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Question 46 Chapter 6 of +2-A
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46. J, H, and K were partners in a firm sharing profits in the ratio of 5: 3: 2. On 31st March 2015, their Balance Sheet was as follows:
Liabilities | Amount | Assets | Amount | ||
Creditors | 42,000 | Land and Building | 1,24,000 | ||
Investment Fluctuation Fund | 20,000 | Motor Vans | 40,000 | ||
Profit and Loss Account | 80,000 | Investments | 38,000 | ||
Machinery | 24,000 | ||||
Capital A/cs: | Stock | 30,000 | |||
J’s Capital | 1,00,000 | Sundry Debtors | 80,000 | ||
H’s Capital | 80,000 | Less: Provision for Doubtful Debts | 6,000 | 74,000 | |
K’s Capital | 40,000 | 2,20,000 | Cash | 32,000 | |
3,62,000 | 3,62,000 |
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On the above date, H retired and J and K agreed to continue the business on the following terms:
- Goodwill of the firm was valued at 1,02,000.
- There was a claim of 8,000 for workmen’s compensation.
- The provision for bad debts was to be reduced by 2,000.
- H will be paid 14,000 in cash and the balance will be transferred in his Loan Account which will be paid in four equal yearly installments together with interest @ 10% p.a.
- The new profit-sharing ratio between J and K will be 3: 2 and their capitals will be in their new profit-sharing ratio. The capital adjustments will be done by opening Current Accounts.
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Prepare Revaluation Account, Partners’ Capital Accounts, and Balance Sheet of the new firm.
The solution of Question 46 Chapter 6 of +2-A: –
Revaluation Account |
|||||
Particular |
Amount | Particular | Amount | ||
To Claim for Workmen Comp | 8,000 | By Provision for Doubtful Debts A/c | 2,000 | ||
By Profit transferred to | |||||
J’s Capital A/c | 3,000 | ||||
H’s Capital A/c | 1,800 | ||||
K’s Capital A/c | 1,200 | 6,000 | |||
8,000 | 8,000 |
Partners’ Capital Account |
|||||||
Part. | J | H | K |
Part. |
J | H | K |
To Revaluation A/c | 3,000 | 1,800 | 1,200 | By Balance B/d | 1,00,000 | 80,000 | 40,000 |
To H’s Capital A/c | 10,200 | – | 20,400 | By I.F.F. A/c | 10,000 | 6,000 | 4,000 |
To Cash A/c | – | 14,000 | – | By P&L A/c | 40,000 | 24,000 | 16,000 |
To H’s Loan A/c | – | 1,24,800 | – | By J’s Capital A/c | – | 10,200 | – |
To J’s Current A/c | 31,680 | – | – | By K’s Capital A/c | – | 20,400 | – |
By K’s Current A/c | – | – | 31,680 | ||||
To Balance c/d | 1,05,120 | – | 70,080 | ||||
1,50,000 | 1,40,600 | 98,400 | 1,50,000 | 1,40,600 | 98,400 |
Balance Sheet |
|||||
Particular |
Amount | Particular | Amount | ||
Creditors | 42,000 | Land and Building | 1,24,000 | ||
Claim for Workmen Comp. | 8,000 | Motor Vans | 40,000 | ||
H’s Loan A/c | 1,24,800 | Investments | 38,000 | ||
J’s Current A/c | 31,680 | Machinery | 24,000 | ||
Stock | 30,000 | ||||
Debtors | 40,000 | ||||
Capital A/cs | Less: Prov. For D/D | 4,000 | 7,600 | ||
J’s Capital | 1,05,120 | Cash A/c | 18,000 | ||
K’s Capital | 70,080 | 1,75,200 | K’s Current A/c | 31,680 | |
3,81,680 | 3,81,680 |
Working Note:-
Calculation of Gaining Ratio
Old Ratio of J, H, and K = 5: 3: 2
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H retires from the firm.
New Ratio of Jand K = 3:2 (given)
Gaining Ratio = New Ratio – Old Ratio
J’s Gain | = | 3 | – | 5 |
5 | 10 | |||
= | 6 | – | 5 | |
10 | ||||
= | 1 | |||
10 |
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Y’s Gain | = | 2 | – | 2 |
5 | 10 | |||
= | 4 | – | 2 | |
10 | ||||
= | 2 | |||
10 |
Gaining Ratio = 1: 2
Adjustment of Goodwill
Goodwill of the firm = Rs 1,02,000
H’s Share of Goodwill | = | Firm’s Goodwill | X | H’s share |
= | 1,02,000 | X | 3 | |
10 | ||||
= | Rs 30,600 |
J will pay | = | H’s Goodwill | X |
Share of J |
= | 30,600 | X | 1 | |
3 | ||||
= | Rs 10,200 |
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K will pay | = | H’s Goodwill | X |
Share of K |
= | 30,600 | X | 2 | |
3 | ||||
= | Rs 20,400 |
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 |
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Balance of J’s Capital Amount after all adjustments | = | 1,00,000 | + | 10,000 | + | 40,000 | – | (3,000 | + | 10,200) | |
= | 1,00,000 | + | 50,000 | – | 13,200 | ||||||
= | 1,36,800/- |
Balance of K’s Capital Amount after all adjustments | = | 40,000 | + | 4,000 | + | 16,000 | – | (1,200 | + | 20,400) | |
= | 40,000 | + | 20,000 | – | 21,600 | ||||||
= | 38,400/- |
Total Capital of the firm | = | J’s Capital Balance | + | K’s Capital Balance |
= | 1,36,800 | + | 38,400 | |
= | 1,75,200/- |
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Calculation of Total Capital
The total capital of the Firm= Rs 1,75,200
New Profit Sharing Ratio = 3:2
J’s New Capital | = | Firm’s New Capital | X |
Share of J |
= | 1,75,200 | X | 3 | |
5 | ||||
= | Rs 1,05,120 |
K’s New Capital | = | Firm’s new Capital | X | Share of K |
= | 1,75,200 | X | 2 | |
5 | ||||
= | Rs 70,080 |
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Calculation of Addition/withdrawal of Capital by the Amit and Balan
Addition/withdrawal by J’s in/from Capital A/c |
= | New Capital Amount | – | Balance of Capital Amount after all adjustments |
= | 1,05,120 | – | 1,36,800 | |
= | (-)31,680/- |
The negative value so he will withdrawal Capital.
Addition/withdrawal by K’s in/from Capital A/c | = | New Capital Amount | – | Balance of Capital Amount after all adjustments |
= | 70,080 | – | 38,400 | |
= | 31,680/- |
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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)
- Chapter No. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
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

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