## Question 83 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 83 Chapter 6 of +2-A

83. X, Y and Z were partners in a firm sharing profits in the ratio of 2: 2: 1. On 31st March 2018, their Balance Sheet was as follows:

 Liabilities Amount Assets Amount Trade Creditors 1,20,000 Cash at Bank 1,80,000 Bills Payable 80,000 Stock 1,40,000 General Reserve 60,000 Sundry Debtors 80,000 Capital A/cs: Building 3,00,000 X 7,00,000 Advance to Y 7,00,000 Y 7,00,000 Profit and Loss A/c 3,20,000 Z 60,000 14,60,000 17,20,000 17,20,000

Y died on 30th June 2018. The Partnership Deed provided for the following on the death of a partner:
i Goodwill of the business was to be calculated on the basis of 2 times the average profit of the past 5 years. Profits for the years ended 31st March, 2018, 31st March, 2017, 31st March, 2016, 31st March, 2015 and 31st March, 2014 were 3,20,000 Loss; 1,00,000; 1,60,000; 2,20,000 and 4,40,000 respectively.
ii Y’s share of profit or loss from 1st April 2018 till his death was to be calculated on the basis of the profit or loss for the year ended 31st March 2018. You are required to calculate the following:
a Goodwill of the firm and Y’s share of goodwill at the time of his death.
b Y’s share in the profit or loss of the firm till the date of his death.
c Prepare Y’s Capital Account at the time of his death to be presented to his executors.

## The solution of Question 83 Chapter 6 of +2-A: –

 Y’s Capital Account Particular Amount Particular Amount Profit & Loss A/c 1,28,000 Balance b/d 7,00,000 Profit & Loss Suspense Share of Loss 32,000 General Reserve 24,000 Advance to Y 7,00,000 X’s Capital A/c 64,000 Z’s Capital A/c 32,000 8,20,000 8,20,000

Working Notes:

Calculation of Share in General Reserve

 Reserve = 60,000 X 2 5 = Rs 24,000

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. 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

## Question 82 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 82 Chapter 6 of +2-A

82. X, Y and Z are partners in firm sharing profits and losses in the ratio of 5 : 3 : 2. Their Balance Sheet as at 31st March 2018 was as follows:

 Liabilities Amount Assets Amount Sundry Creditors 18,000 Goodwill 12,000 Investments Fluctuation Reserve 7,000 Patents 52,000 Workmen Compensation Reserve 7,000 Machinery 62,400 Capital A/cs: Investment 6,000 X 1,35,000 Stock 20,000 Y 95,000 Sundry Debtors 24,000 Z 74,000 3,04,000 Less: Provision for Doubtful Debts 4,000 20,000 Loan to Z 1,000 Cash at Bank 600 Profit and Loss A/c 1,50,000 Z’s Drawings 12,000 3,36,000 3,36,000

Z died on 1st April 2018, X and Y decide to share future profits and losses in the ratio of 3: 5. It was agreed that:
i Goodwill of the firm be valued 212 years’ purchase of average of four completed years’ profits which were: 2014-15— 1,00,000; 2015-16— 80,000; 2016-17— 82,000.
ii Stock is undervalued by 14,000 and machinery is overvalued by 13,600.
iii All debtors are good. A debtor whose dues of 400 were written off as bad debts paid 50% in full settlement.
iv Out of the amount of insurance premium debited to Profit and Loss Account, 2,200 be carried forward as prepaid insurance premium.
v 1,000 included in Sundry Creditors is not likely to arise.
vi A claim of 1,000 on account of Workmen Compensation to be provided for. vii Investment is sold for 8,200 and a sum of 11,200 be paid to executors of Z immediately. The balance to be paid in four equal half-yearly instalments together with interest @ 8% p.a. at half-year rest.
Show Revaluation Account, Capital Accounts of Partners and the Balance Sheet of the new firm

## The solution of Question 82 Chapter 6 of +2-A: –

 Revaluation Account Particular Amount Particular Amount Machinery 13,600 Creditors 1,000 Stock 14,000 Provision for Doubtful Debts 4,000 Profit transferred to: Investment 2,200 X’s Capital A/c 5,000 Bad Debts Recovered 200 Y’s Capital A/c 3,000 Prepaid Insurance 2,200 Z’s Capital A/c 2,000 10,000 23,600 23,600

