Question 57 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 57 Chapter 5 of +2-A

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)

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 57 Chapter 5 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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