Question 57 Chapter 5 of +2-A
57. X, Y and Z are partners sharing profits and losses in the ratio of 6 : 3 : 1. They admitted W into partnership with effect from 1st April, 2019. New profit-sharing ratio between X, Y, Z and W was agreed to be 3 : 3 : 3 : 1. They also decide to record the effect of the following revaluations without affecting the book values of the assets and liabilities by passing an adjustment entry:
| Book Values ( ) | Revised Values ( ) | |
| Plant and Machinery | 3,50,000 | 3,40,000 |
| Land and Building | 5,00,000 | 5,50,000 |
| Trade Creditors | 1,00,000 | 90,000 |
| Outstanding Expenses | 85,000 | 1,00,000 |
Pass necessary adjustment entry.
The solution of Question 57 Chapter 5 of +2-A: –
| Date | Particulars |
L.F. | Debit | Credit | |
| Z’s Capital A/c | Dr | 7,000 | |||
| W’s Capital A/c | Dr | 3,500 | |||
| To X’s Capital A/c | 10,500 | ||||
| (Being adjustment entry made) | |||||
Working Note: –
Calculation of Provision for Doubtful Debts
Provision is always created on the Closing balance of Debtors
| Gain/Loss | = | Land & Building + Trade Creditors – Plant & Machinery – Outstanding Expenses |
| =50,000 + 10,000- 10,000 – 15,000 | |
| =35,000 |
| Total Provision For D/D | = | Closing balance of Debtors X | Percentage of Provision |
| = | 70,000 | X | 5% | |
| = | 3,500 |
| New Provision For D/D | = | Total Provision – | (Old Provision – Bad Debts) |
| = | 3,500 | – | (8,000-6,000) | |
| = | 3,500 |
– | 2,000 | |
| = | 1,500 |
| Old Ratio of X, Y and Z | = | 6 : 3 : 1 |
| New Ratio of X, Y, Z and W | = | 3 : 3 : 3 : 6 |
Sacrificing Share = Old Ratio – New Ratio
| X’s Sacrificing/Gaining Share | = | 6 | – | 3 |
| 10 | 10 |
| = | 6 – 3 | |
| 10 |
| = | 3 | Sacrifice |
|
| 10 |
| Y’s Sacrificing/Gaining Share | = | 3 | – | 3 |
| 10 | 10 |
| = | 3 – 3 | |
| 10 |
| = | 0 | |
| 10 |
| Z’s Sacrificing/Gaining Share | = | 1 | – | 3 |
| 10 | 10 |
| = | 1 – 3 | |
| 10 |
| = | -2 | Gain |
|
| 10 |
| W’s Sacrificing/Gaining Share | = | 1 |
| 10 |
Adjustment of Revaluation Profit
| X will Get from Z & W | = | 35,000 | X | 3 |
| 10 | ||||
| = | 10,500 |
| Z will pay to X | = | 35,000 | X | 2 |
| 10 | ||||
| = | 7,000 |
| W will pay to X | = | 35,000 | X | 1 |
| 10 | ||||
| = | 3,500 |
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)
- Chapter No. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
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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