Question 73 Chapter 5 - Unimax Class 12 Part 1 - 2021

1. C’s loan will be converted into his capital. C brings in 60% of his share goodwill in cash.
   
2. Goodwill is to be valued at 2 years’ purchase of Super Profits based on average profits of last three complete years. The profits were :
   

   2018-2019	Rs. 45,000
   2019-2020	Rs. 90,000
   2020-2021	Rs. 13,5000

   The normal profits are Rs. 60000. No goodwill is to appear in the books of firm. 40% of C’s share of goodwill be adjusted through a newly opened current account in his name.
3. Land and Building was found undervalued by Rs. 10000.
4. Stock was found overvalued by Rs. 6000.
   
5. Provision for doubtful debts is to be made equal to 5% of the debtors.
6. Claim on account of workmen compensation is Rs. 1000.
7. Capital accounts of partners be re-adjusted on the basis of their profit sharing ratio and any excess or deficiency be adjusted in cash. (C’s Capital should be taken as base.)

You are required to prepare Revaluation Account, Partner’s Capital Accounts and Balance Sheet.

The solution of Question 73 Chapter 5 - Unimax Class 12 Part 1: -

Revaluation A/c

Particulars		Rs.	Particulars	Rs.
To Stock a/c		6000	By Land and Building a/c	10,000
To Provision for bad debts a/c		500
To Profit on revaluation
A (3 : 2)	2100
B	1400	3500
		10,000		10,000

Capital Accounts

Particulars	A	B	C	Particulars	A	B	C
To goodwill a/c	600	400	1,635	By Balance b/d	17600	25400	-
To advertisement suspense a/c	600	400	1,635	By Workers comp.	600	400	-
To Balance c/d	40000	30000	30000	By Profit on rev.	2100	1400	-
To Cash a/c	-	2600	-	By Cash a/c	8600	-	-
				By Invt. Fluctuation fund a/c	300	200	-
				By C’s loan	-	-	30000
				By Premium a/c (10800) (60%)	7200	3600	-
				By C’s Current a/c (7200) (40%)	4800	2400	-
	41200	33400	30000		41200	33400	30000

Balance Sheet

Liabilities		Rs.	Assets	Rs.
Workers comp. fund Investment		1000	Land and Building	16000
Capital Accounts			Debtors	30000
A	40000		Stock	10000
B	30000		Cash (19000 + 8600 + 10800 – 2600)	35800
C	30000	100000	Investments	4500
Provision for bad debts (1000 + 500)		1500	C’s current a/c	7200
Employees Provident fund		1000
		1,03,500		1,03,500

Working Note:

(A) Calculation of new PSR :
A’s new share = 3/5 – (1/3 X 3/5) = 3/5 – 1/5 = 2/5
Old Share - Sacrifice 
B’s new share = 2/5 – (1/4 X 2/5) = 2/5 – 1/10 = 3/10
C’s share = 1/5 + 1/10 = 3/10
New PSR = 4 : 3 : 3
(B) Sacrificing Ratio :
A’s sacrifice = 1/3 X 3/5 = 3/15
B’s sacrifice = 1/4 X 2/5 = 1/10
S.R. = 2 : 1
(C) Calculation of Goodwill :
Average Profits = (45000 + 90000 + 135000)/3
Super Profits = Average profits – Normal profits
= 90000 – 60000 = Rs. 30000
Total goodwill of firm = 30000 X 2 = Rs. 60000
C’s share = 3/10 X 60000 = Rs. 18000
(D) Calculation of Capitals :
Total capital of firm = 30000 X 10/3 = Rs. 100000
A’s req. capital = 4/10 X 100000 = Rs. 40000
B’s req. capital = 3/10 X 100000 = Rs. 30000

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)

• 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

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication