Question 38 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 38 Chapter 6 of +2-A

Question 38 Chapter 6 of +2-A

38. A, B, and C are partners sharing profits and losses in the ratio of 4 : 3 : 3. Their Balance Sheet as of 31st March 2019 is:

Liabilities Amount Assets  Amount
Creditors   7,000 Land and Building  36,000
Bills Payable 3,000 Plant and Machinery 28,000
Reserves   20,000 Computer Printer 8,000
Capital A/cs:    Stock    20,000
A’s Capital  32,000   Sundry Debtors  14,000  
B’s Capital 24,000   Less: Provision for Doubtful Debts 2,000 12,000
C’s Capital  20,000 76,000 B’s Loan   2,000
    1,06,000     1,06,000

On 1st April 2019, B retired from the firm on the following terms:

  1. Goodwill of the firm is to be valued at 14,000.
  2. Stock, Land, and buildings are to be appreciated by 10%.
  3. Plant and Machinery and Computer Printer are to be reduced by 10%.
  4. Sundry Debtors are considered to be good.
  5. There is a liability of 2,000 for the payment of outstanding salary to the employees of the firm. This liability was not provided in the Balance Sheet but the same is to be recorded now.
  6. The amount payable to B is to be transferred to his Loan Account.

Prepare Revaluation Account, Partners’ Capital Accounts, and the Balance Sheet of A and C after B’s retirement.

The solution of Question 38 Chapter 6 of +2-A: –

Revaluation Account
Particular
Amount Particular Amount
To Plant and Machinery 2,800 By Stock A/c            2,000
28,000 × 10%   (20,000 × 10%)  
To Electronic Typewriter 800 By Land and Building A/c 3,600
8,000 × 10%   (36,000 × 10%)  
To Outstanding Salary

2,000 By Provision for Doubtful Debts A/c 2,000
To Profit transferred to        
A’s Capital A/c 800        
B’s Capital A/c 600        
C’s Capital A/c 600 2,000      
    7,600     7,600

 

Partners’ Capital Account
Part. X Y Z

Part.

X Y Z
To B’s Capital A/c (Goodwill) 1,200 600 By Balance B/d 32,000 24,000 20,000
        By Reserves A/c 8,000 6,000 6,000
        By Revaluation A/c 800 600 600
To B’s Loan A/c   34,800   By A’s Capital A/c 2,400
To Balance c/d 38,400 24,800 By C’s Capital A/c 1,800
  40,800 34,800 26,600   40,800 34,800 26,600

 

Balance Sheet
Liabilities
Amount Assets Amount
Creditors 7,000  Land and Building 39,600
Bills Payable 3,000 (36,000 + 3,600)  
Outstanding Salary 2,000 Plant and Machinery 25,200
    (28,000 – 2,800)  
    Electronic Typewriter 7,200
      (8,000 – 800)    
B’s Loan   34,800 Stock
  22,000
Capital:     (20,000 + 2,000)  
A’s Capital 38,400   Sundry Debtors   14,000
C’s Capital 24,800 41,200 Bank 2000
    1,10,000     1,10,000

 

Working Note:-

Calculation of Gaining Ratio

Old Ratio of A, B and C= 4:3:3
B retires from the firm.

Gaining Ratio of A and C= 4:3 (Given)

Adjustment of Goodwill

Goodwill of the firm = Rs 14,000

B’s Share of Goodwill = Firm’s Goodwill X B’s share
         
  = 14,000 X 3
10
         
  = Rs 4,200    

 

A’s Share of Goodwill = B’s Goodwill X Gaining share of A
         
  = 4,200 X 4
7
         
  = Rs 2,400    

 

C’s Share of Goodwill = B’s Goodwill X Gaining share of C
         
  = 4,200 X 3
7
         
  = Rs 1,800    

 

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 - Question 38 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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