Question 37 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 37 Chapter 6 of +2-A

Question 37 Chapter 6 of +2-A

37. X, Y, and Z are partners sharing profits in the ratio of 4: 3: 2. Their Balance Sheet as of 31st March 2019 stood as follows:

Liabilities Amount Assets  Amount
Creditors   24,140 Cash at Bank   3,300
      Sundry Debtors   3,045  
Capital A/cs:    Less: Provision for Doubtful Debts   105 2,940
X’s Capital  12,000   Stock    4,800
Y’s Capital 9,000   Plant and Machinery  5,100
Z’s Capital  6,000 27,000 Land and Building  15,000
      Y’s Loan   20,000
    51,140     51,140

AY retired on 1st April 2019 after giving due notice. The following adjustments in the books of the firm were agreed:

  1. Land and Building be appreciated by 10%.
  2. Provision for Doubtful Debts is no longer necessary since all the debtors are good.
  3. Stock be appreciated by 20%.
  4. Adjustment is made in the accounts to rectify a mistake previously committed whereby Y was credited in excess by 810, while X and Z were debited in excess of 420 and 390 respectively.
  5. Goodwill of the firm is valued at 5,400 and Y’s share of the same be adjusted to that of X and Z who was going to share in the ratio of 2:1.
  6. It was decided by X and Y to settle Y’s account immediately on his retirement.

Prepare: i) Revaluation Account; ii) Partner’s Capital Accounts and iii) Balance Sheet of the firm after Y’s retirement.

The solution of Question 37 Chapter 6 of +2-A: –

Revaluation Account
Particular
Amount Particular Amount
    By Land and Building A/c 1,500
    (15,000 × 10%)  
    By Prov. for Doubtful Debts A/c 105
    By Stock A/c 960
To Profit transferred to   (4,800 × 20%)    
X’s Capital A/c 1,140        
Y’s Capital A/c 855        
Z’s Capital A/c 570 18,000      
    2,565     2,565

 

Partners’ Capital Account
Part. X Y Z

Part.

X Y Z
To Y’s Capital A/c(Goodwill) 1,200 600 By Balance B/d 12,000 9,000 6,000
To X’s Capital A/c 420 By Revaluation A/c 1,140 855 570
To Z’s Capital A/c 390 By X’s Capital A/c 1,200
To Y’s Loan A/c 10,845 By Z’s Capital A/c 600
To Balance c/d 12,360 6,360 By Y’s Capital A/c 420 390
  13,560 11,655 6,960   13,560 11,655 6,960

 

Balance Sheet
Liabilities
Amount Assets Amount
Sundry Creditors 24,140 Cash at Bank   3,300
    Sundry debtors 3,045
    Stock 5,760
    Plant and Machinery 5,100
    Land and Building 16,500
      Y’s Loan   9,155
Capital:          
X’s Capital 12,360        
Z’s Capital 6,360 18,720    
    42,860     42,860

 

Working Note:-

Calculation of Gaining Ratio

Old Ratio of X, Y, and Z = 4:3:2
Y retires from the firm.

Gaining Ratio of X and Z = 2:1 (Given)

Adjustment of Goodwill

Goodwill of the firm = Rs 5,400

Y’s Share of Goodwill = 5,400 X 3
9
         
  = Rs 1,800    

 

X’s Share of Goodwill = 1,800 X 2
3
         
  = Rs 1,200    

 

Z’s Share of Goodwill = 1,800 X 1
3
         
  = Rs 600    

Computation of final settlement amount payable to/ receivable from Y after his retirement:

Existing Loan against Y = 20,000

Capital Account Balance Payable = 10,845

The amount payable to/receivable from Y

= Existing Loan against Y Capital Account Balance Payable
  = 20,000 10,845
  = 9,155/-    

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 37 Chapter 6 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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