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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:

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:

  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.

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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)

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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