2/12 | 2/10 | 2/60 (Gain) |
| S 1/12 | 1/10 | 1/60 (Gain) |
3. Net Accumulated Profits
| Reserves | 150000 |
| Profit & Loss a/c (Credit) | 90000 |
| Goodwill | 170000 |
| 410000 | |
| Less Loss on Revaluation | 86000 |
| 324000 |
Credits to be given to Partners
P : (Rs. 324000 X 1/60) = Rs. 5400
Q : (Rs. 324000 X 2/60) = Rs. 10800
And Capital accounts of R & S should be debited with following Amounts
R : (Rs. 324000 X 2/60) = Rs. 10800
S : (Rs. 324000 X 1/60) = Rs. 5400
https://tutorstips.com/what-is-partnership/
T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
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