Question 61 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 61 Chapter 5 of +2-A

Question 61 Chapter 5 of +2-A

61. (a) X, Y and Z are partners sharing profits and losses in the ratio of 5 : 3 : 2. They admit W as partner for 1/6th share. Following is the extract of the Balance Sheet on the date of admission:

Liabilities   Assets  
General Reserve 36,000 Advertisement Suspense A/c 24,000
Contingency Reserve 6,000    
Profit and Loss A/c 18,000    

Pass necessary Journal entries.

b. A and B were partners in a firm sharing profit in 4 : 3 ratio. On 1st April, 2019, they admitted C as a new partner. On the date of C’s admission, the Balance Sheet of A and B showed a General Reserve of 84,000 and a debit balance of 8,400 in the ‘Profit and Loss Account’. Pass necessary Journal entries for the treatment of these items on C’s admission.
c. Give the Journal entry to distribute ‘Workmen Compensation Reserve’ of 72,000 at the time of admission of Z, when there is no claim against it. The firm has two partners X and Y.
d. Give the Journal entry to distribute ‘Workmen Compensation Reserve’ of 72,000 at the time of admission of Z, when there is claim of 48,000 against it. The firm has two partners X and Y .
e. Give the Journal entry to distribute ‘Investment Fluctuation Reserve’ of 24,000 at the time of admission of Z, when Investment (Market Value 1,10,000) appears at 1,20,000. The firm has two partners X and Y.
f. Give the Journal entry to distribute ‘General Reserve’ of 4,800 at the time of admission of Z, when 20% of General Reserve is to be transferred to Investment Fluctuation Reserve. The firm has two partners X and Y .
g. A, B and C were partners sharing profits and losses in the ratio of 6 : 3 : 1. They decide to take D into partnership with effect from 1st April, 2019. The new profit-sharing ratio between A, B, C and D will be 3 : 3 : 3 : 1. They also decide to record the effect of the following without affecting their book values, by passing a single adjustment entry:

  Book Values ( )
General Reserve  1,50,000
Contingency Reserve 60,000
Profit and Loss A/c (Cr.) 90,000
Advertisement Suspense A/c (Dr.) 1,20,000

Pass the necessary single adjustment entry, through the Partner’s Current Account

 

The solution of Question 61 Chapter 5 of +2-A: –

 

Case A

Date Particulars
L.F. Debit Credit
  General Reserve A/c Dr   36,000  
  Contingency Reserve A/c Dr   6,000  
  Profit and Loss A/c Dr   18,000  
  To X’s Capital A/c       30,000
  To Y’s Capital A/c       18,000
  To Z’s Capital A/c       12,000
  (Being distributed the balance of general reserve, Contingency Reserve and profit and loss account among the old partners in their old profit sharing ratio i.e. 5:3:2)        
  X’s Capital A/c Dr   12,000  
  Y’s Capital A/c Dr   7,200  
  Z’s Capital A/c Dr   4,800  
  To Advertisement Suspense A/c       24,000
  (Being distributed the balance of Advertisement Suspense among the old partners in their old profit sharing ratio i.e. 5:3:2)        
  Revaluation A/c Dr   270  
  To Motors A/c       250
  To Furniture A/c       20
  (Being Decrease in value of Motors and Furniture transferred to Revaluation Account)        

 

Case B

Date Particulars
L.F. Debit Credit
  General Reserve A/c Dr   84,000  
  To A’s Capital A/c       48,000
  To B’s Capital A/c       36,000
  (Being distributed the balance of general reserve among the old partners in their old profit sharing ratio i.e. 4:3)        
  A’s Capital A/c Dr   4,800  
  B’s Capital A/c Dr   3,600  
  To Profit & Loss A/c       8,400
  (Being distributed the balance of Profit & Loss among the old partners in their old profit sharing ratio i.e. 4:3        

Case C

Date Particulars
L.F. Debit Credit
  Workmen Compensation Reserve A/c Dr   72,000  
  To X’s Capital A/c       36,000
  To Y’s Capital A/c       36,000
  (Being distributed the balance of Workmen Compensation Reserve among the old partners in equal ratio because profit sharing ratio is not given.)        

Case D

Date Particulars
L.F. Debit Credit
  Workmen Compensation Reserve A/c Dr   72,000  
  To Workmen Compensation Reserve claim A/c       48,000
  To X’s Capital A/c       12,000
  To Y’s Capital A/c       12,000
  (Being distributed the balance of Workmen Compensation Reserve among the old partners in equal ratio because profit sharing ratio is not given.)        

Case E

Date Particulars
L.F. Debit Credit
  Investment Fluctuation Reserve A/c Dr   24,000  
  To Investment A/c       10,000
  To X’s Capital A/c       7,000
  To Y’s Capital A/c       7,000
  (Being distributed the balance of Workmen Compensation Reserve among the old partners in equal ratio because profit sharing ratio is not given.)        

Case F

Date Particulars
L.F. Debit Credit
  General Reserve A/c Dr   4,800  
  To Investment Fluctuation Reserve A/c       960
  To X’s Capital A/c       1,920
  To Y’s Capital A/c       1,920
  (Being distributed the balance of General Reserve after transfer to the Investment Fluctuation Reserve from it among the old partners in equal ratio because profit sharing ratio is not given.)        

Case G

Date Particulars
L.F. Debit Credit
  C’s Current A/c Dr   36,000  
  D’s Current A/c Dr   18,000  
  To A’s Current A/c       54,000
  (Being adjustment made at the time of admission of A)        

 

Old Ratio of A,B, and C = 6 : 3 : 3
New Ratio of A,B, C, and D = 3 : 3 : 3 : 1

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 Gains
  10

 

W’s Sacrificing/Gaining Share = 1
  10

Calculation of Net Effect

 
General Reserve   1,50,000
Add: – Contingency Reserve   60,000
Add: -Profit and Loss A/c (Cr.)   90,000
    3,00,000
Less: Advertisement Suspense A/c (Dr.)   – 1,20,000
    1,80,000

Adjustment of Revaluation Profit

A will Get from C & D = 1,80,000 X 3
10
  = 54,000
   

 

C will pay to A = 1,80,000 X 2
10
  = 36,000
   

 

D will pay to Z = 1,80,000 X 1
10
  = 18,000
   

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 61 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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