Question 45 Chapter 5 - Unimax Class 12 Part 1 - 2021

Question 45 Chapter 5 – Unimax Class 12 Part 1 – 2021

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The solution of Question 45 Chapter 5 – Unimax Class 12 Part 1

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

45. Vimal and Nirmal are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 31st December, 2021 the position of the business was as follows :

Liabilities	Amount	Assets	Amount
Sundry Creditors	20,000	Cash	14000
Profit and Loss Account	10,000	Debtors	18,000
Capital Accounts		Plant and Machinery	50000
Vimal	60000	Stock	40000
Nirmal	32000
	1,22,000		1,22,000

On this day, Kailash agrees to join the business on the following terms and conditions :

(i)He will introduce Rs. 40000 as his capital and will pay Rs. 20000 to the existing partners for his share of goodwill.

(ii)The new profit sharing ratio is 2 : 1 : 1 respectively for Vimal, Nirmal and Kailash.

(iii)A revaluation of assets will be made by reducing plant and machinery to Rs. 35000 and stock by 10%. Provision of Rs. 1000 to be created for bad and doubtful debts.
Pass journal entries for the above arrangement and give the Balance Sheet of the newly constituted firm. Also specify the sacrifice ratio.

The solution of Question 45 Chapter 5 – Unimax Class 12 Part 1

Journal

Date	Particulars		L.F.	Debit	Credit
	Revaluation a/c	Dr.		20000
	To Plant and Machinery a/c				15000
	To Stock A/c				4000
	To Provision for bad debts a/c				1000
	(Being value of assets decreased)
	Vimal’s Capital a/c	Dr.		12000
	Nirmal’s Capital a/c	Dr.		8000
	To Revaluation A/c				20000
	(Being net loss transferred to old partners capital a/c in old ratio)
	Cash a/c	Dr.		60000
	To Kailash’s capital a/c				40000
	To Premium A/c				20000
	(Being capital and goodwill brought in cash by new partner)
	Premium a/c	Dr.		20000
	To Vimal’s capital a/c				8000
	To Nirmal’s capital a/c				12000
	(Being goodwill credited to old partner’s capital A/c in sacrificing ratio)

Date	Particulars		L.F.	Debit	Credit
	Profit and Loss a/c	Dr.		10000
	To Vimal’s Capital A/c				6000
	To Nirmal’s Capital A/c				4000
	(Being Profits of the business credited to old partners’s capital a/c in old ratio)

Revaluation A/c

Particulars	Rs.	Particulars		Rs.
To Stock A/c	4000	By Loss on Revaluation A/c
To Plant and Machinery A/c	15000	Vimal ( 3 : 2 )	12000
To Provision on doubtful debts A/c	1000	Nirmal	8000	20000


	20000			20000

Capital Accounts

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Particulars	Vimal	Nirmal	Kailash	Particulars	Vimal	Nirmal	Kailash
To Loss on revaluation A/c	12000	8000	_	By Balance b/d	60000	32000	_
To Balance c/d	62000	40000	40000	By Cash A/c	_	_	40000
				By Premium A/c	8000	12000	_
				By Profit and Loss A/c ( 3 : 2)	6000	4000	_


	74000	48000	40000		74000	48000	40000

Balance Sheet

Particulars		Rs.	Particulars		Rs.
Sundry Creditors		2000	Cash		74000
Capital Accounts			Stock		36000
Vimal	62000		Plant and Machinery		35000
Nirmal	4000		Debtors	18000
Kailash	40000	142000	Less Provision for sacrifice debts	1000	17000

		162000			162000

Working Note
Old Share – New share
Vimal’s sacrifice = Old share – new share
= 3/5 – 2/4
= 2/20
Nirmal’s sacrifice = 2/5 – 1/4
= 3/20
S.R. = 2 : 3