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Question 33 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 33 Chapter 6 of +2-A
Question 33 Chapter 6 of +2-A

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Question 33 Chapter 6 of +2-A

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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:

Liabilities AmountAssets  Amount
Creditors 1,65,000Cash 1,20,000
General Reserve90,000Debtors 1,35,000 
Capital A/cs:  Less: Provision15,0001,20,000
N’s Capital 2,25,000 Stock  1,50,000
S’s Capital3,75,000 Machinery 4,50,000
G’s Capital 4,50,00010,50,000Patents  90,000
   Building  3,00,000
   Profit and Loss Account75,000
  13,05,000  13,05,000

 

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

  1. 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.
  2. Patents will be completely written off and stock, machinery, and the building will be depreciated by 5%.
  3. An unrecorded creditor of 30,000 will be taken into account.
  4. N and S will share the future profits in a 2 : 3 ratio.
  5. Goodwill of the firm on G’s retirement was valued at 90,000.

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

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

Journal Entries

DateParticulars
L.F.DebitCredit
 General Reserve A/cDr. 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/cDr. 15,000 
 S’s Capital A/cDr. 22,500 
 G’s Capital A/cDr. 37,500 
 To Profit & Loss A/c   75,000
 (Being balance of Profit & Loss transferred to partners’ capital accounts)   
      
 N’s Capital A/cDr.  18,000 
 S’s Capital A/cDr.  27,000 
 To G’s Capital A/c   45,000
 (Being adjustment for goodwill recorded in the books)   
      
 Revaluation A/cDr. 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/cDr. 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/cDr. 2,550 
 To Revaluation A/c   2,550
 (Being provision created transferred to Revaluation Account )

   
 N’s Capital A/cDr. 32,490 
 S’s Capital A/cDr. 48,735 
 G’s Capital A/cDr. 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/cDr. 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)

   

Working Note:-

Calculation of Gaining Ratio

Old Ratio of N, S, and G =  2: 3: 5

New Ratio of N and S = 2:3

Gaining Ratio = New Ratio – Old Ratio

N’s Gaining Share=22
510
     
 =42
 10
     
 =2  
 10  

 

S’s Gaining Share=33
510
     
 =63
 10
     
 =3  
 10  

Gaining Ratio = 2:3

Adjustment of Goodwill

Goodwill of the firm = Rs 90,000

G’s Share of Goodwill=90,000X5
10
     
 =Rs 45,000  

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

N’s Share=45,000X2
5
     
 =Rs 18,000/-  

 

S’s Share=45,000X3
5
     
 =Rs 27,000/-  

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Calculation of Excess/Deficit Provision for Doubtful Debts

Required Provision = 5%

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

Closing Debtors
(after writing off Bad Debts)

=DebtorsBad Debts
 =1,35,0006,000
 =1,29,000 /-  

 

New Provision on Closing Debtors=Closing Debtors XRate of Provision
 =1,29,000X5%
 =6,450/-  

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Balance of Old Provision after Bad Debts=Old ProvisionBad debts
 =15,0006,000
 =9,000/-  

 

Excess/(Deficit) Provision=Old ProvisionOld Provision
 =9,0006,450
 =2,550/-  

 

Calculation of G’s Loan Balance

Amount due to G=Opening Capital+All CreditsAll Debits
 =4,50,000+(45,000+45,000)(37,500 +81,225)
 =4,21,275/-        

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

 

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

+2 Book 1-min
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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