 Partners’ Capital Account Part. X Y Z Part. X Y Z To Goodwill A/c 6,000 3,600 2,400 By Balance B/d 1,35,000 95,000 74,000 To Drawing A/c – – 12,000 By Revaluation A/c 5,000 3,000 2,000 To Profit & Loss A/c 75,000 45,000 30,000 By IFR 3,500 2,100 1,400 To X’s Capital A/c – 8,750 – By Y’s Capital A/c 8,750 – 14,000 To Z ’s Capital A/c – 14,000 – By WFC 3,000 1,800 1,200 To Loan to Z 1,000 By P & L Suspense A/c – – 35,000 To Executors A/c 47,200 To Balance c/d 74,250 30,550 – 1,55,250 1,01,900 92,600 1,55,250 1,01,900 92,600

 Z’s Executors Account Particular Amount Particular Amount Bank A/c 11,200 Z’s Capital A/c 47,200 Z’s Executors Loan Account 36,000 47,200 47,200

 Balance Sheet Liabilities Amount Assets Amount Creditors 17,000 Patents 52,000 Z’s Executors Loan A/c 36,000 Machinery 48,800 Workmen Compensation Claim 1,000 Stock 34,000 Capital: Debtors 24,000 X 74,250 Prepaid Insurance 2,200 Y 30,550 30,550 Bank Overdraft 600 + 8,200- 11,200 + 200 2,200 1,61,000 1,61,000

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. 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

## Question 81 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 81 Chapter 6 of +2-A

81. X, Y and Z were partners in a firm sharing profits and losses in the ratio of 3 : 2: 1. Z died on 30th June 2018. The Balance Sheet of the firm as at that 31st March 2018 is as follows:

 Liabilities Amount Assets Amount X’s Capital A/c 2,40,000 Machinery 2,40,000 Y’s Capital A/c 1,60,000 Furniture 1,50,000 Z’s Capital A/c 80,000 4,80,000 Investments 40,000 X’s Current A/c 16,000 Stock 64,000 Y’s Current A/c 5,000 Sundry Debtors 50,000 Reserve 60,000 Bills Receivable 22,000 Bills Payable 34,000 Cash at Bank 37,000 Sundry Creditors 40,000 Cash in Hand 22,000 Z’s Current A/c 10,000 6,35,000 6,35,000

The following decisions were taken by the remaining partners:
a A Provision for Doubtful Debts is to be raised at 5% on Debtors.
b While Machinery to be decreased by 10%, Furniture and Stock are to be appreciated by 5% and 10% respectively.
c Advertising Expenses 4,200 are to be carried forward to the next accounting year and, therefore, it is to be adjusted through the Revaluation Account.
d Goodwill of the firm is valued at 60,000.
e X and Y are to share profits and losses equally in future.
f Profit for the year ended 31st March 2018 was 8,16,000 and Z’s share of profit till the date of death is to be determined on the basis of profit for the year ended 31st March 2018.
g The Fixed Capital Method is to be converted into the Fluctuating Capital Method by transferring the Current Account balances to the respective Partners’ Capital Accounts. Prepare the Revaluation Account, Partners’ Capital Accounts and prepare C’s Executors’ Account to show that C’s Executors were paid in two half-yearly instalments plus interest of 10% p.a. on the unpaid balance.
The first instalment was paid on 31st December 2018.

## The solution of Question 81 Chapter 6 of +2-A: –

 Revaluation Account Particular Amount Particular Amount Machinery 1,00,000 Furniture 7,500 Provision for Doubtful Debts 2,500 Stock 6,400 Prepaid Advertisement Expenses 4,200 Loss transferred to X’s Capital A/c 4,200 Y’s Capital A/c 2,800 Z’s Capital A/c 1,400 8,400 26,500 26,500

 Partners’ Capital Account Part. X Y Z Part. X Y Z To Current A/c – – 10,000 By Balance B/d 2,40,000 1,60,000 80,000 To Revaluation A/c 4,200 2,800 1,400 By Current A/c 16,000 5,000 – To Z’s Capital A/c – 10,000 – By Reserve 30,000 20,000 10,000 To Z’s Capital A/c – 34,000 – By Y’s Capital A/c – – 34,000 To Executors A/c – – 1,22,600 By Y’s Capital A/c – – 10,000 – – To Balance c/d 2,81,800 1,38,200 – 2,86,000 1,85,00 1,34,000 2,86,000 1,85,00 1,34,000

