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Question 25 Chapter 4 of +2-A
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25. X, Y and Z are partners sharing profits and losses in the ratio of 7 : 5 : 4. Their Balance Sheet as at 31st March, 2019 stood as:
| Liabilities | Assets | |||
| Capital A/c | Sundry Assets | 7,00,000 | ||
| X | 2,10,000 | |||
| Y | 1,50,000 | |||
| Z | 1,20,000 | 4,80,000 | ||
| General Reserve | 65,000 | |||
| Profit and Loss A/c | 25,000 | |||
| Creditors | 1,30,000 | |||
| 7,00,000 | 7,00,000 |
Partners decided that with effect from 1st April, 2019, they will share profits and losses in the ratio of 3 : 2 : 1. For this purpose, goodwill of the firm was valued at 1,50,000. The partners neither want to record the goodwill nor want to distribute the General Reserve and profits. Pass a Journal entry to record the change and prepare Balance Sheet of the constituted firm.
The solution of Question 25 Chapter 4 of +2-A
| In the Books of _______________ | |||||
| Date | Particulars | L.F. | Debit | Credit | |
| 2019 | |||||
| April 1 | X’s Capital A/c | Dr | 15,000 | ||
| Y’s Capital A/c | Dr | 5,000 | |||
| To Z’s Capital A/c*1 | 20,000 | ||||
| (Being adjustment make for the revaluation of assets and liabilities) | |||||
| Balance Sheet as on 01st April, 2019 | ||||
| Particulars | Amount | Particulars | Amount | |
| Capital A/c*1 | Sunday Assets | 7,00,000 | ||
| X | 1,95,000 | |||
| Y | 1,45,000 | |||
| Z | 1,40,000 | 4,80,000 | 20,000 | |
| General Reserve | 25,000 | |||
| Profit and Loss A/c | 1,30,000 | |||
| 7,00,000 | 7,00,000 | |||
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Working Note :
| Old Ratio of X, & Y | = | 7 : 5 : 4 |
| New Ratio of X, & Y | = | 3 : 2 : 1 |
Calculate the Sacrificing or Gaining Ratio of Partners
Sacrificing or Gaining Ratio = Old Ratio – New Ratio
| X’s Share Sacrificing/Gaining | = | 7 | – | 3 |
| 16 | 6 |
| = | 21 – 24 | |
| 48 |
| = | -3 | (Gain) | |
| 48 |
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| Y’s Share Sacrificing/Gaining | = | 5 | – | 2 |
| 16 | 6 |
| = | 15 – 16 | |
| 48 |
| = | -1 | (Gain) | |
| 48 |
| Z’s Share Sacrificing/Gaining | = | 4 | – | 1 |
| 16 | 6 |
| = | 12 – 8 | |
| 48 |
| = | 4 | (Sacrifice) | |
| 48 |
Calculation of Profit or Loss on Revaluation
| Revaluation A/c | ||||
| Particulars | Amount | Particulars | Amount | |
| To Computers A/c | 25,000 | By Machinery A/c | 50,000 | |
| To Outstanding expenses A/c | 10,000 | By Creditors A/c | 15,000 | |
| To Profit on Revaluation | 30,000 | |||
| 65,000 | 65,000 | |||
WN *1 Adjustment of Profit on revaluation of in the sacrificing and gaining share: –
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| Total Amount for Adjustment | = | General Reserve+ P/L A/c+ Goodwill |
| = | 65,000+ 25,000+ 1,50,000 | |
| = | Rs 2,40,000 |
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| Amount to be Debited to X’s Capital | = | 2,40,000 | X | 3 |
| 48 | ||||
| = | 15,000 |
| Amount to be Debited to Y’s Capital | = | 2,40,000 | X | 1 |
| 48 | ||||
| = | 5,000 |
| Amount to be Debited to Z’s Capital | = | 2,40,000 | X | 4 |
| 48 | ||||
| = | 20,000 |
WN *2 Balance of all partners’ Capital Account
| Partners’ Capital Accounts for the year ended 31st March, 2019 | ||||||||
| Particulars | X | Y | Z | Particulars | X | Y | Z | |
| To Z’s Capital A/c | 15,000 | 5,000 | – | By Balance B/d | 2,10,000 | 1,50,000 | 1,20,000 | |
| By X’s Capital A/c *1 | – | – | 15,000 | |||||
| By Y’s Capital A/c *1 | – | – | 5,000 | |||||
| To Balance c/d | 1,95,000 | 1,45,000 | 1,40,000 | |||||
| 2,10,000 | 1,50,000 | 1,40,000 | 2,10,000 | 1,50,000 | 1,40,000 | |||
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
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