Question 32 Chapter 4 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 32 Chapter 4 of +2-A

Question 32 Chapter 4 of +2-A

32. Following is the Balance Sheet of A and B, who shared Profits and Losses in the ratio of 2 : 1, as at 1st April, 2019:

Liabilities     Assets  
Capital A/cs:     Land ad Building  2,90,000
3,00,000    Furniture 80,000
B 2,00,000 5,00,000 Stock 2,40,000
Reserve   1,50,000   Debtors  1,50,000
Creditors   2,00,000  Bank  60,000
      Cash  30,000
    8,50,000     8,50,000

On the above date, the partners changed their profit-sharing ratio to 3 : 2. For this purpose, the goodwill of the firm was valued at 3,00,000. The partners also agreed for the following:

  1. The value of Land and Building will be 5,00,000;
  2. Reserve is to be maintained at 3,00,000.
  3. The total capital of the partners in the new firm will be 6,00,000, which will be shared by the partners in their new profit-sharing ratio.
    Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the reconstituted firm.

 

The solution of Question 32 Chapter 4 of +2-A

 

Revaluation A/c
Particulars
Amount Particulars

Amount
      To Land and Building A/c   2,10,000
To Profit on Revaluation*1   2,10,000      
A’s Capital A/c 1,40,000        
B’s Capital A/c 70,000        
    2,10,000     2,10,000

 

Partners’ Capital Accounts
for the year ended 31st March, 2019

Particulars

A
B
Particulars A
B
To Revaluation A/c 1,80,000 1,20,000 By Balance B/d 3,00,000 2,00,000
To A’s Capita A/c *2 20,000 By Reserve A/C*2 1,00,000 50,000
      By B’s Capital A/c*2 20,000
To Cash A/c’s (B. fig) 20,000 By B’s Capital A/c*2 1,40,000 70,000
      By Cash A/c (B. fig) 60,000
To Balance c/d
3,60,000
2,40,000
     
  5,60,000 3,80,000
  5,60,000
3,80,000

 

Balance Sheet
as on 01st April, 2019
Particulars
Amount Particulars
Amount
Reserve   3,00,000 Land and Building   5,00,000
Creditors   2,00,000 Furniture   80,000
Capital A/c     Stock   2,40,000
A 3,60,000   Debtors   1,50,000
B 2,40,000   Bank   60,000
      Cash   70,000
    19,40,000     19,40,000

 

Cash Account
Particulars
Amount Particulars
Amount
To Balance B/d   30,000 By A’s Capital A/c   20,000
To B’s Capital A/c   60,000 By Balance C/d (B. Fig)   70,000
    90,000     90,000

 

 

Working Note : 

WN *1 Calculation of Total Combined Capital in New Profit Sharing Ratio: –

Amount of A’s Capital = 2,10,000 X 2
3
  = 1,40,000    

 

Amount of B’s Capital = 2,10,000 X 1
3
  = 70,000    

 

Old Ratio of X, & Y = 2 : 1  
New Ratio of X, & Y = 3 : 2

Calculate the Sacrificing or Gaining Ratio of Partners
Sacrificing or Gaining Ratio = Old Ratio – New Ratio

A’s Share Sacrificing/Gaining = 2  – 3
3 5
  = 10 – 9
  15
  = 1  (Sacrifice)
  15

 

B’s Share Sacrificing/Gaining = 1  – 2
3 5
  = 5 – 6
  15
  = (-1) (Gain)
  15

 

Date Particulars
L.F. Debit Credit
2019 B’s Capital A/c Dr   20,000  
  To A’s Capital A/c*1       20,000
  (Being B compensate A)        

 

 

WN *2 Calculation of Amount of Goodwill Debited/Credited to the Capital a/c : –

 

A’s Capital Credited with = 3,00,000 X 1
15
  = 20,000    

 

B’s Capital Credited with = 3,00,000 X 1
15
  = 20,000    

 

 

Partner’s New Capital = Total of Debit side of Capital A/c – Total of Debit side of Capital A/c
A’s New Capital = 5,60,000 – 1,80,000
  = 3,80,000  
B’s New Capital = 3,20,000 – 1,40,000
  = 1,80,000  
Total Combined Capital = 6,00,000
 

WN *3 Calculation of Total Combined Capital in New Profit Sharing Ratio: –

 

Amount of A’s New Capital = 6,00,000 X 3
5
  = 3,60,000    

 

Amount of B’s New Capital = 6,00,000 X 2
5
  = 2,40,000    

 

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 32 Chapter 4 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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