 T’s Executor’s Account Date Particular Amount Date Particular Amount 2018 Dec. 31 To Bank A/c 61,300 + 6,130 67,430 Jun. 30 By Z’s Capital A/c 1,22,600 2019 Mar. 31 To Balance c/d 62,832.5 Dec. 31 By Interest (1,22,600×10100×612 6,130 Mar. 31 By Interest (61,300×10100×312) 1,532.5 1,30,262.5 1,30,262.5 2019 Jun. 30 To Bank 61,300 + 3,065 28,750 April 01 By Balance b/d 62,832.5 2020 Jan. 31 To Cash A/c 25,000 + 2,500 27,500 Jun. 30 By Interest (61,300×10100×312 1,532.5 64,365 64,365

Working Notes:

Calculation of Profit & Loss Suspense

 Profit & loss Suspense = 8,16,000 X 1 X 6 3 12 = Rs 34,000

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. 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

## Question 80 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 80 Chapter 6 of +2-A

80. X, Y and Z were partners in a firm sharing profits and losses in the 5 : 4 : 3. Their Balance Sheet on 31st March, 2018 was as follows:

 Liabilities Amount Assets Amount Creditors 2,00,000 Building 2,00,000 Employees’ Provident Fund 1,50,000 Machinery 3,00,000 General Reserve 36,000 Furniture 1,10,000 Investment Fluctuation Reserve 14,000 Investment Market value 86,000 1,00,000 Capital A/cs: Debtors 80,000 X 3,00,000 Cash at Bank 1,90,000 Y 2,50,000 Advertisement Suspense 1,20,000 Z 1,50,000 7,00,000 11,00,000 11,00,000

X died on 1st October 2018 and Y and Z decide to share future profits in the ratio of 7: 5. It was agreed between his executors and the remaining partners that:
i Goodwill of the firm be valued at 212 years’ purchase of average of four completed years’ profit which were:

 Years 2014-15 2015-16 2016-17 2017-18 Profit 1,70,000 1,80,000 1,90,000 1,80,000

ii X’s share of profit from the closure of last accounting year till date of death be calculated on the basis of last years’ profit.
iii Building undervalued by 2,00,000; Machinery overvalued by 1,50,000 and Furniture overvalued by 46,000.
iv A provision of 5% be created on Debtors for Doubtful Debts.
v Interest on Capital to be provided at 10% p.a.
vi Half of the net amount payable to X’s executor was paid immediately and the balance was transferred to his loan account which was to be paid later.
Prepare Revaluation Account, X’s Capital Account and X’s Executor’s Account as on 1st October, 2018.

## The solution of Question 80 Chapter 6 of +2-A: –

 Revaluation Account Particular Amount Particular Amount To Machinery 1,50,000 By Building 2,00,000 To Furniture 46,000 To Provision for Doubtful Debts 4,000 27,000 2,00,000 2,00,000

 X’s Capital Account Particular Amount Particular Amount To Advertisement Suspense A/c 50,000 By Balance b/d 3,00,000 To X’s Executors A/c 5,05,000 By General Reserve 15,000 By Y’s Capital A/c 1,12,500 By Z’s Capital A/c 75,000 By Profit & Loss Suspense 37,500 By Interest on Capital 15,000 5,55,000 5,55,000

 X’s Executors Account Particular Amount Particular Amount To Bank A/c 2,52,500 By X’s Capital A/c 5,05,000 To X’s Executors Loan Account 2,52,500 5,05,000 5,05,000

Working Notes:

Calculation of Share in General Reserve

 Reserve = 36,000 X 5 12 = Rs 15,000

Calculation of Interest on Capital

 Interest on capital = 3,00,000 X 10 X 6 100 12 = Rs 15,000

Calculation of Profit & Loss Suspense

 Profit & Loss Suspense = 1,80,000 X 5 X 6 12 12 = Rs 37,500

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. 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

## Question 79 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 79 Chapter 6 of +2-A

79. The Balance Sheet of X, Y and Z as at 31st March, 2018 was

 Liabilities Amount Assets Amount Bills Payable 2,000 Cash at Bank 5,800 Employees’ Provident Fund 5,000 Bills Receivable 800 Workmen Compensation Reserve 6,000 Stock 9,000 General Reserve 6,000 Sundry Debtors 16,000 Loans 7,100 Furniture 2,000 Capital A/cs: Plant and Machinery 6,500 X 22,750 Building 30,000 Y 15,250 Advertising Suspense 6,000 Z 12,000 50,000 76,100 76,100

