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

Question 12 Chapter 4 – Unimax Class 12 Part 1

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

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

12. P and Q share the profits of a business in the ratio of 5 : 3. They agreed to change their profit sharing ratio to 3 : 5. On the date of change the Balance Sheet of the firm was as follows :

Liabilities	Amount	Assets	Amount
Creditors	1,000	Machinery	26,000
Employees’ Provident Fund	1,000	Furniture	18,000
Bank Loan	12,000	Stock	10,000
Workmen Compensation Fund	2,000	Debtors	8,000
Contingency Reserve	2,800	Bank	6,000
P’s Capital	30,000	Advertisement suspense A/c	800
Q’s Capital	20,000

	68,800		68,800

There also decide that :
1. Goodwill of the firm be valued at 4 years’ purchase of Super profits. The average super profits of the last three years are Rs. 20,000, while the normal profits that can be earned with Capital employed are Rs. 12,000.
2. Furniture be appreciated by Rs. 6,000 and value of stock to be reduced by 20%. You are required to prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of reconstituted Firm. (Accumulated profits and losses are to be distributed and assets will appear at revalued figures in Balance Sheet.)

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

Revaluation A/c

Particulars		Rs.	Particulars	Rs.
To Stock		2000	By Furniture	6000
To Profit transferred
P (4000 X 5/8)	2500
Q (4000 X 3/8)	1500	4000
		6000		6000

Capital Accounts

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Particulars	P	Q	Particulars	P	Q
To P’s Capital A/c (Share of goodwill)	_	8000	By Balance b/d	30000	20000
To Advertisement suspense A/c	500	300	By Revaluation A/c (Profit)	2500	1500
To Balance c/d	43000	15000	By Q’s Capital a/c (share of goodwill)	8000	_
			By workmen comp. fund	1250	750
			By Reserves A/c	1750	1050
	43500	23300		43500	23300

Balance Sheet of Reconstituted firm

Liabilities		Rs.	Assets	Rs.
Creditors		1000	Bank	6000
Bank Loan		12000	Debtors	8000
Employees provident fund		1000	Stock	8000
Capital Accounts			Furniture	24000
P :	43300		Machinery	26000
Q :	15000	58000
		72000		72000

Working Note :
Calculation of Sacrifice/Gain

Old Share	New Share	Difference
P 5/8	3/8	2/8 (Sacrifice)
Q 3/8	5/8	2/8 (Gain)

2. Calculation of goodwill
Super Profits = Average Profits – Normal Profits
= Rs. 20000 – Rs. 12000 = Rs. 8000
Goodwill = Rs. 8000 X 4 = Rs. 32000
Q will pay to P, share of goodwill
i.E (32000 X 1/4) = Rs. 8000, sacrificed by P.

What is Partnership – Meaning and Its 4 Types

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

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

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)

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