Question 62 Chapter 5 - Unimax Class 12 Part 1 - 2021

Question 62 Chapter 5 – Unimax Class 12 Part 1 – 2021

Table of Contents

The solution of Question 62 Chapter 5 – Unimax Class 12 Part 1: –

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

62. G and S were partners in a manufacturing concern sharing profits and losses equally. On 31st December, 2020 the firm’s book revealed the following position :

Liabilities	Amount	Assets	Amount
Sundry Creditors	15,000	Freehold Premises	13,560
Capital :		Plant and Machinery	7,000
G	20,000	Furniture and Fitting	1,700
S	16,000	Stock	4,800
Bills Payable	4,000	Sundry Debtors	21,000
		Bills Receivable	1,888
		Cash at Bank	4,900
		Cash in hand	152

	55,000		55,000

On 1st January, 2021 it was agreed to admit T into the partnership on the following terms :

That he should bring into business sundry debtors amounting to Rs. 2400 (less provision of 10% for bad debts), sundry creditors of Rs. 500 and also stock of his business at a valuation of Rs. 1500. His capital in the new business is to be Rs. 5000, the balance of which he pays in cash and in consideration there of, he receives 1/5th share of profits of the firm.

It was mutually agreed that the following adjustments should be made as regards the business of G and S.
Stocks to be reduced by Rs. 800 ; Plant and Machinery to be increased by Rs. 300 ; Furniture and Fittings to be completely written off. It was further agreed that after the above adjustments had been effected, S should bring in sufficient cash to make his capital equal to that of G.
From the above particulars, show the opening Balance Sheet of the new firm as on 1st January, 2021 and state in what proportion the future profits and losses are to be shared.

The solution of Question 62 Chapter 5 – Unimax Class 12 Part 1: –

Revaluation A/c

Particulars	Rs.	Particulars		Rs.
To Stock a/c	800	By Plant and Machinery a/c		300
To Furniture and Fittings a/c	1700	By Loss on revaluation
		G ( 1 : 1 )	1100
		S	1100	2200

	2500			2500

Capital Accounts

Particulars	G	S	T	Particulars	G	S	T
To Loss on revaluation	1,100	1,100	–	By Balance b/d	20000	16000	–
To Sundry Creditors	–	–	500	By Sundry drs. a/c	–	–	2400
To Balance c/d	18,900	18,900	5,000	By Stock a/c	–	–	1500
To Provision for bad debts	–	–	240	By Cash a/c	–	–	1840
				By Cash a/c	–	4000	–

	20,000	20,000	5,740		20,000	20,000	5,740

Balance Sheet

Liabilities		Rs.	Assets		Rs.
Bills Payable		4,000	Freehold Premises		13,560
Capital Accounts			Debtors	23,400
G	18,900		Less : Provision	240	23,160
S	18,900		Cash in hand (152 + 1840 + 4000)		5,992
T	5000	42,800	Plant and Machinery		7,300
Creditors (15000 + 500)		15,500	Stock (4800 + 1500 – 800)		5,500
			Cash at Bank		4,900
			Bills Receivable		1,888

		62,300			62,300

Working Note:

Calculation of new PSR :

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Let total profit = 1

T’s Share = 1/5

Remaining share = 1 – 1/5 = 4/5

G’s new share = 1/2 X 4/5 = 2/5

S’s new share = 1/2 X 4/5 = 2/5

T’s share = 1/5

New PSR = G : S : T = 2 : 2 : 1
T will bring capital in cash :

S Drs. A/c	Dr.	2400
Stock A/c	Dr.	1500
Cash A/c	Dr.	1840 (B/F)
To T’s Capital a/c			5740 (5000 + 740)

T’s Capital A/c	Dr.	740
To Sundry Creditors a/c			500
To Provision for doubtful debts a/c			240