The profit-sharing ratio was 3 : 2 : 1. Z died on 31st July, 2018. The Partnership Deed provides that:
a Goodwill is to be calculated on the basis of three years’ purchase of the five years’ average profit. The profits were: 2017-18: 24,000; 2016-17: 16,000; 2015-16: 20,000 and 2014- 15: 10,000 and 2013-14: 5,000.
b The deceased partner to be given a share of profits till the date of death on the basis of profits for the previous year.
c The Assets have been revalued as: Stock 10,000; Debtors 15,000; Furniture 1,500; Plant and Machinery 5,000; Building 35,000. A Bill Receivable for 600 was found worthless. d A Sum of 12,233 was paid immediately to Z’s Executors and the balance to be paid in two equal annual instalments together with interest @ 10% p.a. on the amount outstanding. Give Journal entries and show the Z’s Executors’ Account till it is finally settled

## The solution of Question 79 Chapter 6 of +2-A: –

 Date Particulars L.F. Debit Credit Workmen’s Compensation Reserve Dr. 6,000 To X’s Capital A/c 3,000 To Y’s Capital A/c 2,000 To Z’s Capital A/c 1,000 (Being Workmen’s Compensation Reserve distributed among partners in their old ratio) General Reserve A/c Dr. 6,000 To Z’s Capital A/c 3,000 To Y’s Capital A/c 2,000 To Z’s Capital A/c 1,000 (Being General Reserve distributed among partners in their old ratio) X’ Capital A/c Dr. 3,000 Y’s Capital A/c Dr. 2,000 Z’s Capital A/c Dr. 1,000 To Advertisement Suspense A/c 6,000 (Being Goodwill written off among partners in their old ratio) X’s Capital A/c Dr. 4,500 Y’s Capital A/c Dr. 3,000 To Z’s Capital A/c 7,500 (Being T’s share of goodwill adjusted) Revaluation A/c Dr. 3,600 To Sundry debtors A/c 1,000 To Furniture A/c 500 To Plant and Machinery A/c 1,500 To Bills Receivable A/c 600 (Being Decrease in value of Assets transferred to Revaluation Account) Stock A/c Dr. 1,000 Building A/c Dr. 5,000 To Revaluation A/c 6,000 (Being Increase in value of Assets transferred to Revaluation Account) Revaluation A/c Dr. 2,400 To X’ Capital A/c 1,200 To Y’s Capital A/c 800 To Z’s Capital A/c 400 (Being Revaluation profit distributed among partners in their old ratio ) Profit and Loss Suspense A/c Dr. 1,333 To Z’s Capital A/c 1,333 (Being Z’s share of profit transferred his capital account) Z’s Capital A/c Dr. 22,233 To Z’s Executor’s A/c 22,233 (Being Amount due to Z transferred to his Executor’s Account) (Being Amount due to Z transferred to his Executor’s Account) Z’s Executor’s A/c Dr. 12,333 To Bank A/c 12,333 (Being Amount paid to Z’s Executor)

 Z’s Executor’s Account Date Particular Amount Date Particular Amount 2018 July 31 To Bank A/c 12,233 July 31 By Z’s Capital A/c 22,233 2019 Mar. 31 To Cash A/c 25,000 + 5,000 10,667 Mar. 31 By Interest 10,000 × 10% for 8 months 5,000 22,900 22,900 2019 July. 01 To Bank A/c 5,000 + 667 + 333 6,000 Aug. 01 By Balance b/d 10,667 2020 Mar. 31 To Balance c/d 5,333 Aug. 01 By Interest 75,000 × 10% for 4 months 333 Mar. 31 By Interest 5,000 × 10% for 8 month 333 11,333 11,333 2020 Aug. 01 To Bank A/c 5,000 + 333 + 167 5,500 Aug. 01 By Balance b/d 5,333 Aug. 01 By Interest 25,000 × 10% for 4 months 167 5,500 5,500

Working Notes:

Calculation of Goodwill

Goodwill = Average Profit × Number of Year’s Purchase

 Average Profit = 24,000 + 16,000 + 20,000 + 10,000 + 5,000 5 = Rs 15,000

∴ Goodwill = Average Profit × Number of Years’ Purchase
=15,000 × 3 = Rs 45,000

Old Ratio = 3 : 2 : 1
Z died.
∴ New Ratio X and Y = 3 : 1
Gaining Ratio = 3 : 2

 Z’s Share in Goodwill = 45,000 X 1 6 = Rs 7,500

This share of goodwill is to be distributed between X and Y in their gaining ratio i.e. 3 : 1.

