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Question 28 Chapter 4 of +2-A
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Table of Contents
28. X, Y and Z are partners in a firm sharing profits and losses as 5 : 4 : 3. Their Balance Sheet as at 31st March, 2019 was:
| Liabilities | Assets | |||
| Sundry Creditors | 40,000 | Cash at Bank | 40,000 | |
| Outstanding Expenses | 15,000 | Sundry Debtors | 2,10,000 | |
| General Reserve | 75,000 | Stock | 3,00,000 | |
| Capital A/c | Furniture | 60,000 | ||
| X | 4,00,000 | Plant and Machinery | 4,20,000 | |
| Y | 3,00,000 | |||
| Z | 2,00,000 | 8,75,000 | ||
| 10,40,000 | 10,40,000 |
From 1st April, 2019, they agree to alter their profit-sharing ratio as 4 : 3 : 2. It is also decided that:
- Furniture be taken at 80% of its value.
- Stock be appreciated by 20%.
- Plant and Machinery be valued at 4,00,000.
- Outstanding Expenses be increased by 13,000.
Partners agreed that altered values are not to be recorded in the books and they also do not want to distribute the General Reserve.
You are required to pass a single Journal entry to give effect to the above. Also, prepare Balance Sheet of the new firm.
The solution of Question 28 Chapter 4 of +2-A
| In the Books of _______________ | |||||
| Date | Particulars | L.F. | Debit | Credit | |
| 2019 | |||||
| X’s Capital A/c | Dr | 2,500 | |||
| To Z’s Capital A/c*1 | 2,500 | ||||
| (Being adjustment made for general reserve) | |||||
| Balance Sheet as on 01st April, 2019 | |||||
| Particulars | Amount | Particulars | Amount | ||
| Sunday Creditors | 40,000 | Cash at Bank | 40,000 | ||
| Outstanding Expenses | 15,000 | Sundry Debtors | 2,10,000 | ||
| General Reserve | 75,000 | Stock | 3,00,000 | ||
| Capital A/c *2 | 9,00,000 | Furniture | 60,000 | ||
| X | 3,97,500 | Plant and Machinery | 4,20,000 | ||
| Y | 3,00,000 | ||||
| Z | 2,02,500 | ||||
| 10,30,000 | 10,30,000 | ||||
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Working Note :
| Old Ratio of X, & Y | = | 5 : 4 : 3 |
| New Ratio of X, & Y | = | 4 : 3 : 2 |
Calculate the Sacrificing or Gaining Ratio of Partners
Sacrificing or Gaining Ratio = Old Ratio – New Ratio
| X’s Share Sacrificing/Gaining | = | 5 | – | 4 |
| 12 | 9 |
| = | 15 – 16 | |
| 36 |
| = | (-1) | (Gain) | |
| 36 |
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| Y’s Share Sacrificing/Gaining | = | 4 | – | 3 |
| 12 | 9 |
| = | 12 – 12 | |
| 36 | ||
| = | Nil |
| Z’s Share Sacrificing/Gaining | = | 3 | – | 2 |
| 12 | 9 |
| = | 9 – 8 | |
| 36 |
| = | 1 | (Sacrifice) | |
| 36 |
Calculation of Profit/loss on Revaluation : –
| Revaluation A/c | ||||
| Particulars | Amount | Particulars | Amount | |
| To Furniture A/c | 12,000 | By Stock A/c | 60,000 | |
| To Plant and Machinery A/c | 20,000 | |||
| To Outstanding Expenses A/c | 13,000 | |||
| To Profit on Revaluation*2 | 15,000 | |||
| 60,000 | 60,000 | |||
WN *1 Adjustment of Profit on Revaluation and General Reserve
| Amount for Adjustment | = | Profit on Revaluation + General Reserve |
| = | 15,000 + 7,500 | |
| = | 90,000 |
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| Amount to be Debited to X’s Capital | = | 90,000 | X | 1 |
| 36 | ||||
| = | 2,500 |
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| Amount to be Credited to Z’s Capital | = | 90,000 | X | 1 |
| 36 | ||||
| = | 2,500 |
WN *2 Calculation of Balances of the 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 | 2,500 | – | – | By Balance B/d | 4,00,000 | 3,00,000 | 2,00,000 | |
| By X’s Capital A/c | – | – | 2,500 | |||||
| To Balance c/d | 3,97,500 | 3,00,000 | 2,02,500 | |||||
| 4,00,000 | 3,00,000 | 2,02,500 | 4,00,000 | 3,00,000 | 2,02,500 | |||
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
