Question 52 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question No.52 Chapter No.6 - T.S. Grewal +2 Book 2019-Solution

Question 52 Chapter 6 of +2-A

52. Following is the Balance Sheet of Kusum, Sneh and Usha as on 31st March 2019, who have agreed to share profits and losses in the proportion of their capitals:

Liabilities   Amount Assets   Amount
Capital A/cs:     Land and Building    4,00,000
Kusum 4,00,000   Machinery   6,00,000
Sneh 6,00,000   Closing Stock   2,00,000
Usha 4,00,000` 14,00,000 Sundry Debtors 2,20,000  
Employees’ Provident Fund   70,000 Less: Provision for Doubtful Debts 20,000 2,00,000
Workmen Compensation Reserve   30,000 Cash at Bank    2,00,000
Sundry Creditors   1,00,000      
    16,00,000     16,00,000

On 1st April, 2019, Kusum retired from the firm and the remaining partners decided to carry on the business. It was agreed to revalue the assets and reassess the liabilities on that date, on the following basis:
a Land and Building be appreciated by 30%.
b Machinery be depreciated by 30%.
c There were Bad Debts of 35,000.
d The claim against Workmen Compensation Reserve was estimated at 15,000.
e Goodwill of the firm was valued at 2,80,000 and Kusum’s share of goodwill was adjusted against the Capital Accounts of the continuing partners Sneh and Usha who have decided to share future profits in the ratio of 3 : 4 respectively.
f Capital of the new firm in total will be the same as before the retirement of Kusum and will be in the new profit-sharing ratio of the continuing partners.
g Amount due to Kusum be settled by paying 1,00,000 in cash and balance by transferring to her Loan Account which will be paid later on.
Prepare Revaluation Account, Capital Accounts of Partners and Balance Sheet of the new firm after Kusum’s retirement.

 

 

The solution of Question 52 Chapter 6 of +2-A: –

 

Revaluation Account
Particular
Amount Particular Amount
To Machinery A/c 1,80,000 By Land and Building A/c 1,20,000
To Bad Debts A/c 35,000 – 20,000 15,000    
    By Loss transferred to:    
      Kusum’s Capital A/c 21,429  
      Sneh’s Capital A/c 32,142  
      Usha’s Capital A/c 21,429 75,000
    1,95,000     1,95,000

 

Partners’ Capital Account
Part. Kusum Sneh Usha

Part.

Kusum Sneh Usha
To Revaluation A/c 21,429 32,142 21,429 By Balance B/d 4,00,000 6,00,000 4,00,000
To Usha’s Capital A/c 80,000 By Work
men Compensa
tion Fund A/c
4,286 6,428 4,286
To Bank A/c 1,00,000 _ By Usha’s Capital A/c 80,000
To Kusum’s Loan A/c 3,62,857 By C’s Capital A/c 1,833

To Balance c/d 35,800 5,74,286 3,02,857        
  4,84,286 6,06,428 4,04,286   4,84,286 6,06,428 4,04,286
        By Balance b/d 5,74,286 3,02,857
To Balance c/d 6,00,000 8,00,000 By Cash A/c 25,714 4,97,143
  6,00,000 8,00,000   6,00,000 8,00,000

 

Balance Sheet
Liabilities
Amount Assets Amount
Creditors 1,00,000 Land & Building   5,20,000
Employee’s Provident Fund 70,000 Machinery 6,00,000  
Workmen’s Compensation Claim   15,000 Less: Deprecition 1,80,000 4,20,000
Kusum’s Loan   3,62,857 Stock   2,00,000
Capital:     Sundry Debtors 2,20,000 – 35,000   1,85,000
Sneh 6,00,000   Bank   6,22,857
Usha 8,00,000 14,00,000    
    19,47,857     19,47,857

 

Working Notes:
Calculation of Profit-Sharing Ratio

Old Ratio Kusum, Sneh and Usha = 2:3:2
New Ratio Sneh and Usha = 3:4
Gaining Ratio = New Ratio – Old Ratio
Gaining Ratio = 3 : 1

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Sneh’s Gain = 3 3
7 7
         
  = Nil    

 

Usha’s Gain = 4 2
7 7
         
  = 2    
  7    

Adjustment of Goodwill

Total Goodwill of the Firm = 2,80,000

         
Kusum’s Share of Goodwill = 2,80,000 X 2
7
         
  = Rs 80,000    

It is to be adjusted by the Gaining partners i.e. only by Usha

Adjustment of Capital

Total Capital of Firm before Kusum’s Retirement = 14,00,000
New Ratio = 3:4

Sneh’s Share of Goodwill = 14,00,000 X 3
7
         
  = Rs 6,00,000    

 

Usha’s Share of Goodwill = 14,00,000 X 4
7
         
  = Rs 8,00,000    

 

Balance Sheet
Liabilities
Sneh Usha
New Capital Balance 6,00,000 8,00,000
Adjusted Old Capital Balance 5,74,286 3,02,857
Cash brought in by the Partner   25,7144 4,97,143

 

Cash Account
Particulars
Amount Particulars Amount
Balance b/d 2,00,000 Kusum’s Capital A/c   1,00,000
Sneh’s Capital A/c 25,714      
Usha’s Capital A/c   4,97,143      
      Balance c/d 6,22,857
    7,22,857     7,22,857

 

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

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