Question 51 Chapter 5 - Unimax Class 12 Part 1 - 2021

Question 51 Chapter 5 – Unimax Class 12 Part 1 – 2021

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The solution of Question 50 Chapter 5 – Unimax Class 12 Part 1

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

51. A and B were in partnership sharing profits and losses in the proportion of 2/3rd and 1/3rd respectively. Their Balance Sheet figures on 31st December, 2020 were as follows :
Cash Rs. 1000 ; Sundry Debtors Rs. 15000 ; Stock Rs. 22000 ; Plant and Machinery Rs. 4000 ; Sundry Creditors Rs. 2000 ; Bank Overdraft Rs. 15000 ; A’s Capital Rs. 15000 ; B’s Capital Rs. 10000.
On 1st January, 2021, they admitted C into partnership on the following terms :
(a) C to purchase 1/4th share of the goodwill for Rs. 3000 and to provide Rs. 10000 as capital.
(b) Profits and losses are to be shared in the proportions of 1/2 to A, 1/4 to B and 1/4 to C.
(c) Plant and Machinery is to be reduced by 10% and Rs. 500 are to be provided for estimated bad debts. Stock is to be taken at a value of Rs. 24940.
(d) By bringing in or withdrawing cash the capitals of A and B are to be made proportionate to that of C on their profits sharing basis.
Set out entries relating to the above arrangement in the firm’s Journal, give the partners’ capital accounts in tabular form and submit the opening Balance Sheet of the new firm.

The solution of Question 50 Chapter 5 – Unimax Class 12 Part 1

Journal

Date	Particulars		L.F.	Debit	Credit
	Stock a/c	Dr.		2940
	To Revaluation A/c				1500
	(Being value of assets increased)
	Revaluation a/c	Dr.		900
	To Plant and Machinery A/c				400
	To Bad debts A/c				500
	(Being value of asset decreased)
	Revaluation a/c	Dr.		2040
	To A’s Capital A/c				1360
	To B’s Capital a/c				680
	(Being Profit on revaluation transferred to old partner’s capital a/c in old ratio)

Date	Particulars		L.F.	Debit	Credit
	Cash a/c	Dr.		13000
	To C’s Capital A/c				10000
	To Premium A/c				3000
	(Being capital and goodwill brought by partner)
	Premium a/c	Dr.		3000
	To A’s Capital A/c				2000
	To B’s Capital A/c				1000
	(Being goodwill credited among old partners)
	Cash a/c	Dr.		1640
	To A’s Capital A/c				1640
	(Being capital brought by old partners)
	B’s Capital a/c			1680
	To Cash A/c				1680
	(Being capital withdrawn)

Revaluation A/c

Particulars		Rs.	Particulars	Rs.
To Plant and Machinery a/c		400	By Stock	2940
To Profit on revaluation a/c
A (2 : 1)	1360
B	680
To Bad debts A/c		500
		2940		2940

Capital Accounts

Particulars	A	B	C	Particulars	A	B	C
To Cash A/c	_	1680	_	By Balance b/d	15000	10000	_
To Balance c/d	20000	10000	10000	By Cash A/c	1640	_	10000
				By Premium A/c	2000	1000	_
				By profit on revaluation a/c	1360	680	_


	20000	11680	10000		20000	11680	10000

Balance Sheet

Liabilities		Rs.	Assets		Rs.
Sundry Creditors		2000	Cash (1000 + 10000 + 3000 + 1640 – 1680)		13960
Capital Accounts			Stock		24940
A	20000		Plant and Machinery		3600
B	10000		Debtors	15000
C	10000		Less Provision for bad debts	500	14500
Bank Overdraft

		57000			57000

Working Note
(A) A’s sacrifice = 2/3 – 2/4 = 2/12
B’s sacrifice = 1/3 – 1/4 = 1/12
S.R. = 2 : 1
(B) Adjustments of capital
Total capital of firm = 10000 X 4/1 = Rs. 40000
A’s adjustment capital = 40000 X 2/4 = Rs. 20000
B’s adjustment capital = 40000 X 1/4 = Rs. 10000
B’s capital = Rs. 10000