 X’s Share in Goodwill = 7,500 X 3 5 = Rs 4,500

 Y’s Share in Goodwill = 7,500 X 2 5 = Rs 3,000

Calculation Z’s Share of Prof

Profit for 2017-18 Immediate Previous Year = Rs 24,000

 ∴ Z’s Profit Share = 24,000 X 1 X 4 6 12 = Rs 1,333
 Revaluation Account Particular Amount Particular Amount To Sundry Debtors 1,000 By Balance b/d 80,000 To Furniture 500 By Interest on Capital A/c 1,600 To Plant and Machinery 1,500 To Bills Receivable 600 Profit transferred to: X’s Capital A/c 1,200 Y’s Capital A/c 800 Z’s Capital A/c 400 6,000 6,000

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. 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

## Question 78 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 78 Chapter 6 of +2-A

78. B, C and D were partners in firm sharing profits in the ratio of 5 :3: 2. On 31st December 2008, their Balance Sheet was as follows:

 Liabilities Amount Assets Amount Creditors 43,000 Cash 10,200 Bills Payable 17,000 Stock 24,500 General Reserve 70,000 Debtors 27,300 Capital A/csp: Land and Building 1,40,000 B 40,000 Profit and Loss A/c 70,000 C 50,000 D 52,000 1,42,000 2,72,000 2,72,000

B died on 31st March 2009. The Partnership Deed provided for the following on the death of a partner:
a Goodwill of the firm was to be valued at 3 years’ purchase of the average profit of the last 5 years. The profits for the years ended 31st December 2007, 31st December 2006, 31st December 2005, and 31st December 2004 were 70,000; 60,000; 50,000 and 40,000 respectively.
b B’s share of profit or loss till the date of his death was to be calculated on the basis of the profit or loss for the year ended 31st December 2008. You are required to calculate the following:
i Goodwill of the firm and B’s share of goodwill at the time of his death.
ii B’s share in the profit or loss of the firm till the date of his death.
iii Prepare B’s Capital Account at the time of his death to be presented to his Executors.

## The solution of Question 78 Chapter 6 of +2-A: –

(i) Calculation of Goodwill

Goodwill = Average Profit × Number of Year’s Purchase

 Average Profit = (-70,000 + 70,000 + 60,000 + 50,000 +40,000) 5 = Rs 30,000

∴ Goodwill = Average Profit × Number of Years’ Purchase
= 30,000 × 3 = Rs 90,000

Old Ratio B, C and D = 5 : 3 : 2
B Died
New Ratio C and D = 3 : 2

 B’s Share in Goodwill = 90,000 X 5 10 = Rs 45,000

This share of goodwill is to be distributed between C and D in their gaining ratio i.e. 3 : 2

 C’s Share in Goodwill = 45,000 X 3 5 = Rs 27,000
 D’s Share in Goodwill = 45,000 X 2 5 = Rs 18,000

(ii) Calculation of B’s Share of Profit or Loss

Loss for the Year 2008 = Rs 70,000

 Sunil’s share of Profit = 70,000 X 5 X 3 10 12 = Rs 8,750

 B’s Capital Account Particular Amount Particular Amount To Profit and Loss A/c 35,000 By Balance b/d 40,000 To Profit and Loss Suspense A/c 8,750 By General Reserve 35,000 By C’s Capital A/c Goodwill 27,000 To B’s Executor’s A/c 76,250 By D’s Capital A/c Goodwill 18,000 1,20,000 1,20,000

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. 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

## Question 77 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 77 Chapter 6 of +2-A

77. Akhil, Nikhil and Sunil were partners sharing profits and losses equally. Following was their Balance Sheet as at 31st March, 2018:

 Liabilities Amount Assets Amount Trade Creditor 40,000 Building 2,00,000 General Reserve 45,000 Plant and Machinery 80,000 Capital A/cs: Stock 35,000 Akhil 1,95,000 Debtors 80,000 Nikhil 1,20,000 Cash at Bank 85,000 Sunil 80,000 3,95,000 4,80,000 4,80,000

Sunil died on 1st August 2018. The Partnership Deed provided that the executor of a deceased partner was entitled to:
a Balance of Partners’ Capital Account and his share of the accumulated reserve.
b Share of profits from the closure of the last accounting year till the date of death on the basis of the profit of the preceding completed year before death.
c Share of goodwill calculated on the basis of three times the average profit of the last four years.
d Interest on deceased partner’s capital @ 6% p.a.
e 50,000 to be paid to deceased’s executor immediately and the balance to remain in his Loan Account. Profits and Losses for the preceding years were: 2014-15 − 80,000 Profit; 2015-16 − 1,00,000 Loss; 2016-17 − 1,20,000 Profit; 2017-18 − 1,80,000 Profit.
Pass necessary Journal entries and prepare Sunil’s Capital Account and Sunil’s Executor Account.

