Question 26 Chapter 4 of +2-A
Table of Contents
26. A, B and C were partners in a firm sharing profits in the ratio of 3 : 2 : 1. Their Balance Sheet as on 31st March, 2015 was as follows:
| Liabilities | Assets | |||
| Creditors | 50,000 | Land | 50,000 | |
| Bills Payable | 20,000 | Building | 50,000 | |
| General Reserve | 30,000 | Plant | 1,00,000 | |
| Capital A/c | Stock | 40,000 | ||
| X | 1,00,000 | Debtors | 30,000 | |
| Y | 50,000 | Bank | 5,000 | |
| Z | 25,000 | 1,75,000 | ||
| 2,75,00 | 2,75,000 |
From 1st April, 2015, A, B and C decided to share profits equally. For this it was agreed that:
- Goodwill of the firm will be valued at 1,50,000.
- Land will be revalued at 80,000 and building be depreciated by 6%.
- Creditors of 6,000 were not likely to be claimed and hence should be written off.
Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of the reconstituted firm.
The solution of Question 26 Chapter 4 of +2-A
| Revaluation A/c |
||||
| Particulars |
Amount | Particulars | Amount | |
| To Building A/c | 3,000 | By Land A/c | 30,000 | |
| To Profit on Revaluation*1 | By Creditors A/c | 6,000 | ||
| X | 16,500 | |||
| Y | 11,000 | |||
| Z | 5,500 | 33,000 | 20,000 | |
| 63,000 | 36,000 | |||
| Partners’ Capital Accounts |
||||||||
| Particulars |
A | B | C | Particulars |
A | B | C | |
| To A’s Capital A/c | 25,000 | By Balance B/d | 1,00,000 | 50,000 | 25,000 | |||
| By Revaluation A/c | 16,500 | 11,000 | 5,500 | |||||
| By General Reserve A/c *1 | 15,000 | 10,000 | 5,000 | |||||
| By C’s Capital A/c | 25,000 | – | – | |||||
| To Balance c/d |
1,56,500 |
71,000 |
10,500 | |||||
| 1,56,500 | 71,000 |
35,500 |
1,56,500 |
71,000 |
35,500 | |||
| Balance Sheet | |||||
| Particulars |
Amount | Particulars |
Amount | ||
| Capital A/c*1 | 3,000 | Land | 50,000 | ||
| A | 1,56,500 | Add: Increase | 30,000 | 80,000 | |
| B | 71,000 | Building | 50,000 | ||
| C | 10,500 | 2,38,000 | Less: Dep. | 3,000 | 47,000 |
| General Reserve | 65,000 | Plant | 1,00,000 | ||
| Less: Written-off | 16,500 | 44,000 | Bank | 5,000 | |
| Bills Payable | 11,000 | 20,000 | Stock | 40,000 | |
| Debtors | 30,000 | ||||
| 3,02,000 | 3,02,000 | ||||
Working Note :
WN *1 Adjustment of Profit on revaluation: –
| Amount to be Credited to A’s Capital | = | 33,000 | X | 3 |
| 6 | ||||
| = | 16,500 |
| Amount to be Debited to B’s Capital | = | 33,000 | X | 2 |
| 6 | ||||
| = | 11,000 |
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| Amount to be Debited to C’s Capital | = | 33,000 | X | 1 |
| 6 | ||||
| = | 5,500 |
WN *2 Adjustment of General Reserve: –
| Amount to be Credited to X’s Capital | = | 30,000 | X | 3 |
| 6 | ||||
| = | 15,000 |
| Amount to be Credited to B’s Capital | = | 30,000 | X | 2 |
| 6 | ||||
| = | 10,000 |
| Amount to be Credited to C’s Capital | = | 30,000 | X | 1 |
| 6 | ||||
| = | 5,000 |
| Old Ratio of X, & Y | = | 3 : 2 : 1 |
| New Ratio of X, & Y | = | 1 : 1 : 1 |
Calculate the Sacrificing or Gaining Ratio of Partners
Sacrificing or Gaining Ratio = Old Ratio – New Ratio
| A’s Share Sacrificing/Gaining | = | 3 | – | 1 |
| 6 | 3 |
| = | 9 – 6 | |
| 18 |
| = | 3 | (Sacrifice) |
|
| 18 |
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| B’s Share Sacrificing/Gaining | = | 2 | – | 1 |
| 6 | 3 |
| = | 6 – 6 | |
| 18 | ||
| = | Nil |
| C’s Share Sacrificing/Gaining | = | 1 | – | 1 |
| 6 | 3 |
| = | 3 – 6 | |
| 18 |
| = | – 3 | (Gain) |
|
| 18 |
WN *3 Adjustment of Goodwill: –
| Amount to be Credited to A’s Capital | = | 1,50,000 | X | 3 |
| 18 | ||||
| = | 25,000 |
| Amount to be Debited to C’s Capital | = | 1,50,000 | X | 3 |
| 18 | ||||
| = | 25,000 |
| In the Books of _______________ | |||||
| Date | Particulars |
L.F. | Debit | Credit | |
| 2019 | |||||
| April 1 | C’s Capital A/c | Dr | 25,000 | ||
| To A’s Capital A/c*3 | 25,000 | ||||
| (Being adjustment made for Compensation of C’s, because he is gaining) | |||||
| C’s Capital A/c | Dr | 25,000 | |||
| To A’s Capital A/c*3 | 25,000 | ||||
| (Being adjustment make for the revaluation of assets and liabilities) | |||||
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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
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
