Question 70 Chapter 5 of +2-A – T.S. Grewal 12 Class Part – A Vol. 1

Question 70 Chapter 5 of +2-A

Question 70 Chapter 5 of +2-A

70. On 31st March, 2017, the Balance Sheet of Abhir and Divya, who were sharing profits in the ratio of 3 : 1 was as follows:

Liabilities     Assets    
Creditors   2,20,000 Cash at Bank   1,40,000
Employees’ Provident Fund   1,00,000 Debtors 6,50,000  
Investment Fluctuation Fund   1,00,000 Less: Provision for Bad Debts 50,000 6.00,000
General Reserve   1,20,000 Stock   3,00,000
Capitals:     nvestments (Market value 4,40,000)   5,00,000
Abhir 6,00,000        
Divya 4,00,000 10,00,000      
    15,40,000     15,40,000

They decided to admit Vibhor on 1st April, 2017 for 1/5th share.
(a) Vibhor shall bring 80,000 as his share of goodwill premium.

(b) Stock was overvalued by 20,000.
(c) A debtor whose dues of 5,000 were written off as bad debts, paid 4,000 in full settlement.
(d) Two months’ salary @ 6,000 per month was outstanding.
(e) Vibhor was to bring in Capital to the extent of 1/5th of the total capital of the new firm. Prepare Revaluation Account, Partners’ Capital Accounts and the Balance Sheet of the reconstituted firm.

 

The solution of Question 70 Chapter 5 of +2-A: –

Revaluation Account
Liabilities
Amount Assets Amount
To Stock A/c   20,000 By Cash A/c   4,000
To Outstanding Salary A/c (6,000 × 2)   12,000      
      Loss transferred to    
      Abhir’s Capital A/c 21,000  
      Divya’s Capital A/c 7,000 28,000
    32,000     32,000

 

Partners’ Capital Account
the year ended 31st March, 2019

Parti
culars

Abh
ir

Div
ya
Vib
hor

Partic
ulars

Abh
ir
Div
ya
Vib
hor
To Revaluation A/c (Loss) 21,000 7,000 By Balance B/d 6,00,000 4,00,000
        By Cash A/c 3,03,000
        By Premium for GoodwillA/c 60,000 20,000
        By Investment Fluctuation 30,000 10,000 Fund A/c (1,00,000 – 40,000 30,000 30,000
       

By General Reserve A/c

90,000 30,000  
To Balance c/d 7,59,000
4,53,000 3,03,000        
  7,80,000 4,60,000 3,03,000   7,80,000 4,60,000 3,03,000

 

 

Balance Sheet
Liabilities
Amount Assets Amount
Employee’s Provident Fund   1,00,000 Cash at Bank (1,40,000 + 4,000 + 3,03,000 + 80,000) 5,27,000
Creditors   2,20,000 Debtors 6,50,000  
Outstanding Salary   12,000 Less: Provision for Doubtful Debt 50,000 6,00,000
Capital:     Stock   2,80,000
Abhir 7,59,000   Investments   4,40,000
Divya 4,53,000        
Vibhor 3,03,000 15,15,000      
    18,47,000     18,47,000

Working Note:-

Calculation of New profit-sharing ratio

 

Remaining share = 1 1
5
  = 5 – 1 
5
  = 4
  5

 

To Calculate to New Ratio distribute the remaining share in the old ratio of old partners’

New Ratio = Combined share of A and B X Old Ratio

Abhir’s New Share of Profits = 3 X 4
5 5
  = 12
  25
Divya’s Sacrificing Ratio = 2 X 4
5 5
  = 8
  25
Vibhor’s New Ratio = 1 X 5
5 5
  = 5
  25

 

New Profit sharing Ratio between Abhir : Divya : Vibhor = 12 : 8 : 5

Calculation of Vibhor’s Capital

Total Adjusted Capital of the Old Partners = Abhir’s Capital + Divya’s Capita
Total Adjusted Capital of the Old Partners = (7,59,000 + 4,53,000)
  = 12,12,000
Combined New Share of the Old Partner = 12 + 8
25 25
  = 20
  25
Total Capital of the firm = (Adjusted Capital of the Old Partners × Reciprocal of Combined New Share of the Old Partners)
  = (12,12,000 × 25/20)
  = 15,15,000
Vibhor’s Capital = Total Capital of the firm × His Profit share
  = (15,15,000 × 1/5)
  = 3,03,000

 

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 70 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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