Question 27 Chapter 4 of +2-A - T.S. Grewal 12 Class Part

Question 27 Chapter 4 of +2-A

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27. A and B are partners sharing profits in the ratio of 4 : 3. Their Balance Sheet as at 31st March, 2019 stood as:

They decided that with effect from 1st April, 2019, they will share profits and losses in the ratio of 2:1 For this purpose they decided that:

Fixed Assets are to be reduced by 10%.
A Provision for Doubtful Debts of 6% be made on Sundry Debtors.
Stock be valued at 1,90,000.
An amount of 3,700 included in Creditors is not likely to be claimed .
Partners decided to record the revised values in the books. However, they do not want to disturb the Reserve. You are required to pass Journal entries, prepare Capital Accounts of Partners and the revised Balance Sheet

The solution of Question 27 Chapter 4 of +2-A

In the Books of _______________
Date	Particulars		L.F.	Debit	Credit
2019
	A’s Capital A/c	Dr		4,000
	To B’s Capital A/c^*3				4,000
	(Being adjustment make for the revaluation of assets and liabilities)

Revaluation A/c
Particulars		Amount	Particulars	Amount
To Fixed Assets A/c		15,000	By Stock A/c	50,000
To Provision for Doubtful Debts A/c 1, 20, 000 × 6		7,200	By Creditors A/c	3,700
To Profit on Revaluation^*2		31,500
A	18,000
B	13,500
		53,700		53,700

Partners’ Capital Accounts for the year ended 31st March, 2019
Particulars	A	B	Particulars	A	B
To B’s Capital A/c	4,000		By Balance B/d	2,40,000	1,20,000
			By Revaluation A/c	18,000	13,500
			By A’s Capital A/c	–	4,000
To Balance c/d	2,54,000	1,37,500
	2,58,000	1,37,500		2,58,000	1,37,500

Balance Sheet as on 01st April, 2019
Particulars		Amount	Particulars		Amount
Sunday Creditors	28,000		Cash		20,000
	3,700	24,300	Sundry Debtors	1,20,000
General Reserve		42,000	Less: Provision for Doubtful Debts.	7, 200	1,12,800
Capital A/c		44,000	Stock		1,90,000
A	2,54,000	20,000	Fixed Assets (1,50,000– 15,000)		1,35,000
B	1,37,500
		4,57,800			4,57,800

Working Note :

Old Ratio of X, & Y	=	4 : 3
New Ratio of X, & Y	=	2 : 1

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

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A’s Share Sacrificing/Gaining	=	4	–	2
		7		3

	=	12 – 14
	=	21

	=	-3	(Gain)
		21

B’s Share Sacrificing/Gaining	=	3	–	1
		7		3

	=	9 – 7
	=	21

	=	2	(Sacrifice)
		21

WN *1 Adjustment of General Reserve: –

Amount to be Debited to A’s Capital	=	42,000	X	2
				21
	=	4,000

Amount to be Credited to B’s Capital	=	42,000	X	2
				1
	=	4,000

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WN *2 Adjustment of Profit on revaluation : –

Amount to be Credited to A’s Capital	=	31,500	X	4
				7
	=	18,000

Amount to be Credited to B’s Capital	=	31,500	X	3
				7
	=	13,500

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