Question 58 Chapter 5 of +2- Part-

Question 58 Chapter 5 of +2-Part-1

58. (Adjustment of capital on the basis of NPS) The following is the balance sheet of A , B & C sharing profits & losses in the ratio 6/25, 5/15 & 3/14 :

Liabilities RsAssetsRs
Creditors9,000Land & Building24,000
Bills payable3,000Furniture 3,500
Capital Accounts Stock14,000
A19,000Debtors12,600
B16,000Cash 900
C8,000  
 55,000 55,000

They agreed to take D into partnership and give him a share of 1/8th in the rupee on the following terms:
(a) that D should bring in Rs. 4,200 as goodwill and Rs. 7,000 as his capital.
(b) that furniture is depreciated by 12%.
(c) that stock is valued at 90%.
(d) that a reserve of 5% is created for doubtful debts.
(e) that the value of land and buildings have appreciated being brought up to Rs. 31,000.
(f)that after making the above adjustments the capital accounts of the old partners (who continue to share in the same proportion as before) be adjusted on the basis of the proportion of D’s capital to his share in the business i.e. actual cash to paid off to or brought in by the old partners, as the case may be.
Prepare cash account, Profit and loss adjustment account, and the balance sheet of the new firm.

The solution of Question 58 Chapter 5 of +2 Part-1: –

Profit & Loss adjustment account
Particulars
AmountParticularsAmount
To Furniture 420By Land & Buildings A/c 7,000
To Stock 1,400   
To Provision for doubtful debts 630   
      
To Profit on revaluation transferred to Capital accounts     
A 1,950    
B 1,625    
C9754,550   
  7,000  7,000
Cash account
Particulars
AmountParticularsAmount
To Balance b/d 900By A’s Capital A/C 1,750
To D’s Capital A/C 7,000By B’s Capital A/C 1,625
To Premium A/c 4,200By Balance c/d 9,350
To C’s Capital A/C 625   
  12,725  12,725
Balance Sheet
Liabilities
AmountAssetsAmount
Creditors 9,000Cash 9,350
Bills Payable 3,000Debtors12,600 
   Less reserve for doubtful debts63011,970
Capital Account  Stock 12,600
A21,000 Land & Building 3,080
B17,500 Furniture 31,000
C10,500    
D7,00056,000   
  68,000  68,000

WORKING NOTES :

D’s capital = Rs. 7,000
Total Capital on the basis of D’s Capital = Rs.7,000X 8 = Rs. 56,000
New ratio of A : B : C 😀 was 6 : 5: 3 : 2

A’s capital a/c=6X56,000
16
     
 =21,000  
B’s capital a/c=5X56,000
16
     
 =17,500  
C’s capital a/c=3X56,000
16
     
 =10,500  
D’s capital a/c=2X56,000
16
     
 =7,000  
A’s capital account
Particulars
AmountParticularsAmount
To Cash Account 1,750By Balance b/d 19,000
To Balance c/d 21,000By Revaluation Account 1,950
   By Premium Account 1,800
      
  22,750  22,750
B’s capital account
Particulars
AmountParticularsAmount
To Cash Account 1,625By Balance b/d 16,000
To Balance c/d 17,500By Revaluation Account 1,625
   By Premium Account 1,500
      
  19,125  19,125
C’s capital account
Particulars
AmountParticularsAmount
To Balance c/d 10,500By Balance b/d 8,000
   By Revaluation Account 925
   By Premium Account 900
   By Cash Account 625
  10,500  10,500
D’s capital account
Particulars
AmountParticularsAmount
To Balance c/d 7,000By Bank Account 7,000
      

Comment if you have any questions.

Also, Check out the solved question of previous Chapters: –

Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution

Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution

Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication

2 Book 1 min - Question 58 Chapter 5 of +2 Part-1 - USHA Publication 12 Class Part - 1
Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firm

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