Question 11 Chapter 4 – Unimax Class 12 Part 1 – 2021

Question 11 Chapter 4 - Unimax Class 12 Part 1 - 2021

Question 11 Chapter 4 – Unimax Class 12 Part 1

11. The following is the Balance Sheet of P, Q, R and S as at 31st December, 2020.

Liabilities   Amount Assets Amount
Creditors   80,000 Bills Receivable 20,000
Reserves   1,50,000 Building 6,50,000
Profit & Loss A/c (Profits)   90,000 Plant & Machinery 500000
Capitals :     Stock 3,00,000
P 2,00,000   Debtors 2,40,000
Q 3,00,000   Cash at Bank 10,000
R 5,00,000      
S 4,00,000 14,00,000    
    17,20,000   17,20,000

On 1st January, 2021 the assets and liabilities were revalued as under :

Building Rs. 8,00,000
Plant and Machinery Rs. 3,20,000
Stock Rs. 2,60,000
Creditors Rs. 84,000

A provision of 5% was required on debtors. Goodwill of the firm is valued at Rs. 1,70,000. Partners agreed that from 1.1.2021 they will share profits in ratio of 4 : 3 : 2 : 1 instead of their former ratio of 5 : 4 : 2 : 1. They don’t want to record revised values of assets and liabilities in the books. They also don’t want to distribute the reserve and P & L A/cs balance.
Pass a single Journal entry to give effect to above.

The solution of Question 11 Chapter 4 – Unimax Class 12 Part 1

Journal

Date Particulars   L.F. Debit Credit
Jan 1 2007 R’s Capital A/c Dr.   10800  
  S’s Capital A/c Dr.   5400  
      To P’s Capital A/c       5400
      To Q’s Capital A/c       10800
  (Being adjustment entry passed for accumulated profits, goodwill and profit on revaluation on change in constitution)        

Working Note :

1. Calculation of Profit/Loss on revaluation of Assets and Liabilities.

Increase in the value of Building (Rs. 800000 – Rs. 650000)   150000
Less decrease in value of assets Rs.  
Plant & Machinery 180000  
Stock 40000  
Provision on Debtors 12000  
Increase in Creditors 4000 236000
Loss on Revaluation   86000

Calculation of Sacrifices/ Gains to Partners

Old Share New Share Difference
P            5/12 4/10 1/60 (Sacrifice)
Q           4/12 3/10 2/60 (Sacrifice) 
R           2/12 2/10 2/60 (Gain)
S           1/12 1/10 1/60 (Gain) 

3. Net Accumulated Profits

Reserves 150000
Profit & Loss a/c (Credit) 90000
Goodwill 170000
  410000
Less Loss on Revaluation 86000
  324000

Credits to be given to Partners
P : (Rs. 324000 X 1/60) = Rs. 5400
Q : (Rs. 324000 X 2/60) = Rs. 10800
And Capital accounts of R & S should be debited with following Amounts
R : (Rs. 324000 X 2/60) = Rs. 10800
S : (Rs. 324000 X 1/60) = Rs. 5400

What is Partnership – Meaning and its Types

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

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

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