Question 51 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 51 Chapter 6 of +2-A

Question 51 Chapter 6 of +2-A

51. A B and C are partners in firm sharing profits and losses in the ratio of 3 : 2: 1. Their Balance Sheet as at 31st March 2019 is:

Liabilities   Amount Assets   Amount
Creditors   30,000 Cash in Hand   18,000
Bills Payable   16,000 Debtors 25,000  
General Reserve   12,000 Less: Provision for Doubtful Debts 3,000 22,000
Capital A/cs:     Stock   18,000
A 40,000   Furniture   30,000
B 40,000   Machinery   70,000
C 30,000 1,10,000 Goodwill   10,000
    1,68,000     1,68,000

B retires on 1st April 2019 on the following terms:
a Provision for Doubtful Debts is raised by 1,000.
b Stock to be reduced by 10% and Furniture by 5%.
c Their is an outstanding claim of damages of 1,100 and it is to be provided for.
d Creditors will be written back by 6,000.
e Goodwill of the firm is valued at 22,000.
f B is paid in full with the cash brought in by A and C in such a manner that their capitals are in proportion to their profit-sharing ratio and Cash in Hand remains at 10,000.
Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of A and C.

 

 

The solution of Question 51 Chapter 6 of +2-A: –

 

Revaluation Account
Particular
Amount Particular Amount
To Provision for Doubtful Debts 1,000 By Creditors 6,000
To Stock 18,000 × 10% 1,800    
To Outstanding Claim for Damages 1,100    
To Furniture 30,000 × 5% 1,500    
To Profit transferred to        
A’s Capital A/c 300        
B’s Capital A/c 200        
C’s Capital A/c 100 600      
    6,000     6,000

 

Partners’ Capital Account
Part. A B C

Part.

A B C
To B’s Capital A/c 5,500 1,833 By Balance B/d 40,000 40,000 30,000
To X’s Loan A/c 5,000 3,333 1,667 By Revaluation A/c 300 200 100
To Cash A/c 48,200 _ By A’s Capital A/c 5,500
        By C’s Capital A/c 1,833

To Balance c/d 35,800 28,600        
  46,300 51,533 32,100   46,300 51,533 32,100
To Cash A/c 2,450 By Balance b/d 35,800 28,600
To Balance c/d 78,450 26,150 By Cash A/c 42,650
  78,450 28,600   78,450 28,600

 

Balance Sheet
Liabilities
Amount Assets Amount
Creditors 24,000 Cash in Hand   11,000
Bills Payable 16,000 Debtor 25,000  
Outstanding Claim for Damages   1,100 Less: Provision for Doubtful Debts 4,000 21,000
Capital:     Stock   16,200
A 78,450   Furniture   28,500
C 26,150 1,04,600 Machinery 70,000
    1,45,700     1,45,700

 

Cash Account 
Particulars
Amount Particulars Amount
Balance b/d 18,000 B’s Capital A/c   48,200
A’s Capital A/c 42,650 C’s Capital A/c   2,450
      Balance c/d 10,000
    60,650     60,650


Working Notes:
Calculation of Profit-Sharing Ratio

Old Ratio A, B and C = 3: 2: 1
B retires from the firm
∴ New Ratio A and C = 3: 1 and
Gaining Ratio = 3 : 1

Adjustment of Goodwill

Goodwill of the firm = Rs 22,000

         
B’s Share of Goodwill = 22,000 X 2
6
         
  = Rs 7,333    

This share of goodwill is to be distributed between A and C in their gaining ratio i.e. 3: 1.

A ‘ share = 7,333 X 3
4
         
  = Rs 5,500    

 

C ‘ share = 7,333 X 1
4
         
  = Rs 1,833    

 

Adjustment of Partners’ Capital after B’s Retirement

Amount to be brought in by A and C = Cash to be paid to B + Minimum Balance of Cash Existing Balance of Cash
  = 48,200 + 10,000 18,000
  = Rs 40,200    

Combined Capital of A and C after of all adjustments = 35,800 + 28,600 = Rs 64,400
∴ Total Capital of the Firm = Amount to be brought in by A and C + Combined Capital of A and C
= 40,200 + 64,400 = 1,04,600

A’s New Capital = 1,04,600 X 3
4
         
  = Rs 78,450    

 

C ‘ share = 1,04,600 X 1
4
         
  = Rs 26,150    

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 51 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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