Question 45 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 45 Chapter 6 of +2-A

Question 45 Chapter 6 of +2-A

45. Amit, Balan, and Chander were partners in a firm sharing profits in the proportion of 1/2, 1/3, and 1/6 respectively. Chander retired on 1st April 2014. The Balance Sheet of the firm on the date of Chander’s retirement was as follows

Liabilities Amount Assets  Amount
Sundry Creditors  12,600 Bank    50,000
Provident Fund 3,000 Debtors 30,000  
General Reserve  9,000 Less: Provision  1,000 29,000
Partner’s Capital A/cs:  Stock    25,000
Amit’s Capital  40,000   Investments 10,000
Balan’s Capital 36,500   Patents   5,000
Chander’s Capital  20,000 96,500 Machinery 48,000
    1,21,100     1,21,100

It was agreed that:

  1. Goodwill will be valued at 27,000.
  2. Depreciation of 10% was to be provided on Machinery.
  3. Patents were to be reduced by 20%.
  4. Liability on account of Provident Fund was estimated at 2,400.
  5. Chander took over Investments for 15,800.
  6. Amit and Balan decided to adjust their capitals in a proportion to their profit-sharing ratio by opening Current Accounts.

Prepare Revaluation Account and Partners’ Capital Accounts on Chander’s retirement.

The solution of Question 45 Chapter 6 of +2-A: –

Revaluation Account
Particular
Amount Particular Amount
To Machinery A/c 4,800 By Investments A/c 5,800
To Patents 1,000 By Provident Fund A/c 600
       
To Profit transferred to:      
Amit’s Capital A/c 300        
Balan’s Capital A/c 200        
Chander’s Capital A/c 100 600      
    6,400     6,400

 

Partners’ Capital Account
Part. Amit Balan Chander

Part.

Amit Balan Chander
To Investments A/c 15,800 By Balance B/d 40,000 36,500 20,000
To Chander’s Capital A/c 2,700 1,800 By Revaluation (Profit)A/c 300 200 100
To Chander’s Loan A/c 10,300 By General Reserve A/c 4,500 3,000 1,500
To Balan’s Current A/c 5,900 By Amit’s Capital A/c 2,700
        By Balan’s Capital A/c 1,800
        By Current A/c 5,900
               
               
               
  50,700 39,700 26,100   50,700 39,700 26,100

 

Working Note:-

Calculation of Gaining Ratio

Old Ratio of Amit, Balan, and Chander = 1/2: 1/3: 1/6

= 3/6:2/6:1/6       (make base equal)
Chander retires from the firm.

New or Gaining Ratio of Amit and Balan,= 3:2 (as per old ratio)

Adjustment of Goodwill

Goodwill of the firm = Rs 27,000

Chander’s Share of Goodwill = Firm’s Goodwill X Chander’s share
         
  = 27,000 X 1
6
         
  = Rs 4,500    

 

Amit will pay = Chander’s Goodwill X

Share of Amit

         
  = 4,500 X 3
5
         
  = Rs 2,700    

 

Balan will pay = Chander’s Goodwill X Share of Balan
         
  = 4,500 X 2
5
         
  = Rs 1,800    

Calculation of Addition/withdrawal of Capital by the Amit and Balan

Balance of Capital Amount after all adjustments = Opening Balance of Capital Account + All Credits  All Debits

 

Balance of Amit’s Capital Amount after all adjustments = 40,000 + 300 + 4,500 2,700
  = 42,100/-            

 

Balance of Balan’s Capital Amount after all adjustments = 36,500 + 200 +  3,000 (1,800)
                 
  = 37,900            

 

Total Capital of the firm = Amit’s Capital Balance + Balan’s Capital Balance
         
  = 42,100 + 37,900
         
  = 80,000    

 

Calculation of Total Capital

The total capital of the Firm= Rs 80,000

Amit’s New Capital = Firm’s new Capital X

Share of Amit

         
  = 80,000 X 3
5
         
  = Rs 48,000    

 

Balan New Capital = Firm’s new Capital X Share of Balan
         
  = 80,000 X 2
  5
         
  = Rs 32,000    

 

Calculation of Addition/withdrawal of Capital by the Amit and Balan

Addition/withdrawal by Amit’s in/from Capital A/c

= New Capital Amount Balance of Capital Amount after all adjustments
         
  = 48,000 42,100
         
  = 5,900/-    

 

Addition/withdrawal by Balan’s in/from Capital A/c = New Capital Amount Balance of Capital Amount after all adjustments
         
  = 32,000 37,900
         
  = 5,900/-    

 

 

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 45 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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