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Question 100 Chapter 5 of +2-A
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100. Following is the Balance Sheet of X and Y as at 31st March, 2019. Z is admitted as a partner on that date when the position of X and Y was:
| Liabilities | Assets | |||
| X’s Capital | 10,000 | Cash in Hand | 9,000 | |
| Y’s Capital | 8,000 | 18,000 | Debtors | 11,000 |
| Creditors | 12,000 | Stock | 12,000 | |
| General Reserve | 16,000 | Building | 8,000 | |
| Workmen Compensation Reserve | 4,000 | Machinery | 10,000 | |
| 50,000 | 50,000 |
X and Y share profits in the proportion of 3 : 2. The following terms of admission are agreed upon:
(a) Revaluation of assets: Building 18,000; Stock 16,000.
(b) The liability on Workmen Compensation Reserve is determined at 2,000. (c) Z brought in as his share of goodwill 10,000 in cash.
(d) Z was to bring in further cash as would make his capital equal to 20% of the combined capital of X and Y after above revaluation and adjustments are carried out.
(e) The further profit-sharing proportions were: X−2/5th, Y−2/5th and Z−1/5th.
Prepare new Balance Sheet of the firm and Capital Accounts of the Partners.
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The solution of Question 100 Chapter 5 of +2-A: –
| Revaluation Account | |||||
| Particular | Amount | Particular | Amount | ||
| Building | (18,000 – 8,000) | 10,000 | |||
| Stock | (18,000 – 8,000) | 4,000 | |||
| Profit on Revaluation | |||||
| X Capita | 8,400 | ||||
| Y Capital | 5,600 | 14,000 | |||
| 14,000 | 14,000 | ||||
| Partners’ Capital Account | |||||||
| Parti culars | X | Y | Z | Partic | X | Y | Z |
| By Balance B/d | 10,000 | 8,000 | – | ||||
| By General Reserve | 9,600 | 6,400 | – | ||||
| By Workmen’s Compensation Fund | 16,000 | – | – | ||||
| By Premium for Goodwill | 10,000 | – | – | ||||
| By Revaluation | 8,400 | 5,600 | – | ||||
| To Balance c/d | 39,200 | 20,800 | – | ||||
| 39,200 | 20,800 | – | 39,200 | 20,800 | – | ||
| By Balance B/d | 39,200 | 20,800 | – | ||||
| By Bank A/c | – | – | 12,000 | ||||
| To Balance c/d | 39,200 | 20,800 | 12,000 | ||||
| 39,200 | 20,800 | 12,000 | 39,200 | 20,800 | 12,000 | ||
| Balance Sheet | |||||
| Liabilities | Amount | Assets | Amount | ||
| Creditors | 12,000 | Cash in Hand | 31,000 | ||
| Outstanding Workmen’s Compensation Claim | 2,000 | Debtors | 11,000 | ||
| Capital: | Stock | 16,000 | |||
| X | 39,200 | Building | 18,000 | ||
| Y | 20,800 | Machinery | 10,000 | ||
| Z | 12,000 | 72,000 | |||
| 2,18,640 | 2,18,640 | ||||
Working Note:-
Old Ratio X and Y = 3 : 1
Old Ratio X ,Y and Z = 2 : 2 : 1
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Sacrificing Ratio = Old Ratio – New Ratio
| x’s New Ratio | = | 3 | – | 2 |
| 5 | 5 |
| = | 3 – 2 | |
| 5 |
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| = | 1 | |
| 5 |
| Y’s New Ratio | = | 2 | – | 2 |
| 5 | 5 |
| = | 2- 2 | |
| 5 |
| = | 0 | |
| 5 |
Only X is sacrificing 1/5 portion of profit in favor of Z. Therefore, amount of Premium for Goodwill will be taken by X only
Calculation of Z’s Capital
| Combined Capital of X and Y after all adjustments | = | 39,200 + 20,800 |
| = | 60,000 |
| Z’s Capital | = | 60,000 | X | 20 |
| 100 | ||||
| = | 12,000 |
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| Cash Account | |||||
| Particular | Amount | Particular | Amount | ||
| Balance b/d | 9,000 | ||||
| Z’s Capital | 12,000 | ||||
| Premium for Goodwill | 10,000 | ||||
| Balance c/d | 31,000 | ||||
| 31,000 | 31,000 | ||||
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. 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
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