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Question 46 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 46 Chapter 6 of +2-A
Question 46 Chapter 6 of +2-A

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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:

LiabilitiesAmountAssets Amount
Creditors  42,000Land and Building 1,24,000
Investment Fluctuation Fund20,000Motor Vans40,000
Profit and Loss Account80,000Investments38,000
   Machinery24,000
Capital A/cs:  Stock  30,000
J’s Capital 1,00,000 Sundry Debtors 80,000 
H’s Capital80,000 Less: Provision for Doubtful Debts6,00074,000
K’s Capital 40,0002,20,000Cash  32,000
  3,62,000  3,62,000

On the above date, H retired and J and K agreed to continue the business on the following terms:

  1. Goodwill of the firm was valued at 1,02,000.
  2. There was a claim of 8,000 for workmen’s compensation.
  3. The provision for bad debts was to be reduced by 2,000.
  4. 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.
  5. 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.

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
AmountParticularAmount
To Claim for Workmen Comp8,000By Provision for Doubtful Debts A/c2,000
    
  By Profit transferred to 
   J’s Capital A/c3,000 
   H’s Capital A/c1,800  
   K’s Capital A/c1,200 6,000
  8,000  8,000

 

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Partners’ Capital Account
Part.JHK

Part.

JHK
To Revaluation A/c3,0001,8001,200By Balance B/d1,00,00080,00040,000
To H’s Capital A/c10,20020,400By I.F.F. A/c10,0006,0004,000
To Cash A/c14,000By P&L A/c40,00024,00016,000
To H’s Loan A/c1,24,800By J’s Capital A/c10,200
To J’s Current A/c31,680By K’s Capital A/c20,400
    By K’s Current A/c31,680
        
To Balance c/d 1,05,12070,080    
 1,50,0001,40,60098,400 1,50,0001,40,60098,400

 

Balance Sheet
Particular
AmountParticularAmount
Creditors42,000Land and Building1,24,000
Claim for Workmen Comp.8,000Motor Vans40,000
H’s Loan A/c1,24,800Investments38,000
J’s Current A/c 31,680Machinery 24,000
   Stock 30,000
   Debtors40,000 
Capital A/cs  Less: Prov. For D/D4,0007,600
J’s Capital1,05,120 Cash A/c 18,000
K’s Capital70,0801,75,200K’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

H retires from the firm.

New Ratio of Jand K = 3:2 (given)

Gaining Ratio =  New Ratio – Old Ratio

J’s Gain=35
510
     
 =65
 10
     
 =1  
 10  

 

Y’s Gain=22
510
     
 =42
 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 GoodwillXH’s share
     
 =1,02,000X3
10
     
 =Rs 30,600  

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 J will pay=H’s GoodwillX

Share of J

     
 =30,600X1
3
     
 =Rs 10,200  

 

K will pay=H’s GoodwillX

Share of K

     
 =30,600X2
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

 

Balance of J’s Capital Amount after all adjustments=1,00,000+10,000+40,000(3,000+10,200)
 =1,00,000+50,00013,200    
           
 =1,36,800/-        

 

Balance of K’s Capital Amount after all adjustments=40,000+4,000+16,000(1,200+20,400)
 =40,000+20,00021,600    
           
 =38,400/-        

 

Total Capital of the firm=J’s Capital Balance+K’s Capital Balance
     
 =1,36,800+38,400
     
 =1,75,200/-  

 

Calculation of Total Capital

The total capital of the Firm= Rs 1,75,200

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New Profit Sharing Ratio = 3:2 

J’s New Capital=Firm’s New CapitalX

Share of J

     
 =1,75,200X3
5
     
 =Rs 1,05,120  

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K’s New Capital=Firm’s new CapitalXShare of K
     
 =1,75,200X2
5
     
 =Rs 70,080  

 

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

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

=New Capital AmountBalance of Capital Amount after all adjustments
     
 =1,05,1201,36,800
     
 =(-)31,680/-  

The negative value so he will withdrawal Capital. 

Addition/withdrawal by K’s in/from Capital A/c=New Capital AmountBalance of Capital Amount after all adjustments
     
 =70,08038,400
     
 =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)

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
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms

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