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Question 29 Chapter 4 of +2-A
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29. Balance Sheet of X and Y, who share profits and losses as 5 : 3, as at 1st April, 2019 is:
| Liabilities | Assets | ||
| X’s Capital | 52,000 | Goodwill | 8,000 |
| Y’s Capital | 54,000 | Machinery | 38,000 |
| General Reserve | 4,800 | Furniture | 15,000 |
| Sundry Creditors | 5,000 | Sundry Debtors | 33,000 |
| Employees’ Provident Fund | 1,000 | Stock | 7,000 |
| Workmen Compensation Reserve | 10,000 | Bank | 25,000 |
| Advertisement Suspense A/c | 800 | ||
| 1,26,800 | 1,26,800 |
On the above date, they decided to change their profit-sharing ratio to 3 : 5 and agreed upon the following:
- Goodwill be valued on the basis of two years’ purchase of the average profit of the last three years. Profits for the years ended 31st March,are: 2016-17 − 7,500; 2017-18 − 4,000; 2018-19 − 6,500.
- Machinery and Stock be revalued at 45,000 and 8,000 respectively.
- Claim on account of workmen compensation is 6,000.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the new firm.
The solution of Question 29 Chapter 4 of +2-A
| Revaluation A/c | ||||
| Particulars | Amount | Particulars | Amount | |
| By Machinery A/c | 7,000 | |||
| By Stock A/c | 8,000 | |||
| To Profit on Revaluation*1 | 8,000 | |||
| X | 5,000 | |||
| Y | 3,000 | |||
| 8,000 | 8,000 | |||
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| Partners’ Capital Accounts for the year ended 31st March, 2019 | ||||||
| Particulars | X | Y | Particulars | X | Y | |
| To Advertisement Suspense A/c | 500 | 300 | By Balance B/d | 52,000 | 54,000 | |
| To Goodwill A/c *2 | 5,000 | 3,000 | By General Reserve A/c | 3,000 | 1,800 | |
| To X’s Capital A/c *3 | – | 3,000 | By WCF A/c | 2,500 | 1,500 | |
| By Revaluation A/c | 5,000 | 3,000 | ||||
| By Y’s Capital A/c *3 | 3,000 | – | ||||
| To Balance c/d | 60,000 | 54,000 | ||||
| 65,500 | 60,300 | 65,500 | 60,300 | |||
| Balance Sheet as on 01st April, 2019 | |||||
| Particulars | Amount | Particulars | Amount | ||
| Sunday Creditors | 5,000 | Machinery | 45,000 | ||
| Outstanding Expenses | 15,000 | Furniture | 15,000 | ||
| Employees’ Provident Fund | 1,000 | Sundry Debtors | 33,000 | ||
| Workmen’s Compensation Reserve | 6,000 | Stock | 8,000 | ||
| Capital A/c | Bank | 25,000 | |||
| X | 58,500 | ||||
| Y | 55,500 | 1,14,000 | |||
| 1,26,000 | 1,26,000 | ||||
Working Note :
WN *1 Adjustment of Profit on revaluation: –
| Amount to be Credited to X’s Capital | = | 8,000 | X | 5 |
| 8 | ||||
| = | 5,000 |
| Amount to be Credited to Y’s Capital | = | 8,000 | X | 3 |
| 8 | ||||
| = | 3,000 |
WN *2 Adjustment of Existing goodwill already in the books: –
| Amount to be Credited to X’s Capital | = | 8,000 | X | 5 |
| 8 | ||||
| = | 5,000 |
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| Amount to be Credited to Y’s Capital | = | 8,000 | X | 3 |
| 8 | ||||
| = | 3,000 |
| Old Ratio of X, & Y | = | 5 : 3 |
| New Ratio of X, & Y | = | 3 : 5 |
Calculate the Sacrificing or Gaining Ratio of Partners
Sacrificing or Gaining Ratio = Old Ratio – New Ratio
| X’s Share Sacrificing/Gaining | = | 5 | – | 3 |
| 8 | 8 |
| = | 5 – 2 | |
| 8 |
| = | 2 | (Sacrifice) | |
| 8 |
| Y’s Share Sacrificing/Gaining | = | 3 | – | 5 |
| 8 | 8 |
| = | 3 – 5 | |
| 8 |
| = | (-2) | (Gain) | |
| 36 |
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WN *1 Adjustment of General Reserve: –
| Amount to be Debited to X’s Capital | = | 42,000 | X | 2 |
| 8 | ||||
| = | 4,000 |
| Amount to be Credited to Y’s Capital | = | 42,000 | X | 2 |
| 8 | ||||
| = | 4,000 |
WN *3 Calculation of New Goodwill
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| Average Profit | = | Sum of all year Profit |
| Numbers of Year |
| = | 7,500 + 4,000 + 6,500 | |
| 3 | ||
| = | 6,000 |
| Goodwill | = | Average Profit X Number of Years of Purchase |
| = | 6,000 X 2 | |
| = | 12,000 |
| Amount to be Debited to X’s Capital | = | 12,000 | X | 2 |
| 8 | ||||
| = | 3,000 |
| Amount to be Debited to Y’s Capital | = | 12,000 | X | 2 |
| 8 | ||||
| = | 3,000 |
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
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
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