Question 31 Chapter 4 of +2-A
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31. Suresh, Ramesh, Mahesh and Ganesh were partners in a firm Sharing profits in the ratio of 2 : 2 : 3 : 3. On 1st April, 2016, their Balance Sheet was as follows:
| Liabilities | Assets | |||
| Capital A/cs: | Fixed Assets | 6,00,000 | ||
| Suresh | 1,00,000 | Current Assets | 3,45,000 | |
| Ramesh | 1,50,000 | |||
| Mahesh | 2,00,000 | |||
| Ganesh | 2,50,000 | 7,00,000 | ||
| Workmen Compensation Reserve | 75,000 | |||
| 9,45,000 | 9,45,000 |
From the above date, the partners decided to share the future profits equally. For this purpose the goodwill of the firm was valued at 90,000. It was also agreed that:
- Claim against Workmen Compensation Reserve will be estimated at 1,00,000 and fixed assets will be depreciated by 10%.
- The Capital of the partners will be adjusted according to the new profit-Sharing ratio. For this, necessary cash will be brought or paid by the partners as the case may be.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the reconstituted firm.
The solution of Question 31 Chapter 4 of +2-A
| Revaluation A/c |
|||||
| Particulars |
Amount | Particulars |
Amount | ||
| To Depreciation on Fixed Assets A/c | 60,000 | By Profit on Revaluation*1 | 85,000 | ||
| To Prov. for Claim against WCF A/c | 25,000 | Suresh’s Capital A/c | 17,000 | ||
| Ramesh’s Capital A/c | 17,000 | ||||
| Mahesh’s Capital A/c | 25,500 | ||||
| Ganesh’s Capital A/c | 25,500 | ||||
| 85,000 | 85,000 | ||||
| Partners’ Capital Accounts |
||||
|
Particulars |
Suresh |
Ramesh |
Mahesh |
Ganesh |
| To Revaluation A/c | 17,000 | 17,000 | 25,500 | 25,500 |
| To Mahesh’s Capita A/c *2 | 2,250 | 2,250 | ||
| To Ganesh’s Capital A/c *2 | 2,250 | 2,250 | ||
| To Cash A/c’s (B. fig) | 25,250 | 75,250 | ||
| To Balance c/d |
1,53,750 |
1,53,750 |
1,53,750 |
1,53,750 |
| 1,75,250 | 1,75,250 |
2,04,500 |
2,54,500 |
|
| Partners’ Capital Accounts |
|||||
|
Particulars |
Suresh |
Ramesh |
Mahesh |
Ganesh |
|
| By Balance B/d | 1,00,000 | 1,50,000 | 2,00,000 | 2,50,000 | |
| By Suresh’s Capital A/C*2 | 2,250 | 2,250 | |||
| By Ramesh’s Capital A/c*2 | 2,250 | 2,250 | |||
| By Cash A/c (B. fig) | 75,250 | 25,250 | |||
| 1,75,250 | 1,75,250 |
2,04,500 |
2,54,500 |
||
| Balance Sheet | |||||
| Particulars |
Amount | Particulars |
Amount | ||
| Provision of Claim against WCF | 1,00,000 | Fixed Assets | 5,40,000 | ||
| Sundry Creditors | 1,70,000 | Current Assets | 3,45,000 | ||
| Capital A/c | |||||
| Suresh | 1,53,750 | ||||
| Ramesh | 1,53,750 | ||||
| Mahesh | 1,53,750 | ||||
| Ganesh | 1,53,750 | 6,15,000 | |||
| 8,85,000 | 8,85,000 | ||||
Working Note :
WN *1 Calculation of Total Combined Capital in New Profit Sharing Ratio: –
| Amount of Suresh’s Capital | = | 85,000 | X | 2 |
| 10 | ||||
| = | 17,000 |
| Amount of Ramesh’s Capital | = | 85,000 | X | 2 |
