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Question 20 Chapter 4 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 20 Chapter 4 of +2-A
Question No.20 Chapter No.4 - T.S. Grewal +2 Book 2019-Solution-

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Question 20 Chapter 4 of +2-A

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20. Bhavya and Sakshi are partners in a firm, sharing profits and losses in the ratio of 3 : 2. On 31st March, 2018 their Balance Sheet was as under:

 

Liabilities Assets 
Sundry Creditors 13,800Furniture 16,000
General Reserve23,400Land and Building56,000
Investment Fluctuation Fund20,000Investments30,000
Bhavya’s Capital 50,000Receivables18,500
Sakshi’s Capital40,000Cash in Hand 26,700
 1,47,200 1,47,200

The partners have decided to change their profit sharing ratio to 1 : 1 with immediate effect. For the purpose, they decided that:

  1. Investments to be valued at 20,000.
  2. Goodwill of the firm be valued at 24,000.
  3. General Reserve not to be distributed between the partners.
    You are required to pass necessary Journal entries in the books of the firm. Show workings

The solution of Question 20 Chapter 4 of +2-A

In the Books of _______________
DateParticulars
L.F.DebitCredit
2018     
31st MarchInvestment Fluctuation Reserve A/cDr 20,000 
 To Investment A/c *1   10,000
 To Bhavya’s Capital A/c*1   6,000
 To Sakshi’s Capital A/c*1   4,000
 (Being Adjustment for General Reserve)    
 Sakshi’s Capital A/c*3Dr 2,400 
 To Bhavya’s Capital A/c   2,400
 (Being Adjustment for Goodwill through Capital account)    
 Sakshi’s Capital A/c*4 Dr 2,340 
 To Bhavya’s Capital A/c   2,340
 (Being Adjustment for General Reserve through Capital account)    
      

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Working Note :

WN *1 Calculation of Share of Investment Fluctuation Reserve –
In the case IV – The amount of I.F.R distributed as following: –

Distributable Amount of I.F.R.=Total I.F.R. Balance – (Difference between Market value and Cost)
 =20,000- (30,000 – 20,000)
Distributable Amount of I.F.R.=10,000

 

Amount to be Credited to Bhavya’s Capital=10,000X3
5
 =6,000  

 

Amount to be Credited to Sakshi’s Capital=10,000X2
5
 =4,000  

 

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WN *2 Calculation of Share of General Reserve –

Old Ratio of X, & Y=3 : 2
New Ratio of X, & Y=1 : 1

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Calculate the Sacrificing or Gaining Ratio of Partners
Sacrificing or Gaining Ratio = Old Ratio – New Ratio

Bhavya’s Share Sacrificing/Gaining=3 –1
52
 =6- 5
 10
 =1 (Sacrificing)
 10
Sakshi’s Share Sacrificing/Gaining=5 –1
52
 =4 – 5
 10
 =– 1 Gaining
 10

 

WN *3 Calculation of Share of Goodwill

Amount to be Credited to Bhavya’s Capital=24,000X1
10
 =2,400  

 

Amount to be Debited to Sakshi’s Capital=24,000X1
10
 =2,400  

 

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WN *4 Calculation of Adjustment of General Reserve because not to be
distributed among the Partner

Amount to be Credited to Bhavya’s Capital=23,400X1
10
 =2,340  

 

Amount to be Debited to Sakshi’s Capital=23,400X1
10
 =2,340  

 

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)

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

+2 Book 1-min
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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