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Question 31 Chapter 6 of +2-A
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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:
- 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.
- Fixed Assets were to be increased to 3,00,000.
- 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 | ||||
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| 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
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Goodwill of the firm = Rs 1,40,000
| Kanika’s Share of Goodwill | = | 1,40,000 | X | 2 |
| 4 | ||||
| = | Rs 70,000 |
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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/- |
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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