| 10 | ||||
| = | 17,000 |
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| Amount of Mahesh’s Capital | = | 85,000 | X | 3 |
| 10 | ||||
| = | 25,500 |
| Amount of Ganesh’s Capital | = | 85,000 | X | 3 |
| 10 | ||||
| = | 25,500 |
| Old Ratio of X, & Y | = | 2 : 2 : 3 : 3 |
| New Ratio of X, & Y | = | 1 : 1 : 1 : 1 |
Calculate the Sacrificing or Gaining Ratio of Partners
Sacrificing or Gaining Ratio = Old Ratio – New Ratio
| Suresh’s Share Sacrificing/Gaining | = | 2 | – | 1 |
| 10 | 4 |
| = | 8 – 10 | |
| 40 |
| = | 2 | (Sacrifice) |
|
| 40 |
| Ramesh’s Share Sacrificing/Gaining | = | 2 | – | 1 |
| 10 | 4 |
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| = | 8 – 10 | |
| 40 |
| = | 2 | (Sacrifice) |
|
| 40 |
| Mahesh’s Share Sacrificing/Gaining | = | 3 | – | 1 |
| 10 | 4 |
| = | 12 – 10 | |
| 40 |
| = | (-2) | (Gain) |
|
| 40 |
| Mahesh’s Share Sacrificing/Gaining | = | 3 | – | 1 |
| 10 | 4 |
| = | 12 – 10 | |
| 40 |
| = | (-2) | (Gain) |
|
| 40 |
| Date | Particulars |
L.F. | Debit | Credit | |
| Mahesh’s Capital A/c | Dr | 4,500 | |||
| Ganesh’s Capital A/c | Dr | 4,500 | |||
| To Suresh’s Capital A/c*1 | 4,500 | ||||
| To Ramesh’s Capital A/c*1 | 4,500 | ||||
| (Being Mahesh and Ganesh compensate ram and Mohan) | |||||
WN *2 Calculation of Amount of Goodwill Debited/Credited to the Capital a/c : –
| Suresh’s Capital Credited with | = | 90,000 | X | 2 |
| 10 | ||||
| = | 4,500 |
| Ramesh’s Capital Credited with | = | 90,000 | X | 2 |
| 10 | ||||
| = | 4,500 |
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| Mahesh’s Capital Debited with | = | 90,000 | X | 2 |
| 10 | ||||
| = | 4,500 |
| Ganesh’s Capital Debited with | = | 90,000 | X | 2 |
| 10 | ||||
| = | 4,500 |
- Mahesh will compensate Suresh and Ramesh in the ratio 1 : 1 for Goodwill
- Ganesh will compensate Suresh and Ramesh in the ratio of 1 : 1 for Goodwill
| Partner’s New Capital | = | Total of Debit side of Capital A/c | – Total of Debit side of Capital A/c |
| Suresh’s New Capital | = | 1,00,000 | – 21,500 |
| = | 78,500 | ||
| Ramesh’s New Capital | = | 1,50,000 | – 21,500 |
| = | 1,28,500 | ||
| Mahesh’s New Capital | = | 2,04,500 | – 25,500 |
| = | 1,79,000 | ||
| Ganesh’s New Capital | = | 2,54,500 | – 25,500 |
| = | 2,29,000 | ||
| Total Combined Capital | = | 6,15,000 |
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WN *3 Calculation of Total Combined Capital in New Profit Sharing Ratio: –
| Amount of Suresh’s New Capital | = | 6,15,000 | X | 1 |
| 4 | ||||
| = | 1,53,750 |
| Amount of Ramesh’s New Capital | = | 6,15,000 | X | 1 |
| 4 | ||||
| = | 1,53,750 |
| Amount of Mahesh’s New Capital | = | 6,15,000 | X | 1 |
| 4 | ||||
| = | 1,53,750 |
| Amount of Ganesh’s New Capital | = | 6,15,000 | X | 1 |
| 4 | ||||
| = | 1,53,750 |
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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
