Question 66 Chapter 5 - Unimax Class 12 Part 1 - 2021

Question 66 Chapter 5 – Unimax Class 12 Part 1 – 2021

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The solution of Question 66 Chapter 5 – Unimax Class 12 Part 1: –

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

66. A and B were partners in a firm sharing profits and losses in the ratio of 3 : 2. Their Balance Sheet on 1st January, 2021 was as follows :

Liabilities	Amount	Assets	Amount
Sundry Creditors	15000	Plant	30000
Capital :		Patents	10000
A	30,000	Debtors	18000
B	25,000	Stock	20000
Reserves	10,000	Cash	2000

	80,000		80,000

C is admitted as a partner on the above date on the following terms.

He will pay Rs. 10000 as his share of goodwill and will get 1/4th share in the profits of the firm.
The assets are to be valued as under Plant at Rs. 32000, Stock at Rs. 18000, Debtors at book figure less a provision of 5% for doubtful debts.
It was found that creditors include a sum of Rs. 1400 which was not to be paid. But it was also found that there was a liability for compensation to workers amounting to Rs. 2000.
C was to introduce Rs. 20000 as capital and the capitals of the other partners were to be adjusted in the new profit sharing ratio. For this purpose Current Accounts were to be opened.

Give Journal entries to record the above and Balance Sheet after C’s admission.

The solution of Question 66 Chapter 5 – Unimax Class 12 Part 1: –

Revaluation A/c

Particulars	Rs.	Particulars		Rs.
To Provision for bad debts a/c	900	By Plant a/c		2000
To Stock a/c	2000	By Creditors a/c		1400
To Worker’s compensation fund a/c	2000	By Loss on revaluation
		A (3 : 2)	900
		B	600	1500

	4,900			4,900

Capital Accounts

Particulars	A	B	C	Particulars	A	B	C
To Loss on revaluation	900	600	–	By Balance b/d	30,000	25,000	–
To Current a/c	5100	8400	–	By Reserve a/c	6,000	4,000	–
To Balance c/d	36000	24000	20000	By Cash a/c	–	–	–
				By Premium a/c (3 :2)	6,000	4,000	20,000

	42000	33000	20,000		42,000	33,000	20,000

Balance Sheet

Liabilities		Rs.	Assets		Rs.
Sundry Creditors		13600	Plant		32000
Capital Accounts			Debtors	18000
A	36000		Less : Provision	900	17100
B	24000		Cash (2000 + 20000 + 10000)		32000
C	20000	80000	Patents		10000
A’s Current a/c		5100	Stock		18000
B’s Current a/c		8400
Worker’s Compensation Fund		2000

		1,09,100			1,09,100

Working Note:

(A) Calculation of Capitals of Partners :

Total Capital of firm = 4/1 X 20000 = Rs. 80000
(i) A’s required capital = 9/20 X 80000 = Rs. 36000
A’s actual capital Rs. 41100
A will withdraw Rs. 5100
(ii) B’s required capital = 6/20 X 80000 = Rs. 24000
B’s actual capital = Rs. 32400
B will withdraw = Rs. 8400
(iii) C’s capital = Rs. 20000
(B) Calculation of New PSR :
Let Total profit = 1
C’s Share = 1/4
Remaining share = 3/4
A’s new share = 3/5 X 3/4 = 9/20
B’s new share = 2/5 X 3/4 = 6/20
C’s share = 1/4
New PSR = 9 : 6: 5 (New PSR)
(C) Sacrificing Ratio is 3 : 2 as if nothing has been decided in partnership deed.

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Journal

Date	Particulars		L.F.	Debit	Credit

	Revaluation a/c	Dr.		4,900
	To Stock A/c				2,000
	To Provision for bad debts a/c				900
	To Worker’s compensation fund a/c				2,000
	(Being value of assets decreased & new liability created)

	Plant a/c	Dr.		2,000
	Creditors A/c	Dr.		1,400
	To Revaluation A/c				3,400
	(Being value of assets increased & liability decreased.)

	A’s Capital a/c	Dr.		900
	B’s Capital a/c	Dr.		600
	To Revaluation a/c				1,500
	(Being loss on revaluation transferred to old partner’s capital a/c)

	General Reserve a/c	Dr.		10,000
	To A’s capital a/c				6,000
	To B’s capital a/c				4,000
	(Being reserve fund distributed among old partners)

	Bank a/c	Dr.		30,000
	To C’s capital A/c				20,000
	To Premium a/c				10,000
	(Being capital and goodwill brought by new partner)

	Premium a/c	Dr.		10,000
	To A’s Capital a/c				6,000
	To B’s Capital a/c				4,000
	(Being goodwill distributed among old partners’ in sacrificing ratio)

	A’s Capital a/c	Dr.		5,100
	B’s capital a/c	Dr.		8,400
	To A’s capital a/c				5,100
	To B’s capital a/c				8,400
	(Being withdrawn by old partners and transferred to their current a/c)