Question 26 Chapter 4 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 26 Chapter 4 of +2-A

Question 26 Chapter 4 of +2-A

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:

  1. Goodwill of the firm will be valued at 1,50,000.
  2. Land will be revalued at 80,000 and building be depreciated by 6%.
  3. 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   33,000 By Creditors A/c 6,000
X 16,500      
Y 11,000      
Z 5,500     20,000
    63,000   36,000

 

 

Partners’ Capital Accounts
for the year ended 31st March, 2019
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
as on 01st April, 2019
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    

 

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

 

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)        

 

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 - Question 26 Chapter 4 of +2-A - T.S. Grewal 12 Class Part - A Vol. 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.