# Question 102 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question No.102 Chapter No.5 - T.S. Grewal +2 Book 2019-Solution

Question 102 Chapter 5 of +2-A

102. A and B are partners sharing profits in the ratio of 3: 2. They admit C as a new partner from 1st April 2019. They have decided to share future profits in the ratio of 4 : 3 : 3. The Balance Sheet as of 31st March 2019 is given below

 Liabilities Assets A’s Capital 1,76,000 Goodwill 34,000 B’s Capita 2,54,000 4,30,000 Land and Building 60,000 Workmen Compensation Reserve 20,000 Investment (Market value 45,000) 50,000 Investments Fluctuation Reserve 10,000 Debtor 1,00,000 Employee’s Provident Fund 34,000 Less: Provision for Doubtful Debts 10,000 90,000 C’s Loan 3,00,000 Stock 3,00,000 Bank Balance 2,50,000 Advertising Suspense A/c 10,000 7,94,000 7,94,000

Terms of C’s admission are as follows:
(i) C contributes proportionate capital and 60% of his share of goodwill in cash.
(ii) Goodwill is to be valued at 2 years’ purchase of super profit of the last three completed years. Profits for the years ended 31st March were: 2017 − 4,80,000; 2018 − 9,30,000; 2019 − 13,80,000. The normal profit is 5,30,000 with the same amount of capital invested in a similar industry.
(iii) Land and Building were found undervalued by 1,00,000.
(iv) Stock was found overvalued by 31,000.
(v) Provision for Doubtful Debts is to be made equal to 5% of the debtors. (vi) The claim on account of Workmen Compensation is 11,000. Prepare Revaluation Account, Partners’ Capital Accounts, and Balance Sheet.

## The solution of Question 102 Chapter 5 of +2-A: –

 Revaluation Account Particular Amount Particular Amount Stock 31,000 Land and Building A/c 1,00,000 Provision for Doubtful Debts 5,000 Profit on Revaluation A’s Capital 44,400 B’s Capital 29,600 74,000 1,05,000 1,05,000

 Partners’ Capital Account Particulars A B C Particulars A B C To Goodwill 20,400 13,600 – By Balance B/d 1,76,000 2,54,000 – To Advertisement Suspense A/c 4,000 4,000 By Cash – – 3,06,000 By General Reserve 36,000 24,000 – By C’s Current A/c 64,000 32,000 – By Premium for Goodwill 96,000 48,000 – By Revaluation 44,400 29,600 – By IFR 3,000 2,000 – By WCR 5,400 3,600 – To Balance c/d 3,62,400 3,51,600 3,06,000 3,88,800 3,69,200 3,06,000 3,88,800 3,69,200 3,06,000

 Balance Sheet Liabilities Amount Assets Amount Workmen Compensation Reserve 11,000 Land & Building 1,60,000 Employees Provident Fund 34,000 Debtors 1,00,000 Capital: Less: Provision for debtors 5,000 95,000 A 3,62,400 Bank A/c 7,00,000 B 3,51,600 Investment 45,000 C 3,06,000 10,20,000 Stock 2,69,000 C ‘s Loan 3,00,000 C ‘s Current A/c 96,000 13,65,000 13,65,000

Working Note:-

Calculation of Sacrifice or Gain

Old Ratio of A and B = 3 : 2
New Ratio of A , Band C = 4 : 3 : 3
(New Ratio)Sacrificing (or Gaining) Ratio = Old Ratio – New Ratio

 A’s Share = 3 – 4 5 10
 = 6  – 4 10
 = 2 10

 B’s Share = 2 – 3 5 10
 = 4 – 3 10
 = 1 10

Sacrificing Ratio = 2 : 1

Calculation of Goodwill

Goodwill=Super Profit × No. of Years’ Purchase =4,00,000×2=Rs 8,00,000

 C Share of Goodwill = 8,00,000 X 3 10 = 2,40,000

 Goodwill bought in cash = 2,40,000 X 60 100 = 1,44,000

Calculation of C’s Capital

 Combined Capital A and B’s Capita = 3,62,400 + 3,51,600 = Rs 7,14,000

 C’s Share of Goodwill = 7,14,000 x 10 x 3 7 10 = 3,06,000

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