Question 59 Chapter 5 of +2- Part-

Question 59 Chapter 5 of +2-Part-1

59. (Adjustment of the capital on the basis of NPS ) a & b sharing profit in the proportion of three fourth showed the following as their balance sheet on 31ST MARCH, 2018

Liabilities  RsAssetsRs
Creditors 37,500Cash at bank22,500
General Reserve  4,000Bills receivable3,000
Capital Accounts  Debtors16,000
A30,000 Stock20,000
B16,00046,000Office Furniture1,000
   Land & Building25,000
  87,500 87,500

They admit C into the partnership on 1st April 2018 on the following terms:
1. That C pays Rs. 10,000 as his capital for a fifth share in the future profits.
2. That goodwill account is valued at Rs. 20,000.
3. That furniture is reduced by 10% and a reserve for doubtful debts be created at 5% on debtors.
4. That the value of land and building be appreciated by 20%.
5. That the capital accounts of all the partners be readjusted on the basis of their profit-sharing arrangements and additional amounts be debited or credited to their current accounts.
6. Interest payable is Rs. 2,000.
Open the necessary accounts to give effect to the above-mentioned items and also give the opening balance sheet of the new firm.

The solution of Question 59 Chapter 5 of +2 Part-1: –

Revaluation account
Particulars
AmountParticularsAmount
To Stock A/c 100By Land & Buildings A/c 5,000
To Reserve of doubtful debts 800   
To Interest payable A/c 2,000   
      
To Profit on revaluation transferred to Capital accounts     
A 3/41,575    
B 1/45252,100   
  7,000  7,000
Partners’ Capital Account 
ParticularsAB CParticularsABC
To Current A/c7,5758,525 By Balance b/d30,00016,000 
    By Bank A/c  10,000
    By C’s Current A/c3,0001,000 
    By Revaluation A/c1,575525 
    By General reserve3,0001,000 
To Balance c/d 30,00010,00010,000    
 37,57518,52510,000 37,57518,52510,000
Balance Sheet
Liabilities
AmountAssetsAmount
Creditors 37,500Cash at bank 32,500
Capital Accounts  Debtors16,000 
A30,000 Less reserve for doubtful debts80015,200
B10,000 Bills receivable 3,000
C10,000 Stock 20,000
Current Accounts  Office Furniture 900
A7,575 Land & Building 30,000
B8,52516,100C’s Current Accounts 4,000
Outstanding interest 2,000   
  1,05,600  1,05,600

WORKING NOTES :

1. Calculation of new profit share ratio
Let total profits of the firm = Re 1

Share of profit acquired by C=1
5
Remaining share (Joint share of A and B)=11
5
     
 =4  
 5  
A‘s new share=3x4
45
     
 =3  
 5  
B‘s new share=1x4
45
     
 =1  
 5  

New profit sharing ratio = 3 : 1 : 1
PARTNER’S CAPITALS IN THE NEW FIRM ARE = Rs. ( 30,000;10,000;10,000)

2. SACRIFICING RATIO

A=33
45
     
 =3  
 20  
B=11
45
     
 =1  
 20  

Sacrificing ratio = 1 : 1

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 59 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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