Q.No.26 | Chapter 4 – Change in Profit-Sharing Ratio Among the Exiting Partners | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

1. Goodwill of the firm will be valued at 1,50,000.
2. Land will be revalued at 80,000 and building be depreciated by 6%.
3. Creditors of 6,000 were not likely to be claimed and hence should be written off.
   Prepare Revaluation Account, Partners' Capital Accounts and Balance Sheet of the reconstituted firm.

The solution of Question 26 Chapter 4 of +2-A

Revaluation A/c

Particulars		Amount	Particulars	Amount
To Building A/c		3,000	By Land A/c	30,000
To Profit on Revaluation*1			By Creditors A/c	6,000
X	16,500
Y	11,000
Z	5,500	33,000		20,000
		63,000		36,000

 

Partners’ Capital Accounts

Particulars	A	B	C	Particulars		A	B	C
To A's Capital A/c			25,000	By Balance B/d		1,00,000	50,000	25,000
				By Revaluation A/c		16,500	11,000	5,500
				By General Reserve A/c *1		15,000	10,000	5,000
				By C’s Capital A/c		25,000	-	-
To Balance c/d	1,56,500	71,000	10,500
	1,56,500	71,000	35,500			1,56,500	71,000	35,500

 

Balance Sheet

Particulars		Amount	Particulars		Amount
Capital A/c*1		3,000	Land	50,000
A	1,56,500		Add: Increase	30,000	80,000
B	71,000		Building	50,000
C	10,500	2,38,000	Less: Dep.	3,000	47,000
General Reserve	65,000		Plant		1,00,000
Less: Written-off	16,500	44,000	Bank		5,000
Bills Payable	11,000	20,000	Stock		40,000
			Debtors		30,000
		3,02,000			3,02,000

Working Note : 

WN *1 Adjustment of Profit on revaluation: -

 

Amount to be Credited to A's Capital	=	33,000	X	3
				6
	=	16,500

 

Amount to be Debited to B's Capital	=	33,000	X	2
				6
	=	11,000

 

Amount to be Debited to C's Capital	=	33,000	X	1
				6
	=	5,500

WN *2 Adjustment of General Reserve: -

Amount to be Credited to X's Capital	=	30,000	X	3
				6
	=	15,000

 

Amount to be Credited to B's Capital	=	30,000	X	2
				6
	=	10,000

 

Amount to be Credited to C's Capital	=	30,000	X	1
				6
	=	5,000

 

Old Ratio of X, & Y	=	3 : 2 : 1
New Ratio of X, & Y	=	1 : 1 : 1

Calculate the Sacrificing or Gaining Ratio of Partners
Sacrificing or Gaining Ratio = Old Ratio - New Ratio

A's Share Sacrificing/Gaining	=	3	-	1
		6		3

=	9 - 6
		18

=	3	(Sacrifice)
			18

 

B's Share Sacrificing/Gaining	=	2	-	1
		6		3

=	6 - 6
		18
=	Nil

C's Share Sacrificing/Gaining	=	1	-	1
		6		3

=	3 - 6
		18

=	- 3	(Gain)
			18

WN *3 Adjustment of Goodwill: -

Amount to be Credited to A's Capital	=	1,50,000	X	3
				18
	=	25,000

 

Amount to be Debited to C's Capital	=	1,50,000	X	3
				18
	=	25,000

 

In the Books of _______________

Date	Particulars		L.F.	Debit	Credit
2019
April 1	C's Capital A/c	Dr		25,000
	To A’s Capital A/c*3				25,000
	(Being adjustment made for Compensation of C’s, because he is gaining)
	C's Capital A/c	Dr		25,000
	To A’s Capital A/c*3				25,000
	(Being adjustment make for the revaluation of assets and liabilities)

 

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

• Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
• Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
• Chapter No. 3 – Goodwill: Nature and Valuation
• Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
• Chapter No. 5 – Admission of a Partner
• Chapter No. 6 – Retirement/Death of a Partner
• Chapter No. 7 – Dissolution of a Partnership Firm

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 8 – Company Accounts –  Accounting for Share Capital
• Chapter No. 9 – Company Accounts – Issue of Debentures
• Chapter No. 10 – Redemption of Debentures

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 1 – Financial Statements of a Company
• Chapter No. 2 – Financial Statement Analysis 
• Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
• Chapter No. 4 – Accounting Ratios
• Chapter No. 5 – Cash Flow Statement

 

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