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

question 66 - UNIMAX

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

Free Accounting book Solution - Class 11 and Class 12

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.

  1. He will pay Rs. 10000 as his share of goodwill and will get 1/4th share in the profits of the firm.
  2. 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.
  3. 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.
  4. 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.

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)        

What is Partnership – Meaning and its Types

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

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)

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

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