## The solution of Question 77 Chapter 6 of +2-A: –

 Date Particulars L.F. Debit Credit General Reserve A/c Dr. 45,000 To Akhil’s Capital A/c 15,000 To Nikhil’s Capital A/c 15,000 To Sunil’s Capital A/c 15,000 (Being General Reserve distributed among partners in their old ratio) Akhil’s Capital A/c Dr. 35,000 Nikhil’s Capital A/c Dr. 35,000 To Sunil’s Capital A/c 70,000 (Being Sunil’s share of goodwill adjusted) Interest on Capital A/c Dr. 1,600 To Sunil’s Capital A/c 1,600 (Being Interest allowed on Sunil’s Capital) Profit and Loss Suspense A/c Dr. 20,000 To Sunil’s Capital A/c 20,000 (Being Sunil’s profit share transferred to his capital account) Sunil’s Capital A/c Dr. 1,86,600 To Sunil’s Executor’s A/c 1,86,600 (Being Amount due to Sunil after all adjustments transferred to his Executor’s Account) Sunil’s Executor’s A/c Dr. 50,000 To Bank A/c 50,000 (Being Amount paid to Sunil’s Executor )

 Sunil’s Capital Account Particular Amount Particular Amount To Executor’s A/c 1,86,600 By Balance b/d 80,000 By Interest on Capital A/c 1,600 By General Reserve 15,000 By Profit and Loss Suspense A/c 20,000 By Akhil’s Capital A/c Goodwill 35,000 By Nikhil’s Capital A/c Goodwill 35,000 1,86,600 1,86,600

 Sunil’s Executor Account Particular Amount Particular Amount To Bank A/c 1,86,600 By Sunil’s Capital A/c 1,86,600 1,26,000 1,26,000

Working Notes:

Calculation of Sunil’s Share of Profit

Profit for 2017-18 = Rs 1,80,000

 Sunil’s share of Profit = 1,80,000 X 1 X 4 3 12 = Rs 20,000

Calculation of Goodwill

Goodwill = Average Profit × Number of Year’s Purchase

 Average Profit = (80,000 -1,00,000 + 1,20,000 + 1,80,000 ) 4 = Rs 70,000

∴ Goodwill = Average Profit × Number of Years’ Purchase
= 70,000 × 3 = Rs 2,10,000

Old Ratio = 1 : 1 : 1
Sunil died
∴ New Ratio = 1 : 1
Gaining Ratio = 1 : 1

 Sunil’s Share in Goodwill = 2,10,000 X 2 10 = Rs 70,000

This share of goodwill is to be distributed between Akhil and Nikhil in their gaining ratio i.e. 1 : 1

 Akhil’s Share in Goodwill = 70,000 X 1 2 = Rs 35,000

 Nikhil’s Share in Goodwill = 70,000 X 1 2 = Rs 35,000

Calculation of Interest on Sunil’s Capital

Sunil’s Capital Balance = Rs 80,000

 Interest on Capital = 80,000 X 6 X 4 100 12 = Rs 1,600

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. 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

## Question 76 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 76 Chapter 6 of +2-A

76. R, S and T were partners sharing profits and losses in the ratio of 5 : 3 : 2 respectively. On 31st March, 2018, their Balance Sheet stood as:

 Liabilities Amount Assets Amount Sundry Creditors 40,000 Goodwill 25,000 Bills Payable 15,000 Leasehold 1,00,000 Workmen Compensation Reserve 30,000 Patents 30,000 Capital A/cs: Machinery 1,50,000 R 1,50,000 Stock 50,000 S 1,25,000 Debtors 40,000 T 75,000 3,50,000 Cash at Bank 40,000 4,35,000 4,35,000

T died on 1st August 2018. It was agreed that:
a Goodwill be valued at 212 years’ purchase of average of last 4 years’ profits which were: 2014-15: 65,000; 2015-16: 60,000; 2016-17: 80,000 and 2017-18: 75,000.
b Machinery be valued at 1,40,000; Patents be valued at 40,000; Leasehold be valued at 1,25,000 on 1st August, 2018.
c For the purpose of calculating T’s share in the profits of 2018-19, the profits in 2018-19 should be taken to have accrued on the same scale as in 2017-18.
d A sum of 21,000 to be paid immediately to the Executors of T and the balance to be paid in four equal half-yearly instalments together with interest @ 10% p.a.
Pass necessary Journal entries to record the above transactions and T’s Executors’ Account.

