Question 53 Chapter 6 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 53 Chapter 6 of +2-A

Question 53 Chapter 6 of +2-A

53. The Balance Sheet of X, Y and Z who were sharing profits in the ratio of 5 : 3: 2 as at 31st March 2019 is as follows:

Liabilities   Amount Assets Amount
Creditors   50,000 Cash at Bank 40,000
Employees’ Provident Fund   10,000 Sundry Debtors 1,00,000
Profit and Loss A/c   85,000 Stock 80,000
Capital A/cs:     Fixed Assets 60,000
X 40,000      
Y 62,000      
Z 33,000 1,35,000    
    2,80,000   2,80,000

X retired on 1st Apri  2019 and Y and Z decided to share profits in future in the ratio of 3: 2 respectively. The other terms on retirement were:
a Goodwill of the firm is to be valued at 80,000.
b Fixed Assets are to be depreciated to 57,500.
c Make a Provision for Doubtful Debts at 5% on Debtors.
d A liability for a claim, included in Creditors for 10,000, is settled at 8,000. The amount to be paid to X by Y and Z in such a way that their Capitals are proportionate to their profit-sharing ratio and leave a balance of 15,000 in the Bank Account.
Prepare Profit and Loss Adjustment Account and Partners’ Capital Accounts.

 

 

The solution of Question 53 Chapter 6 of +2-A: –

 

Revaluation Account
Particular
Amount Particular Amount
To Fixed Assets A/c 60,000 – 57,500 2,500 By Creditors 10,000 – 8,000 2,000
To Provision for Doubtful Debts 5,000    
    By Loss transferred to:    
      X’s Capital A/c 2,750  
      Y’s Capital A/c 1,650  
      Z’s Capital A/c 1,100 5,500
    7,500     7,500

 

Partners’ Capital Account
Part. X Y Z

Part.

X Y Z
To Revaluation A/c 2,750 1,650 1,100 By Balance B/d 40,000 62,000 33,000
To X’s Capital A/c 24,000 16,000 By Profit & Loss A/c 42,500 25,500 17,000
        By Y’s Capital A/c 24,000
        By Z’s Capital A/c 16,000

To Balance c/d 1,19,750 61,850 32,900        
  1,22,500 87,500 50,000   1,22,500 87,500 50,000
To Capital A/c 1,19,750 By Balance b/d 1,19,750 61,850 32,900
To Balance c/d 1,18,500 79,000 By Cash A/c 56,650 46,100
  1,19,750 1,18,500 79,000   1,19,750 1,18,500 79,000

 

Working Notes:
Calculation of Gaining Ratio

Old Ratio X, Y and Z = 5:3:2
New Ratio Y and Z = 3:2
Gaining Ratio = New Ratio – Old Ratio

Y’s Share = 3 3
5 10
         
  = 3    
  10    

 

Z’s Share = 2 2
5 10
         
  = 2    
  10    

Adjustment of Goodwill

Total Goodwill of the Firm = 80,000

         
X’s Share of Goodwill = 80,000 X 5
10
         
  = Rs 40,000    

To be borne by Gaining partners in their Gaining Ratio i.e. 3:2

Y’s Share = 40,000 X 3
5
         
  = Rs 24,000    

 

Z’s Share = 40,000 X 2
5
         
  = Rs 16,000    

 

Adjustment of Capital

X’s Capital before adjustment = 1,19,750
Y’s Capital before adjustment = 61,850
Z’s Capital before adjustment = 32,900

Total Capital of New Firm = X’s Capital +Y’s Capital + Z’s Capital + Closing balance of Bank Account Available Bank Balance
  = 1,19,750+61,850+32,900+15,000 32,000
  = Rs 1,97,500    

New Profit Sharing Ratio = 3:4

Y’s Share of Goodwill = 1,97,500 X 3
5
         
  = Rs 1,18,500    

 

Z’s Share of Goodwill = 1,97,500 X 2
5
         
  = Rs 79,000    

 

Balance Sheet
Liabilities
Y Z
New Capital Balance 1,18,500 79,000
Adjusted Old Capital Balance 61,850 32,900
Cash brought in by the Partner   56,650 56,650

 

Cash Account
Particulars
Amount Particulars Amount
Balance b/d 40,000 Creditors   8,000
Y’s Capital A/c 56,650 X’s Capital A/c   1,19,750
Z’s Capital A/c   46,100      
      Balance c/d 15,000
    1,42,750     1,42,750

 

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 53 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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