Question 33 Chapter 6 of +2-A - T.S. Grewal 12 Class Part

Question 33 Chapter 6 of +2-A

Table of Contents

33. N, S, and G were partners in firm sharing profits and losses in the ratio of 2: 3: 5. On 31st March 2016 their Balance Sheet was as under:

G retired on the above date and it was agreed that:

Debtors of 6,000 will be written off as bad debts and a provision of 5% on debtors for bad and doubtful debts will be maintained.
Patents will be completely written off and stock, machinery, and the building will be depreciated by 5%.
An unrecorded creditor of 30,000 will be taken into account.
N and S will share the future profits in a 2 : 3 ratio.
Goodwill of the firm on G’s retirement was valued at 90,000.

Pass necessary Journal entries for the above transactions in the books of the firm on G’s retirement.

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The solution of Question 33 Chapter 6 of +2-A: –

Journal Entries

Date	Particulars		L.F.	Debit	Credit
	General Reserve A/c	Dr.		90,000
	To N’s Capital A/c				18,000
	To S’s Capital A/c				27,000
	To G’s Capital A/c				45,000
	(Being General reserve transferred to partners’ capital accounts)

	N’s Capital A/c	Dr.		15,000
	S’s Capital A/c	Dr.		22,500
	G’s Capital A/c	Dr.		37,500
	To Profit & Loss A/c				75,000
	(Being balance of Profit & Loss transferred to partners’ capital accounts)

	N’s Capital A/c	Dr.		18,000
	S’s Capital A/c	Dr.		27,000
	To G’s Capital A/c				45,000
	(Being adjustment for goodwill recorded in the books)

	Revaluation A/c	Dr.		1,35,000
	To Patent A/c				90,000
	To Stock A/c				7,500
	To Machinery A/c				22,500
	To Building A/c				15,000
	(Being Decrease in the value of assets transferred to Revaluation account)

	Revaluation A/c	Dr.		30,000
	To Creditors A/c				30,000
	(Being balance of Y’s capital account transferred to Y’s loan account)
	Provision for Doubtful Debts A/c	Dr.		2,550
	To Revaluation A/c				2,550
	(Being provision created transferred to Revaluation Account )
	N’s Capital A/c	Dr.		32,490
	S’s Capital A/c	Dr.		48,735
	G’s Capital A/c	Dr.		81,225
	To Revaluation A/c				1,62,450
	(Being loss on revaluation transferred to partners’ capital accounts 1,35,000 + 30,000 -2550 = 162450/-)

	G’s Capital A/c	Dr.		4,21,275
	To G’s Loan A/c				4,21,275
	(Being balance of Y’s capital account transferred to Y’s loan account)

Old Ratio of N, S, and G = 2: 3: 5

New Ratio of N and S = 2:3

Gaining Ratio = New Ratio – Old Ratio

Gaining Ratio = 2:3

Goodwill of the firm = Rs 90,000

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This share of goodwill is to be distributed between N and S in their gaining ratio i. e. 2:3

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Required Provision = 5%

Closing Debtors = Debtors – Bad Debts
(after writing off Bad Debts)

Closing Debtors (after writing off Bad Debts)	=	Debtors	–	Bad Debts
	=	1,35,000	–	6,000
	=	1,29,000 /-

New Provision on Closing Debtors	=	Closing Debtors	X	Rate of Provision
	=	1,29,000	X	5%
	=	6,450/-

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Balance of Old Provision after Bad Debts	=	Old Provision	–	Bad debts
	=	15,000	–	6,000
	=	9,000/-

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

Chapter No. 1 – Financial 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