## The solution of Question 76 Chapter 6 of +2-A: –

 Date Particulars L.F. Debit Credit Revaluation A/c Dr. 75,000 To Machinery A/c 75,000 (Being Decrease in value of Machinery transferred to Revaluation Account) Patents A/c Dr. 10,000 Leasehold A/c Dr. 25,000 To Revaluation A/c 35,000 (Being Increase in value Patents and Leasehold transferred to Revaluation Account) Revaluation A/c Dr. 25,000 To R’s Capital A/c 12,500 To S’s Capital A/c 7,500 To T’s Capital A/c 5,000 (Being Revaluation profit distributed among partners in their old ratio) R’ Capital A/c Dr. 12,500 S’s Capital A/c Dr, 7,500 T’s Capital A/c Dr. 5,000 To Goodwill A/c 25,000 (Being Goodwill written off among partners in their old ratio) R’s Capital A/c Dr. 21,875 S’s Capital A/c Dr. 13,125 To T’s Capital A/c 35,000 (Being T’s share of goodwill adjusted) Profit and Loss Suspense A/c Dr. 5,000 To T’s Capital A/c 5,000 (Being T’s share of profit transferred to his capital account) Workmen’s Compensation Reserve A/c Dr. 30,000 To R’s Capital A/c 15,000 To S’s Capital A/c 9,000 To T’s Capital A/c 6,000 (Being Workmen’s Compensation Reserve distributed among partners in their old ratio) T’s Capital A/c Dr. 1,21,000 To T’s Executors A/c 1,21,000 (Being Amount due to T after all adjustments transferred to his Executor’s Account) T’s Executor’s A/c Dr. 21,000 To Bank A/c 21,000 (Being Amount due to T after all adjustments transferred to his Executor’s Account)

 T’s Executor’s Account Date Particular Amount Date Particular Amount 2018 Aug. 01 To Cash A/c 21,000 Aug. 01 By T’s Capital A/c 1,21,000 2019 Jan. 31 To Cash A/c 25,000 + 5,000 30,000 Aug. 01 By Interest 1,00,000 ×10% for 6 months 5,000 Mar. 31 To Balance c/d 76,250 Mar. 31 By Interest 75,000 ×10% for 2 months 1,250 1,27,250 1,27,250 2019 Aug. 01 To Cash A/c 25,000 + 1,250 + 2,500 28,750 Aug. 01 By Balance b/d 76,250 2020 Jan. 31 To Cash A/c 25,000 + 2,500 27,500 Aug. 01 By Interest 75,000 × 10% for 4 months 2,500 Mar. 31 To Balance c/d 25,417 Mar. 31 By Interest 50,000 × 10% for 6 months 2,500 Mar. 31 By Interest 25,000 × 10% for 2 months 417 81,667 81,667 2020 Aug. 01 To Cash A/c 25,000 + 417 + 833 26,250 Aug. 01 By Balance b/d 25,417 Aug. 01 By Interest 25,000 × 10% for 4 months 833 26,250 26,250

Working Notes:

Calculation of Goodwill

Goodwill = Average Profit × Number of Year’s Purchase

 Average Profit = 65,000 +60,000 +80,000 + 75,000 4 = Rs 70,000

∴ Goodwill = Average Profit × Number of Years’ Purchase
= 70,000 × 2.5 = Rs 1,75,000

Old Ratio R, S and T = 5 : 3: 2
T died.
∴ New Ratio R and S = 5 : 3
Gaining Ratio = 5 : 3

 T’s Share in Goodwill = 1,75,000 X 2 10 = Rs 35,000

This share of goodwill is to be distributed between R and S in their gaining ratio i.e. 5 : 3.

