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Question 32 Chapter 4 of +2-A
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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 | ||
| A | 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:
- The value of Land and Building will be 5,00,000;
- Reserve is to be maintained at 3,00,000.
- 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 | ||
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| 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 |
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| Old Ratio of X, & Y | = | 2 : 1 |
| New Ratio of X, & Y | = | 3 : 2 |
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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 | |
| B’s Capital A/c | Dr | 20,000 | |||
| To A’s Capital A/c*1 | 20,000 | ||||
| (Being B compensate A) | |||||
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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 |
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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)
- 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
