Question 37 Chapter 3 of Class 12 Part - 1 VK Publication

Question 37 Chapter 3 of Class 12 Part – 1

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The solution of Question 37 Chapter 3 of Class 12 Part – 1: –

Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution

Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution

37. P, Qand Rare in partnership sharing profits and losses in the ratio of 5:4:3. On 31st March, 2018, their Balance Sheet was as follows:

Liabilities	Rs.	Assets	Rs.
Sundry Creditors	50,000	Cash at bank	40,000
Outstanding Expenses	5,000	Sundry Debtors	2,10,000
General Reserve	75,000	Stock	3,00,000
Capital Accounts:		Furniture	60,000
P 4,00,000		Plant and Machinery	4,20,000
Q 3,00,000
R 2,00,000	9,00,000
	10,30,000		10,30,000

It was decided that with effect from 1st April, 2018 the profit-sharing ratio will be 4:3:2. For this purpose, the following revaluations were made:
(i) Furniture to be taken at 80% of its value.
(ii) Stock to be appreciated by 20%.
(iii) Plant and Machinery be valued at Rs. 4,00,000.
(iv) Create provision for doubtful debts for Rs. 10,000 on debtors.
(v) Outstanding expenses to be increased by Rs.3,000.
Partners agreed that altered values are not to be recorded in the books and they also do not want to distribute the general reserve.
You are required to pass a single Journal entry to give effect to the above. Also prepare the revised Balance Sheet of the firm.

The solution of Question 37 Chapter 3 of Class 12 Part – 1: –

Journal Entry

Date	Particulars		L . F	Dr. ₹	Cr. ₹
2018	P’s Capital A/c	Dr.		2,500
April 1	To R’s Capital A/c				2,500
	( Being proportionate share of General Reserve and profit on revaluation adjusted between partners)

Balance Sheet

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(as at 1st April 2018)

Liabilities		Amount	Assets	Amount
Creditors		50,000	Cash At Bank	40,000
Outstanding Expenses		5,000	Sundry Debtors	2,10,000
General Reserve		75,000	Stock	3,00,000
Capitals A/c’s:			Furniture	60,000
P	3,97,500		Plant and Machinery	4,20,000
Q	3,00,000
R	2,02,500	9,00,000
		10,30,000		10,30,000

Working Note:

1. Statement Showing Profit on Revaluation and General Reserve

Particulars	Amount	Amount
Loss due to decrease in the value of furniture	12,000
Loss due to decrease in the value of plant and machinery	20,000
Loss due to Provision for doubtful Debts	10,000
Loss due to increase in Outstanding Expenses	3,000	(45,000)
Profit due to increase in the value of stock	60,000	60,000
Profit on revaluation		15,000
Add: General Reserve		75,000
		90,000

2.Partner Capital Account

Particulars	A	B	C	Particulas	A	B	C
To R’s Capital A/c	2,500	–	–	By Balance b/d	4,00,000	3,00,000	2,00,000
To Balance c/d	3,97,500	3,00,000	2,02,500	By R’s Capital A/c	–	–	2,500
	4,00,000	3,00,000	2,02,500		4,00,000	3,00,000	2,02,500

3. Old Ratio of P,Q and R = 5:4:3
New Ratio of P,Q and R = 4:3:2
Sacrificing ratio = old share – new share
P = 5/12-4/9=(15-16)/36=(-1)/36 (Gain)
Q = 4/12-3/9=(12-12)/36=0/36 (Nil)
R = 3/12-2/9=(9-8)/36=1/36 (Sacrifice)
Amount to be adjusted = 90,000 x 1/36= Rs. 2,500

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