Q.No.46 | Chapter 6 – Retirement/Death of a Partner | T.S. Grewal 12 Class Book Keeping Part - A - Vol. 1

1. Goodwill of the firm was valued at 1,02,000.
2. There was a claim of 8,000 for workmen's compensation.
3. The provision for bad debts was to be reduced by 2,000.
4. H will be paid 14,000 in cash and the balance will be transferred in his Loan Account which will be paid in four equal yearly installments together with interest @ 10% p.a.
5. The new profit-sharing ratio between J and K will be 3: 2 and their capitals will be in their new profit-sharing ratio. The capital adjustments will be done by opening Current Accounts.

Prepare Revaluation Account, Partners' Capital Accounts, and Balance Sheet of the new firm.

The solution of Question 46 Chapter 6 of +2-A: -

Revaluation Account

Particular		Amount	Particular		Amount
To Claim for Workmen Comp		8,000	By Provision for Doubtful Debts A/c		2,000
			By Profit transferred to
			J's Capital A/c	3,000
			H's Capital A/c	1,800
			K's Capital A/c	1,200	6,000
		8,000			8,000

 

Partners’ Capital Account

Part.	J	H	K	Part.	J	H	K
To Revaluation A/c	3,000	1,800	1,200	By Balance B/d	1,00,000	80,000	40,000
To H’s Capital A/c	10,200	-	20,400	By I.F.F. A/c	10,000	6,000	4,000
To Cash A/c	-	14,000	-	By P&L A/c	40,000	24,000	16,000
To H's Loan A/c	-	1,24,800	-	By J's Capital A/c	-	10,200	-
To J's Current A/c	31,680	-	-	By K's Capital A/c	-	20,400	-
				By K’s Current A/c	-	-	31,680
To Balance c/d	1,05,120	-	70,080
	1,50,000	1,40,600	98,400		1,50,000	1,40,600	98,400

 

Balance Sheet

Particular		Amount	Particular		Amount
Creditors		42,000	Land and Building		1,24,000
Claim for Workmen Comp.		8,000	Motor Vans		40,000
H’s Loan A/c		1,24,800	Investments		38,000
J’s Current A/c		31,680	Machinery		24,000
			Stock		30,000
			Debtors	40,000
Capital A/cs			Less: Prov. For D/D	4,000	7,600
J's Capital	1,05,120		Cash A/c		18,000
K's Capital	70,080	1,75,200	K’s Current A/c		31,680
		3,81,680			3,81,680

Working Note:-

Calculation of Gaining Ratio

Old Ratio of J, H, and K = 5: 3: 2

H retires from the firm.

New Ratio of Jand K = 3:2 (given)

Gaining Ratio =  New Ratio - Old Ratio

J's Gain	=	3	-	5
		5		10
	=	6	-	5
		10
	=	1
		10

 

Y's Gain	=	2	-	2
		5		10
	=	4	-	2
		10
	=	2
		10

Gaining Ratio = 1: 2

Adjustment of Goodwill

Goodwill of the firm = Rs 1,02,000

H's Share of Goodwill	=	Firm's Goodwill	X	H's share
	=	1,02,000	X	3
				10
	=	Rs 30,600

 

J will pay	=	H’s Goodwill	X	Share of J
	=	30,600	X	1
				3
	=	Rs 10,200

 

K will pay	=	H’s Goodwill	X	Share of K
	=	30,600	X	2
				3
	=	Rs 20,400

Calculation of Addition/withdrawal of Capital by the Amit and Balan

Balance of Capital Amount after all adjustments

=

Opening Balance of Capital Account

+

All Credits

-

All Debits

 

Balance of J’s Capital Amount after all adjustments	=	1,00,000	+	10,000	+	40,000	-	(3,000	+	10,200)
	=	1,00,000	+	50,000	-	13,200
	=	1,36,800/-

 

Balance of K’s Capital Amount after all adjustments	=	40,000	+	4,000	+	16,000	-	(1,200	+	20,400)
	=	40,000	+	20,000	-	21,600
	=	38,400/-

 

Total Capital of the firm	=	J's Capital Balance	+	K's Capital Balance
	=	1,36,800	+	38,400
	=	1,75,200/-

 

Calculation of Total Capital

The total capital of the Firm= Rs 1,75,200

New Profit Sharing Ratio = 3:2 

J's New Capital	=	Firm’s New Capital	X	Share of J
	=	1,75,200	X	3
				5
	=	Rs 1,05,120

 

K's New Capital	=	Firm’s new Capital	X	Share of K
	=	1,75,200	X	2
				5
	=	Rs 70,080

 

Calculation of Addition/withdrawal of Capital by the Amit and Balan

Addition/withdrawal by J's in/from Capital A/c	=	New Capital Amount	-	Balance of Capital Amount after all adjustments
	=	1,05,120	-	1,36,800
	=	(-)31,680/-

The negative value so he will withdrawal Capital. 

Addition/withdrawal by K's in/from Capital A/c	=	New Capital Amount	-	Balance of Capital Amount after all adjustments
	=	70,080	-	38,400
	=	31,680/-

 

 

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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