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Question 70 Chapter 6 of +2-A
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70. A B and C were partners in a firm sharing profits in the ratio of 5 : 3: 2. On 31st March 2018, their Balance Sheet was as follows:
| Liabilities | Amount | Assets | Amount | |
| Creditors | 11,000 | Building | 20,000 | |
| Reserves | 6,000 | Machinery | 30,000 | |
| A’s Loan A/c | 5,000 | Stock | 10,000 | |
| Capital A/cs: | Patents | 11,000 | ||
| A | 25,000 | Debtors | 8,000 | |
| B | 25,000 | Cash | 8,000 | |
| C | 15,000 | |||
| 87,000 | 87,000 |
A died on 1st October 2018. It was agreed among his executors and the remaining partners that:
i Goodwill to be valued at 212 years’ purchase of the average profit of the previous 4 years, which were 2014-15: 13,000; 2015-16: 12,000; 2016-17: 20,000 and 2017-18: 15,000.
ii Patents be valued at 8,000; Machinery at 28,000; and Building at 25,000.
iii Profit for the year 2017-18 be taken as having accrued at the same rate as that of the previous year.
iv Interest on capital be provided @ 10% p.a.
v Half of the amount due to A to be paid immediately to the executors and the balance transferred to his Executors’ Loan Account. Prepare A’s Capital Account and A’s Executors’ Account as on 1st October 2018.
The solution of Question 70 Chapter 6 of +2-A: –
| A’s Capital Account | |||||
| Particular | Amount | Particular | Amount | ||
| To Bank A/c | 28,450 | By Balance b/d | 25,000 | ||
| To A’s Executors A/c | 28,450 | By Reserve | 3,000 | ||
| By B’s Capital A/c Goodwill | 11,250 | ||||
| By C’s Capital A/c Goodwill | 7,500 | ||||
| By Profit & Loss Suspense | 3,750 | ||||
| By Interest on Capital WN2 | 1,250 | ||||
| By A’s Loan A/c WN6 | 5,150 | ||||
| 56,900 | 56,900 | ||||
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| A’s Executors Account | |||||
| Particular | Amount | Particular | Amount | ||
| To Bank A/c | 28,450 | By Balance b/d | 56,900 | ||
| To A’s Executors A/c | 28,450 | ||||
| 56,900 | 56,900 | ||||
Working Notes:
Calculation of Share in Reserve
| = | 6,000 | X | 5 | |
| 10 | ||||
| = | Rs 3,000 |
Calculation of Interest on Capital
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| = | 25,000 | X | 6 | X | 10 | |
| 100 | 12 | |||||
| = | Rs 1,250 |
Calculation of Profit & Loss Suspense
| Profit & loss Suspense | = | 15,000 | X | 5 | X | 6 |
| 100 | 12 | |||||
| = | Rs 3,750 |
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Calculation of Share in Revaluation Profit/Loss
Revaluation=Nil(−3,000−2,000+5,000)
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)
- Chapter No. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
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
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
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