 R’s Share in Goodwill = 35,000 X 5 8 = Rs 21,875

 S’s Share in Goodwill = 35,000 X 3 8 = Rs 13,125

Calculation of T’s Share of Profit

Profit for 2017-18 = Rs 75,000

 T’s Share of Profit for 2018-19 = 75,000 X 2 X 4 10 12 = Rs 5,000

 Revaluation Account Particular Amount Particular Amount To Machinery 10,000 By Patents 10,000 Profit transferred to: By Leasehold 25,000 R’s Capital A/c 12,500 S’s Capital A/c 7,500 T’s Capital A/c 5,000 81,350 81,350

 T’s Capital Account Particular Amount Particular Amount To Executor’s A/c 1,21,000 By Balance b/d 75,000 To Goodwill A/c 5,000 By Workmen’s Compensation Reserve 6,000 By Profit and Loss Suspense A/c 5,000 By R’s Capital A/c 21,875 By S’s Capital A/c 13,125 By Revaluation A/c Profit 5,000 1,26,000 1,26,000

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. 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

## Question 75 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 75 Chapter 6 of +2-A

75. Sunny, Honey and Rupesh were partners in a firm. On 31st March 2014, their Balance Sheet was as follows:

 Liabilities Amount Assets Amount Creditors 10,000 Plant and Machinery 40,000 General Reserve 30,000 Furniture 15,000 Capital A/cs: Investments 20,000 Sunny 30,000 Debtors 20,000 Honey 30,000 Stock 20,000 Rupesh 20,000 80,000 Cash 25,000 1,20,000 1,20,000

Honey died on 31st December, 2014. The Partnership Deed provided that the representatives of the deceased partner shall be entitled to:
a Balance in the Capital Account of the deceased partner.
b Interest on Capital @ 6% per annum up to the date of his death.
c His share in the undistributed profits or losses as per the Balance Sheet.
d His share in the profits of the firm till the date of his death, calculated on the basis of the rate of net profit on sales of the previous year.
The rate of net profit on sales of the previous year was 20%. Sales of the firm during the year till 31st December 2014 was 6,00,000. Prepare Honey’s Capital Account to be presented to his executors.

## The solution of Question 75 Chapter 6 of +2-A: –

 Honey’s Capital A/c Particular Amount Particular Amount To Executor’s A/c 81,350 By Balance b/d 30,000 By Interest on Capital A/c 1,350 By General Reserve 10,000 By Profit and Loss Suspense A/c 40,000 81,350 81,350

Working Notes:

Calculation of Interest on Honey’s Capital

 Interest on capital = 30,000 X 6 X 9 100 12 = Rs 1,350

Calculation of Honey’s share in profits

 Profit = Sale X Rate of Profit 100
 = 6,00,000 X 20 100 = Rs 1,20,000

 Honey’s share in profits = 1,20,000 X 1 3 = Rs 40,000

Calculation of Honey’s Share in General Reserve

 Honey’s share in profits = 30,000 X 1 3 = Rs 10,000

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. 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

## Question 74 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 74 Chapter 6 of +2-A

74. Babita, Chetan and David are partners in a firm sharing profits in the ratio of 2 : 1 : 1 respectively. Firm closes its accounts on 31st March every year. Chetan died on 30th September, 2012. There was a balance of 1,25,000 in Chetan’s Capital Account in the beginning of the year. In the event of death of any partner, the Partnership Deed provides for the following:
a Interest on capital will be calculated at the rate of 6% p.a.
b The executor of deceased partner shall be paid 24,000 for his share of goodwill.
c His share of Reserve Fund of 12,000, shall be paid to his executor.
d His share of profit till the date of death will be calculated on the basis of sales. It is also specified that the sales during the year 2011-12 were 4,00,000. The sales from 1st April, 2012 to 30th September, 2012 were 1,20,000. The profit of the firm for the year ending 31st March, 2012 was 2,00,000. Prepare Chetan’s Capital Account to be presented to his executor.

## The solution of Question 74 Chapter 6 of +2-A: –

 A’s Capital Account Particular Amount Particular Amount To Chetan’s Executor’s A/c 1,79,750 By Capital 1,25,000 By Interest on Capital for 6 months 3,750 By Babita’s Share Capital A/c* 16,000 By David’s Share Capital A/c* 8,000 By Share of Reserve 12,000 By P & L Suspense A/c** 15,000 1,79,750 1,79,750

Working Notes:

Calculation of Interest on Capital

Chetan’s Share of goodwill = Rs 24,000

 Babita’s Share of contribution = 24,000 X 2 3 = Rs 16,000

 David’s Share of contribution = 24,000 X 1 3 = Rs 8,000

**Sales in the year 2011-12 = 4,00,000
Profit for year 2011-12 = 2,00,000 = 50% of Sales
Therefore, Profit for the Period Apr 01 to 30 th Sep = 50% of Sales of the same period
Share of Profit to be divided = 50% of Rs 1,20,000 = Rs 60,000
Chetan’s Share of Profit = 1/4 th of Rs 60,000 = Rs 15,000

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. 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