Question 31 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 31 Chapter 6 of +2-A

Question 31 Chapter 6 of +2-A

31. Kanika, Disha, and Kabir were partners sharing profits in the ratio of 2: 1: 1. On 31st March 2016, their Balance Sheet was as under:

Liabilities Amount Assets  Amount
Trade creditors 53,000 Bank  60,000
Employees’ Provident Fund  47,000 Debtors 60,000
Kanika’s Capital  2,00,000 Stock  1,00,000
Disha’s Capital 1,00,000 Fixed assets 2,40,000
Kabir’s Capital  80,000 Profit and Loss A/c 20,000
  4,80,000   4,80,000

Kanika retired on 1st April 2016. For this purpose, the following adjustments were agreed upon:

  1. Goodwill of the firm was valued at 2 years’ purchase of average profits of three completed years preceding the date of retirement. The profits for the year: 2013-14 were 1,00,000 and for 2014-15 were 1,30,000.
  2. Fixed Assets were to be increased to 3,00,000.
  3. The stock was to be valued at 120%.

The amount payable to Kanika was transferred to her Loan Account. Prepare Revaluation Account, Capital Accounts of the partners, and the Balance Sheet of the reconstituted firm.

The solution of Question 31 Chapter 6 of +2-A: –

Revaluation Account
Particular
Amount Particular Amount
      By Fixed Assets A/c   60,000
      By Stock A/c   20,000
To Profit transferred to        
Kanika’s Capital 40,000        
Disha’s Capital 20,000        
Kabir’s Capital 20,000 80,000      
    80,000     80,000

 

Partners’ Capital Account
Part. Kanika Disha Kabir

Part.

Kanika Disha Kabir
To Profit & Loss A/c 10,000 5,000 5,000 By Balance B/d 2,00,000 1,00,000 80,000
To Kanika’s Capital A/c 35,000 35,000 By Disha’s Capital A/c 35,000
To Kanika’s Loan A/c 3,00,000 By Kabir’s Capital A/c 35,000
        By Revaluation A/c 40,000 20,000

20,000

To Balance c/d 80,000 60,000        
  3,10,000 1,20,000 1,00,000   3,10,000 1,20,000 1,00,000

 

Balance Sheet
Liabilities
Amount Assets Amount
Employees’ Provident Fund 47,000 Bank A/c   8,000
Trade Creditors   53,000 Sundry Debtors   17,000
Kanika’s Loan A/c   3,00,000 Fixed Assets A/c   3,00,000
Capital:     Stock   1,20,000
Disha’s Capital 80,000        
Kabir’s Capital 60,000 1,40,000      
    5,40,000     5,40,000


Working Note:-

Calculation of Goodwill

Average Profit = Total Profit for past given years
Number of years
     
  = 1,00,000 + 1,30,000 + (- 20,000)
3
     
  = 2,10,000
3
     
  = Rs 70,000/-

Number of years’ purchase = 2 

Goodwill = Average Profit X Number of years’ purchase

= 70,000 X 3 

= 1,40,000/-

Adjustment of Goodwill

Goodwill of the firm = Rs 1,40,000

 

Kanika’s Share of Goodwill = 1,40,000 X 2
4
         
  = Rs 70,000    

 

This share of goodwill is to be distributed between Disha and Kabir in their gaining ratio i. e. 1:1

Disha’s Share = 70,000 X 1
2
         
  = Rs 35,000/-    

 

Kabir’s Share = 70,000 X 1
2
         
  = Rs 35,000/-    

 

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)

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

 

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2 Book 1 min - Question 31 Chapter 6 of +2-A - T.S. Grewal 12 Class Part - A Vol. 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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